How Human Resource Management Can Impact Your Bottom Line

Transcription

1 How Human Resource Management Can Impact Your Bottom Line Presented by: Jenna Weidner, Senior Consultant May 2, 2012 Baker Tilly Virchow Krause, LLP Baker Tilly refers to Baker Tilly Virchow Krause, LLP, an independently owned and managed member of Baker Tilly International. 1

2 WebEx guide > Everyone is muted to avoid background noise. Please use the chat box if you need to communicate with the host. Chat Window > Asking questions: In the chat screen, ask questions by choosing All Panelists in lower right chat window. Type your message in the chat box and hit send. > If disconnected: Refer to your and reconnect. If audio is disconnected,click the Communicate tab in the upper left to find the dial in numbers and access code or refer back to your for the dial-in #. > Support #: If you have any technical problems, call WebEx Support at Chat Box > We will be recording today. Refresh button Choose All Panelists 2

3 CPE credit This webinar qualifies for one hour of Continuing Professional Education (CPE). To qualify for the CPE credit, you must be in attendance for the entire webinar, answer the polling questions, and complete the evaluation form at the end of the webinar. Qualified attendees will receive a CPE certificate. Questions regarding the CPE for this webinar can be sent to agatha.gaca@bakertilly.com. Baker Tilly Virchow Krause, LLP is not registered with NASBA s National Registry of CPE Sponsors as a provider of CPE. CPE credits should not be claimed for this program in states where the licensing authority requires all CPE credits claimed to be provided by CPE providers registered with the National Registry of CPE Sponsors. 3

4 Presenters Moderator Presenter Agatha Gaca Senior Marketing Associate Baker Tilly Jenna Weidner Senior Consultant Public Sector Consulting Group Baker Tilly 4 4

5 Objectives of the Presentation > Why human resource management is central to cost control > Key cost considerations relative to legislative mandates and collective bargaining negotiations > Identifying key steps to optimizing your human resources Alignment with strategic priorities Cross-entity considerations Key metrics Key HR Audit points > Benefits of moving from tactical HR to strategic HR Dept. Improved ability to serve both staff and management Improved ability to review, measure, and provide insight > Tools and best practices for effective HR Management 5

6 HR Management and Cost Control > Personnel costs are the largest part of your budget > People are your biggest asset and biggest liability > Consider associated costs direct and indirect fixed, stepped and variable ongoing and one time > Maximize coordination between HR, Payroll and Finance 6

7 Managing Your Biggest Asset Human Resource Management Adapted from hr-scorecard-metrics.com 7

8 Collective Bargaining Negotiations > Contract language directly impacts cost > Fiscal analysis prior to negotiations is key to setting priorities Consider full cost and benefit Examples: Saved $350,000/yr elimination of paid breaks and lunch Saved $50,000/yr categorizing service responses > Take the broad view of impacts Impacts on non-reps Impacts on other contracts Operational changes 8

9 Cost of Turnover > Separation costs/savings Severance pay and leave pay out Administrative costs related to termination Processing paperwork Conduct exit interviews Increased unemployment compensation Wages and benefits saved due to vacancy > Lost productivity and revenue Vacancy coverage (overtime or temp) Initial performance differential of new hire 0% productive during training 25% productive weeks % productive weeks % productive weeks Mentoring and coaching from coworkers and management > Replacement costs Recruitment time and advertising expense Interviews, screening, testing Operational changes > On boarding and training time and materials Turnover cost* for a typical employee = 150% of annual salary Turnover cost* for management or sales staff = 200% of annual salary Example Inputs: 100 non-management, non-sales staff, 10% turnover rate, average salary of $50,000/yr. Calculation: 150% X $50,000 X 10 staff = $750,000/ yr in turnover costs *William Bliss, Cost of Employee Turnover, The Advisor. Isquare.com 9

10 Poll What is the largest component of the typical budget? A. Rent B. Supplies C. Personnel D. Contracted services 10

11 Legislative Mandates > Understand implications Timeline- plan the process Transparency- communicate early and often > Strategic implementation Gain insight into what staff really value Standardize HR practices across units Reduce labor costs > Case study: Wisconsin Acts 10 & 32 Various approaches Lessons learned 11

12 Optimizing Human Resource Management > Alignment with organizational strategic priorities > Cross-entity considerations > The role of HR in auditing the use of resources > Examples of applied metrics 12

13 Alignment with Strategic Priorities and Cross-Entity Considerations > Determine organizational priorities > Opportunities for alignment Budget process Position control process Functional analysis > Avoid silos 13

14 Poll Which of the following represent opportunities to align human resource management with organizational goals? A. Requests for new positions B. Budget development C. Operational reviews D. All of the above 14

15 Auditing the Use of Human Resources > The role of HR as auditor > Partners in the process Executive leadership Payroll and finance departments Department leadership > Approach and metrics Expected service level Resources needed to achieve this level of service Key metrics FTE per function (industry benchmarks) % turnover per year (organization data) expected attrition (organization data) 15

16 Example of Applied Metrics: Number of HR Department Staff Organization Size Benchmarks* Professional HR and Benefits Staff Per 100 Employees** Benchmark employees 0.94 FTE Your Entity (using average of metrics) 0.89 FTE employees 0.83 FTE 541 Employees 4.8 FTE HR and Benefits Staff Current State 4.0 FTE HR Staff 2.5 FTE Benefits Staff in Payroll 6.5 FTE HR and Benefits Staff (Currently Authorized) (Estimated) (Total for Comparison) * Source: SHRM Human Capital Benchmarking Study, 2007 ** Excludes administrative staff *** Weighted average based on benchmarks Potential for improved efficiency: 1.7 FTE 16

17 Example of Applied Metrics: Role of HR Department Staff Functional Areas Related Tasks HR Priorities Expected Services* Previous Effort Current Effort Employee Relations Research and investigation, discipline documentation, grievance processing, mediation/arbitration, negotiation, policy and procedure development and revision, performance evaluation program, exit interviews, providing advice, technical assistance, and counseling to staff, writing letters of agreement 1 st 2nd (1.67) 1.40 FTE, 42% of Weighted Staff Costs 1.58 FTE, 60% of Weighted Staff Costs Classification and Workforce Analysis Analyzing jobs by gathering input via interviews, receiving documents, observation, surveys, questionnaires, filing, creating, reviewing, and revising job descriptions, retrieving files, position control and maintenance, copying and dispersing files, administering job classification systems, minute taking and clerking, scheduling, organizing materials, preparation meetings, destroying files, committee meetings, clerk activities, logging and tracking data, employment data reporting 2 nd 3 rd (3.00) 0.75 FTE, 18% of Weighted Staff Costs 0.40 FTE, 11% of Weighted Staff Costs Recruitment and Selection Creating and approving job requisitions, screening and selecting candidates, creating and posting internal postings, preparing for and scheduling interviews, advertising jobs to the public, scheduling and conducting preemployment tests, collecting applications, conducting reference and background checks, preparing offers of employment or rejection letters 3 rd 1 st (1.50) 1.35 FTE, 29% of Weighted Staff Costs 0.82 FTE, 21% of Weighted Staff Costs Support and Retention Orientation program, id and key card creation, employee recognition award program, morale boosting activities, training programs 4 th 4 th (3.83) 0.50 FTE, 11% of Weighted Staff Costs 0.20 FTE, 7% of Weighted Staff Costs *Source: average (mean) of priority rankings (1 though 4) collected from focus group participants 17

18 High Opportunity Areas: Role of the HR Department $160,000 Resource Outlay by HR Priority Area $140,000 Salary and Benefits of HR Staff $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ Priority #1 - Employee Relations Priority #2 - Classification and Workforce Analysis Priority #3 - Recruitment and Selection Priority #4 - Support and Retention 18

19 Other examples of Metrics for HR Management >Time to fill a position > Ratio of HR managers to HR support staff > Training dollars spent per employee > Cost per hire > Benefit component cost per employee > HR expense per employee > Workers compensation incident rate 19

20 Tactical vs. Strategic HR Management > Defining the difference between tactical and strategic HR > Options for structure and governance > Options for roles and functions > Options for review approaches Strategic focus Efficiency focus Compliance focus 20

21 Approaches to Human Resource Management* > Transactional: Administrative, order-taking. For example, updating an individual employee s HR records, filling a vacant position, locating a training program for an individual. Completing this work efficiently and effectively is a requirement to earn credibility to work strategically. > Tactical: Solutions offered. Most HR work over the past 20 years is tactical. For example, recruitment initiatives, training programs, restructuring of departments, succession-planning process. > Strategic: Work that moves the organization into a favorable position, supporting one or more courses of action developed by the organization s leaders. Long term (two or more years). Linked to one or more business goals. Solution-neutral in early stages of partnering. When a department manager approaches you with a tactical request, resist the urge to offer an immediate solution. Focus on the result the client is seeking to achieve and propose ideas for analyzing the root causes of the problem. Requires multiple solutions or tactics to be implemented. It s macro (focuses on department, functions or entire enterprise). Strategic Tactical Transactional *Source: Beyond Tactical, Frankie S. Jones, Ph.D., SHRM Presentation,

22 Strategic Role of the HR Department > Strategic seat at table, driving overall systemic approaches (i.e. workforce planning, position prioritization, employee morale efforts) Companies that empower key HR professionals to take on a strategic business partner role create HR teams that outperform the average HR organization by 25 percent or more.* Such companies typically outsource HR administrative functions and realign their HR business partners to work with line executives on hiring, coaching, leadership and collaboration.* > Creation of tactical frameworks designed to ensure consistency, compliance and confidence > Understanding of operational needs to support department managers *Source: The High-Impact HR Organization: Top 10 Best Practices on the Road to Excellence, Bersin & Associates / Stacey Harris, January

23 Best Practices for the HR Department > Move beyond tactical functions to a strategic partner role* Position Processing Personnel Management Human Resource Management Strategic HR > Focus is on organization-wide change > Staff as a valued resource aligned with organizational priorities > Target training: Training Magazine found that the average spend on training for the top 125 corporate companies is 6.7%. *Source: Christensen, R. (2006). Roadmap to strategic HR: Turning a great idea into a business reality. New York: AMACOM. 23

24 Review Approaches > Strategy - Focused: Determines whether the efforts of the HR department align with the organization s goals or strategic plan. From High Level > Efficiency - Focused: Helps the organization maintain or improve a competitive advantage by comparing its practices with those of companies identified as having exceptional HR practices. > Compliance - Focused: Measures how well the company is complying with current federal, state and local laws and regulations. With More Detail 24

25 Start with Strategy Strategic Review: High Level Ideas Compliance Audit: Narrow and Detailed 25

26 More on Strategy Importance of Strategic Objectives* Input from Elected Officials Input from Department Heads *Adapted from workforce-development-advice.com 26

27 Poll Which of the following functions are examples of strategic HR management? A. Employee recordkeeping B. Long-term workforce planning C. Job posting 27

28 An Efficiency-Focused Process > Data Collection Follow the life-cycle of an employee Understand roles of HR staff Identify policies, procedures and systems Listen to pain points > Analysis and Benchmarking > Recommended Actions > Implementation Plan 28

29 More on Efficiency > Review documentation: Is each process adequate as described? > Review practice: Does each described process reflect reality? > Find Pain Points: Is the process timely and efficient? Are there any bottlenecks, shortcomings, or breakdowns in the system? Do employees like the process, or do they have suggestions for improvement? 29

30 More on Efficiency *Source: TPI Information Services Group 30

31 A Compliance-Focused Process > Common Areas Reviewed ERISA Compensation COBRA Unemployment EEOC Workers Compensation OSHA Age discrimination ADA Sexual harassment FMLA Immigration reform and control FLWA/FLSA Right to privacy Title VII > Common Methods Applied Document Review Checklists > Common Deliverables 31

32 More on Compliance > Largest Areas of Legal Exposure Hiring Performance Management Discipline Termination > Specific Risks to Consider Misclassification of exempt and nonexempt jobs Inadequate personnel files Prohibited attendance policies Inaccurate time records Insufficient documentation 32

33 Maximizing the Benefits of Review > Regardless of the focus of the review, these elements are key to success Transparency Benchmarking Fiscal Analysis Interdepartmental partnerships Strategic leadership role of HR Plan for implementation 33

34 Strategy to Implementation Components Strategic Objective Improvement Initiatives Action Steps Necessary Elements Goal Description and Priority Level Defined Outcome and Measures Task Details Task Details Owner Due Date Resources A high level of detail in each of the various elements of your plan will improve your ability to execute it effectively. Defined Outcome and Measures Task Details Task Details Owner Due Date Resources 34

35 Implementation Plan Example (Content is for Illustration Only) Strategic Objective: Ensure Perceived Value and ROI Initiative Action Step Priority Timeline Activities Assigned To Monitoring Responsibility Completion Date 1. Adopt a TCO & ROI Model High Short term a. Review BT Model and determine if applicable to other areas. b. Identify specific costs relative to other applications c. Gather relevant market data to for vendor cost comparison Finance Director Executive Director March 2012 Articulate ROI, increase understanding and enhance member buy-in 2. Develop a communication plan for TCO and ROI awareness 3. Prepare and distribute materials with value quotient 4. Develop schedule for reviewing TCO model High High Short term Short term Medium Mid-term a. Develop specific materials and venues for information distribution. b. Identify potential audiences and specific method of information sharing (e.g. , direct person to person). c. Determine needed resources to carry out plan. a. Assign responsibilities to carry out TCO communication plan. b. Secure marketing or public relations assistance for first time development of materials. a. Establish cost allocation review schedule to coordinate with annual budget cycle. b. Access changes in costs and transactions. c. Review member input relative to costs and allocation methodology. Innovation Director Member Care Coordinator Finance Director Executive Director Executive Committee Executive Director Initial information - January 2012 Initial information - January 2012 September 1 annually 35

36 Poll What is the first step in developing an implementation plan? A. Assigning owners to tasks B. Determining deadlines C. Identifying strategic objectives D. Defining outcomes of tasks 36

37 Tools for Strategic HR Departments > Examples of tools for strategic HR management Excellent Job Classification Workforce Planning Performance Evaluation Competency Models Information Technology > Discussion of these tools Why this tool Best practices Options to consider 37

38 Job Classification > Why Job Classification Core Applications: basis for pay rates, organizational structure, and compliance with legal requirements Other Applications: recruitment/selection criteria, workforce and succession planning, Performance Evaluation, development and training, risk management and legal defense > Best Practices Job Classifications that Reflect Complexity of Work Performed A Transparent and Accessible Review Process Internally and Externally Equitable Compensation Specific yet Flexible Job Classifications 38

39 Job Classification >Options to Consider Recommendation: Unify Job Classification Approach Options for Unified Approach, listed from most to least recommended 1. Outsource Job Classification Rating Process 2. Select a single new method Modification of DBM to Broadband Method Market Pricing Approach 3. Choose one of the existing methods More employees currently on Decision Band Method Focus group disliked Position Evaluation Boards with the Hay Method Those using DBM may have been under represented in the focus group Recommendation: Eliminate 5 Year Review Cycle and Limit Review to New or Significantly Modified Positions (>20% of job duties changed) Eliminate Formal Classifications Recommendation: Pay for Performance/Effort Should be the End Goal 39

40 Workforce Planning >Why Workforce Planning Significant anticipated retirements from aging workforce Attrition due to concerns over collective bargaining changes Impact of lost knowledge upon ability to deliver services >Best Practices Identify and plan for staffing, training and knowledge needs Involve department management Proactive tracking of projected attrition Continuous competency monitoring Establish conditions that support workforce planning initiatives Provide adequate and focused funding Communicate top management support Allow flexible adaptation Clearly demonstrate and share benefits Provide tools and guidance to supervisors Engaging in the leading-edge practice of workforce planning, including enterprise forecasting and skillsgap scenario planning, is one of the greatest drivers of business results. For example, those companies that excel in workforce planning drive four times the value of those companies that focus on the consolidation of HR technology systems. -SHRM, Report: Many HR Departments Lack Crucial Skills for Success 2/7/

41 Workforce Planning >Options to Consider Collect/track data regarding employee age and years of service Establish a framework for assessing workload and staffing levels Develop a position and employee competency inventory Prioritize resources based on program priorities HR leads planning effort with a proactive and cohesive approach Develop strategy for recruiting qualified staff: o Consider adoption of more flexible and appealing hiring procedures o Expedite screening and validation of entry/examination requirements o Develop worker-friendly personnel policies o Explore benefits of more flexible job descriptions Develop strategy for developing existing staff competencies Develop strategy for cross training and knowledge transfer Communicate strategies and seek feedback from stakeholders Include training and workshop time related to workforce planning as part of the upcoming supervisory training program 41

42 Performance Evaluation >Why Performance Evaluation Tool for employee performance measurement: basis for pay increases, promotions, assignment changes and/or discipline Tool for employee growth: plan the training, guide job experiences, mentoring and other activities related to employee development >Best Practices Balances performance measurement and growth in way that reflects organizational values and culture Aligns with strategic objectives/priorities of the County Legally defensible practice (timely, consistent, levels of review, etc.) Focusing first on the fairness of the design process and the approach chosen (job evaluation, skill/competency-based plans and market pricing) rather than on the results (pay structure) is likely to achieve employee and management commitment, trust and acceptance of the results.* *Source: Milkovich, G., and Newman, J. (2002). Compensation, Seventh Edition. San Francisco: McGraw-Hill Higher Education, p

43 Performance Evaluation >Options to Consider More automation of processes (see use of technology section) Competency Model Implement in phases and organize in groupings o o o By category of job (supervisory, administrative, professional, etc.) By skill area of job (finance, information technology, etc.) All employees (teamwork, communication, punctuality, etc.) Should be used for recruitment, development and placement in addition to Performance Evaluation Requires buy-in and support of leadership and effective communication of rationale and advantages with staff 360-Degree Evaluation (aka Multisource Feedback) Model Evaluations from peers, supervisors, direct reports, internal and external customers, suppliers, etc. Better to use as a secondary tool, rather than primary measurement 43

44 Competency Models >Three ways to use Competency Models Develop a common competency model at the organizational level and create subsets of performance standards reflecting those competencies (for example, professional jobs, administrative jobs and managerial jobs). Identify job families such as information technology, finance and management. Develop customized competencies and performance standards for each job family and level. Define a core set of performance standards and competencies such as interpersonal effectiveness, teamwork and communication across all jobs. Define specialized technical competencies for each individual job group. *Source: SHRM Foundation Executive Briefing: Four Questions the CEO Should Ask About Performance Evaluation, June

45 Information Technology >Why Information Technology Improve workflow Empower employees with self-service options Improve communication Increase capability for analysis and planning Enhance decision-making relative to human resource management >Best Practices Integration between payroll and human resource systems is imperative to ensure that processes and decision making is effective, efficient and has positive impact Workflows and priorities should be clearly defined before a pursuing a technology solution The largest part of an organization s budget is it s personnel costs, so HR needs and workflows should be central to any system selection 45

46 Review > Why human resource management is central to cost control > Key cost considerations relative to legislative mandates and collective bargaining negotiations > Identifying key steps to optimizing your human resources Alignment with strategic priorities entity-wide Key metrics and HR Audit points > Benefits of moving from tactical HR to strategic HR Dept. Improved ability to serve both staff and management Improved ability to review, measure, and provide insight > Tools and best practices for effective HR Management 46

47 Questions and comments 47

48 Contact information Jenna Weidner, Senior Consultant direct 48

49 Disclosure Pursuant to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of Treasury, nothing contained in this communication was intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose. No one, without our express prior written permission, may use or refer to any tax advice in this communication in promoting, marketing, or recommending a partnership or other entity, investment plan or arrangement to any other party. Baker Tilly refers to Baker Tilly Virchow Krause, LLP, an independently owned and managed member of Baker Tilly International. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought Baker Tilly Virchow Krause, LLP 49