Step Two of Developing an HR Strategic Plan: Conduct an Internal and External Environmental Scan

AdobeStock_92951733This week, I’m introducing the second step of developing an HR Strategic Plan. This is the step where both internal and external environmental scans must be conducted in order to identify and interpret the data that pertains to opportunities and threats in the organization’s business environment.

Being able to identify and understand these threats is essential in developing an effective strategic plan. The two types of scans are defined below:

The first is the internal scan which identifies internal organizational trends as well as the physical, financial, and human assets and determines whether these trends and assets are strengths or weaknesses.

Examples of what to examine in an internal scan include employee interaction with each other, employee interaction with management, manager interaction with each other, management interaction with shareholders/owners, access to resources, brand awareness, organizational structure, individual and core competencies, innovation capabilities, operational potential, etc.

The second is the external scan which identifies and analyzes the external environment in order to anticipate and identify trends, opportunities and threats to the organization.

I recommend three environments that should be scanned and analyzed.

  1. The organization’s industry environment. Examine the competitive structure of the organization’s industry. Take a good look at the competitive position of the organization as it relates to its top competitors. The industry’s history, life cycle stage, and dynamics must be carefully assessed including how globalization is affecting the competitive environment.
  2. The national environment. Examine the whether the organization’s national/local framework is capable of being competitive in the national and global environment.
  3. The broader socio-economic environment. Explore the macro-economic, social, government, legal, technological and global factors that may influence the organization’s competitive environment.

Understanding what we are scanning and gathering data on, next we’ll take a look on how go about collecting that data.

Internal Sources:

  • Annual Reports
  • Business Unit strategic plans
  • Marketing materials
  • Employee surveys
  • Staffing Plans
  • HR and training staff
  • Employee exit interviews
  • Conversations with leadership team
  • Org charts

External Sources:

As I alluded to earlier, the main purpose of the scans is to identify and evaluate the organization’s strengths and weaknesses.

The first element to assessing the organization’s strengths and weaknesses are the competencies that are necessary for the organization to be successful in executing its strategy. The people of the organization are the critical link between the business strategy and the results.

There are specific competencies and behaviors that are needed to successfully implement a strategy within its environment. For example, significantly different competencies are needed for a cost strategy vs a service strategy.

The next element to consider when evaluating the strengths and weaknesses is to analyze the organization’s various management practices. Determine whether the management practices are logically related to each other and capable of producing the critical competencies needed to effectively implement the strategy.

A thorough HR Department assessment must also be conducted. Take a cold hard look at the organizational structure of the HR department and the skill levels of the staff. In addition, analyze and evaluate whether the right processes and systems are in place.

The HR Department needs to know how it will make a contribution to the organization’s business, have the right org structure, have the right systems and processes in place, understand the department’s strengths and weaknesses, how the department is perceived by leadership and employees, and have a plan in place to capitalize on staff strengths and address staff weaknesses.

Strategic HR is all about the relationship between HR leadership and the organization’s business unit leadership. It’s about delivering real business value to all functions of the organization. HR has to be thoroughly involved with all aspects of the business in order to fully understand and appreciate the opportunities and problems the organization and business units deal with every day.

To be taken seriously by the organization’s leadership, strategic HR professionals need to be great business professionals. They should have actual business leadership experience outside of HR, in my opinion. In addition, they should put themselves in positions where they regularly work with key influencers, identify opportunities and provide solutions to business problems, facilitate key meetings, be members of leadership teams, etc.

Step One of Developing an HR Strategic Plan: Determine and communicate a Vision, Mission, and Values Statement

Last week I introduced the summary of the six steps needed in developing an HR Strategic Plan. This week I will start drilling down into each step in more detail.

This week is step one, determine and communicate an HR Department Vision, Mission, and Values Statement. These three things will help the HR function positively identify and distinguish itself to the organization’s leadership and employees. Always a good thing!

Since private sector organizations don’t publicize their HR Department’s vision, mission, and value statements (because they don’t exist or are just shared internally?) and the Higher Education sector does, I am sharing some of my favorite examples.  Some of the universities have all three and some just have vision and mission statements. I also found and am sharing an excellent list of value statements from the County of San Mateo.

First, the Vision Statement.

The Vision Statement is an aspirational description of what the HR organization wants to achieve in the future. It serves as a guide for choosing current and future courses of action.

Here are some sample HR Vision Statements:

Marquette University HR

The Human Resources Department will be a catalyst; we aspire to be the model for excellence and leadership in human resources, emphasizing strategic and progressive human resource practices, high quality service, efficiency, employee growth and enrichment, and community. We will seek to implement human resource best practices and innovative human resource solutions. We will maintain a dedicated focus on customer service and continuous improvement, and we will remain committed to fostering an environment that sustains Marquette’s tradition of transformational education.

Loyola University HR

Our vision is to be recognized as a preferred employer and provider of innovative and results-oriented human resources services, policies, and systems.

UC Davis HR

We are a model HR organization that inspires all people to reach their full potential where their contributions and discoveries advance our world-class university.

Buffalo State HR

We aspire to build partnerships with management at all levels of the organization to create a campus culture that values all employees. This culture encourages and rewards exceptional performance and continuous improvement, fosters teamwork, and supports balanced attention to work and personal life issues. We provide services of the highest quality in a cost-effective manner while creating a healthy professional environment that fosters respect for both diverse perspectives and a service orientation.

Second is the Mission Statement.

The Mission Statement is a written declaration of the HR organization’s core purpose and focus. It typically remains unchanged over time.

Here are some sample HR Mission Statements:

Marquette University HR

The Human Resources Department creates, encourages, and maintains an environment that supports, develops and sustains the well being of Marquette University’s employees, students, and broader community. We do this by being a knowledgeable, approachable, professional resource in providing quality services in the areas of employee relations, benefits, recruitment and retention, organizational development, compensation, and human resource information management. We develop and communicate sound policies and procedures that balance the needs of employees and the needs of the university while ensuring compliance with federal and state law. We provide strategic leadership, modeling excellence, honesty, integrity, and teamwork. We deliver our services in support of the university’s mission of excellence, faith, leadership, and service.

Loyola University HR

Our mission supports Loyola University Maryland by ensuring human resources services, policies, and systems align with the University’s values, strategy, and mission. These services include:

  • Recruitment and hiring diverse and talented employees
  • Salary and Benefits Administration
  • Employer and Employee Relations
  • Professional Development
  • Organizational Development
  • Human Resources Information Systems Management
  • Compliance with employment related legislation

The human resources mission is best achieved by continuously researching, learning, developing, and delivering innovative results oriented service, policies, and systems for and with faculty, administrators, staff, applicants, and external stakeholders.

UC Davis HR

We promote excellence in people by delivering innovative HR programs and strategies to support One UC Davis.

Buffalo State HR

We support and influence the strategic direction of Buffalo State by providing managers and employees with innovative solutions to organizational and human resource issues. The department exists to provide services which help the college to attract, retain, and reward competent and dedicated faculty and staff who share a commitment to the values of excellence and innovation in teaching, research, and service to students and the community.  We are committed to promoting a quality work environment for our staff that positively influences the education of our students.

*It’s important to note that many people confuse the two.  The Mission is what needs to be accomplished while the Vision is what needs to be pursued in order to accomplish the Mission.  

Third is the Value Statement.

The Values Statement are the basic beliefs and guiding principles for the HR organization that, similar to the Mission Statement, remain unchanged over time.

Here are some examples of Value Statements:

Loyola University HR

Our values are guided by our Jesuit traditions and history of excellence, integrity, honesty, diversity, community, justice, service, leadership, discernment, and learning

UC Davis HR

Excellence as the standard for measuring the quality, timeliness, and consistency of our service.

Integrity at the core of all we do to provide service that is trustworthy, reliable, and fair.

Compassion in our service to faculty, staff, and students who have committed to building a better world.

Diversity to advance an inclusive and respectful culture.

County of San Mateo HR

  • Promote Honesty, Integrity, and Trust: We honor our commitments and conduct business in a manner that promotes fairness, respect, honesty, and trust.
  • Celebrate Teamwork: We encourage the diversity of thoughts, experiences, and backgrounds and celebrate participation and partnership in all of our endeavors.
  • Encourage Communication: We solicit the input of others and strive for transparency and inclusiveness.
  • Focus on Our Customers: We have a passion for service and are committed to knowing our customers’ business, anticipating their needs, and exceeding expectations.
  • Embrace Change and Innovation: We are open to possibility and foster creativity and risk-taking to support continuous improvement.
  • Champion Employee Development: We are committed to maximizing the potential of every individual and to support and promote the County as a learning organization.
  • Model Leadership: We lead by example and advocate equitable treatment in our behaviors, policies, and practices.
  • Produce Quality Results: We believe those we serve deserve excellent service, a safe, productive, and healthy work environment, and quality results.

As soon as the vision, mission and values statements are defined and established, HR must communicate and share them throughout the organization.  

If done effectively, the HR Department will gain a great deal of credibility, respect, and can ensure their place in the organization’s strategic planning and implementation process by consistently following and living up to their established vision, mission and values.

Speaking the Language of Business for Strategic HR Professionals

AdobeStock_101865782This week I’m returning to discussing strategic HR and am going to define some important business terminology Strategic HR Professionals must know in order to be taken seriously by their organization’s leadership.

This is not a comprehensive list but simply some basic business terms that relate to developing an effective HR strategic plan.

The first term is Business Strategy.  Business strategy as defined by Michael Watkins of the Harvard Business Review is the following:

A business strategy is a set of guiding principles that, when communicated and adopted in the organization, generates a desired pattern of decision making. A strategy is therefore about how people throughout the organization should make decisions and allocate resources in order accomplish key objectives. A good strategy provides a clear roadmap, consisting of a set of guiding principles or rules, that defines the actions people in the business should take (and not take) and the things they should prioritize (and not prioritize) to achieve desired goals.

The definition implies that a business strategy can be looked at from the perspective of creating shareholder value, competitive market position, and creating a strategic advantage within the constantly changing business environment.  

This constantly changing business environment is influenced by things such as national and local politics, regulatory agencies, the economy, customers, suppliers, competitors, technology, economic trends and current and potential markets.

The second term is Strategic Intent. The business strategy, described above, is built upon the strategic intent and is defined by the website Simply Strategic Planning as the following:

Strategic intent is a statement of the course that the management of an organization plans to take the enterprise in the future. As many people as possible should understand these intentions. Then everyone can work consistently to achieve the corporate purpose.

Statements of intent aim to be more explicit than the usual directional statements. Most mission and vision statements point the way forward only in general terms. Sharp statements of intent can provide more clarity about what to do in the near future to achieve the vision and/or mission. Such statements convey the flavor of the strategic decisions taken through the planning process

In order to determine an organization’s strategic intent, the following questions must be answered: who we are and what we are trying to accomplish, what business are we in, what is our mission, what is our vision, what are our core values, how do we compete, and how do we add value to the marketplace.

The third term is Strategic Focus. A good description of strategic focus comes from Ann Latham at Forbes where she writes the following:

A good strategic framework provides focus by limiting the number of directions the organization runs. You’d be foolish to try to extend all your products while simultaneously expanding all your markets while also ramping up capacity or shifting your business model to include new types of production, sourcing, sales, delivery, and partnerships. This isn’t just an issue of capacity. It is also an issue of risk, learning, complexity, and credibility.

A great way to identify an organization’s strategic focus is to take a close look to the classic Generic Strategies by Michael Porter where he identified three strategies that address the question of how value is added by an organization.

These three approaches are cost leadership, differentiation, and focus as described in this article by the Institute for Manufacturing:

Cost Leadership

In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. if a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average.

Differentiation
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.

Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.

The focus strategy has two variants.

(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on differences between a focuser’s target segment and other segments in the industry. The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments. Cost focus exploits differences in cost behaviour in some segments, while differentiation focus exploits the special needs of buyers in certain segments

In order for an organization to be successful and grow, it must have a business strategy that excels in all three of these strategies, not just one or two.  All of the organization’s operating and management systems, which include HR, must support all three of these approaches.

Bottom line, for an HR pro to be seen as an effective business partner, they must fully understand such important basic business elements such as the operations of the organization, its sales/revenue LY and YTD, its profit margin, how those margins compare with competitors and industry, its cash flow, its growth rate, the metrics leadership tracks, and the top initiatives of each of the members of the leadership team.

What is a Strategic Plan?

This week I’m going to talk about what exactly a strategic plan is.

A strategic plan is a written statement about the future direction and goals of an organization or HR department based on an analysis of the organization’s current status, strategy, strengths, limitations, threats, and opportunities in the current and future business environment.  

An effective strategic plan helps the organization understand where it is now, where it would like to be in the future, and how it’s going to close the gap between its current reality and the desired future status in order to get to where it wants to be.

All good strategic plans support the organization’s vision, mission, and values as well as identify its strategic goals and needed resources.

Since I brought it up, let’s take a minute to define vision, mission and values even though most readers probably already know but it never hurts to revisit the definitions.

An organization’s vision statement provides a clear perspective of what it wants to have happen in the future. It includes a description of its operations as well as a compelling explanation of how the organization will look and function once the strategic plan has been implemented.

The organization’s mission statement is a clear description of it’s overall purpose. It identifies the essential reasons the organization exists and the principal products and services it provides to the marketplace.

Finally, the values of an organization represent the key core priorities of it’s culture. It’s what drives the organization’s priorities and how employees honestly behave.  An organization’s values typically remain the same over time.

A complete business strategy is made up of three parts – an operations strategy, a financial strategy, and most importantly IMO a people strategy.  I’m focusing on the people strategy, or HR Strategic Plan, as it provides the foundation of all the other strategies with the ability to identify, build, and reinforce the organization’s capabilities.  

The justifications for creating an HR Strategic Plan are that it provides a solid framework for value-added action, helps establish priorities, allows for the all important measurement of results, and creates a way for reallocating resources from the organization’s low producing activities to its high producing activities.

In addition, it helps increase and improve HR’s credibility within the organization by showing its positive impact on the organization’s bottom line. Which is always a good thing especially since, as I recently mentioned in a previous post, HR is still thought by many business leaders as pretty much an administrative function that operates separately from the rest of the other functions in the organization

In order for HR to take on a strategic role and be a strong strategic business partner, it must be represented in the leadership of an organization and be involved in defining the organizational issues before the strategic decision are made.  HR must be involved in turning those decisions into a set of organizational actions.  

According to my favorite HR thought leader, Dave Ulrich, there are several things an HR professional must do in order to be an effective Strategic HR Business Partner:

  • Understand and communicate that improvements are typically very difficult and complex and will take time to accomplish so watch out for quick fixes as they are typically very seductive but rarely work.
  • Align the HR Strategic Plan with the Business Strategic Plan which will ensure HR being seen as adding value to the organization.
  • Keep the strategic plan top of mind instead of shelving it and forgetting it.  The plan must be executed and managed in order to be effective.
  • Create a Capabilities Focus within the organization.

I want to focus a little more on that last bullet, Capabilities Focus, since the first three bullets are fairly self explanatory.

Capabilities are an organization’s ability to effectively manage its resources in order to gain a competitive advantage in the marketplace. They are anything the organization does well that improves business and creates a competitive advantage in the organization’s marketplace.  

Strategic HR Professionals are able to effectively identify and improve an organization’s capabilities that will help execute the organization’s strategy and leverage new products and services.

Some examples of organizational capabilities include knowledge, innovative designs, adaptability, cost competitiveness, and strong leadership.

Defining deliverables and showing how they can be measured and what actions need to be taken is critical in the strategic planning process. The Strategic HR Professional must focus on the deliverables which are, in other words, value added results.

The HR strategic plan is developed from looking, listening, questioning, clarifying and knowing what needs to be done.

The plan must include ways that HR can help the organization add value to its key stakeholders (employees, customers, and investors), improve organizational capabilities, improve employee competence, fulfill regulatory compliance, determine processes and activities that can be retained or outsourced, and align HR programs with organizational goals.

My next post in this series will discuss how the strategic HR Professional must be able to speak the language of business and define a few important strategic business terms that will need to be understood. Then after that, I’ll get into the steps of how to actually develop an HR Strategic Plan.

Why You Need to Create a Strategic Plan for Your HR Function

So why have an HR Strategic Plan?

In today’s highly competitive business environment, success is often determined by how well an organization and Human Resources can manage change.  Organizations have to constantly monitor their place in the external business environment as well as evaluate and improve their organizational capabilities, or intangible assets, in order to effectively compete in the marketplace.

The strategic planning process is the most effective way for organizations to identify and address all of the various external and internal forces that have an impact their business. This process moves the organization from their current place to their desired future.  And more importantly, brings value to all of the stakeholders of the organization.  

But what value is the strategic plan without the people within the organization being ready, willing, and able to execute the plan? None. The organization’s employees must understand and be fully engaged in and willing to follow the strategic plan in order for it to be of any value to the organization.

This is where HR comes in.  

HR’s value lies in being able to build and maintain the organizational foundation and infrastructure to help drive the necessary changes that will accomplish the organization’s strategic goals.  

Regrettably, HR is still thought by many business leaders as pretty much an administrative function that operates separately from the rest of the other functions in the organization.  Sadly, this reinforces the opinion that HR isn’t that important to the success of the organization. HR is also not typically held accountable for business results, as the other functions are, and because of this, HR considerations are typically ignored and viewed as a cost center rather than a profit line contributor.

There are some leaders, however, who recognize that an organization’s human capital is a key strategic resource for increasing organizational capability and achieving a competitive advantage over competitors.  Being able to attract, retain, motivate, and develop the best employees in the organization’s industry are critical to its success in the marketplace.

The ability of an organization to execute it’s strategic plan rests solely on its effective utilization of its human capital.  

Smart business leaders are recognizing this and have turned to HR to help them positively impact their business results.

In order for HR to have a positive impact on an organization’s business results, we must focus on and engage in both the long-term strategic and the short-term administrative and operational planning.

There are three roles that HR has in an organization that need defining before we go any further:

First is the administrative role. This is the traditional role most people think about HR. It’s things like regulatory compliance, policy & procedure interpretation, record keeping, HRIS management, benefits administration, onboarding & offboarding activities, etc.

Second is the operational role. These are the HR activities that relate to the day to day operations of the organization.  These are the tactical activities such as recruiting, filling job reqs, handling employee relations issues, employee communication, compensation program management, etc.

These two HR roles aren’t the high-level exciting things many of us in the upper levels of HR like doing any more but they are absolutely essential to the organization and the reputation of the HR function. HR must be 100% technically competent in the administrative and operational roles and execute their HR services flawlessly.  

HR’s reputation is built on the employee’s perceptions of competence and has to be flawless in these two roles in order for to build a solid foundation of building on the higher level strategic role.

Third is the strategic role. This is the role where HR can really make a difference.  It requires HR participating in the strategic planning process, improving the organization’s performance, ensuring effective leadership, redesigning organizational processes, and ensuring financial accountability for HR results.  

Business literacy is required in order for HR to be effective in the strategic role. HR must know and fully understand who the organization’s stakeholders are as well as the organization’s markets, products, customers, and competitors.  Fully understanding financial terminology, speaking the language of business, and knowing how to read and interpret the organization’s financial statements – income statement, balance sheet, cash flow statement, etc.- are absolutely necessary.

I believe that the most effective strategic HR professionals are those who have real-life business experience outside of HR. (Self-promotion alert) I’m, of course, biased having successfully led and operated, with full P&L accountability, an award winning full line Macys department store for 13 years.

By having a solid business background and experience, HR can develop effective value-added strategies of staffing, performance management, total rewards, employee relations, and employee development. This puts the organization’s employees in the best possible position to execute it’s strategic plan and contribute to its financial success in the marketplace.

Strategic HR is my favorite topic and the role I enjoy most as an HR professional. I’ve touched on it a bit in my Metrics and Analytics series but I’ve been focusing on writing/podcasting mostly on the operational side of HR.  I had to build a foundation first, you know!

Now I can start exploring more strategic HR topics here at HHHR!  

Next week, I’m going to continue with strategic HR and explain exactly what a strategic plan is.  

Steps to Help Your Employees Understand the Details of Their Benefits

Tell them real-life stories

This week I’m going to cover a small but very important tactical element of HR. Although it’s a small thing, it leads to a much larger strategic element of building a high-performing workplace culture

I’m a strong believer in delivering an amazing onboarding experience for employees. I built one at one employer from the ground up and I had the pleasure of  inheriting an outstanding one at another employer.

Today’s post is going to deal with one portion of the onboarding process – the Benefits discussion.  This is often the most confusing and boring part because HR typically comes in and goes through the insurance benefits using HR and insurance industry jargon. As a result, most employees don’t understand most of what is being said and just tune out and start looking at their phones. This is unfortunate because an organization’s benefits are an important and  critical piece of the total rewards program and employees need to fully be comfortable with understanding them.

I think employees really need to understand all of their benefits and there should be the appropriate amount of time put into the onboarding schedule to make sure employees really do fully understand them. We owe our employees the extra effort to help them understand their benefits rather than just handing them a packet of papers or just helping them logon to the onboarding site and leaving them with an hour to review and enroll.  

So here’s how I do it.

In my schedule, the benefits discussion occurs immediately after all the required hiring paperwork is completed. This way, they are still pretty fresh and enthusiastic.  I always go into the HR portion which includes the insurance and benefit portion of onboarding telling the new hires that this portion is going to be the most exciting and interesting part of the entire  process. I’m obviously being silly and I purposely exaggerate this because they and everybody else has experienced the opposite so it grabs their attention.

I then like to tell real-life stories about how the different benefits work. These are my stories based on my experiences and I’m certain you have your own story bank you can go to when communicating benefit details to your employee team.

For instance as I’m talking about the medical benefits, most people understand what the deductible means and how the co-pay plays into that but many don’t really understand what the Annual Max Out of Pocket means.

So I tell a real-life story about an employee (this was at a previous employer and whose identity I keep confidential) who had a heart attack while out camping with his family. He was life flighted to the hospital and had open heart surgery.  Well, when everything was said and done and the employee added up all the bills that came, the total was over $1,000,000. Fortunately for him and his family, the company health insurance plan had a maximum out of pocket of $3500.  What does this mean? Simple. The employee only had to pay $3500 total for the episode.. And this all happened in the summer so he had to continue treatment, cardiac rehab, and many other doctor appointments and because he reached his MOP, he paid nothing for the rest of the year. Every time I tell this story, I see clear understanding in the new hires’ eyes because this story always makes it obvious what the max out of pocket is.

Another story I like to tell is when describing the Employee Assistance Program (EAP). This benefit is very often forgotten and rarely used. I believe strongly in it as I’ve used it myself and tell the story of a couple employees I helped through substance abuse problems (again at a previous employer keeping names confidential).  

I had employees come to me asking for help with their substance abuse. They feared they would lose their job but my company believes in helping employees who ask for help. So I gave them all the EAP info and explained to them how the EAP works and strongly encouraged them to call and get the counseling help they need. I also explained that in addition to the free counseling sessions, our medical insurance has programs to help them clean up. They took advantage of these programs, cleaned themselves up, and remained good productive employees.

I love telling this story.

The last story I’m going to share this week is about the Flexible Savings Account (FSA). I tell them I love this benefit because it’s like an interest free, tax free loan to pay for medical related expenses like co-pays and deductibles. I tell them I usually max out the benefit and contribute the full $2600 and at the end of the year, if I have some left over, I treat myself to some very nice eye glasses and/or prescription sunglasses.  I also go back to the story above about the maximum out of pocket and tell them the heart attack employee had about $1600 left in his FSA and applied that to the MOP amount of $3500 he owed. So he only had to come up with $1900 for the entire cost of the episode.

There are, of course, other stories I tell to help our new employees understand the more complicated details of their benefits but I may share those at another time.. I always get positive comments from the new hires who appreciate me taking the time to sit down with them and going through the benefits we offer and explaining, through real-life stories, how they work.

Not only does this help them personally in understanding their benefits package, it sends the strong message that the organization sincerely cares about them and their well-being.  It’s an important element in the strategy of building that all important high-performing culture that we all strive for.  

The Three Types of Analytics

Third Entry in the Metrics and Analytics Series

We still have a little bit of work to do before we get into the real nuts and bolts of metrics and analytics.

Last week we discussed the five steps of  analytics and this week we are going to cover the three different types of analytics, Descriptive Analytics, Predictive Analytics, and Causation. Again, I am taking all of this information and summarizing it from the Jac Fitz-Enz book titled The New HR Analytics.

The first type of analytic is the most basic, Descriptive Analytics. This type of analytics takes a look at data and analyzes events that happened in the past to help us understand how to approach the future. With this data, we can look for reasons behind past success and failure. Most management reporting uses this type of data.

As HR professionals, we all know that there are many different groups and subgroups within our workforce. With Descriptive Analytics we can really take a deep dive into our workforce and really analyze each of the different groups. It allows us to discover and describe many types of relationships and differences between the groups and show past and current behavior among the groups. It’s important to remember that this type of analytic is not a prescription or solution, but rather just the exploration of past and current data.

Descriptive analytic models quantify relationships in data into group classifications or characteristic. We can take almost any group characteristic and use it to build descriptive models to understand our workforce. The characteristics can be things such as performance appraisal ratings, skills, education, rank, title, age, etc. Fitz-Enz equates this to what the marketing department does with customer segmentation and calls it workforce segmentation with the purpose of improving the return on investment, or ROI, of our HR services.

The second type is Predictive Analytics. This is where we take data and turn it into valuable and actionable information. It uses data to determine the possible outcome of a future event. It gives us meaning to the current patterns that we see in Descriptive Analytics to identify risks and opportunities in helping us see what might happen in the future.

It will give us a good probability of what might happen in the future. We won’t be able to predict the future with 100% accuracy but we can increase the probability that we will be right by reducing as many variabilities as possible.

A great example in the Fitz-Enz book is building a model for selecting employees to hire, train, and promote for a particular position. The model is based on traits, skills, and experience of your very best employees in that particular position. You will increase the probability of making a successful selection by applying the model to all of the candidates for the job.

The third and final type of analytic is called Causation. This is a combination of Descriptive and Predictive Analytics and is considered the most sophisticated level of human capital analysis.

Causal modeling is used to find the hidden root cause of a problem or to make a business proposition for a human capital project investment. Fitz-Enz cites Dr. Nick Bontis as the most prominent expert of causal modeling and uses an example of the perceived value of a training program by the trainees.

In his model, he wants to determine the trainee’s perceived value of the training program so he adds the perceived value of training by the trainees to their rating of the course materials and delivery.

By surveying the trainees, we can determine the business value of the training program by asking them to rate their perceived value of the training on a scale of 1 to 100, the course materials from 1 to 5, and the delivery from 1 to 5. Throw these into an equation and you get something like this:

Perceived Value Course Materials Delivery Total
.80 X 4 X 5 = 16

And you get a total score of 16 out of a possible maximum of 25. We can now track the training’s effectiveness over time, the value of the training to the organization, etc.

When discussing HR Analytics, we can’t simply rely on the past to predict the future. We have to have knowledge as our base in order to do so. Fitz-Enz puts it this way:

Being able to foretell what is likely to happen with a high degree of probability depends on four things:

  1. Comprehension of past and current events.
  2. Understanding not only trends but also the drivers behind them.
  3. Being able to see patterns of consistency as well as change.
  4. Having tools to describe the probability of something in the future.

HR Analytics takes HR metrics and looks to the future by taking past and current strategic and operational data and adding leading indicators.

We now have a basic understanding of the three types of analytics which will help us understand many of the topics in this series I will cover in future posts and podcasts.

Week Six of the PA Cycle: Delivery Week

ID-10040852We’re getting near the end, Crew! This week is when the managers actually deliver the Performance Appraisals to their direct reports and finalize the upcoming year’s Objectives. This is the reason we did all the work the past five weeks! This is where it all comes together.

Let’s start off by explaining what employees expect from their PA. Every employee who works for a manager and organization wants the answer to three basic questions and during the Delivery Week, all three of these questions are answered as described below.

  1. The first is what do you expect of me? This is answered by establishing and finalizing the upcoming year’s objectives.
  2. The second is how am I doing at meeting your expectations? This is answered by delivering the PA based on the previous year’s performance.
  3. Finally, what do I need to do to meet expectations? This is answered when giving feedback during the objective setting and delivery of the PA on what the manager expects from the employee to meet the expectations of the manager and the organization.

In the HHHR PA Cycle, these three questions are answered at the beginning of each year, when managers sit down with their direct reports and discuss their objectives, expected behaviors, and key job responsibilities. This is done through establishing the employee’s Objectives during the PA cycle. During Week Two, Writing Week of the cycle, managers meet with their direct reports and start the discussion of setting objectives for the upcoming year. I will discuss the specifics of how to establish objectives in a later post.

An effective performance appraisal system is an important tool that gives the senior leaders of an organization the information they need to allow them to make some very important human capital decisions such as:

  • Which employees deserve a raise based on their performance over the previous year? Which employees shouldn’t?
  • Which employees should the organization promote? Can the organization promote them? Is there a position in the organization now or will there be one in the near future? If not, how can the organization retain these employees until there is a position?
  • What’s the depth of the organization’s internal talent? Are there people with the skills, experience, and/or potential the organization needs for the future? If not, what are the organization’s plans to hire or develop these people?
  • Who are the organization’s best performers and what are the plans to retain them? If no plans, it needs to be seriously discussed.
  • Who are the organization’s weakest performers and why are they still employed? Are any of them salvageable? Has their poor performance and conduct been documented? If not, why not?
  • And most importantly, in my opinion, an effective performance appraisal system requires managers to inform their employees of exactly what is expected of them and how they are doing at meeting those expectations.

It’s a moral obligation.

Employees who don’t know what’s expected of them and how they are doing at meeting those expectations are not engaged and not nearly as effective as they could be. Unfortunately, this may be the one time in an entire year when an employee gets feedback on their performance from their manager.

In small organizations, there typically is not much of a training budget for “silly” things such as management training so this leaves a lot of your managers without the tools to provide effective feedback throughout the year. HHHR will provide some of those tools in the future but for now, the best tool we have is the annual Performance Appraisal where providing feedback at least once a year is better than nothing.

Since we are talking about the week where your managers are delivering the PA to their direct reports, here are some important steps to remind your managers to take in order to make the process worthwhile and effective for them, their direct report, and the organization.

  • Schedule and clearly communicate the time and place of the meeting with the employee. Do not call them into your office without warning and deliver the PA. Give them time to think about and prepare themselves. This should be an interactive two-way discussion. It’s not fair to ambush them with their PA. You’re doing all this work so that the employees perceive the process is fair, so don’t ruin it by not giving them a heads up.
  • Schedule at least a half hour for each PA. This should give you plenty of time to review the PA with your direct report without being rushed. You owe them that time so give it to them. Some of your PAs might take an hour and you probably will know which so schedule appropriately.
  • Sit on the same side of the desk or table as the employee, if possible. Don’t play the power game during this meeting where you are behind your desk in an elevated chair looking down at them while you deliver the PA. Get out from behind your desk and sit next to them. It shows respect which they will remember.
  • Do it in an office with the door closed, if possible. I understand that this may be difficult in some office environments but do everything you can to deliver the PA in a private room with the door closed. Nobody wants to have other employees overhear their PA being delivered to them.
  • Hibernate your computer, mute your phones, and dedicate 100% of your attention to the employee. Eliminate all distractions for this period of time and focus on your employee. The PA is very personal, show them the respect.
  • At the meeting, have two copies of the PA, one for you and one for employee. They need to be able to read the PA while you are going through it with them.
  • Establish some ground rules and before starting the meeting and review them with your direct report. Below are a few examples:
    • Promise to start and end the meeting on time but your willing to extend the meeting if needed.
    • There will be no comparisons to other employees.
    • Both of you promise to remain professional throughout the meeting.
    • Either of you can end the meeting or take a break at any time
    • Both of you promise to listen actively to each other when speaking.
    • Encourage your employee to ask questions if they don’t understand anything.
  • Review the message you want the employee to take from the meeting and make sure they clearly understand it by the end of the meeting. (More on this in a future post)
  • Show your employee the respect they deserve during the meeting.

Well, we have now completed Delivery Week and we have one more week to go in the PA cycle – Deadline Week for Final PAs and Objectives.

Evergreen Jobs

I recently read this article by Dr. John Sullivan over at TLNT discussing the strategic advantage of using the “evergreen job approach” for certain key jobs in an organization.

So what, exactly is an evergreen job?

An Evergreen Job Program continually sources top talent in a mission-critical job. But rather than stopping when you create a pipeline of reserve talent, it continuously “over hires” each of the “more-than-qualified” applicants, in order to create a talent surplus in this critical job.

So you are basically seeking out and hiring candidates for the one or two most important jobs whether you have a position open or not.  Dr. Sullivan lists 10 benefits explaining why the approach is impactful but I won’t re-list them here – you can read them in his article.

I do want to list his business case, however.

The evergreen job approach has the highest impact when companies are in growth mode and the market for top talent is tight. If your organization is in this situation, you will need to make the business case to executives about the power and the impact of the evergreen job approach.

The most effective business case quantifies the negative dollar impact on revenue that having a shortage of talent in mission-critical jobs has. But it also demonstrates the positive value of the new opportunities that are created when you have a surplus of talent in any high-impact job.

Incidentally, my research indicates that the cost of almost continuous position vacancies in a critical job is at least two times greater than the possible negative costs resulting from having “too much talent.” The final element of the business case should involve calculating and quantifying the increased “quality of hire” (the improvement in on-the-job performance) that results from hires under the evergreen program.

I really like the idea of identifying a couple key jobs and applying the evergreen approach.  It makes a lot of sense when you consider the fact that you will always have somebody available to fill that key job rather than the job being open for a period of time while you are recruiting for a replacement.  You have to weigh the costs and with Dr. Sullivan’s research suggesting vacancies in the critical job is at least two times greater than the costs from having extra employees, it seems to be a no brainer!

Developing the Strategy for Staffing a New Mine – Connect with the Communities

In the fall of 2012, I was ‘officially’ tasked with developing a strategy for recruiting and staffing our newly licensed uranium mine located in south central Wyoming.  When I say ‘officially’ I mean it was time to launch the strategy I had been developing and working on for several years.

I actually started developing the recruiting and hiring strategy a few years prior to my having to launch it.  We had been working on the permitting and licensing of the mine for several years but did not know exactly when we were going to receive the final set of permits that would allow us to start the construction and operation activities.  So with the luxury of time, I set out.

The first thing I did was make connections with people in the communities where our employee base would be located.  In this case, Rawlins, Bairoil, Wamsutter, Riverton, and Lander.  I focused most of my attention on Rawlins, Bairoil and Wamsutter because those communities are 45 to 15 minutes away from the mine site while Riverton and Lander are a little over an hour away.

I started the process of connecting with the economic development organizations in Rawlins by learning when they held their meetings and attended them.  I made sure I looked the part by arriving in Rawlins in the white company Ford F-150 with Wyoming plates (bad form showing up in Wyoming as a “greenie” with green Colorado plates!)  and wearing a company shirt and my Wranglers and roper boots.   The Rawlins community is a small Wyoming town with the majority of the population employed in the extractive industries and are predominately hard working blue collar.  It’s important to be deferential and try to fit in and not come off as a big shot big city type coming in to save them.

When attending these meetings, I simply introduced myself to everybody I could and explained who I was and what my company’s future hiring plans were.  This, of course, generated a very positive reaction leading the people I met to introduce me to other local influential officials.  I soon built up a solid network of influential people in Rawlins, Bairoil, and Wamsutter and kept in touch with them by sending them press releases of our progress, emailing them with company updates, and making presentations at city council and annual local “roundtable” meetings.

In addition to attending these meetings, I made a lot of phone calls and knocked on a lot of office doors.  This effort introduced me to a lot of people who would later help with my recruiting efforts and with gathering public support for the company.  I also made a lot of new friends.

I was able to build a level trust with the influencers in the communities.  This was important because they have lived through many “boom and bust” periods where companies swept in with big promises and swept out when things got tough, leaving the communities holding the bag for the infrastructure costs they incurred to accommodate the influx of employees.

Initially connecting with the communities established the critical foundation for the next steps in the strategy for staffing the mine.  Steps I will cover in a series of future posts.