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How to understand the ROI of investing in People

Posted By Editor, Wednesday, November 9, 2016
Updated: Wednesday, November 9, 2016

By Maia Josebachvili
HR West 2017 Speaker 
HR in the most innovative place on earth
March 6-8 2017 www.hrwest.org 




Articulating the return on investment (ROI) of People Practices is extremely challenging. Unlike other departments in the organization, the output of the 
People Team isn’t as directly tied to business outcomes and has few measurable outputs. Because of this, it’s difficult to demonstrate the absolute value of making investments in your talent or talent practices.

However even small improvements in hiring, onboarding, and managing talent can result in significant ROI for the business. In this whitepaper, I’ll walk through a case study that quantifies the return of a handful of People Practices and propose a framework to help you articulate the ROI of People Practices more broadly.

To help assess the business impact of People Practices I would like to introduce and define a new concept: using Employee Lifetime Value (ELTV) to compare the relative return of People Practices.

Defining ELTV

Employee Lifetime Value represents the total net value over time that an employee brings to an organization. The People Team’s job is to drive the organization to maximize ELTV. It can achieve this goal by developing and executing programs that impact the inputs that drive ELTV. When we put these programs into the context of the employee lifetime value, we can more clearly see their relative ROI and their contribution to the business.

This concept is illustrated in the graph below, which presents ELTV in terms of the employee lifecycle. The X axis represents time, spanning from the start date to the day the employee leaves and the Y axis represents employee output.

At the “Start,” an employee’s output is negative because they’re not yet doing anything to contribute to the team but they have consumed resources from the recruiting and hiring team.

They then ramp up productivity until reaching the next milestone, “Fully contributing” where an employee has fully ramped up in their role.

At some point, an employee’s growth plateaus and they start to consider other employment options. They make the “Decision to leave.” Generally after this point their productivity starts to decrease.

Finally, an employee reaches their “Last day” at the company. Their output goes to zero at this point.

The 4 inputs of ELTV

The ELTV of the employee is represented by the gray-shaded area under the curve (the integral, for those who like calculus). The goal is generally to make this area as tall and as wide as possible. Note: This is a simplified version of the curve for illustration purposes. In reality, there are dips and valleys and it’s generally not as linear.

As illustrated, there are four ways to increase ELTV, or maximize the area under the curve:

These inputs can be loosely mapped to a handful of strategic People Practices, as presented below. In reality, each of these practices impacts the whole curve, but for the sake of illustrating the impact, I’ve isolated the variables.

Onboarding:  A good onboarding program accomplishes two goals: 1) It decreases the time it takes an employee to become a fully contributing member, and 2) It significantly increases the likelihood that the employee will stay with the company long-term.

Hiring:  An excellent hire has a higher maximum output from the beginning, plus has the added network effect of attracting and elevating other top performers.

Management & Development:  Excellent management and development practices increase the value an employee brings to the organization over time.

Management & Culture: A strong management practice and positive culture are directly correlated with retention, which results in an increase in ELTV.

A note on the supporting data behind these statements:

The Greenhouse team did a thorough review of the existing research on these topics. While not exhaustive, we covered most of the major papers published in the last ten years. Our takeaway is that there is not nearly enough good research and data out there to draw precise conclusions about the impact of these practices. The information is directional and we feel comfortable making assumptions based on it, *and* we’d like to be a part of the movement to get more data created in this space.

Supporting data used can be found in the whitepaper here.


HR in the most innovative place on earth
March 6-8 2017 www.hrwest.org 
Oakland Convention Center

REGISTER TODAY
#HRWest17

 

Tags:  HR Innovation  HR Management  HR Strategy  People Management  Talent ROI  Workf 

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Legalizing Marijuana: What's an Employer to do?

Posted By Editor, Wednesday, November 2, 2016


Contributed by Becky Barton

These days it’s difficult to avoid the election mania covered by the various media outlets. Given the major spotlight on the presidential race, you may not know that the potential decriminalization of marijuana will be on the ballot in several states.

California, Arizona, Maine, Massachusetts and Nevada will all weigh in on legalized marijuana for recreational use (also known as “adult use” and “non-medical use”) where it is currently approved for medical use only. Another 3 states (Arkansas, Florida, and North Dakota) will decide on the future of cannabis for medical use in their states.

Supporters of the ballot measures see this as a boon to the states’ economies via increased taxes and job growth for cannabusiness people. We have seen 25 states and the District of Columbia legalize marijuana in some fashion, making a continued trend of legalization highly likely.

So what does this mean for business owners and employers? Marijuana remains illegal under federal law and the state-by-state variations make this particularly confusing. For example, within the subset of those states approved for recreational use, the amount an individual can personally carry varies.  As an employer, particularly a multi-state employer, these variations can be an administrative and enforcement nightmare.

Or do they? After all, alcohol is a mind and behavior altering substance that’s been legal for over 80 years and we seem to manage that in the workplace, right? Wouldn’t this be treated similarly? Well, it depends. Many laws clearly state that employers don't have to accommodate medical marijuana use during work hours or on company property while other states require reasonable accommodations for workers with disabilities (specifically as it relates to drug testing and adverse action).

The key is to know what is required by the states in which you operate, create an employment policy that complies with state law and enforce it consistently amongst employees of similar work groups.

The Bottom Line: Work with an HR consultant or an employment law attorney to navigate these unchartered waters. They should be watching how these new laws are interpreted by the courts and have your back should your policy need updating.

 

Becky Barton is the founder of People415, a San Francisco-based Human Resource Consultancy Firm helping companies navigate every stage of their growth.

Tags:  behavior  company culture  employee  employee communication  employee health and wellness  employee relations  Employee Training  employee wellness  healthcare expenditures  hr  HR Communication  HR law  HR Legislation  Human resources management. HR Leadership  law  leadership  management  marijuana  Policies  workforce 

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Why HR must escape its past... to seize a future!

Posted By Administration, Wednesday, October 26, 2016

By David C. Forman

In his book, Fearless HR — Driving Business Results (2015), David Forman asserts that HR must escape its past before seizing a future in which it becomes a primary driver of business results. Five specific historical perceptions of HR are examined in terms of the latest research and thought leadership. One of those perceptions is that HR is siloed and too inwardly focused. His insights from examining the most recent evidence on this perception follows.

Don't miss Forman's session, "Driving Business Results Through Fearless HR" (8:30-9:30a.m.) at the NCHRA Strategic HR & Leadership Conference tomorrow - October 27, 2016 - Online registration is available until: 10/27/2016! #NCHRAStrategy

1. A different zeitgeist is coming

It takes time to escape the past, recognize the changing demands of the future, and develop a new world view. HR has, in fact, been too siloed and inwardly focused in the past, partially because the profession has been insecure and wanted to keep others out while finding its own way.FearlessHR

But the evidence is clear through credible HR stage models, clearer definition of what being strategic means, emphasis on cross-functional activities, and demonstrated practices of leading companies that HR is becoming more closely aligned with the business.

Part of the fuel for HR being accepted as a more integral part of the organization is a growing emphasis on collaboration across functions within companies. This lack of collaboration has long been the bane of CEOs.

Lew Platt, a former CEO of Hewlett Packard, once said, “If HP only knew what HP knows, it would be a very different company.”

There are now many examples of the positive impacts of breaking down barriers, getting people to work together, using social media to form new connections (crowdsourcing) and what GE calls a “boundaryless organization.”

These drivers and the momentum from the sheer weight of research, models and best practices is that HR is moving from its silo to “partner and player status.” It is becoming more business-focused, because that is what all groups and departments must do.

Now it is up to HR, just like any other function, to demonstrate its ability to move out of its own silo, use the language of the business and focus more on results than blind adherence to process.

2. Follow the money

Ram Charan is right: It’s all about the money.

There is no better way to enhance credibility among colleagues across the organization than to speak the language of the business — not just HR’s language. This is done best by understanding  three key financial statements:

  1. Income Statement;
  2. Balance Sheet; and,
  3. Cash Flow Analysis.

These financial statements are usually way out of the comfort zone of HR professionals who are thought to be “good with words but not numbers.”

Perhaps the two most valuable financial literacy skills are:

  1. Review financial statements and recognize the story they tell; and,
  2. Ask the right questions to gain more insight.

For example, if an Income Statement is reviewed, it is relatively easy to determine if:

  • Revenue is growing or declining over several years, including the percentage increase or decrease.
  • Costs, both direct and overhead, are growing or declining and by what percentage.
  • Gross and net profit are increasing or declining.

Once this information has been gathered, then it is important to discern the more complete picture (the story). For example, it could be that a company is profitable, but costs are growing faster than revenues over a several year period of time  This situation should then lead to questions that can provide even more insight, including:

  • Which costs are growing faster? COGS (cost of goods sold which is the direct cost of providing the product or service) or SG&A (sales, general and administrative which is the overhead line)
  • How does the revenue increases compare with others in our industry?
  • Are some products growing at a faster rate than others?

These types of questions lead to better, more informed findings and judgments. “Follow the money” so the right problem can be identified and fixed. These skills enable HR professionals to see the bigger picture and escape their own silo.

3. Mindsets matter

HR professionals must think that they are business people first.

This is not heresy. It is not abandoning the HR profession. It is a realization of how HR can add the most value to organizations and also what capabilities will enhance the careers of HR professionals.

This business-first mindset is partially about job and career security.

Some of HRs tendency toward isolation is on the profession itself. It is self-inflicted. HR is often satisfied to be in its comfort zone, but this zone doesn’t matter to the people that matter.

Seth Godin, the influential marketing leader, states that value in this new age is all about connections. The people with more connections, win; and the irony is that HR should not mildly resist leaving its own silo, it should actively demand it.

HR should become the community-maker itself; it should be the glue that holds the organization together. But to do so, HR must believe in itself, have a strong point of view, and be willing to take risk.

4.  The Cobbler’s Children

It has been established that HR needs to act differently.

Even when HR adds value, it does a poor job of articulating this value. KPMG (2014) research says that while 60 percent of leaders expect HR to grow in strategic significance, only 17 percent say that HR does a good job of demonstrating its value to the business.

For HR to become more business-driven and strategic, three things must happen.

  1. First, HR must be given the chance to escape its past and play this role. As we have seen, this opportunity, after years of anticipation, is increasingly open to HR professionals today.
  2. Second, HR professionals need new skills and capabilities to consistently perform at the strategic level.  Whether these skills are business acumen, financial literacy, data analysis, consulting, influencing skill or others, HR must start to invest in itself to witness the type of return that can make a rapid impact.
  3. And third, HR must believe in itself and develop a strong point of view that is respected within the organization.

An investment is needed to upgrade both the skills and the mindset of HR professionals. The irony is that while HR is an advocate for professional development for others, we do a terrible job for ourselves.

Bersin states that less than 20 percent of organizations invest in the development of their HR professionals. This must change.  It will damage the business if it does not.

Excerpted with permission from Fearless HR — Driving Business Results by David C. Forman. 
Copyright 2015 by David C. Forman.

Tags:  David Forman  Fearless HR  HR Leadership  Strategic HR 

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A new wave of branding?

Posted By Laurie A. Pehar Borsh, Wednesday, October 19, 2016

By Lesley Everett 

Everett will present the closing session (read below) at the Strategic HR & Leadership Conference, October 27th, Hyatt Regency, Downtown San Francisco.

There's still time to register

3:00 – 4:15pm: Establishing the Personality of Your Corporate Brand
Lesley Everett, Founder
Walking TALL International
Discover why and how personality of the corporate brand impacts the bottom line, and examine where some companies fall short and create risk. You’ll leave this session ready to create a culture of authenticity, trust and respect from the Executive Team down. 

#corporatebrandpersonality #NCHRAStrategy

A new wave of branding? 

Creating an authentic personality to your corporate brand may not be something you have spent lots of time thinking about in your organisation. In today’s highly competitive and trust-seeking business world we all operate in, it is perhaps quite simply your biggest differentiator.

 

However, we are now starting to experience the need for leaders to really embrace this and develop a personal brand that ensures they are well known for what they do inside and outside the organisation they work for. This means taking control of their personal brand and building their own visibility beyond where it has been before.

 

Traditionally companies have felt that if they help employees to build a strong personal brand they will be poached from outside and leave. What we are now starting to see is that some global players are appreciating the huge benefit to their business in helping managers and leaders to develop their personal brand.

 

Global leaders are getting on platforms that they would never have traditionally been invited onto as a supplier, because of their leaders’ powerful personal brands and proven expertise in a specialist field. What better than having an ‘advert’ for your company than from the brand within!

 

Your leaders are the best advert you could have for employer brand and for creating a trust and authenticity to your corporate brand.

 

I spoke with Andrew Grill, Global Managing Partner at IBM Social Consulting, and he said that IBM sees a direct benefit to the business with him being ‘out there and visible’ and being considered a thought-leader in his own right. He is often invited to speak at global conferences that IBM would never normally be invited to present at and as a result he is able to promote the IBM brand in a ‘human’, authentic and compelling way. Andrew now recruits leaders into his team that have strong personal brands as he’s seen first-hand the benefits this brings to the business.

 

The benefits that can be expected from recruiting leaders with strong personal brands, and helping others to develop theirs are:
  • More opportunities to get the corporate brand messaging out externally via a human interface
  • Enhancement of Employer Brand and in particular in attracting Generation Y talent
  • Increase in trust of the company (as the leader is willing to put himself on a stage and personally talk about the company and its value set)
  • Increase in authenticity and respect

In order to get ahead of the competition, you need to get onto this new wave of branding that is ‘leader visibility’ and enable your managers and leaders to create their personal brand in a way that truly interprets and personifies your corporate brand on the external stage.

World class means having a strong personality that is known over and above your individual products and services. Your leaders provide this personality.

Meet and listen to Lesley Everett at the Strategic HR & Leadership Conference, October 27th!

Strategic HR
The book, 
Corporate Brand Personality is > Available on Amazon
www.lesleyeverett.com  #corporatebrandpersonality #NCHRAStrategy

Tags:  corporate branding  HR Leadership  strategic HR  strategy 

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Cool employee perks—ideas for small and large companies

Posted By Administration, Wednesday, October 12, 2016

This week - Company Folders Inc. offers a great infographic that outlines what companies are doing to ensure that they’re the best in the biz. Great ideas that small and larger company human resources managers can gleen from! How does your workplace stacks up against these amazing incentives?  

Remember! The Small Company HR Conference, tomorrow (10/13) in San Francisco (and there's still time to register), is designed with your pain points in mind - as the one who holds the company together. Network with others in your shoes and get strategies for succeeding as a department of one, two or three. The essential HR topics including onboarding and offboarding, improving productivity, building culture, and avoiding legal risk – will be covered. This conference is ideal for office managers, administrative assistants, vice presidents, directors and nonprofits!  Be sure to post and or follow #NCHRASmallHR. 

10 Employee Perks To Attract Top Talent

Tags:  employee benefits  HR Conference  HR Management  Small Business HR  Workplace Incentives 

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