Softscape Whitepaper: Mission Critical Human Capital Management: A Practical Guide For Hr Leaders

WHITE PAPER

Mission Critical Human Capital Management: A Practical Guide For HR Leaders A Softscape White Paper November 2008

The Strategic Mandate With the economy in a downturn, and pundits prognosticating a prolonged global recession, human resources (HR) leaders are searching for a path to follow. The question is, what’s the right path? There are two (seemingly) competing lines of thought. On the one hand, HR organizations can hunker down and focus on cutting costs. Becoming tactically focused in troubled economic times is a legitimate path. HR leaders that effectively streamline and cut costs from their operations by automating inefficient, paper-based processes (e.g., performance management), and tie the outcomes to the bottom-line, invariably gain credibility with their CEOs. But is this enough? On the other hand, HR leaders can act more strategically and think about long-term consequences, since the silver lining of uncertain economic times is that there are always opportunities for leaders with the foresight and vision to capitalize on them. Strategic human capital management (HCM) – or talent management – is contingent upon integration of disparate HR functions, processes, and systems. These include performance management, hiring, succession planning, compensation, learning and development, employee records and talent profiles, and workforce analytics. It all amounts to leverage. If succession planning is currently a high priority, is there a performance management system in place to identify high performers? If a company is promoting a performance-oriented culture, is it effectively linking pay (compensation) to performance? Automating individual HR functions is a tactical exercise. Optimizing the connections between HR functions is a strategic one. The reality is that tactical and strategic endeavors are not mutually exclusive. Both build upon each other, and both are essential to not only weathering the economic storm, but also to positioning HR to become a more strategic contributor to the overall business. HR leaders that focus on a holistic HCM strategy supported by integrated technology – even when the instinct is to hunker down and cut costs – are poised to become mission critical.

Seizing The Low-Hanging Fruit During the second half of 2008, HCM investments have become increasingly scrutinized. HR leaders are under more pressure to justify their investments with business cases and return-on-investment (ROI) analyses. However, complications often arise due to the fact that HCM offers both hard and soft returns. Quantifiable (hard) metrics are generally preferable to qualitative (soft) metrics because they lend themselves better to financial analysis, are more credible to the CEO, and more readily stand up to scrutiny. Yet both have their proper place in an HCM business case, and it is often difficult to associate an actual dollar figure to some of the more complex yet equally beneficial HCM outcomes. There is little doubt that automating HR functions that were once manual and/or paper-based can provide the typical company with substantial cost savings. One Softscape customer, a leading financial services company with 11,000 employees, conducted more than 20,000 online learning sessions and 200 classroom sessions within twelve months of deploying Softscape’s Learning & Development solution. Using the data in Table 1, this would amount to a savings of roughly $280,000 in training enrollment costs alone (see Table 1). Table 1: Cost Benefits of HCM Automation Function

Manual Cost

Softscape Cost

Approx. Savings*

Description

Employee Profile

$10 - $13

$3 - $4

70%

Process change of address

Compensation

$43 - $45

$18 - $20

57%

Process salary change

Recruitment

$21 - $23

$11 - $12

48%

Process job application

Manager Requisitioning

$35 - $37

$10 - $12

69%

Create a requisition

Development

$17 - $18

$3 - $4

80%

Enroll someone in training

Appraisal

$48 - $49

$14 - $15

70%

Approve promotion or transfer

*Take # of transactions performed in each category and approximate the savings Source: AMR Research, 2006

The automation and technology-enablement of core HR functions and processes is the first step to mission critical HCM. Automation provides several key benefits:

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Speed: Automating a manual process such as performance management can be done relatively quickly. One of the keys to success is selecting a technology platform that is scalable yet highly configurable so that time-consuming and expensive programmatic customizations are not required during implementation. Further, by leveraging best-practices within the technology (e.g., a standard five step or seven step performance management process), companies can effectively configure and deploy a new performance system in a matter of days or weeks. User training and education can be executed concurrently with the deployment.

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Cost Savings: As Table 1 highlights, companies can expect roughly a 70% savings in the cost of approving a promotion or transfer as they technology-enable a manual performance management process. There are other significant cost benefits as well, some not so easily quantifiable. For instance, time savings related to instrument writing. A narrative style instrument typically requires 3-5 hours to complete between managers, employees, and peers. Softscape solutions have been shown to reduce the writing time by 20-35%. Further, routing instrument documents for review, approval, and subsequent revisions is difficult to track, but conservative estimates show

an instrument changes hands back and forth five times or more (between manager, employee, 2nd level manager, HR, etc.). By automating the routing of documents, a 25%-50% reduction in time can be realized. A final note on cost savings: key metrics must be established and systematically measured (e.g., completion metrics), leveraging workforce reporting and analytics, in order to establish and maintain credibility with senior management. •

Credibility: A quick, efficient automation project that demonstrates significant hard and soft returns is essential for HR leaders to build credibility with their CEOs. Yet perhaps the most significant benefit of HR automation is that it lays the plumbing for more strategic, mission critical endeavors. In a down economy, “quick wins” are especially important, since the credibility gained from these projects open the door for more visionary HR programs. Further, automated HR processes can now be optimized and the linkages and interdependencies between them can be fully exploited.

Shifting From Automation To Optimization Traditionally, organizations automated individual processes, such as performance reviews, compensation, or learning management. Yet while automating a single process can garner significant improvements, it does little to solve more strategic problems. Automating individual activities creates silos that isolate information from other users and processes. Points of leverage cannot be fully exploited, and creating these standalone silos does not enable HR leaders to gain insight into information that spans different HR activities and processes. Succession planning provides an ideal example. Effective succession planning requires a centralized foundation and numerous inputs, as well as key outputs such as learning and development for career planning. In essence, succession planning is not a siloed business process, but part of a broader talent ecosystem (see Figure 1). Figure 1: Succession Planning Within The Broader Talent Ecosystem Analytics & Reporting

Succession Planning

Self Assessment

Successor Pool

Talent Pool

Not Ready

360 Feedback

Ready

Performance Appraisals

· Talent Assessment · Career Planning · Org. Chart · Search · Nine-box · Gap Analysis

Learning/Development Plan Competencies Job Profiles Talent Profiles S.P. Foundation

Employee Records Inputs

Outputs

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A case study of the company ALFA further highlights the valve of HCM process interdependency. Based in Mexico and employing more than 50,000 people, ALFA is a diversified global company consisting of four distinct business units: petrochemicals, aluminum auto components, refrigerated food, and telecommunications. A key challenge facing the company was promoting cross-business unit transfers, thereby minimizing employee attrition to the competition. ALFA was losing high-performing talent because it was unable to find growth opportunities for employees within the organization. Due to the proliferation of different HR systems at each of its four business units, ALFA suffered from inconsistency in managing its global HR processes as well as a lack of visibility into key employee information that could be used to drive succession planning. To address its challenges, ALFA standardized on a single, integrated human capital platform across its diverse business units. This platform, provided by Softscape, became the centerpiece of ALFA’s employee lifecycle, which consists of planning, hiring, compensation, performance management, learning and development, succession planning, reporting and analysis, and HR management. As a result of ALFA’s implementation, it is far more common for employees to jump from one business unit within the company to another, expanding their experience and skill sets via promotion and advancement. This example clearly demonstrates that HR has become a strategic and mission critical contributor to ALFA.

Exploring The Role Of HCM Technology While technology is not a proxy for a well thought-out strategy, a robust and flexible technology foundation is an essential enabler for mission critical HCM. The technology foundation provides a best practices platform for information integration and process optimization. One such example of this platform is Softscape Apex© (see Figure 2). Figure 2: Integrated HCM Platform – Softscape Apex©

An integrated HCM system fully supports mission critical HR processes that enable organizations to effectively plan, hire, align, manage, develop, motivate, retain, and analyze a high performing workforce. At the center of the platform is the employee system of record, which includes employee data, talent profiles, job profiles, on-boarding best practices, and competencies. This critical information, once made consistent across the organization, feeds the core HR processes, facilitates the linkages across these processes, and ultimately enables improved business analysis and insight.

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Leading companies are realizing the numerous benefits of a holistic HCM strategy supported by a strong, centralized technology platform. These benefits include: •

Elevate HR to a mission critical function within the business by enabling cross-function integration and execution of strategic initiatives

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Link all elements of the employee lifecycle, from hiring through retirement

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Ensure company-wide consistency of HR information and processes

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Improve reporting and decision making through workforce analytics and a centralized information repository

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Automate and optimize workforce performance processes and provide clearly defined goals to employees

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Provide line-of-site visibility to employees by aligning their performance to company goals and strategies

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Establish pay-for-performance programs to build a performance-driven business culture

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Identify top performers and facilitate succession planning for all employees

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Develop comprehensive learning and development programs to facilitate employee growth

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Fill key positions by hiring the most qualified people

Becoming Mission Critical Several immediate strategic opportunities present themselves to HR leaders to further establish credibility with their CEOs and have the vision and foresight to act now, not when the economy begins showing signs of improvement. By creating a sense of urgency and attacking these issues head-on, HR leaders can clearly demonstrate the positive impact that they are having on the business as a whole. Indeed, the goal for every HR leader should be to make the HR organization a mission critical part of the business. •

Avoid A Succession Planning Crisis: The U.S. Bureau of Labor Statistics estimates a shortage of 10 million workers by 2010 as baby boomers start retiring, and more than 50% of companies are facing a talent shortage today. According to Bersin & Associates, only 20% of companies have an enterprise-wide succession planning process, and fully 53% have no process at all. What are you doing to prepare your high performing employees for the mantle of leadership as current leaders retire or move on? What are you doing to mitigate the risk of untimely departures of essential personnel? The time to act is now, not when your talent crisis hits.

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Engage Employees To Impact The Bottom Line: Keeping your workforce engaged during times of economic uncertainty is extremely challenging. Companies in all industries are experiencing layoffs, and workers are finding the value of their retirement accounts sinking at a sickening rate due to the volatile stock market. Does your company run the risk of a disengaged workforce and low morale? Research clearly shows that companies with higher percentages of engaged employees perform better than their industry peers (e.g., Better financial performance, higher customer satisfaction, higher employee retention, higher productivity). Companies that fail to engage their staff face significant risks – beyond low morale – relative to their competitors that have established systematic engagement strategies.

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Retain Your Top Performers: Focusing on employee retention in a time of when companies are experiencing mass layoffs may seem like an oxymoron. Yet high performers will always be in demand. And when the economic climate does improve, which segment of your workforce will be the first out the door? Motivating, rewarding, and retaining top performers is a key business objective in any economic climate. Best-in-class companies focus on a performance-driven rewards system that compensates individual contributors directly proportionate to what they achieve and what they contribute to the bottom-line. Don’t wait for your high performers to polish off their résumés in search of greener pastures. By then, it will be too late.

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Hire Successful Candidates: As companies in just about all industries experience layoffs, one might think that hiring is not a high priority. Yet even in troubled economic times, companies still experience great difficulty filling key positions. Hiring is not simply a search issue, it’s an assessment issue as well. The cost of hiring the wrong person ranges from 5-7 times that person’s annual salary. Traditional applicant tracking systems helped manage processes for requisition creation and résumé searching. Yet these systems neglected one critical element of effective hiring: “Will the candidate actually succeed at the job?” By hiring right the first time, companies can dramatically improve employee retention. And, there are significant cost and efficiency benefits to be realized by streamlining the entire hiring lifecycle from requisition to candidate selection.

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Double-Down On Employee Development: To their regret, many companies cut back on their learning and development programs during the recession of 2001. The inevitable result was a multi-year rebuilding effort just to get back to the status quo. The lesson learned: Don’t sacrifice the future for a more comfortable present. Smart companies double-down on employee development in challenging times. The reasoning is straightforward: Actively developing employees and providing career advancement opportunities to them are top drivers of employee engagement. And research clearly shows that companies with higher percentages of engaged employees perform better from a financial perspective than their industry peers. Bottom line: The ability of HR to have a tangible impact on the business, especially in challenging times, is essential to survival.

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Analyze Your Workforce: A key challenge many HR leaders face is consistently and accurately measuring the impact of their HCM programs. Part of the challenge lies in the fact that data is spread out in various silos across the organization and there is no common employee system of record. Integrated HCM technology platforms that cover the gamut of HR functions can alleviate some of the problems (since the data is all in one place) but a robust analytic and reporting environment is also required. Pre-defined metrics and reports, key performance indicators (KPIs), and executive dashboards, along with configurable tools to establish new measurements, must become of an integral component of HCM strategy. Without the analytic “infrastructure,” HR leaders are often operating blind, not to mention how difficult it becomes to establish credibility with CEOs and other senior management as to the effectiveness of various programs.

Conclusion Good economic times or bad, HR organizations have an incredible opportunity to become more strategic and mission critical to their companies. Economic downturns simply create a sense of urgency for HR leaders to further justify their investments and endeavors. Seizing the low-hanging fruit by focusing on automation and cost savings is a viable path, yet it has the real potential to leave significant upside on the table. Smart leaders find opportunity in adversity. Setting the stage for HR to become a mission critical contributor to the company will inevitably pay dividends for years to come. Don’t let the opportunity pass you by.

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Authored By Steve Bonadio, Senior Director of Product Marketing, Softscape, Inc. For more information, contact [email protected].

About Softscape Softscape is the global leader in integrated people management software that enables organizations to more effectively drive their business performance. Recognized by industry analysts as the most comprehensive strategic human capital management (HCM) solution, Softscape provides complete employee lifecycle management, including a core system of record, in a single, integrated platform for improved business intelligence. The company offers customers of all sizes and in all industries the most flexibility and choice with multiple purchase, configuration, and deployment options. For more than a decade, Softscape has helped millions of workers across 156 countries be more successful at their jobs while contributing to bottom-line results. Softscape’s customers represent Fortune 500/Global 500, mid-market, and government organizations, including Procter & Gamble, Barclays, AstraZeneca, Seagate, ALFA, GKN, Edcon, LandAmerica, and the U.S. Department of Homeland Security. Softscape is based in Massachusetts with offices in London, Sydney, New York City, Chicago, San Francisco, Hartford, Washington, D.C., Bangkok, Hong Kong, and Johannesburg. www.softscape.com Copyright © 2008. All Rights Reserved. Reproduction without written permission is strictly prohibited. The Softscape logos and referenced products are either trademarks or registered trademarks of Softscape, Inc. All other brand and product names contained herein may be trademarks or registered trademarks of their respective holders. 08_1211l s

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