How Human Resource Management
Can Impact Your Bottom Line
Presented by:
Jenna Weidner, Senior Consultant
May 2, 2012
© Baker Tilly Virchow Krause, LLP
Baker Tilly refers to Baker Tilly Virchow Krause, LLP,
an independently owned and managed member of Baker Tilly International.
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3
Presenters
Moderator
Presenter
Agatha Gaca
Jenna Weidner
Senior Marketing
Associate
Senior Consultant
Public Sector
Consulting Group
Baker Tilly
Baker Tilly
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4
Objectives of the Presentation
> Why human resource management is central to cost control
> Key cost considerations relative to legislative mandates and collective
bargaining negotiations
> Identifying key steps to optimizing your human resources
− Alignment with strategic priorities
− Cross-entity considerations
− Key metrics
− Key HR Audit points
> Benefits of moving from tactical HR to strategic HR Dept.
− Improved ability to serve both staff and management
− Improved ability to review, measure, and provide insight
> Tools and best practices for effective HR Management
5
HR Management and Cost Control
> Personnel costs are the largest part of your budget
> People are your biggest asset and biggest liability
> Consider associated costs
− direct and indirect
− fixed, stepped and variable
− ongoing and one time
> Maximize coordination between HR, Payroll and Finance
6
Managing Your Biggest Asset
Human
Resource
Management
Adapted from hr-scorecard-metrics.com
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Collective Bargaining Negotiations
> Contract language directly impacts cost
> Fiscal analysis prior to negotiations is key to setting priorities
• Consider full cost and benefit
• Examples:
−Saved $350,000/yr elimination of paid breaks and lunch
−Saved $50,000/yr categorizing service responses
> Take the broad view of impacts
•Impacts on non-reps
•Impacts on other contracts
•Operational changes
8
Cost of Turnover
> Separation costs/savings
• Severance pay and leave pay out
• Administrative costs related to termination
−Processing paperwork
−Conduct exit interviews
• Increased unemployment compensation
• Wages and benefits saved due to vacancy
> Lost productivity and revenue
• Vacancy coverage (overtime or temp)
• Initial performance differential of new hire
−0% productive during training
−25% productive weeks 2-4
−50% productive weeks 5-12
−75% productive weeks 13-20
• Mentoring and coaching from coworkers and management
> Replacement costs
Turnover cost* for a typical
employee = 150% of annual salary
Turnover cost* for management or
sales staff = 200% of annual salary
Example
Inputs:
100 non-management, non-sales
staff, 10% turnover rate, average
salary of $50,000/yr.
Calculation:
150% X $50,000 X 10 staff =
$750,000/ yr in turnover costs
•Recruitment time and advertising expense
•Interviews, screening, testing
•Operational changes
> On boarding and training time and materials
*William Bliss, “Cost of Employee Turnover”, The
Advisor. Isquare.com
9
Poll
What is the largest component of
the typical budget?
A.
B.
C.
D.
Rent
Supplies
Personnel
Contracted services
10
Legislative Mandates
> Understand implications
− Timeline- plan the process
− Transparency- communicate early and often
> Strategic implementation
−Gain insight into what staff really value
−Standardize HR practices across units
−Reduce labor costs
> Case study: Wisconsin Acts 10 & 32
− Various approaches
− Lessons learned
11
Optimizing Human Resource Management
> Alignment with organizational strategic priorities
> Cross-entity considerations
> The role of HR in auditing the use of resources
> Examples of applied metrics
12
Alignment with Strategic Priorities and
Cross-Entity Considerations
> Determine organizational priorities
> Opportunities for alignment
− Budget process
− Position control process
− Functional analysis
> Avoid silos
13
Poll
Which of the following represent
opportunities to align human
resource management with
organizational goals?
A.
B.
C.
D.
Requests for new positions
Budget development
Operational reviews
All of the above
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Auditing the Use of Human Resources
> The role of HR as auditor
> Partners in the process
− Executive leadership
− Payroll and finance departments
− Department leadership
> Approach and metrics
− Expected service level
− Resources needed to achieve this level of service
− Key metrics
−FTE per function (industry benchmarks)
−% turnover per year (organization data)
−expected attrition (organization data)
15
Example of Applied Metrics:
Number of HR Department Staff
Organization Size
Benchmarks*
Professional HR and
Benefits Staff Per
100 Employees**
Benchmark
250-499 employees
0.94 FTE
Your Entity
(using average of metrics)
0.89 FTE
4.8 FTE
HR and
Benefits
Staff
500-999 employees
0.83 FTE
541 Employees
4.0 FTE
HR Staff
2.5 FTE
Benefits
Staff in
Payroll
6.5 FTE
HR and
Benefits
Staff
(Currently Authorized)
(Estimated)
(Total for Comparison)
Current State
* Source: SHRM Human Capital Benchmarking Study, 2007
** Excludes administrative staff
*** Weighted average based on benchmarks
Potential for improved efficiency: 1.7 FTE
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Example of Applied Metrics:
Role of HR Department Staff
Functional
Areas
Related Tasks
Employee
Relations
Research and investigation, discipline documentation, grievance processing,
mediation/arbitration, negotiation, policy and procedure development and
revision, performance evaluation program, exit interviews, providing advice,
technical assistance, and counseling to staff, writing letters of agreement
Analyzing jobs by gathering input via interviews, receiving documents,
observation, surveys, questionnaires, filing, creating, reviewing, and revising
Classification job descriptions, retrieving files, position control and maintenance, copying
and Workforce and dispersing files, administering job classification systems, minute taking
Analysis
and clerking, scheduling, organizing materials, preparation meetings,
destroying files, committee meetings, clerk activities, logging and tracking
data, employment data reporting
Creating and approving job requisitions, screening and selecting candidates,
creating and posting internal postings, preparing for and scheduling
Recruitment
interviews, advertising jobs to the public, scheduling and conducting preand Selection
employment tests, collecting applications, conducting reference and
background checks, preparing offers of employment or rejection letters
Support and
Retention
Orientation program, id and key card creation, employee recognition award
program, morale boosting activities, training programs
HR
Expected Previous
Priorities Services*
Effort
1st
2nd
(1.67)
2nd
rd
3
(3.00)
3rd
st
1
(1.50)
4th
th
4
(3.83)
Current
Effort
1.40 FTE, 1.58 FTE,
42% of
60% of
Weighted Weighted
Staff Costs Staff Costs
0.75 FTE, 0.40 FTE,
18% of
11% of
Weighted Weighted
Staff Costs Staff Costs
1.35 FTE, 0.82 FTE,
29% of
21% of
Weighted Weighted
Staff Costs Staff Costs
0.50 FTE, 0.20 FTE,
11% of
7% of
Weighted Weighted
Staff Costs Staff Costs
*Source: average (mean) of priority rankings (1 though 4) collected from focus group participants
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High Opportunity Areas:
Role of the HR Department
Resource Outlay by HR Priority Area
$160,000
Salary and Benefits of HR Staff
$140,000
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$0
2010
2011
Priority #1 Employee Relations
2010
2011
Priority #2 Classification and
Workforce Analysis
2010
2011
Priority #3 Recruitment and
Selection
2010
2011
Priority #4 - Support
and Retention
18
Other examples of Metrics for HR Management
>Time to fill a position
> Ratio of HR managers to HR support staff
> Training dollars spent per employee
> Cost per hire
> Benefit component cost per employee
> HR expense per employee
> Workers’ compensation incident rate
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Tactical vs. Strategic HR Management
> Defining the difference between tactical and strategic HR
> Options for structure and governance
> Options for roles and functions
> Options for review approaches
− Strategic focus
− Efficiency focus
− Compliance focus
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Approaches to Human Resource Management*
> Transactional: Administrative, order-taking. For example, updating an individual
employee’s HR records, filling a vacant position, locating a training program for an
individual. Completing this work efficiently and effectively is a requirement to earn
credibility to work strategically.
> Tactical: Solutions offered. Most HR work over the past 20 years is tactical. For
example, recruitment initiatives, training programs, restructuring of departments,
succession-planning process.
> Strategic: Work that moves the organization into a favorable position, supporting
one or more courses of action developed by the organization’s leaders.
− Long term (two or more years).
Strategic
− Linked to one or more business goals.
− Solution-neutral in early stages of partnering. When a department
manager approaches you with a tactical request, resist the urge to offer an
immediate solution. Focus on the result the client is seeking to achieve and
propose ideas for analyzing the root causes of the problem.
− Requires multiple solutions or tactics to be implemented.
Tactical
Transactional
− It’s macro (focuses on department, functions or entire enterprise).
*Source: “Beyond Tactical,” Frankie S. Jones, Ph.D., SHRM Presentation, 2009
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Strategic Role of the HR Department
> Strategic seat at table, driving overall systemic approaches (i.e.
workforce planning, position prioritization, employee morale efforts)
− Companies that empower key HR professionals to take on a “strategic business
partner” role create HR teams that outperform the average HR organization by 25
percent or more.*
− Such companies typically outsource HR administrative functions and realign their
HR business partners to work with line executives on hiring, coaching, leadership
and collaboration.*
> Creation of tactical frameworks designed to ensure consistency,
compliance and confidence
> Understanding of operational needs to support department
managers
*Source: The High-Impact HR Organization: Top 10 Best Practices on the Road to Excellence, Bersin & Associates / Stacey Harris, January 2011
22
Best Practices for the HR Department
> Move beyond tactical functions to a strategic partner role*
Position
Processing
Personnel
Management
Human
Resource
Management
Strategic HR
> Focus is on organization-wide change
> Staff as a valued resource aligned with organizational priorities
> Target training: Training Magazine found that the average spend
on training for the top 125 corporate companies is 6.7%.
*Source: Christensen, R. (2006). Roadmap to strategic HR: Turning a great idea into a business reality. New York: AMACOM.
23
Review Approaches
> Strategy - Focused: Determines whether the efforts of the HR
department align with the organization’s goals or strategic plan.
From
High
Level
> Efficiency - Focused: Helps the organization maintain or
improve a competitive advantage by comparing its practices
with those of companies identified as having exceptional HR
practices.
> Compliance - Focused: Measures how well the company is
complying with current federal, state and local laws and
regulations.
With
More
Detail
24
Start with Strategy
Strategic Review:
High Level Ideas
Compliance Audit:
Narrow and Detailed
25
More on Strategy
Importance of Strategic Objectives*
Input from
Elected
Officials
Input from
Department
Heads
*Adapted from workforce-development-advice.com
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Poll
Which of the following functions
are examples of strategic HR
management?
A.
B.
C.
Employee recordkeeping
Long-term workforce planning
Job posting
27
An Efficiency-Focused Process
> Data Collection
− Follow the life-cycle of an employee
− Understand roles of HR staff
− Identify policies, procedures and systems
− Listen to pain points
> Analysis and Benchmarking
> Recommended Actions
> Implementation Plan
28
More on Efficiency
> Review documentation: Is each process adequate as described?
> Review practice: Does each described process reflect reality?
> Find Pain Points:
− Is the process timely and efficient?
− Are there any bottlenecks, shortcomings, or breakdowns in the system?
− Do employees like the process, or do they have suggestions for improvement?
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More on Efficiency
*Source: TPI Information Services Group
30
A Compliance-Focused Process
> Common Areas Reviewed
− ERISA
− Compensation
− COBRA
− Unemployment
− EEOC
− Workers Compensation
− OSHA
− Age discrimination
− ADA
− Sexual harassment
− FMLA
− Immigration reform and control
− FLWA/FLSA
− Right to privacy
− Title VII
> Common Methods Applied
− Document Review
− Checklists
> Common Deliverables
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More on Compliance
> Largest Areas of Legal Exposure
− Hiring
− Performance Management
− Discipline
− Termination
> Specific Risks to Consider
− Misclassification of exempt and nonexempt jobs
− Inadequate personnel files
− Prohibited attendance policies
− Inaccurate time records
− Insufficient documentation
32
Maximizing the Benefits of Review
> Regardless of the focus of the review, these elements are key to success
− Transparency
− Benchmarking
− Fiscal Analysis
− Interdepartmental partnerships
− Strategic leadership role of HR
− Plan for implementation
33
Strategy to Implementation Components
Strategic
Objective
Improvement
Initiatives
Action Steps
Necessary
Elements
Task Details
Owner
Defined
Outcome and
Measures
Task Details
Goal
Description and
Priority Level
Due Date
Resources
Task Details
Owner
Task Details
Due Date
A high level of
detail in each of
the various
elements of your
plan will improve
your ability to
execute it
effectively.
Defined
Outcome and
Measures
Resources
34
Implementation Plan Example
(Content is for Illustration Only)
Strategic Objective: Ensure Perceived Value and ROI
Initiative
Action Step
1. Adopt a TCO
& ROI Model
2. Develop a
communication
Articulate ROI,
plan for TCO and
increase
ROI awareness
understanding
and enhance
3. Prepare and
member buy-in
distribute
materials with
value quotient
4. Develop
schedule for
reviewing TCO
model
Priority Timeline
High
High
Activities
Assigned
Monitoring Completion
To
Responsibility
Date
Short
term
a. Review BT Model and determine if applicable to
other areas.
b. Identify specific costs relative to other applications
c. Gather relevant market data to for vendor cost
comparison
Short
term
a. Develop specific materials and venues for information
distribution.
Innovation
b. Identify potential audiences and specific method of
Director
information sharing (e.g. email, direct person to person).
c. Determine needed resources to carry out plan.
Finance
Director
a. Assign responsibilities to carry out TCO
Member
Short communication plan.
High
Care
term
b. Secure marketing or public relations assistance for
Coordinator
first time development of materials.
a. Establish cost allocation review schedule to
coordinate with annual budget cycle.
Finance
Medium Mid-term b. Access changes in costs and transactions.
Director
c. Review member input relative to costs and allocation
methodology.
Executive
Director
March 2012
Executive
Director
Initial
information January 2012
Executive
Committee
Initial
information January 2012
Executive
Director
September 1
annually
35
Poll
What is the first step in developing
an implementation plan?
A.
B.
C.
D.
Assigning owners to tasks
Determining deadlines
Identifying strategic objectives
Defining outcomes of tasks
36
Tools for Strategic HR Departments
> Examples of tools for strategic HR management
− Excellent Job Classification
− Workforce Planning
− Performance Evaluation
− Competency Models
− Information Technology
> Discussion of these tools
− Why this tool
− Best practices
− Options to consider
37
Job Classification
> Why Job Classification
− Core Applications: basis for pay rates, organizational structure, and
compliance with legal requirements
− Other Applications: recruitment/selection criteria, workforce and
succession planning, Performance Evaluation, development and
training, risk management and legal defense
> Best Practices
− Job Classifications that Reflect Complexity of Work Performed
− A Transparent and Accessible Review Process
− Internally and Externally Equitable Compensation
− Specific yet Flexible Job Classifications
38
Job Classification
>Options to Consider
− Recommendation: Unify Job Classification Approach
− Options for Unified Approach, listed from most to least recommended
1. Outsource Job Classification Rating Process
2. Select a single new method
•
•
Modification of DBM to Broadband Method
Market Pricing Approach
3. Choose one of the existing methods
•
•
•
More employees currently on Decision Band Method
Focus group disliked Position Evaluation Boards with the Hay Method
Those using DBM may have been under represented in the focus group
− Recommendation: Eliminate 5 Year Review Cycle and Limit Review to New
or Significantly Modified Positions (>20% of job duties changed)
− Eliminate Formal Classifications
− Recommendation: Pay for Performance/Effort Should be the End Goal
39
Workforce Planning
>Why Workforce Planning
− Significant anticipated retirements from aging workforce
− Attrition due to concerns over collective bargaining changes
− Impact of lost knowledge upon ability to deliver services
>Best Practices
− Identify and plan for staffing, training and knowledge needs
•
Involve department management
•
Proactive tracking of projected attrition
•
Continuous competency monitoring
− Establish conditions that support workforce planning initiatives
•
Provide adequate and focused funding
•
Communicate top management support
•
Allow flexible adaptation
•
Clearly demonstrate and share benefits
“Engaging in the
leading-edge practice
of workforce planning,
including enterprise
forecasting and skillsgap scenario planning,
is one of the greatest
drivers of business
results. For example,
those companies that
excel in workforce
planning drive four
times the value of
those companies that
focus on the
consolidation of HR
technology systems.”
-SHRM, “Report: Many HR
Departments Lack Crucial
Skills for Success” 2/7/2011
− Provide tools and guidance to supervisors
40
Workforce Planning
>Options to Consider
− Collect/track data regarding employee age and years of service
− Establish a framework for assessing workload and staffing levels
− Develop a position and employee competency inventory
− Prioritize resources based on program priorities
− HR leads planning effort with a proactive and cohesive approach
• Develop strategy for recruiting qualified staff:
o Consider adoption of more flexible and appealing hiring procedures
o Expedite screening and validation of entry/examination requirements
o Develop worker-friendly personnel policies
o Explore benefits of more flexible job descriptions
• Develop strategy for developing existing staff competencies
• Develop strategy for cross training and knowledge transfer
• Communicate strategies and seek feedback from stakeholders
− Include training and workshop time related to workforce planning as part of
the upcoming supervisory training program
41
Performance Evaluation
>Why Performance Evaluation
− Tool for employee performance measurement: basis for pay increases,
promotions, assignment changes and/or discipline
− Tool for employee growth: plan the training, guide job experiences, mentoring
and other activities related to employee development
>Best Practices
− Balances performance measurement and growth in way that reflects
organizational values and culture
− Aligns with strategic objectives/priorities of the County
− Legally defensible practice (timely, consistent, levels of review, etc.)
− Focusing first on the fairness of the design process and the approach chosen
(job evaluation, skill/competency-based plans and market pricing) rather than on
the results (pay structure) is likely to achieve employee and management
commitment, trust and acceptance of the results.*
*Source: Milkovich, G., and Newman, J. (2002). Compensation, Seventh Edition. San Francisco: McGraw-Hill Higher Education, p. 141.
42
Performance Evaluation
>Options to Consider
− More automation of processes (see use of technology section)
− Competency Model
• Implement in phases and organize in groupings
o By category of job (supervisory, administrative, professional, etc.)
o By skill area of job (finance, information technology, etc.)
o All employees (teamwork, communication, punctuality, etc.)
• Should be used for recruitment, development and placement in addition
to Performance Evaluation
• Requires buy-in and support of leadership and effective communication
of rationale and advantages with staff
− 360-Degree Evaluation (aka Multisource Feedback) Model
• Evaluations from peers, supervisors, direct reports, internal and
external customers, suppliers, etc.
• Better to use as a secondary tool, rather than primary measurement
43
Competency Models
>Three ways to use Competency Models
− Develop a common competency model at the organizational level and create
subsets of performance standards reflecting those competencies (for example,
professional jobs, administrative jobs and managerial jobs).
− Identify job families such as information technology, finance and management.
Develop customized competencies and performance standards for each job
family and level.
− Define a core set of performance standards and competencies—such as
interpersonal effectiveness, teamwork and communication— across all jobs.
Define specialized technical competencies for each individual job group.
*Source: SHRM Foundation Executive Briefing: Four Questions the CEO Should Ask About Performance Evaluation, June 2010
44
Information Technology
>Why Information Technology
−
−
−
−
−
Improve workflow
Empower employees with self-service options
Improve communication
Increase capability for analysis and planning
Enhance decision-making relative to human resource management
>Best Practices
− Integration between payroll and human resource systems is imperative to ensure
that processes and decision making is effective, efficient and has positive impact
− Workflows and priorities should be clearly defined before a pursuing a
technology solution
− The largest part of an organization’s budget is it’s personnel costs, so HR needs
and workflows should be central to any system selection
45
Review
> Why human resource management is central to cost control
> Key cost considerations relative to legislative mandates and
collective bargaining negotiations
> Identifying key steps to optimizing your human resources
− Alignment with strategic priorities entity-wide
− Key metrics and HR Audit points
> Benefits of moving from tactical HR to strategic HR Dept.
− Improved ability to serve both staff and management
− Improved ability to review, measure, and provide insight
> Tools and best practices for effective HR Management
46
Questions and comments
47
Contact information
Jenna Weidner, Senior Consultant
608 240 2664 direct
jenna.weidner@bakertilly.com
48
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as promulgated by the United States Department of Treasury, nothing
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cannot be used by any taxpayer for such purpose. No one, without our
express prior written permission, may use or refer to any tax advice in
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partnership or other entity, investment plan or arrangement to any
other party.
Baker Tilly refers to Baker Tilly Virchow Krause, LLP, an
independently owned and managed member of Baker Tilly
International. The information provided here is of a general nature and
is not intended to address the specific circumstances of any individual
or entity. In specific circumstances, the services of a professional
should be sought. © 2011 Baker Tilly Virchow Krause, LLP
49