VII.

LoorrNc AUEAD

E MENTIoNEDEARLIERthat staffdepartrnents
have typically been ewed as expense centers.

Y Y This view developedas everyonebought

the idea and began to runage staff functions that way.
Cutting the cost of sta{Ifunctions has long been a primary
objective.With every dormturn in the businessrycle, staff
groups are decimated.In many casesthis has been proven
to be penny-wiseand pound-foolish.
Staffdepartrnentsplay a vital role when they connect
themselvesto the SQP objectivesof their line customers.
A better way to manageStaffis to view them as potential
contributors to profit. If you askedyourself what could we
do in human resourcesto contribute to profit, you would
think of severalways ro do that. This book has described
many tools and processesfor contributing tangible value
to the entelprise.

99

A Nnw WstoNron HuhtsN REso(mcES

tu companie,
:::: ortherwenry-nrsr
"oj"*:?T
century HR has to find a basic model for staying itr ulig"ment with its customers.In times of great flux and uncertainry the best approachis usually the simplest and closest
to bedrock management.Basicall the human resources
function has five responsibties:planning, staffing, payrng,
developing and retaining human capital. The HR Star
(seeFigure 11), revealshow the five functions are
interdependent.

WorffircePlanning
Workforce planrring is making a comeback.The
main human capital activity from the late 1980sthrough
the mid 1990swas staff reduction.By 1997,somepeople
Workforce
Planning

Retaining

Developing

Paying

Figure11. HR star

100

Looxtc AuEAD

began to wonder how in the world they were going to

competewhen they didn't have enough of the necessary
skills resident in the workforce. As the economy boomed,
recruiting heatedup and competition for technical skills
becamea pitched battle. Over time, a shortageof reliable
workers at all levels becamea central problem. The more
farsighted looked up from the daily srruggleand decided
they had to coruider the future as well as the present.This
led them back to workforce planning (\MFP).
Let's face it, WFP is redious.It requires developing
a vast amount of data on the competenciesof the current
workforce.Just setting up the systemand getting agreement on definitions and levels of skills can be drudgery.
A small number of companieshave perseveredand
developeda thorough description of their skills profile.
Others are studying ways to do it that won't be so
time-consuming.
No matter what sizeyour organization is, you have
to look ahead to your future skills profile. If you devore
a reasonableamount of time to planning, you will have
it returned in reduced hiring time and cost, lower training
costsfor new employees,and probably higher productity
through a more stableand motivated workforce.

Stffing
Hiring during periods of sustainedhigh growth
becomesan all-consumingtask. The only thing that will
make it easieris having good data on the results of your
current practices.Doesn't it make sensethat if you know
how much it costs,how long it takes,and the quality and

101

A Nzw Wstouron Huu,sNREso(mcES

availabfity of eachof your major sources,you can do a

betterjob? The classicexcuseis, "I don't have time to
arralyzewhat I am doing; I'm too busy." As they say,those
who ignore history are condemnedto repeatits mistakes.
The sameis true here. A little time devoted now to measurement and analysiswill pay back later in reduced workload and lower stressfor all-not to mention reduced cost.

Poyi"g
Pay coverswages,salariesand benefits-the total cash
investmentin human assets.We can do a betterjob of
managing that investrnentif we look at it from a resource
ewpoint. First, we should determinewhat percentof
revenuethe businessconditions dictate to be e most
efficient level of pay. That is, how much of every dollar
we take in should we invest in human assets?This is
a,nalyzedthrough a pyramid model, shown in Figure 12.

Productivity

Figttre 12. Payfuram.id.

t02

Looxtyc ATTEAD

How much of your total compensationdolla can

and should you invest in initial pay levels for new hires,
to maintain and retain skilled personnel,and to motivate
them to be productive? There are many options here. The
decision should be basedon management'sphilosophy
regarding human value added and the company's abfity
to pay. By looking at the question from e standpoint of
the pyramid you might get new insights.

Deueloping
Employee developmentis no longer an option. There
simply aren't enough skills in the national labor pool
to support the growth curve into the next decade.The
make/buy decision has been preemptedby a lack of supply. The national investrnentin training has been increasing at a steady50/oper year, compounded since the early
years of the decade.The key businessissuenow is where
to spend development dollars. Basic skills, management
competenciesand executivedevelopment are all priorities.
Despite the obous basic skills shortage,we would suggestthat the biggestopportunity is in executiveleadership
development.A study of 600 companiesacrossmany
industries revealeda belief that leadershipin the twentyfirst century will require new skills and insights.* In the
final analysis,if we don't develop effectiveleaders,we
won't have to wony about basic skills becausewe will
be out of business.

103

A NnwWstoN ton HuuN RnsouRCES

Retaining
\Arhen the supply is limited, a wise strategy is to pay
attention to keeping what you have. Consider what it costs
to lose a sklled employee:the direct costsof termination,
hiring a replacement,vacancy costsand learning curve
loss.These add up to more than one year'spay and benefits for an exempt person. Add to that the external costsin
unhappy and lost customers,and the number goesout of
sight. One study claims that the costsof losing an effective
salespersoncan take up to three years to recover.tn
The most coflrmon causeof voluntary termination is
not pay or opportunity elsewhere.That only tips the scale
in favor of leaving. An ongoing study now covering over
20,000 casesof voluntary turnover has revealedthat 800/o
of the caseswere triggered by problems with a supervisor,
working conditions, and perceivedlack of careeropportunities. Work conditions related to flexibfiry and respectfor
the worker's personal needs.Acnrally, this is good news.
You might not be able to outbid someonefor your valued
employee,but you certainly can do something about
supervisory skills, working conditions, and career
oPportunity.
Working

C ross-Functionally

In our cornbined forty years of human resourcesexperience,we have seldom seenHR departmentsin which
all the sectionswork as one unit. The intention might be
there, but few HR directors have developedmanagement
systemsthat induce everyone to work for the gteater good
of HR.

t04

Loorttc ArnAD

There are natural connectionsacrosssectionsof HR

that are often ignored. Following re some examples:
.

Hiring and taining: The buy it or make it question

should be discussedamong all HR sectionsand,
most import*tly, the staffing and development
people.

Paying and Retaining: Employee-relatiorspeople,

if they are doing their job, can feed a good deal of
information to the compensationand benefits Soup
about employeeamiqdestoward pay and benefits.

Paying and Benefits:I:r many large comparriesthe

compensationand benefits people are disconnected.
If they communicateeffectively they can find ways
to maximize the total return on investrnentin human
assets.

Planning-Statrng-Paying-Developing-Retaining:
The human assetsof the organization need to be
reviewed holistically. Peoplecare as much about
personal growth as pay.Th.y are turned on and
off by policies in all five areasof the HR star.The
best solution is usually found in a fivepoint view.
Monitoring

the Effects

of a Collaborative Approach
When HR professionalswork with their managers,customers and their professionalcolleagues,e results are

105

A Now VtstoNron HuuN RtsoLncns

usually measurable.Th.y can trace the effectsof their

work in severalways:
.

Lower hiring costs

Fastertime fillingjobs

Higher-quality hires

Higher levels of retention

Lower developmentcosts

Higher levels of productivity

To set up a valid and reliable measurementprogram,

all you need to do is have clear targetsin mind at the
beginning of the process.Then, you build a casefor the
relationship betweenyour recornmendedaction stepsand
It is much easierthan
effectson businessunit processes.
you think. This book has provided many examplesto
guide you.

The Top Ten Measures

of HR's Effectiveness
There is no end to the number of actions and results that
can be measured.What to measuredependson what is
important to the organization.As a generalization,we
would say that the following ueamong the most important for most companies:
per n flqu. The aging workforce
10. Healtlrcare
cost
will put added pressureon healthcarecost containment. Until the healthcareindustry shakes

106

Loot<twcATIEAD

out a ne/, more efficient delivery process,this

single large cost should be moniiored.
9.

py ana nyelttsasa permttageof oprafingexpaue.

Downsizings or rightsizing, *. ui-.j, at reduc_
ing the company's operating expenses.This
is one way ro seeif people cost is drop
T.d.
ping at the samerate as other ixpenses.

8.

Cwtperhire.The qualiry of the hire is more

important than the cost. Nevertheless,it is quite
useful to track hiring cost. The standardfor_
mula that appliesin almost all casesis: advertis+ agencyfees* employeereferrals * travel
1g
of applicantsand staff * relocation * the cost
of the internal recruiter . . . plus 100/oto cover
all other relatedcosts.
haining.One great challengingissueis
***-m
the calcrlationof return on investnienii" *uirr_
ing. Ironically, although trainers are concemed
that if they rry ro show ROI ir won,t be there,
training almost always shows a huge ROI.
Tumouer
rate.Retenaonof key employeesis
probably the biggestchallengein irun u"s.t
muragementtoday. Organizationsneed to
h:*.*lo
is leaving, aiwhat point during their
period^of employmenr are most people leaving
and, of course,the reasonsfor leaving. This
data can be used to dramatically cut irnwanted
turnover.

r07

A Naw Wstou ron HuwtdN RnsouRCES

5.

furnnuercost.Thekey issuein turnover is not

only that skills are lost, but so is a lot of money.
There are four componentsof turnover cost:
termination, replacement,vacIncy,and learning
curve loss. Losing as few as six skilled exempt
personscan cost a companyover $1,000,000!

4.

fmz tojtt s. Filling jobs quickly-with qualiry

people-is a critical need. HR has more opportunity to influence this result than any other function. Time should be measuredin calendar
days.

3.

For decadesthe
R.enmonhumnn*Pituf inuested.
has been
employee
question of the value of an
debated.Here is a simple solution: Take revenue and subtract operating expenselessthe
cost of pay and benefits.This "adjustedprofit"
figure dided by the cost of pay and benefits
showsthe rate of return on PeoPle.

2.

Ifunnn aalueadded.Do the samecalculation as

Return on Human Capital Lrvested,but divide
that adjustedprofit fig*. by the number of
firll-time equivalent employeesand conffact
workers. This shows the leveragethat people
have on profitabfity expressedas adjusted
profit dollars per person.

1.

flu sntltnt meanstfu mosttoyot'trar. Be honest:

Your survival and advancementare largely
dependenton your boss. It makes senseto show
that you have met or exceededhisiher needs.

108

LooxnvcArnAD

Human resourcesdepartrnentcostsand staff ratios

are not included in the Top Ten. That is becausethev are
of lesserimportance. triormfollows function. yo,, establi.h
the sizeand cost of the HR function basedon the organi_
zation's needsand expectationsfrom HR. Budget urr rt
ff
the driving force of an effecrive,businesslartnering
l:ol
HR departrnent.A clear vision of a value adding p.rlporJ
separatesthe best from the rest.

How To Contribute Tomorrow

Anticipation is a much-appreciatedskill in an'ncertain
world. HR must develop the insights neededto tell its
managementcustomerswhat is coming tomorrow. This
is not magic.Two actions
pr.pur.lro,r,
"*
1. Maintain a broad-basedview of rhe world. The
important, dtiri"g forcesof the marketplaceare
outside of HR. Information technology,social
trends, financial news and competitors, actions
are the stuffof prediction.Scanthe media and
subscribeto an Internet newspage.In the space
of frfteen minutes a day,you can catch the most
important eventsthat will affect the investrnent
in human capital.
2.

kepare the HR staflwith businessskills.Forget

HR sklls for the moment and concentratein
rhree areas:anulyhc abiliry selling skills and
intelpersonal competence.

109

A NlvVwoNron Huntax farsotnrr

*:*:*:,,,,l"ll: #:::.", h.w,he

numan resourcesfunction is
on e ascendancy,claiminq
that becausehumar

ogruzedasrhe;',','#"*Unn:'lt*J:,T
humanresources
fri.roio., i, ,iri.i.

.ilr"t

is true.

\Alhat
is also ffue is the edence
tf."t
percentage
of human resources
"fy
are taking",*
aclvantage of this
opportunity. Wiress {orp.
the fact thut *y HRrri*"g*,

arenow comingfroalnance,
_urketig and op.ririo*,
not from wirhintheHR prof.rriorr.
ThJ_.rrug. should
beclear.The opportuniqg pf"/ir't.rJ*a
now.But in
order ro makethe team,HR prr.rrl""i,
havero become
businessprofessional,a, well.

r1 0

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