As financial professionals, our HR counterparts are the most important allies we could possibly have. They should be our strategic planning partners and our confidants. So why don’t we team up more often? In the majority of cases, I think it’s because of how we work. Fractured systems isolate us professionally, making it difficult to understand the points of synergy between our two worlds. During my years in finance, I didn’t understand the value of human capital because it wasn’t something I could capture on a balance sheet. There is no generally accepted accounting principal to assign monetary value to talent, but the intrinsic value is there, just the same.
A growing demand to track Human Capital Management (HCM) metrics is putting pressure on already burdened HR professionals. Digital HCM is the future of HR and promises to become the strategic keystone we need. So why are we so slow to embrace it? Many companies are still struggling to manually piece together information from payroll, finance, and even sales in order to extract sophisticated insights from data. Unlike most HR professionals, those of us in Finance are already accustomed to this type of analytical work. We’ve been forced to leverage technology to track and benchmark metrics far longer than our friends in HR. We’re familiar with the challenges of disparate systems and what it takes to build bridges between human capital management (HCM) and financial ERP solutions. Think of the possibilities.
Establish HCM as an integral part of the business
As the finance leader in your organization, you are typically included in strategic planning activities. If you haven’t already invited your HR counterparts to the table, I encourage you to do so now. They could be one of your most strategic partners as they understand the value of your firm’s workforce and how to increase that value through thoughtful investment.
Below are 5 ways finance can (and should) partner with HR:
1. Establish a Human Capital Management Strategy
Encourage your firm’s leaders to establish human capital management as a strategic function and recognize that they are a valuable, untapped resource. Focus on how to grow the business organically by tapping into the productivity that results from a highly engaged workforce. Attracting, developing, and optimizing great people will help your firm lead the industry with high performing teams. 2. Create an HR Technology Roadmap
For most firms, the road to a fully integrated HR technology solution is just the beginning. Prepare your firm for the total investment in terms of budget and time. Create a roadmap to help all stakeholders in your firm understand what it will take to successfully craft and implement a digital human capital management strategy. 3. Integrate HR and ERP technology
The integration of these two technologies is a must for any strategic HR roadmap. Integrating critical business functions is the only way to get the analytics required to optimize your workforce. Integration will allow employee information to be pushed into the ERP system to facilitate the project lifecycle. Critical data around time and attendance, employee expense reports, and employees will be able to move between systems and streamline the allocation of costs to projects, improve resource planning, and automate payroll. 4. Enable Collaboration
Be sure to include collaboration tools in your HR technology roadmap. Project work is often spread across locations and teams, making it necessary to have tools in place that enable dispersed teams to communicate and work together. Collaboration tools can also help to identify disengaged employees faster and ramp new employees more quickly. 5. Choose a Partner
Software was once something that we bought and used. Today, when you choose a tool, you are also choosing a partner. Spending time evaluating features and functionality is not enough. Chose a partner that understands project-based firms and your unique challenges. Make sure they have made the right investments in solutions for your industry and aligned with your needs.
Although on the surface the goals of Finance and HR may appear different; they are much more aligned than most of us realize. We both want to be able to analyze, manage, and optimize the workforce in order to predict future needs, improve utilization and grow profitability. It’s time to recognize this and come together with a mutual understanding of how so much untapped value is lying dormant in our organizations. It’s hard to quantify, you can’t report it in your financial statements, but people are our greatest asset and the true source of our organization’s value.
Who exactly comprises the “new” workforce? Most likely, your mind went generational, and applied this term in that vein. Perhaps you briefly thought of new employees within your organization. You may have applied the term universally to anyone entering a new career. While this may largely be comprised of the millennials and generation Z, this also applies to those who are entering the workforce at a later stage in life. But what about those of us who adapt and evolve? Those of us who are open to new experiences, challenges, ideas and opportunities? Those of us who are resistant to change, content or happy where we stand? How about just thinking of the “new” workforce as all of us…the “modern workforce”?
When we read studies, observe behaviors, read social media articles, or are just in tune with society, we know that the workforce, and people, have evolved. Unfortunately, no matter how much we read or know, so many of our organizations have just not caught up. If we are approaching this from an HR/business process perspective, let’s use an example that states the following: long gone are the days where employees seek meaningless, exhaustive performance appraisals. That said, feedback…i.e. meaningful, timely feedback is something all generations crave. We seek out feedback both in our personal and professional lives. We desire to know where we stand in our relationships, and we seek specific, relevant feedback than can help us progress, advance our knowledge and position, and solidify and grow our relationships.
In addition to such feedback, autonomy and flexibility are often items we think of with the new workforce, but more importantly, how about versatility? Stability? Financial reward? How about development and opportunity for growth and advancement of skills/our career paths? A recent Forbes article discussed the volume of Generation Z entering the workforce. The article states they are looking for good money, job security, opportunities to advance rapidly, excellent mentoring, the chance to showcase their competitive nature and more. Where I struggle is, are these really qualities of just one or two generations? Although I read more and more that these are characteristics of millennials and generation Z, honestly as a former HR executive, I know these qualities to be important across all employees. This includes generations, different socioeconomic backgrounds, etc. We all have evolved, and while there are differences among us, let’s not be so quick to pin characteristics only on certain groups of people.
As stated, development is also strongly valued. Knowing that, why aren’t most of our organizations meeting this basic employee need? Various studies show anywhere from 60%-80% of companies do not have a formal learning management system that fuels development. A Gallup poll recently showed that only 21% of employees strongly agree that their company’s performance management process motivates them. A recent Business Insider survey shows 71% of millennials are dissatisfied with their development plans and are planning to leave their employer in the near future. Maybe not all of these aforementioned characteristics are important to each of us, but one or more apply to all of us.
Let’s get back to our example about performance appraisals. We know that all generations value specificity and meaningful feedback, yet so many organizations are still mired in long, exhaustive appraisal cycles. We are riddled with a lack of trust, including long approval paths for anything that needs to be moved forward. We are so concerned with measurements (which are very important), but seem satisfied measuring many of the wrong items…items which hold no real business value or are not actionable. Reporting to the CEO that our average accountability score is 4.3 out of 5 is not actionable. Scoring an employee in March on items that happened 14 months ago is not useful. A long workflow that goes through 9 steps and multiple approval stages is not practical in an agile world.
Think of a calendar year, and nod along (or off to sleep) to this scenario. We are supposed to be delivering final appraisal feedback/scoring in December; however, because we have outdated processes that are not relevant, timely, specific or interesting/meaningful, appraisals rarely get completed. Next thing you know, it’s March, and 45% of our appraisals are still not completed. We are almost a full quarter into the new fiscal year, and we still can’t tie a bow on the prior year. Are you really interested in spending time in March on objectives from last year? Of course not. So why aren’t we changing, and why aren’t we giving the new/modern workforce what they want?
Every executive roundtable has discussed its organization’s appetite for change. Do we welcome it? How does our staff handle it? Are we good at developing change management principles and do we communicate and execute well? While these are important discussions, Harvard Business Review tells us that there are some significant reasons we (people) don’t move forward with change. When we know change is coming, we fear we will lose control in areas we may currently have control over. We become uncertain about what’s next for us, and as creatures of habit, we are frightened. We dread more work will come with change, and we are fearful that new processes will shed a negative light on the old ones we developed. As a result, we feel we will lose face and begin to feel incompetent.
I get it, change can be scary and intimidating. Changing a business process, switching software, moving to a new town, leaving an abusive partner, etc. The unknown can intimidate us, and the “what ifs” will paralyze us. But as we deal with HR and business processes, or life in general, I choose to look at it a little differently. We aren’t necessarily “changing”. Many times, we are simply “catching up” or moving through phases that we might have had to endure to get to where we need/want to be. And sometimes, we have to go through long periods without good process, innovation, support, care, positive relationships, etc. to get to a better place in life.
Take something like music for example. Most people have their favorite genre or decade. And when we find that era that we love most, we often look at the prior era and think less of it. Here is your example. The 80’s. For many people who loved 90’s or 2000’s rock, they look at the 80’s and think it was a dumpster fire. But for those of us who didn’t like the 80’s (I am not one…I loved them, because who doesn’t look good in a “Frankie Say Relax” t-shirt?), we need to change our perception to understand how it was a necessary part of the evolutionary journey.
So what does this have to do with HR/business processes? Well, we unfortunately had to go through a long period of ineffective performance management, lack of development, and poor understanding of people in order to get to a much easier, relevant, meaningful way of managing people. We had to evolve our understanding of relevance, and develop trust to craft better process. We needed technology to advance in order to have better collaboration or allow remote work/flexibility. We had to suffer through the 80’s to get to the 2000’s, music fans. My question to you now is, how much longer do we need to keep suffering through the 80’s to get to where you want to be? Are you prolonging the 80’s unnecessarily? I know you love that t-shirt, but it may be time to break it out only on throwback day at the office.
Here we are, 2018. My iPhone recognizes my face, I’m playing Jeopardy on my Echo Show (I promise, I do have actual friends too), and an AI chat bot can fix my internet connection. Many of us though, are still mired in outdated processes and approaches to people (personally and professionally). Fraught with fear of change, we are paralyzed daily by our inability to act. So here is the call to action. Stand up. Embrace modernization of HR/business processes. Ditch the old irrelevant processes… long appraisal cycles, lack of investment in learning and development, lack of trust in approval processes, lack of flexibility and inability to manage by deliverables. Stare fear down, and no longer allow it to own you. I keep mentioning the personal side too. Invest in those around you. Seek feedback on how you can improve. Be vulnerable and open to change so you maintain the relationships you value.
You won’t be seen as incompetent, and you won’t lose face. You will be seen as someone who truly values improvement, and is ready to progress through the 80’s to get to the 2000’s…because you care about those around you. You want to be at your best for your loved ones, your employer, and you want to contribute to continuous improvement by staying relevant and versatile.
Spend some time thinking about what the modern workforce wants. Investigate your processes. Are they truly meeting the needs of this workforce? If not, you will suffer massive retention issues, face incredibly difficult uphill battles with talent acquisition, and be irrelevant as an employer in your industry/market. Do not prolong the 80’s. Do not be afraid to admit it’s time for something new, and please be the one to act on it.
What it comes to helping your employees plan their career, you have many options available to keep them engaged within your organization. These include career planning, development plans, learning, mentoring, and succession planning. Both employee engagement and retention are strong reasons to participate in these activities with your employees.
According to a Gallup poll, employee engagement differs between different segments of your employee population. Engagement is highest among managers (38.4%) and lowest among millennials (28.9%), and there is value in looking at these numbers and knowing if your workforce is simply not engaged or actively disengaged. There are many causes of this level of disengagement, and according to Forbes, the biggest cause of this is when companies fail to consider the employee’s life outside of work and don’t treat them as a person.
Some things to keep in mind when addressing employee engagement include:
Engagement starts at the top.
Mission and vision statements are a way of living.
Create harmony between the “dual lives” of employees.
Communication is key.
Invest in your employees’ future careers.
Low engagement of employees can also have an impact on employee retention, and some other factors you can look at to assist with retention include:
Compensation
Job fit
Career opportunities
Work environment
With both employee engagement and retention, your investment in your employees’ careers and opportunities is important. So acknowledging your employee’s life outside of work is not only a benefit when keeping them engaged but also reaps benefits when creating their succession planning and career development. Catch our blog to see other ways to make sure that you turned disengaged employees to engaged employees.
Why is it so important that organizations set clear, well developed goals? Many of us see goal setting as a chore we must complete at the beginning of each appraisal cycle without really understanding the impact or importance of the process. If done correctly, goals can motivate employees, help align business processes and improve the overall performance of the company.
How can goals help to align employees and business units with the overall organizational business processes? There needs to be great visibility throughout the goals of the company. If realistic goals are set and there is a vast deal of information sharing during the goal creation process, goals throughout the organization will be consistent. Visibility into the organizational goals enables employees to align their own goals with those of the organization to ensure they are helping support and contribute to the future of the company. Furthermore, this can help clarify the roles of all employees in the company so they are clear in how their performance contributes to the overall success.
Not only is determining a realistic timeframe a key factor in monitoring a goal, but also determining how it will be achieved and how it will be measured. In some cases, a particular goal may require several objectives to be adequately monitored. Goals without objectives are essentially meaningless because progress is impossible to measure. It is this level of specificity sets goals and objectives apart.
One of the methods we employ in the Brilliant HR Talent Performance solution is that of using S.M.A.R.T. goals. These are meant to guide both managers and employees through a successful goal setting process. Each letter stands for an attribute every goal should have to be a clear and reachable goal:
Specific – simple, sensible, significant
Measurable – meaningful, motivating
Achievable – agreed, attainable
Relevant – reasonable, realistic and resourced, results-based
Time-bound – time-based, time limited, timely, time-sensitive
The bottom line is that goal setting is not just an annual exercise all employees need to go through so they can check off the box in their list of tasks to complete. Goals are critical to the success of a company and when the proper attention and priority are given to the creation of realistic goals, the outcome realized will definitely be well worth the effort invested up-front.
In 2017, Baby Boomers will be between 53 and 71 years old. Their waning numbers underline the need for good succession planning, especially since this segment likely represents the majority of the senior team. Yet 68% of firms have no formal succession plan leaving organizations at risk when baby boomers retire.
While succession planning is typically thought of as more of a learning and development discussion, more and more organizations are finding the need to tap recruiters’ skills for both external recruitment and internal redeployment of roles, finding talent that is often overlooked or neglected by traditional development methods.
Retirement Trends for 2017
According to Deltek’s 2016 A&E Clarity Report:
1 in 10 workers in the A&E industry fall into the Baby Boomer or Millennial categories.
The average turnover is around 13.3%. Departing Baby Boomers are likely contributing to this number but turnover is being driven primarily by voluntary departures.
As retirement rates accelerate for Baby Boomer-era partners who have historically bore the lion’s share of the Business Development burden, the responsibility is now spreading throughout the organization.
59% of firms have the same number of open positions as last year, while 1 in 4 firms reported more open positions and only 16% reported fewer. Large firms had the most unfilled jobs with more than 30% reporting a greater number of open spots than last year. Large firms are losing employees faster than their small and mid-sized counterparts, highlighting the need for better processes to engage and recruit employees.
70% of firms rank talent acquisition as one of their top three most expensive HR processes, with succession planning at the sixth most expensive.
Just 19% of companies surveyed said they have a repository that helps them source and acquire talent for projects.
68% of firms have no formal succession plan or the plan applies only to a select few people leaving organizations at risk when baby boomers retire or a key member of the firm leaves unexpectedly.
Prevent lack of leadership or critical talent
Identify talent gaps
Identify individuals with potential
Speed up development
Minimize leader turnover
Discourage talent hoarding
Goals of Succession Plans
Shortcomings of Traditional Succession Planning
Succession plans fail when you don’t have the right mindset, processes, and support to make them succeed. There are some things you should definitely think about to reduce the chances that your plans will not work out.
Don’t use the “set it and forget it” mentality. Let’s face it – things change and you need to make sure that you are able to account for those changes. People leave; availability changes; the company changes direction. You need to be thinking about these things when making plans and evaluate the plans regularly (at least once or twice a year) to make sure that you still have the best people identified as successors.
Have a backup plan. Again, things change and you don’t want to be caught in a lurch if there are unforeseen changes. It is a good idea to have other potential successors identified provide for flexibility in succession planning.
Develop your potential successors. Once you’ve identified potential successors, make sure you groom them so that they are ready if they need to step up. Under-developed leaders weaken the entire organization, erode workforce confidence, and impact job satisfaction. Make sure you have the resources in place to get your successors ready for the next step.
Include managers in the process. This will not only broaden your search, but it fosters engagement. Both managers and team members feel they have a voice and are represented in the company’s planning.
Consider your entire workforce. If you only consider HiPos, you may miss hidden talent. Don’t overlook talent that is new to the company. And make sure to consider all important criteria, not just past jobs held and skills/competencies.
Listen to what your employees say they want. This encourages engagement, positively impacts retention rates, improves job satisfaction, contributes to overall business success and demonstrates support for employees’ goals and aspirations.
Don’t keep your employees in the dark. Tell employees they are on a succession plan. This is a huge opportunity to impact retention in your highest performers, and this engagement can impact the bottom line. Also, keeping employees aware can motivate self-development.
Tapping Recruiter Skills for Finding Talent
Recruiters can be a great resource for identifying potential successors within your organization. They are already strong at sourcing for openings, and those same skills can come in handy for succession planning. Recruiters have multiple sources at their disposal, can ensure the job is the right fit, and can include external candidates.
Your recruiting team can also be a valuable resource in building career paths for employees, evaluating the quality of new hire, looking at HiPo employees to build interview questions, and sharing information with managers.
Another good reason for including recruiters is that sometimes (unfortunately) managers might not be the most reliable source for identifying potential successors. This happens when managers fail to develop their talent, either for their current role or future possibilities. Also, some managers will hold back employees who are ready for more because of the impact that would have on their team’s performance. Study after study identifies bad managers and lack of challenge/opportunity as the number one and number two reason people leave a job. This could lead to your best talent being deprived of growth opportunities and walking out the door.
From finding the best talent and the right fit for your company to looking internally at the possible employees who are best suited to take on a higher role. Understanding your company’s values and culture and having the right systems in place will help make the transition to the next role easier.
Knowing what to measure and when to measure it helps define your HR team as a crucial addition to the company’s success. Gone are the days of simply posting job opportunities on your company website, and hoping for the best. Building a strategy, being smarter about where you are finding candidates, and knowing how effective your recruiters are will determine the future of your organization’s talent. When it comes to recruiting, there are dozens of metrics that you could report on, but we have picked out just the top five most commonly used to focus on in Part 1 of this post, with another five coming in Part 2.
1 – Time to Start
Time to Start refers to the amount of time it takes to bring a new hire on board from the moment that you first publicize the open position.
It is important to distinguish that this means the time until a new hire’s first day on the job, not the day they accept the offer. This is probably the most important recruiting metric to focus on as it relies on the efficiency of the recruiters and the sourcing channels used, but also determines the success of your overall recruiting strategy. Job vacancies within an organization can mean a loss of productivity until that position is filled, so the longer the time to hire, the longer your organization is lacking in that area.
Of course, the time to fill is going to vary based on the job level and perhaps the skill set that is required. As time goes on, however, HR should be able to determine an average time frame across all positions and work towards reducing that time.
2 – Retention Rate
Employee retention is an important metric for many reasons. Not only does it show how successful your recruiting efforts are in finding qualified candidates, but is also a great indicator of the overall health of an organization. For now, we will focus on what the retention rate can tell us about recruiting efforts.
If your organization has a hard time retaining people for longer than a year after their hire date, you may be hiring the wrong type of candidate. Once you have determined the cost per hire for each position, it’s no wonder that the retention rate is such an important metric. Your company could be bleeding money with this unnecessary turnover. The cost of replacing an employee can be upwards of two times their salary! (Article from the Center for American Progress)
So, as with any problem, the first step is to identify whether or not your organization has a reasonable retention rate based on your industry’s standards as this can vary widely by industry.
Then, rather than trying to look at retention rates for all positions across all levels of the organization, it will be more insightful to analyze by sections. For example, you can look at the turnover rate for a specific role. If one role is causing turnover every year, maybe you need to take a look at the responsibilities of that role. Are there unrealistic expectations or unattainable goals? Another way to look at the data is turnover by pay grade or even by department. In this way, you can determine if the retention problem is company-wide, if it’s in a certain department because of a bad manager, etc.
Ultimately, measuring the retention rate will allow you to pinpoint whether or not the issue is a recruiting one. To quote an article from Forbes, “The best recruitment strategy is a solid retention strategy and this has to start at the top.”
3 – Applicant Satisfaction
While related to the employee retention rate, it is important to look at applicant satisfaction on its own to ensure that your recruiting efforts are placing applicants into positions where they feel they can grow and excel.
The best way to measure this is simply to have a standardized new hire survey, and then use performance reviews as another chance for employees to express how satisfied or dissatisfied they are with their job. Surveys can include questions on the hiring process, on-boarding, and overall job satisfaction. These metrics will help you determine how positive an applicant’s experience is from the moment a recruiter reaches out to them. This allows a company to take a step back and look at their processes from an outsider’s perspective, and shed some light on how they are portraying their organization to applicants versus what they experience when they are hired.
In today’s social world, this firsthand experience and testimonial is as important to a company’s reputation and messaging as any other marketing effort. The real goal is highlighting where a change needs to occur internally.
Is there an opportunity for more training for not just the interview process, but the competencies of employees? Is there a reason for employee dissatisfaction with the company that can be fixed to help retain top talent? It may be as simple as the job descriptions need to be revised. But it may be the job, the role, or the company direction that may need to be refocused, clarified or redirected. These are just some of the insights that can be gained by using applicant satisfaction company’s self-reflection.
4 – Sourcing Channel
Sourcing channel or source of hire simply refers to the efficacy of the different job boards or media a company uses to publicize its current job openings. The reason for tracking this metric is simple – there are hundreds of options for sourcing candidates, but depending on your industry or your specific organization, certain sources will prove to be more effective or provide higher quality candidates than others.
Talk about sourcing channels comes up often when thinking about Big Data – gathering the information above, you are able to combine this data to see the big picture and support your sourcing choices. As noted by David Bernstein on HR.com, “Big Data analysis also enables the employer to measure the effectiveness of their recruitment campaigns in real time and make necessary adjustments—sooner rather than later—to improve performance.” Not only do we need to take a look at what we’ve done in the past that worked, but what are we doing now that isn’t working? And how might we shift our resources towards more effective sources?
5 – Quality of Hire
It will take some time to determine the quality of a new hire, but the longer the employee is at the company, the easier it will be to establish. This should take into account not only performance ratings, but also their potential. Over time, you will be able to see a trend in their performance reviews, and determine their overall worth to the organization. This metric can then be linked to the sourcing channels to help determine where the highest quality candidates originated from, as well as the time to hire so recruiters can get a sense of how long it takes to find the right candidate.
The formula for Quality of Hire should be comprised of recruitment-focused quality measures and post-hire contribution / performance quality. The factors that contribute the data for each side of this metric can differ from one organization to the next. Deltek’s Quality of Hire report plots recruitment efficacy and directly correlates this to post-hire performance appraisal scores.
Quality of hire may sound rather subjective and difficult to determine, but nevertheless is one of the most important metrics. Because the cost per hire and retention rate are constantly scrutinized, it is important to find quality hires that are going to stay with your company for a long time, thus diminishing the need for another costly hire down the road.
Because of its organizational impact, quality of hire is a more important metric to track than time to fill or cost per hire.
For more recruiting KPIs, keep an eye out for Part 2 of this blog post coming soon!
You may also find our Top 10 Recruiting Metrics Cheat Sheet to be helpful in your efforts to streamline your recruiting plans in 2017.
