Claremont Graduate University
School of Behavioral and Organizational Sciences
Master of Science in Human Resources Design Program
HRD 322: Financial Analysis for HR
Fall 2015
Module 1
1
Instructor:
Michael L Manning, MBA, SPHR
Work Telephone:
(626) 302-5232
Cell Telephone:
(626) 614-6316
E-Mail:
Manning116@hotmail.com
Class Dates:
Session 1 - Tuesday, September 1st
Session 2 - Tuesday, September 8th
Session 3 - Tuesday, September 15th
No class - Tuesday, September 22nd
Session 4 - Tuesday, September 29th
Session 5 - Tuesday, October 6th
Session 6 - Tuesday, October 13th
Session 7 - Tuesday, October 20th
Class Hours:
7:00pm – 9:50pm
Class Hours:
By appointment
Course Description
Financial analysis for human resources covers the essential business functions in which the
human resources program operates such as accounting, finance, budgeting, cost-benefit
analysis, etc. This course presents an introduction to accounting practices and will provide
students with the understanding theyneed to interact effectively with accounting and finance
departments as HR professionals.
Course Overview & Objectives
This course presents and introduction to accounting practices and will provide you with the
understanding you need to interact effectively with accounting and finance departments as HR
professionals. In addition you will be exposed to non-traditional and innovative ways of linking
HR activities to business performance. After this course you should be able to:
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Read and understand financial statements
Conduct a cost-benefit analysis linking HR actions to financial impact
Link HR actions to hard to cost activities through
o Systems thinking & causal loop diagrams
o HR linkage model (Talent Strategy Institute)
Develop an HR budget (with an understanding of capital and A&G expenses impacts)
o How HR budget supports and aligns to business strategy
o Determine possible relationships between workforce planning and budgeting
Understand traditional and emerging ways of valuing the HR function
o Benchmarking
o Human capital financial statement (Human Capital Management Institute)
o People profit chain
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Required Textbooks & Materials
Berman, Karen and Knight, Joe. (2008). Financial Intelligence for HR Professionals: What You
Really Need to Know About the Numbers. Harvard Business Press. Boston, MA. ISBN-13: 978-14221-1913-6.
The Essentials of Finance and Budgeting: Business Literacy for HR Professionals (2005). Harvard
Business School Press. ISBN-13: 978-1-5913-9572-0. (Note: No author was listed as this book was edited
by the Harvard Business School Press & the Society for Human Resource Management).
Bucknell, Hugh and Wei, Zheng. (2006). Magic Numbers for Human Resource Management:
Basic Measures to Achieve Better Results. John Wiley & Sons, Incorporated. ISBN-13: 978-04708-2161-9.
Students will learn about and draw insights from thought leading business research in the HR
field. In addition to the class texts, students will be exposed to articles, case studies, & other
course content from:
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The Conference Board
Institute for Corporate Productivity (i4cp)
CEB Corporate Leadership Council (CEB)
Talent Strategy Institute (TSI)
Human Capital Management Institute (HCMI)
PwC Saratoga Institute
And more
The previously mentioned research providers are typically for profit institutions and their inclusion in the class
material is not an endorsement from Claremont Graduate University for their services, products or other offerings.
They are included as professional forward looking sources of information and at times their concepts and ideas may
contradict each other and ideas from your texts.
Web links to articles and case studies
i4cp - People Profit Chain - http://go.i4cp.com/ppc
CFO Magazine – Power from the People, Can human-capital financial statements allow
companies to measure the value of their employees
http://www.cfo.com/printable/article.cfm/14604427
PwC Saratoga Institute – Trends in People Analytics - http://www.pwc.com/en_US/us/hrmanagement/publications/assets/pwc-trends-in-the-workforce-2015.pdf
CEB- A New Way to Manage G&A Spend - http://www.cebglobal.com/exbdresources/pdf/finance/FLC2559715SYN%20INFO%20Overhead%20Cost%20Mgmt.pdf
CEB – A Better Way to Budget in Complex Organizations - http://www.cebglobal.com/exbd/formpages/finance/ocm-ford.page?
Articles are free and in some instances you need to enter basic info to download.
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Calculator
You should purchase a financial calculator for the class. A Texas Interments BAII PLUS is highly
recommended. The instructor will use this calculator to solve exercises and problems in class.
It is available through any of the office supply or discount stores.
Grading Policy & Course Requirements
The final course grade will be determined by:
Class Participation
Homework
Final Exam
100 points
100 points
100 points
300 points
Class Participation (100 points)
As we will discuss in class, an important component of developing HR expertise involves sharing
information and applying what you have learned. Class activities and interaction with your
peers in the classroom setting are critical to helping you better understand the systematic
aspects of HR financial analysis, and how to apply what you are learning to real business
settings. Therefore, attendance is necessary for you to maximize your learning of the material.
A lack of attendance signifies a lack of participation. Students will self-assess their own level of
class participation by completing the Class Participation Self Assessment Sheet (which will be
handed out on the first day of class), to be turned in at the end of each class. The instructor
will collect the Class Participation Self Assessment Sheet at the end of each class, review the
student’s self-assessment and either confirm or modify the assessment sheet. If modifications
are made to a student’s assessment, feedback will be given as to why, and what can be done to
improve the student’s participation level for future class sessions. Please note the new MSHRD
program policy regarding attendance for the standard module (7-week) course states: No
more than ONE class should be missed to receive credit for a course.
Homework (100 points)
To ensure that your learning occurs on a continuous basis – the course schedule contains
homework assignments as part of the learning process. All homework is due on the date stated
on the course schedule. No late homework will be accepted. Homework is to be prepared using
Word, Excel and PowerPoint or other standard software packages. No handwritten homework
will be accepted. If you cannot make class, you should email or otherwise deliver the homework
before the start of class.
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Homework 1 - Linkage Assignment
Part 1 - Select an HR activity and create a causal loop diagram for that activity with a shared
variable from the financial systems causal loop diagram given in class. This can be challenging
and points will be awarded for trying.
Part 2- Select an HR activity from the HR Talent Management Section (light blue box) of the
Talent Strategy Institute HR Linkage Model and link it to a financial outcome. Create a one (1)
page slide telling the linkage story (example provided was onboarding program leading to
increase in sales). You may use actual data from your work if they allow it, or you can create
mock data to illustrate how the linkage works.
Homework 2 - Cost-benefit Analysis & Budgeting Assignment - Will be handed out during class.
Homework 3 - Dashboarding Assignment
Identify an HR function or use the full HR function to measure and link to company performance. Select
metrics based on magic numbers, PwC article or other sources. Create a mock or actual dashboard.
Explain your reason for:
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Selecting the metrics you selected (do they measure efficiency or effectiveness)
How the measures link the HR activities back to the business and financials (will they directly or
indirectly impact income statement, balance sheet or cash flows?)
Why you chose to show the metrics as a point in time or trending over periods of time
Your decision to use performance targets and/or benchmarks and how they were selected
Exams (100 points)
One (1) non-scored baseline exam will be administered the first day of class followed by two (2) scored
exams through the class. The first exam will be a take home exam. The second exam will be
administered as an in class final. Each exam will consist of multiple choice, matching, fill-in the blank,
and problem questions. Exam questions will be based on reading assignments, in-class discussions,
exercises and examples. Due to the nature of this class, the multiple choice questions will be detailed, so
you will need to study accordingly. On the day of the exam, please bring your calculator. You will NOT be
allowed to share calculators during the exam or to use the built-in calculator in your phone.
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Schedule
Session
Date
Week 1
1-Sep
Week 2
8-Sep
Week 3 15-Sep
Topic
Types of business,
Systems thinking & financial
mental model,
Linking HR to financial
outcomes
Reading due
Homework due
Test
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Baseline
non-credit
test
-
-
HR linkage
Hand-out
test 1
Financial
Intelligence
pages xi to 142
Finance and
Budgeting
pages 21- 59
Finance and
Budgeting
pages 205 - 219
i4cp Article - People
Profit Chain
CFO Article - Power
from the People
Balance Sheet,
Income Statement
Traditional and emerging ways
of valuing the HR function,
Human Capital Financial
Statement
Week 4 22-Sep
No class - work on take-home
test 1
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Week 5 29-Sep
ROI, breakeven , NPV, hurdle
rate,
Budgeting
Finance and
Budgeting
pg. 155 - 204
CEB Articles on G&A
budgeting
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Week 6
How HR budget supports and
align to business strategy,
Relationship with workforce
planning
Financial
Intelligence
pages 177 - 229
Cost-benefit
analysis &
budgeting
-
Dashboard
6-Oct
Week 7
13-Oct
Benchmarking and dash
boarding
PwC Saratoga Article
- Trends in People
Analytics
Magic Numbers for
HR - all pages
Week 8
20-Oct
In Class Final Exam
-
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Turn-in
test 1
Final Exam
About the instructor
Michael Manning has over 20 years’ experience working in Fortune 500 companies as an HR
generalist/manager with multi-site and multi-state responsibility, corporate HR specialist in
measurement & strategy as well having as experience outside of HR in business operations,
supervising and managing core business functions.
Currently Manning leads a team of approximately 60 HR professionals making up Southern
California Edison’s HR Shared Services Division. Through 5 subordinate Sr. managers the team
performs a variety of HR functions including enterprise-level strategic workforce planning, HR
analytics, SAP HCM master data, HR’s technology portfolio, HR project management office, HR
business process improvement function (6 Sigma/LEAN/OpX), HR’s centralized budgeting, HR
vendor management, Employee Information Call Center, Employee Engagement, and HR
Compliance & Risk.
Prior to joining Edison in 2010, Manning held various roles in engineering, operations
management, and HR with Siemens and Merck. Prior to that Michael was part of a sevenperson start-up company which raised over $60 million from JP Morgan, successfully taking the
company from concept to launching manufacturing and distribution of product to major retail
chains in 14 states. Michael draws on this broad set of experiences to bridge engineering and
operations solutions to HR challenges.
Manning is a thought leader and sought after speaker on HR Measurement & Strategic
Workforce Planning. Manning was recognized with a 2013 Best Practice Award in HR Analytics
& Workforce Planning. He has presented at industry leading conferences such as HR Tech,
Bersin IMPACT, Institute for Corporate Productivity i4cp, HR.com, Talent Management Alliance
(TMA) and others. The work done by him and his team has been the topic of case studies by
The Conference Board, Deloitte, and the Best Practice Institute and covered in the Journal of
the International Association for Human Resource Management (IHRIM).
Michael holds an M.B.A. with Beta Gamma Sigma honors in operations management from
California State University – San Bernardino and a B.S. from the University of Utah. After
business school Manning was recruited into Siemens high potential (HIPO) fast track
development program. In 2014 he was invited into Edison’s HIPO Sr. Manager development
program. He holds a Six Sigma Black Belt and is a certified ISO 9000 auditor and SPHR. He
resides in the greater Los Angeles area with his wife and 2 children.
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