In the aftermath of the recent global financial crisis, there has been a renewed focus on strengthening corporate governance; a number of committees and panels have been set up to review governance norms & practices.
Sir David Walker's review of boardroom standards and practice in Britain's banks has identified the key problems - inadequate scrutiny of bank bosses by their boards and by investors, a lax approach to risk and a pay & bonus system that encouraged short-termism. It has made a number of recommendations for changes to governance code on pay, risk, boardroom structure and director responsibilities
The U.S. Congress is pushing to reform how companies are governed and executives are compensated as part of a broader package to overhaul the country's financial regulation; they are considering giving public company shareholders a nonbinding annual vote on executive pay.
In India there is a call to put a cap on the number of directorships an independent director can hold.
An interesting article that I read a couple of days ago by Eric Jackson on best governed companies in America concludes that well governed companies stand apart from others in Board equity ownership, independence & competence and real time spent on matters of governance. Berkshire Hathaway, Johnson & Johnson and Amazon.com have been identified as companies with the best in class corporate governance in America. .
The question is can Board independence, shareholders nonbinding annual vote on executive pay, compensation restrictions and other similar codes guarantee good governance? It will I am sure make for better governance but good governance really goes beyond laws, norms and board structures & practices to values and ethics espoused by companies in every day interactions and transactions at work. The more we depend on norms and regulations to govern good conduct the less and less people take real responsibility and ownership for acting with honor. The focus therefore has to be more on defining & living core values that are espoused
and in restoring first principles of integrity, respect and responsibility in interactions and in use of resources.
For scores of Indians, Tata’s epitomize Trust. In their work and actions, their core purpose remains “to improve the quality of life of the communities we serve.” That is reflected in the work they do and in the businesses they run.
Infosys’ commitment to Transparency sets them apart - and this what makes customers, employees, shareholders, social beneficiaries and vendor partners keep faith in them.
Interestingly, the two companies ( Berkshire Hathaway & J&J) referred by Eric Johnson in his article are known for their focus on values and ethics and the way in which these values are embedded in the very fabric of the organisation.
Johnson & Johnson is famous for its Credo which was crafted way back in 1943 by a former Chairman & member of the Company’s founding family. The Credo defines the company’s beliefs and serves as a guiding principle in the way work is done; it defines how customers, vendors, suppliers, employees, community and shareholders will be treated. It recognizes that the well being of people being served comes first and it is only through living its guiding principles can business make profits and shareholder realize a fair return. The credo sets the baseline for all interactions and leaves no room for ambiguity. “We believe our first responsibility isto the doctors, nurses, patients, to mothers , fathers and all others who use our products & services” “ we must constantly strive to reduce costs so prices are maintained at reasonable levels. Customer orders must be serviced promptly and accurately. Our suppliers and distributors must have opportunity to make fair profit” “ we must maintain in good order the property we are priveleged to use”
The Code of Business and Ethics in Berkshire Hathaway defines expectations of behavior from all directors, officers and employees. The focus is on upholding highest levels of business ethics and personal integrity in all types of transactions and interactions. When in doubt, Warren Buffett’s rule of thumb applies: “…I want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper – to be read by their spouses, children and friends – with the reporting done by an informed and critical reporter.”
Good & responsible governance can only be ensured by a self imposed code of honour and commitment to leaving a responsible legacy. For that to happen organization should consciously look at embedding a DNA that defines the spiritual, physical, social and intellectual dimensions of its purpose and existence & ensure that DNA is reflected in every business interaction and transaction.
Friday, July 31, 2009
Tuesday, June 30, 2009
HR’s role in governance
Corporate Governance is usually associated with financial reporting, compliance and disclosure on matters impacting shareholder interests & value. The fact is it is also about how companies & its resources are directed, managed and controlled. Therein lies opportunity for HR to play a larger role in corporate governance and to drive good governance practices.
Good governance is all about delivering results and balancing the expectations of all stakeholders through the effective utilization of and responsible stewardship of resources. What distinguishes governance in one organization from the other is the way principles of stakeholder inclusion, strategic vision, performance, accountability and fairness are embedded in organization functioning and are reflected in business results.
By virtue of their scope of responsibility and areas of influence HR can play an important role in embedding these principles in the work structures, processes & practices and thus institutionalizing good governance . Some ways in which HR can contribute to good governance is by creating the:
1. Right Structure:
a. Differentiate & define the policy, planning, control, coordination and operating systems within the organization. This differentiation will ensure there is effective focus, allocation & monitoring of responsibilities so resources are deployed & used most effectively
b. Ensure independence of the audit & quality control functions so deviations and inconsistencies in principles can be thrown up early and addressed appropriately
2. Right Performance Orientation:
a. Ensure performance processes align stakeholder interests in a sustainable manner. Communicate goals and effectively monitor progress to build the right orientation to performance
b. Ensure that appropriate checks are in place to maintain the objectivity & transparency around performance measurement & progress.
c. Ensure that the compensation policy, supports the performance focus, reflects business requirements and reality and is not unduly aggressive or skewed to serving a particular stakeholder interest to the disadvantage of another stake holder.
3. Right Capabilities & Culture
a. Ensure that the senior team has the right balance of business aggression and gravitas to drive growth and manage risk appropriate to the business situation & stakeholder risk appetite.
b. Create an effective leadership pipeline so business effectiveness and continuity is not compromised
c. Work with other members of the executive in creating a performance driven culture, in creating an environment of fairness and transparency and in promoting the right attitude to meeting business performance and stakeholder expectations responsibly
Demonstrate HR ability to strengthen Governance
The two greatest challenges that HR may face in seeking a larger role in corporate governance would be existing organizational prejudices around who should be involved in Governance and doubt on whether HR has the skills to play a credible role in governance.
Increasingly there is acceptance that responsibility for Corporate Governance cannot be confined to Board Rooms but needs to extend across the executive organization. Existing organisation constraints on who should be involved in governance will therefore no longer be relevant in a not so distant future. As regards the capability to play a credible role, the responsibility lies with HR to equip itself with skills and to demonstrate that it can
• Speak business – taking a holistic rather than a functional view
• Integrate stakeholder expectations, business realities and environmental challenges to develop a performance architecture that aligns stakeholder interests, drives business results and motivates employees to strong performance
• Work with all constituents within the organization to develop the right attitude to delivering responsible business.
By playing a larger role in embedding the tenets of good governance in the very fabric of the organisation HR can contribute to taking organizations to a higher level of performance – not only by achieving the desired business results but also by achieving them in the right way.
Good governance is all about delivering results and balancing the expectations of all stakeholders through the effective utilization of and responsible stewardship of resources. What distinguishes governance in one organization from the other is the way principles of stakeholder inclusion, strategic vision, performance, accountability and fairness are embedded in organization functioning and are reflected in business results.
By virtue of their scope of responsibility and areas of influence HR can play an important role in embedding these principles in the work structures, processes & practices and thus institutionalizing good governance . Some ways in which HR can contribute to good governance is by creating the:
1. Right Structure:
a. Differentiate & define the policy, planning, control, coordination and operating systems within the organization. This differentiation will ensure there is effective focus, allocation & monitoring of responsibilities so resources are deployed & used most effectively
b. Ensure independence of the audit & quality control functions so deviations and inconsistencies in principles can be thrown up early and addressed appropriately
2. Right Performance Orientation:
a. Ensure performance processes align stakeholder interests in a sustainable manner. Communicate goals and effectively monitor progress to build the right orientation to performance
b. Ensure that appropriate checks are in place to maintain the objectivity & transparency around performance measurement & progress.
c. Ensure that the compensation policy, supports the performance focus, reflects business requirements and reality and is not unduly aggressive or skewed to serving a particular stakeholder interest to the disadvantage of another stake holder.
3. Right Capabilities & Culture
a. Ensure that the senior team has the right balance of business aggression and gravitas to drive growth and manage risk appropriate to the business situation & stakeholder risk appetite.
b. Create an effective leadership pipeline so business effectiveness and continuity is not compromised
c. Work with other members of the executive in creating a performance driven culture, in creating an environment of fairness and transparency and in promoting the right attitude to meeting business performance and stakeholder expectations responsibly
Demonstrate HR ability to strengthen Governance
The two greatest challenges that HR may face in seeking a larger role in corporate governance would be existing organizational prejudices around who should be involved in Governance and doubt on whether HR has the skills to play a credible role in governance.
Increasingly there is acceptance that responsibility for Corporate Governance cannot be confined to Board Rooms but needs to extend across the executive organization. Existing organisation constraints on who should be involved in governance will therefore no longer be relevant in a not so distant future. As regards the capability to play a credible role, the responsibility lies with HR to equip itself with skills and to demonstrate that it can
• Speak business – taking a holistic rather than a functional view
• Integrate stakeholder expectations, business realities and environmental challenges to develop a performance architecture that aligns stakeholder interests, drives business results and motivates employees to strong performance
• Work with all constituents within the organization to develop the right attitude to delivering responsible business.
By playing a larger role in embedding the tenets of good governance in the very fabric of the organisation HR can contribute to taking organizations to a higher level of performance – not only by achieving the desired business results but also by achieving them in the right way.
Friday, June 5, 2009
Governance – Not Just about Boards
A McKinsey survey reports that institutional investors are prepared to pay more for a “well governed” company over those recording the same performance but have inferior standards as to the rules of conduct. Mr. Ram Charan talks about “advancing Corporate Governance from Compliance to Competitive Advantage”.
To most of us on the street, when we hear the word 'Governance' what comes to mind are reports of financial misappropriation, fraud, misuse of resources and creative accounting or the various regulatory bodies, government bail-outs and once in a while, of visionaries like Mr. Deepak Parekh, Mr. Narayana Murthy. Inside organizations, it is something which happens behind closed doors in those 'Board Rooms' with CFOs and auditors in attendance carrying spreadsheets and presentations.
Over the last decade a combination of regulatory action, investor activism and media reporting has put focus on Board performance and its role in oversight, advisory and good governance. While some Boards are responding by strengthening Board dynamics & processes for better governance, it may not be enough. A large part of responsibility for building the culture for good governance lies with the executive organization. The Boards investment of time and resources in governance can never bear the desired fruits unless the executive organization also believes in and conducts business and work in a manner that reflects accountability for creating responsible legacy and value.
Good corporate conduct can only be institutionalized when all employees understand that their role is to maximize shareholder value while balancing and respecting the interests of other stakeholders including consumers, suppliers, creditors, employees and the environment. This can only be done when structures, people processes, systems & performance measures promote the right attitude to responsibly delivering business results and stakeholder expectations.
Ultimately it is not just effective Board oversight or regulatory action that can ensure good governance. The secret lies in strengthening the way of work & quality of interactions within organisations. In creating an environment of Openness & Transparency where material information is readily available and where sharing and collaboration is valued, where debate is encouraged to improve quality of decisions & outcomes, where the focus is on performance and on doing the right things for all stakeholders and finally where responsibilities & outcomes are not subordinated or compromised by personal interests.
We are familiar with surveys that are conducted to assess organisation energy & employee engagement in workplaces. Many organization aspire to find a place in the ranks of best places to work and take actions that meet standards of what is defined as best place or great place to work. Is it time now to evaluate organizations not merely in terms of how employee friendly it is but also in terms of how governance effective it is? Whether structures, processes, systems & outcomes achieved by organization reflect bronze, silver, gold or platinum standards of good governance- making it the real indicator of whether the company does good and does well.
To most of us on the street, when we hear the word 'Governance' what comes to mind are reports of financial misappropriation, fraud, misuse of resources and creative accounting or the various regulatory bodies, government bail-outs and once in a while, of visionaries like Mr. Deepak Parekh, Mr. Narayana Murthy. Inside organizations, it is something which happens behind closed doors in those 'Board Rooms' with CFOs and auditors in attendance carrying spreadsheets and presentations.
Over the last decade a combination of regulatory action, investor activism and media reporting has put focus on Board performance and its role in oversight, advisory and good governance. While some Boards are responding by strengthening Board dynamics & processes for better governance, it may not be enough. A large part of responsibility for building the culture for good governance lies with the executive organization. The Boards investment of time and resources in governance can never bear the desired fruits unless the executive organization also believes in and conducts business and work in a manner that reflects accountability for creating responsible legacy and value.
Good corporate conduct can only be institutionalized when all employees understand that their role is to maximize shareholder value while balancing and respecting the interests of other stakeholders including consumers, suppliers, creditors, employees and the environment. This can only be done when structures, people processes, systems & performance measures promote the right attitude to responsibly delivering business results and stakeholder expectations.
Ultimately it is not just effective Board oversight or regulatory action that can ensure good governance. The secret lies in strengthening the way of work & quality of interactions within organisations. In creating an environment of Openness & Transparency where material information is readily available and where sharing and collaboration is valued, where debate is encouraged to improve quality of decisions & outcomes, where the focus is on performance and on doing the right things for all stakeholders and finally where responsibilities & outcomes are not subordinated or compromised by personal interests.
We are familiar with surveys that are conducted to assess organisation energy & employee engagement in workplaces. Many organization aspire to find a place in the ranks of best places to work and take actions that meet standards of what is defined as best place or great place to work. Is it time now to evaluate organizations not merely in terms of how employee friendly it is but also in terms of how governance effective it is? Whether structures, processes, systems & outcomes achieved by organization reflect bronze, silver, gold or platinum standards of good governance- making it the real indicator of whether the company does good and does well.
Sunday, April 26, 2009
Architecting Performance
In many organisations people performance review has become an annual management exercise in compliance or an exercise to justify people decisions, rather than an on-going organisation process of people, resource and outcome alignment. Few organisations spend time and effort sharing & communicating the critical success factors & the performance expectations map so all can understand the linkages between their work efforts & outcomes and the achievement of business goals. A quick survey of employee performance areas can throw light on the strength of the People Performance Architecture in your organisation. Take a random sample of your employees and their Managers (preferably customer facing departments where performance requirements are usually relatively clearer and more transparent) and do a short survey to evaluate how strongly employee performance areas link with the overall business goal.
Identify gaps and inconsistencies in Architecture
An analysis of the data collected through the survey may throw up interesting insights on what strengthens/ ails performance in your organisation and where the linkages are strong or weak/missing. Typical areas of disconnect are
1. Unclear priorities:
Match the top three performance areas listed by the employee and his/her Manager.
You will find that at least one out of three areas does not match and priorities often don’t align. The alignment in performance areas is often strong at the senior levels but weakens as one goes through the ranks of the organisation structure so it is almost tenuous at the more junior levels and in most organizations, they are the folks an average customer experiences. In divisions where alignment in performance areas is strong you will find stronger teams and good performance.
2. Unclear measurements
Map the measures (metrics) listed by the employee with that listed by his Manager. See if they match in terms of importance of measure and source of performance data. Evaluate the strength of the measure in terms of clarity and its consistency with business objectives and/or divergence from the organisation strategic map & performance measure (metric) cascade.
You will find that where the measure is not clearly defined performance is also not strong; in such cases you will also find that there is little consistency in how the measure is tracked; it may be captured in different parts of the organisation in different ways depending on each ones convenience.
3. Absent 360:
We are all familiar with conducting a 360 for performance evaluation, but have we considered a 360 to assess understanding of performance goals of peers & Managers? More often than not you will find an employee uninterested in his peer or team members or key interface peoples goals. There is a high chance, a serious ‘none of my business’ look will also happen. Don’t be surprised if they are unclear about organization goals! The point is that if an employee does not have an idea of priorities of people around him how can he contribute to the larger business goal and be an effective team player?
Build performance confidence
Oftentimes organisations focus on the implementation of sophisticated performance management processes and tools without first establishing the strength of its performance framework, priorities, linkages, measures and the cascade through the organisation. What makes it worse is communications are focussed on the understanding of the process or use of tool and less on comprehension of performance map, priorities, linkages and the individual role within this context.
In order to build people performance confidence and create more effective and dynamic work places it is important that organisations spend time and effort in ensuring that everyone understands what they have to do and how what they do contributes in achieving business goals.
Identify gaps and inconsistencies in Architecture
An analysis of the data collected through the survey may throw up interesting insights on what strengthens/ ails performance in your organisation and where the linkages are strong or weak/missing. Typical areas of disconnect are
1. Unclear priorities:
Match the top three performance areas listed by the employee and his/her Manager.
You will find that at least one out of three areas does not match and priorities often don’t align. The alignment in performance areas is often strong at the senior levels but weakens as one goes through the ranks of the organisation structure so it is almost tenuous at the more junior levels and in most organizations, they are the folks an average customer experiences. In divisions where alignment in performance areas is strong you will find stronger teams and good performance.
2. Unclear measurements
Map the measures (metrics) listed by the employee with that listed by his Manager. See if they match in terms of importance of measure and source of performance data. Evaluate the strength of the measure in terms of clarity and its consistency with business objectives and/or divergence from the organisation strategic map & performance measure (metric) cascade.
You will find that where the measure is not clearly defined performance is also not strong; in such cases you will also find that there is little consistency in how the measure is tracked; it may be captured in different parts of the organisation in different ways depending on each ones convenience.
3. Absent 360:
We are all familiar with conducting a 360 for performance evaluation, but have we considered a 360 to assess understanding of performance goals of peers & Managers? More often than not you will find an employee uninterested in his peer or team members or key interface peoples goals. There is a high chance, a serious ‘none of my business’ look will also happen. Don’t be surprised if they are unclear about organization goals! The point is that if an employee does not have an idea of priorities of people around him how can he contribute to the larger business goal and be an effective team player?
Build performance confidence
Oftentimes organisations focus on the implementation of sophisticated performance management processes and tools without first establishing the strength of its performance framework, priorities, linkages, measures and the cascade through the organisation. What makes it worse is communications are focussed on the understanding of the process or use of tool and less on comprehension of performance map, priorities, linkages and the individual role within this context.
In order to build people performance confidence and create more effective and dynamic work places it is important that organisations spend time and effort in ensuring that everyone understands what they have to do and how what they do contributes in achieving business goals.
Monday, March 30, 2009
HR: Getting to the core of Business
Most organizations view the HR driven Performance Management System as a set of discrete processes & tools deployed for a defined period of time for a specific purpose linked to business (such as development of individual personal development plan or basis for reward or career progression or compensation decision). Very few organizations leverage the power of a holistic & integrated people performance process in delivering business value.
The fact is that the People Performance processes in an organization provide opportunity for functions to stay centred around the business purpose and goals. It is the means for HR to get to the core of business not merely as a service provider or business partner but as co creators of business value. However, to do so HR should look beyond performance processes and tools to the People Performance Architecture (PPA). PPA encompasses the whole process of defining, communicating and deploying performance frameworks and supporting organization systems so every member / participant in the organization is continuously aware of and comprehends the organization vision, goal, objectives and targets, understands what is critical to business performance, and importantly knows exactly how his/her work relates to those goals, has the facilities and tools to do what is required and does what is required to achieve goals. At the heart of the PPA is defining the critical success factors for the business, identifying key performance areas and key result areas, developing the performance cascade to the smallest unit level, defining the cross functional and cross departmental collaboration nodes & deploying supporting HR processes.
By anchoring around the People Performance Architecture, HR can ensure that all members/constituents of an organisation have clear visibility into business goals & performance and are constantly alive to the purpose of the organization and their role within that purpose and that all HR strategies, structures, policies, processes and programs are not merely aligned to business requirements but are also centred around business performance.
There are several benefits of anchoring the HR role around effective deployment of a robust People Performance Architecture.
Alignment: It serves as a basis for aligning all resources, people efforts & energies to the business goals and contributes to developing a motivated work force that is likely to make that extra effort in delivering goals as they are more aware of how their actions can impact business. Every employee is able to answer two key questions: (a) What does your company do?, and (b) What do you do? in a coherent way while establishing the contribution of his role to the organization's purpose.
Preparedness: Enhance people preparedness for change; by making them more business attuned, helping them understand factors & changes in the business environment that have potential to impact their and the organization performance. Thus strengthening the organisation’s ability to be better prepared to adapt to change.
Innovation: Strengthen people’s ownership to performance and their ability to develop insights around their and their team performance that could help in generating innovative & new ways of working to achieve goals
Credibility: It ensures that HR stays at the center of business not merely as a business partner but as an integral part of business making sure that resources, processes and systems facilitate business growth.
There is no one-size-fit-all, PPA. The architecture has to be specific to the organization business and context. A successful architecture is one that is able to effectively engage employees in the performance process. It is one that is, dynamic and which provides employees value by giving them the ability to navigate through self monitoring, learning, changing course where performance imperatives so demand and growing through the process. For its full value to be leveraged it is important to ensure that the performance architecture
• Is simple and easy to understand and implement and is delivered in a way that promotes trust and positive relationships with Managers
• Provides goal, objective & target clarity to the smallest unit within the organization; Provides clarity in measurement parameters and objectivity in measurement
• Defines capabilities required for people to contribute meaningfully and effectively
• Integrates feedback and learning, recognition & reward mechanisms and all those systems that go to strengthen the people facet of organizations.
• Is a critical part of the organization DNA as evidenced by a continuous & daily review of progress and is not an annual exercise in compliance
By defining and developing the People Performance Architecture within their organisation as the starting point in their journey to getting to the core of business HR folks would create value not only for the business but for themselves as co creators in business success.
There is no better time than now to start this journey. Creating a performance culture remains a key priority for all organisations in good times and in difficult times; through the effective deployment of a robust Performance Architecture HR can ensure that people performance becomes the basis and the organisation mantra for creating value
The fact is that the People Performance processes in an organization provide opportunity for functions to stay centred around the business purpose and goals. It is the means for HR to get to the core of business not merely as a service provider or business partner but as co creators of business value. However, to do so HR should look beyond performance processes and tools to the People Performance Architecture (PPA). PPA encompasses the whole process of defining, communicating and deploying performance frameworks and supporting organization systems so every member / participant in the organization is continuously aware of and comprehends the organization vision, goal, objectives and targets, understands what is critical to business performance, and importantly knows exactly how his/her work relates to those goals, has the facilities and tools to do what is required and does what is required to achieve goals. At the heart of the PPA is defining the critical success factors for the business, identifying key performance areas and key result areas, developing the performance cascade to the smallest unit level, defining the cross functional and cross departmental collaboration nodes & deploying supporting HR processes.
By anchoring around the People Performance Architecture, HR can ensure that all members/constituents of an organisation have clear visibility into business goals & performance and are constantly alive to the purpose of the organization and their role within that purpose and that all HR strategies, structures, policies, processes and programs are not merely aligned to business requirements but are also centred around business performance.
There are several benefits of anchoring the HR role around effective deployment of a robust People Performance Architecture.
Alignment: It serves as a basis for aligning all resources, people efforts & energies to the business goals and contributes to developing a motivated work force that is likely to make that extra effort in delivering goals as they are more aware of how their actions can impact business. Every employee is able to answer two key questions: (a) What does your company do?, and (b) What do you do? in a coherent way while establishing the contribution of his role to the organization's purpose.
Preparedness: Enhance people preparedness for change; by making them more business attuned, helping them understand factors & changes in the business environment that have potential to impact their and the organization performance. Thus strengthening the organisation’s ability to be better prepared to adapt to change.
Innovation: Strengthen people’s ownership to performance and their ability to develop insights around their and their team performance that could help in generating innovative & new ways of working to achieve goals
Credibility: It ensures that HR stays at the center of business not merely as a business partner but as an integral part of business making sure that resources, processes and systems facilitate business growth.
There is no one-size-fit-all, PPA. The architecture has to be specific to the organization business and context. A successful architecture is one that is able to effectively engage employees in the performance process. It is one that is, dynamic and which provides employees value by giving them the ability to navigate through self monitoring, learning, changing course where performance imperatives so demand and growing through the process. For its full value to be leveraged it is important to ensure that the performance architecture
• Is simple and easy to understand and implement and is delivered in a way that promotes trust and positive relationships with Managers
• Provides goal, objective & target clarity to the smallest unit within the organization; Provides clarity in measurement parameters and objectivity in measurement
• Defines capabilities required for people to contribute meaningfully and effectively
• Integrates feedback and learning, recognition & reward mechanisms and all those systems that go to strengthen the people facet of organizations.
• Is a critical part of the organization DNA as evidenced by a continuous & daily review of progress and is not an annual exercise in compliance
By defining and developing the People Performance Architecture within their organisation as the starting point in their journey to getting to the core of business HR folks would create value not only for the business but for themselves as co creators in business success.
There is no better time than now to start this journey. Creating a performance culture remains a key priority for all organisations in good times and in difficult times; through the effective deployment of a robust Performance Architecture HR can ensure that people performance becomes the basis and the organisation mantra for creating value
Sunday, March 1, 2009
Beyond HR Metrics
The evident lack of preparedness in managing the present economic upheavals around us has brought renewed interest in the science of Performance Analytics particularly the predictive aspects of Analytics. Within the larger umbrella of Performance Analytics lies HR Analytics, an area that is well worth the while for HR professionals to study and adopt.
We are all familiar with HR metrics that are more commonly used in organisations today - Headcount change - hires and terminations, time to delivery of results- be it recruitment, development, programs etc, trends in disciplinary & grievance cases, quality of hires, changes in people related costs, training day per person, cost per training day etc. All these focus predominantly on reporting status or trends and at best on alerting a shift in pattern or trend. The limitation of such metrics is that energies get directed towards resolving the problems that we face today or encountered yesterday rather than being directed towards proactive preparation for tomorrow. HR Analytics goes beyond reporting to forecasting, predicting, optimising and providing gainful insights into how to manage the people facet in delivering business goals . It signifies a shift to being more forward looking and more strongly business value focussed.
Imagine being able to relate & quantify how key vacancies being unfilled for continuous period impact business, or how attrition beyond a minimum acceptable level in the Sales organisation today is likely to impact new sales pipeline and therefore revenues tomorrow. Imagine an HR dept which is able to establish linkages amongst projects with high re-work, customer profiles of those projects and people attrition and recommend a customer qualification system.
Take the case of a service organisation that was vexed with the spate of exits in their Client servicing team. Over the last two years key personnel had left- the once strong service team had become a pale shadow of mediocrity. Hefty pay increases given generously over the years did not stem the exits. The ragged pieces of data put together suggested a pattern that prompted further exploration. Further analysis indicated that a combination of nature of engagement – the client and tenure, the age of the employee and project management dynamics tended to impact a team’s level of association and alignment and more often than not resulted in exits of key personnel which in turn fuelled more resignations from the team. The interesting part was that the HR team had an intuitive feel of the situation but could not convincingly present their case to the Division Head. In such a situation Analytics could have aided objective and convincing presentation of the case and ensured proactive strategies & effective intervention to address the issue. The insights provided by the data analysis prompted the organisation to change the way they deployed teams to Client engagements- age profile and experience set were factored in allocation to long tenure engagements making for greater continuity in the team and stronger Client satisfaction.
HR Analytics helps to put the focus on being better prepared to deal with business situations, pre-empt adverse consequences and thus develop an orientation towards creating a desired future state. More importantly, it brings more energies to work as individuals become more conscious of the magnitude of impact that their actions can have on the business success , the critical levers that are in their control and therefore get motivated to direct energies more appropriately.
It is well recognised that people make the difference in what is a good organisation and what is a great organisation. It is important for organisations that seek to be great to understand the different aspects of the people dimensions at work and to know what is critical to creating future success and in managing possible failure. HR Analytics provides a tool for organisations to better understand HR strategies and measures that could impact business performance. Importantly it is also a check for HR in ensuring that its strategies, programs and initiatives deliver real business value.
Adopting HR Analytics however requires a good understanding of business, clarity on factors that impact business, the doggedness to look beyond the obvious to link the metrics and see the relationships and a culture for continuous improvement.
HR folks looking to embark on the road to Analytics could look at the following steps in their journey
• Identify key business success metrics and understand the factors that impact the identified business success metrics
• Focus on collating & tracking the right data in respect of each relevant factor; ensure quality of data by defining source of data, periodicity of measurement ; standardise the data nomenclature;
• Ensure that data is collected over a period of time;
• Analyse the data for each factor in terms of its impact on business; analyse trends- recognising factors which have a greater power to impact and those that have lesser power to impact business objectives; Understand what drives business performance; what are the causative relationships between factors.
• Ensure that the organisation has the systems to measure relevant metrics; Technology can facilitate this process. Integrate the information sources available within existing systems instead of creating new systems. Minimise the data sources to ensure information accuracy and validity.
For those interested in understanding and delving the area of Analytics there is a lot of interesting information and material on Analytics on the web. I came across this interesting presentation by PA Consulting on how HR Analytics can be used. Infohrm is another firm that appears to have done a lot of work in the area check it out; it goes beyond technology to presenting frameworks & methodologies for implementing HR Analytics.
We are all familiar with HR metrics that are more commonly used in organisations today - Headcount change - hires and terminations, time to delivery of results- be it recruitment, development, programs etc, trends in disciplinary & grievance cases, quality of hires, changes in people related costs, training day per person, cost per training day etc. All these focus predominantly on reporting status or trends and at best on alerting a shift in pattern or trend. The limitation of such metrics is that energies get directed towards resolving the problems that we face today or encountered yesterday rather than being directed towards proactive preparation for tomorrow. HR Analytics goes beyond reporting to forecasting, predicting, optimising and providing gainful insights into how to manage the people facet in delivering business goals . It signifies a shift to being more forward looking and more strongly business value focussed.
Imagine being able to relate & quantify how key vacancies being unfilled for continuous period impact business, or how attrition beyond a minimum acceptable level in the Sales organisation today is likely to impact new sales pipeline and therefore revenues tomorrow. Imagine an HR dept which is able to establish linkages amongst projects with high re-work, customer profiles of those projects and people attrition and recommend a customer qualification system.
Take the case of a service organisation that was vexed with the spate of exits in their Client servicing team. Over the last two years key personnel had left- the once strong service team had become a pale shadow of mediocrity. Hefty pay increases given generously over the years did not stem the exits. The ragged pieces of data put together suggested a pattern that prompted further exploration. Further analysis indicated that a combination of nature of engagement – the client and tenure, the age of the employee and project management dynamics tended to impact a team’s level of association and alignment and more often than not resulted in exits of key personnel which in turn fuelled more resignations from the team. The interesting part was that the HR team had an intuitive feel of the situation but could not convincingly present their case to the Division Head. In such a situation Analytics could have aided objective and convincing presentation of the case and ensured proactive strategies & effective intervention to address the issue. The insights provided by the data analysis prompted the organisation to change the way they deployed teams to Client engagements- age profile and experience set were factored in allocation to long tenure engagements making for greater continuity in the team and stronger Client satisfaction.
HR Analytics helps to put the focus on being better prepared to deal with business situations, pre-empt adverse consequences and thus develop an orientation towards creating a desired future state. More importantly, it brings more energies to work as individuals become more conscious of the magnitude of impact that their actions can have on the business success , the critical levers that are in their control and therefore get motivated to direct energies more appropriately.
It is well recognised that people make the difference in what is a good organisation and what is a great organisation. It is important for organisations that seek to be great to understand the different aspects of the people dimensions at work and to know what is critical to creating future success and in managing possible failure. HR Analytics provides a tool for organisations to better understand HR strategies and measures that could impact business performance. Importantly it is also a check for HR in ensuring that its strategies, programs and initiatives deliver real business value.
Adopting HR Analytics however requires a good understanding of business, clarity on factors that impact business, the doggedness to look beyond the obvious to link the metrics and see the relationships and a culture for continuous improvement.
HR folks looking to embark on the road to Analytics could look at the following steps in their journey
• Identify key business success metrics and understand the factors that impact the identified business success metrics
• Focus on collating & tracking the right data in respect of each relevant factor; ensure quality of data by defining source of data, periodicity of measurement ; standardise the data nomenclature;
• Ensure that data is collected over a period of time;
• Analyse the data for each factor in terms of its impact on business; analyse trends- recognising factors which have a greater power to impact and those that have lesser power to impact business objectives; Understand what drives business performance; what are the causative relationships between factors.
• Ensure that the organisation has the systems to measure relevant metrics; Technology can facilitate this process. Integrate the information sources available within existing systems instead of creating new systems. Minimise the data sources to ensure information accuracy and validity.
For those interested in understanding and delving the area of Analytics there is a lot of interesting information and material on Analytics on the web. I came across this interesting presentation by PA Consulting on how HR Analytics can be used. Infohrm is another firm that appears to have done a lot of work in the area check it out; it goes beyond technology to presenting frameworks & methodologies for implementing HR Analytics.
Monday, January 19, 2009
Are present formats of employee engagement surveys relevant today?
Is it time to junk the familiar employee engagement formats that scores of organisations across the globe have been using for well over two decades to measure levels of employee engagement and commitment?
Perception based survey tools no longer relevant in these times of real time information
Engagement surveys based on an analysis of employee perceptions of organisation and work were developed at a time when there was not much free flow of information and more importantly when employer- employee relations were formal and were hierarchies worked. It was then necessary to adopt non threatening & inclusive methods to understand employee expectations at work and to objectively gauge employee views on matters that impacted their work life - perception based surveys provided organisations a basis to probe different aspects of work life & collect views of all employees and provided employees the anonymity to respond without fear. In this day of networks, access to information, technology enabled work systems and openness in employee – employer interactions, the relevance of perception based employee surveys is questionable.
A tool meant to improve HR credibility could actually compromise HR effectiveness
Employee surveys that are based more on employee perception of organisation & work, could confuse rather than clarify and through their focus on employee feelings and perception of organisation & work could perpetrate a view that may have no substantial basis in reality and thus actually jeopardise organisation efforts rather than drive it towards a desirable direction. The explosion of information over the past several decades and the availability of sophisticated analytical and statistical techniques have made it possible for more science and rigour to be brought into the way we can analyse and measure information and evaluate their impact on business performance. In marketing, sales, finance, production and host of other business divisions we are increasingly seeing the use of relevant and real time information in making decisions and use of statistical tools in analysing the impact of decisions and actions on business performance. HR has lagged far behind their organisation counterparts in incorporating this approach of using real information and statistical analysis and rigour in understanding the way people operate at work and contribute to business performance With Human Capital increasingly becoming the true differentiator between good and excellent companies , it is now critical that new and real measures of employee engagement that are driven by fact not perception be developed.
Learn from Consumer Research Methods
Perception based survey tools no longer relevant in these times of real time information
Engagement surveys based on an analysis of employee perceptions of organisation and work were developed at a time when there was not much free flow of information and more importantly when employer- employee relations were formal and were hierarchies worked. It was then necessary to adopt non threatening & inclusive methods to understand employee expectations at work and to objectively gauge employee views on matters that impacted their work life - perception based surveys provided organisations a basis to probe different aspects of work life & collect views of all employees and provided employees the anonymity to respond without fear. In this day of networks, access to information, technology enabled work systems and openness in employee – employer interactions, the relevance of perception based employee surveys is questionable.
A tool meant to improve HR credibility could actually compromise HR effectiveness
Employee surveys that are based more on employee perception of organisation & work, could confuse rather than clarify and through their focus on employee feelings and perception of organisation & work could perpetrate a view that may have no substantial basis in reality and thus actually jeopardise organisation efforts rather than drive it towards a desirable direction. The explosion of information over the past several decades and the availability of sophisticated analytical and statistical techniques have made it possible for more science and rigour to be brought into the way we can analyse and measure information and evaluate their impact on business performance. In marketing, sales, finance, production and host of other business divisions we are increasingly seeing the use of relevant and real time information in making decisions and use of statistical tools in analysing the impact of decisions and actions on business performance. HR has lagged far behind their organisation counterparts in incorporating this approach of using real information and statistical analysis and rigour in understanding the way people operate at work and contribute to business performance With Human Capital increasingly becoming the true differentiator between good and excellent companies , it is now critical that new and real measures of employee engagement that are driven by fact not perception be developed.
Learn from Consumer Research Methods
It is a well accepted fact that surveys as a research tool are vulnerable to bias – the wording of the question, the administration of the question, the circumstances under which the question is asked, all have an impact on the outcome. Research has shown that the environment, availability of choices and information and situational factors all have an impact on consumer purchase behaviour- and that the actual purchase decision of a consumer could be in variance to the purchase intent. Market Researchers are therefore increasingly using observation based and fact based data to gain insights to what consumers and competitors are doing. The focus is more on what consumers and competitors are doing not what they may like to do. HR should learn from the field of current Market Research to build measurement tools that are based more on what employees do rather than what employees feel or think they may do.
Develop tools to measure actions and outcomes
Develop tools to measure actions and outcomes
Work systems and technology today makes it possible to develop tools that measure employee engagement based on what an employee actually does at work rather than what he feels about or thinks about work.
As a first step towards developing those tools the focus could be on measuring
A comprehensive tool incorporating these dimensions and their impact on business performance could help business and leadership to understand and be better prepared in managing the People Facet of organisations. Until such time that HR can demonstrate this fact based understanding of people issues at work and advice accordingly, organisations will not be able to effectively leverage the true power of Human Capital at work.
- Enabling knowledge- individual alignment with organisation values, goals, objectives, job purpose; Individual understanding of department or Unit role
- Enabling actions – behaviours that impact on business performance- eg absenteeism, adherence to commitments etc
- Understanding its linkage with business outcomes
A comprehensive tool incorporating these dimensions and their impact on business performance could help business and leadership to understand and be better prepared in managing the People Facet of organisations. Until such time that HR can demonstrate this fact based understanding of people issues at work and advice accordingly, organisations will not be able to effectively leverage the true power of Human Capital at work.
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