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Charachteristics of World Class HR Organizations - PDF

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					                      SHRM Webcast



Characteristics of
  World Class
HR Organizations
     Carey Ellinghaus
    Valmont International

       October 17, 2008
                                           Discussion Topics


•   Background
     > About the speaker
     > About Valmont and it’s international operations


•   Valmont’s current state

•   “World Class HR Organizations”, according to Hackett
     >   Overall cost structure(s)
     >   Staffing levels
     >   Technology utilization
     >   Degree of outsourcing
     >   Summary view

•   Valmont’s road to world class




                                                               2
                           Actual data is used to define the WC population
                                                            World Class HR Organizations, According to Hackett


Hackett Value Grid™
    EFFECTIVENESS                                                                            EFFICIENCY
 HR linkage to business strategy                                                       Total HR cost per employee
 Sourcing utilization                                                                  Total HR staffing
 Workforce management alignment                                                        Staffing levels by process
 Quality metrics (HR transactions)                                                     Technology allocation
 Linkages between employee                                                             Degree of application integration
 development and business strategy                                                     Process automation
 Percent internal promotions                                                           Automation of reports
 HR partnering on organizational                                                       HR self-service utilization
 issues
                                                                                       Resource allocation
 HR Generalist allocation of time
                                                                                       Integration of HR systems
 Use of organizational metrics in
 HR-managed projects                                                                   Productivity per FTE
 Retention plans for key employees                                                     Days to fill positions
 Termination rates                                                                     Ratio of technology cost to
                                                                                       transaction process labor cost
 Ratio of strategic workforce
 planning process costs to Total HR                                                    Overall HR span of control
 process costs
 Skills & education of HR staff
                                                  Company       ABC Co.



                                      Where would you place yourself?
        Structural factors are the primary performance
                 differentiators between organizations
                                            World Class HR Organizations, According to Hackett




  Used to determine world-   Used to define peer group      Used to identify Hackett-
class performing companies    companies for additional       CertifiedSM Practices
                                    comparison
              WC HR organizations come in various sizes
                                     World Class HR Organizations, According to Hackett



        < €1B       €1B - €2B     €2B - €7B            €7B - €14B

       < 4K          4K – 10K       10K – 20K              20K – 45K          > 45K



       One              2-4           5-20                   21 - 45        > 45




   < 20             31- 50         51 - 125                125 - 300        > 300



None                1 – 1K        1K – 2.5K           2.5K – 10K            > 10K




             None       1 –10   10 – 100             100 – 500            > 500


                                  World-Class Population
                         Standard Hackett peer groupings are based
                                          upon size and complexity
                                                      World Class HR Organizations, According to Hackett

                     High
                                                                                       Global Giants

    Small Diverse
                     Complexity ranking




                                                                                     Large Consolidated




Small Consolidated



                     Low
                                          Small   Size ranking             Large
                   WC HR organizations have lower cost structures
                                                              World Class HR Organizations, According to Hackett



            HR Cost per Employee                                Quartile Breakdown per Employee

   $1,864                                                                                          $5,697

    224                  $1,679
                                               $1,614
    172                     247
                                                207                              Quartile 4
                            170
    391                                         261
                            298
                                                228                                                $2,206

                                                                                 Quartile 3

    1,077                                                                                          $1,679
                            964                 919
                                                                                 Quartile 2
                                                                                                   $1,539

                                                                                 Quartile 1
  DB Median         Global Peer Group      World-Class

Labor         Outsourcing         Technology          Other
                                                                                        Historical growth in HR costs
                                                                                           World Class HR Organizations, According to Hackett



                            $2,200
                                                                                          $2,109
                            $2,100
                                               DB Median                                                                    y = 36.327x + 1600.5          $1,995
                            $2,000
Annual HR Cost / Employee




                                                                          $1,906                             $1,892
                                               World                                                                                   $1,864
                            $1,900
                                                                                                                           $1,895                         $1,822
                                                                   $1,757
                            $1,800
                                                     $1,737
                                                                                                        $1,735
                            $1,700
                                                                                                                                    $1,614
                                     $1,556
                            $1,600
                                                 $1,557                                                                                         y = 41.5x + 1168.7
                                                                                         $1,485
                            $1,500
                                                                            $1,425
                                                          $1,351                                                               $1,422
                            $1,400
                                                                       $1,351                                     $1,390
                                     $1,237
                            $1,300
                                                 $1,236                                                 $1,262
                            $1,200
                                     1996     1998        1999     2000          2001     2002     2003          2004      2005          2006           2007
                                                                                          Year
                                                                                   HR cost components, per employee
                                                                                                          World Class HR Organizations, According to Hackett

                                                                          9% Lower Total Cost,
                                                                                                                                                                                        18% Lower
                                                                        Continued Tech Investment
                                               Total Costs                                                                                            Process Costs                    Process Costs
          $2,297 $2,279                                                                                          $1,793 $1,842
                                                                                     $2,124                                      $131
           $283        $261                               $1,995                                                    $136                                                                  $1,604
                                $1,892                                                                                           $151                             $1,560
                       $176                                             $1,822          $365                        $204                  $1,430                                              $156
           $220                                              $255                                                                                                    $127
                                    $275                                                                                                                                         $1,321
                                                                            $230        $156                                                  $139                   $152                     $187
                                                             $180                                                                                                                 $120
           $470        $555         $187                                                                                                      $145
                                                                            $271        $274                                     $818                                             $152
                                                             $398
                                                                    33%                                             $714                                                   16%
                                    $309      $1,151                                                                                               $878              $658
                                                                            $299                 $1,064                                                                                       $749 $761
                                                $122               14%
                                                                                                                                              $653   $54
                                                                                                  $121                                               $52                          $567
                                                $150                                                                                                                                                 $75
                                                                                                  $182                                                                                               $80
                                                $228                                                                                                     $415
          $1,323       $1,287                                                        $1,330       $204                                                                     30%

                                    $1,121                   $1,162                                                                                                                                     $324
                                                                          $1,022                                    $739         $741
                                                                                                                                                                     $623
                                                $650                                                                                          $493                                $481        $511
                                                                                                  $557                                                   $357                                           $282




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              Labor              Outsourcing                    Technology                Other                Transactional                   EE Life Cycle                Strategic             HR Mgmt
                                                              HR costs do by geographic region
                                                                            World Class HR Organizations, According to Hackett



                             Total Costs                                                          Process Costs                 $1,712
                                                                                                                                   $139
                                                              $2,167
                                                                                        $1,447                                     $176
                                                                $260                                  $1,361
                 $1,886                                                                   $84
                                $1,799
                                                                $194                      $145          $144
                  $339
                                 $338                                                                   $114
                  $100                                          $481                                                               $681
                                 $100
                  $377                                                      $813         $732
$1,064                           $309
                                                                              $88                       $612

 $207                                                                        $108
                                               $807                                                                 $537
  $44
 $145                                           $196                                                                 $58
                                                                             $378                                    $59
                                                 $74           $1,231
                 $1,070          $1,052                                                                                            $717
                                                 $90                                                                $244
                                                                                         $485           $491
 $668
                                                $447                         $239                                   $176


 Asia       Australia and        Europe     Latin America   North America    Asia     Australia and    Europe    Latin America North America
              Oceania                                                                   Oceania

         Labor           Outsourcing       Technology        Other           Transactional       EE Life Cycle    Strategic      HR Mgmt
                                         FTE and cost differentials can be seen at the
                                                                         process level
                                                                                                  World Class HR Organizations, According to Hackett
                                                                      HR FTEs / 1000 Employees
                                                   2.1              2.1
                                                                          1.9
                                                                                                                           1.8
   1.6             1.7                                                                                                           1.6
                                                                                       1.5 1.5
         1.3                                             1.2
                         1.0                                                                                                                                                       1.0 1.0
                                  0.8
                                                                                                                                                                     0.7
                                                                                                        0.5 0.6                                0.6 0.5       0.5
                                        0.2


Total Rewards     Time and        Payroll        Data Mgmt,     Staffing Services     Workforce     Labor Relations Organizational        Total Rewards      Strategic          Management
Administration    Attendance   Administration   Reporting and                        Development     Administration     Effectiveness        Planning        Workforce                and
                                                 Compliance                                                               Services                           Planning         Administration

          233
   $285                                                               Process Cost per Employee
          $233                                                    $233

                                                                                    $183                              $183
                                                 $165                                                                     $163
                                                         $136          $134             $139                                                                                $127
                  $126
                                                                                                                                                                                   $93
                                                                                                                                         $81              $71 $79
                                                                                                     $58                                       $64
                                 $46 $53
                         $28                                                                               $26


  Total Rewards    Time and        Payroll       Data Mgmt,         Staffing         Workforce     Labor Relations Organizational       Total Rewards     Strategic         Management
 Administration   Attendance   Administration   Reporting and      Services         Development    Administration     Effectiveness       Planning        Workforce             and
                                                 Compliance                                                             Services                          Planning         Administration

                                              DB Median                                                World-Class
                        WC HR organizations are staffed differently
                                             World Class HR Organizations, According to Hackett


    Average HR Manager Experience & Tenure                       HR Staff Time Allocation
                   (Years)
                                                           7%
                            25.2                           8%
                                                                                                9%
                                                                                               10%
          22.0
                                                           41%
                                                                                               49%




                                                           44%
                                                                                               32%




         DB Median        World-Class                 DB Median                           World-Class


Average, Fully-Loaded HR Labor Costs / FTE                                 HR FTE staff mix
                           $88,822
        $82,977
                                             World-Class         22%             53%                 25%




                                              DB Median           29%            43%                 28%


                                                                 Manager        Professional          Clerical
     DB Median             World-Class
                       …..are more productive……
                          World Class HR Organizations, According to Hackett


World Class organizations:
• process 150% more paychecks per payroll employee
  (26,660 vs.10,649 per employee)

• process 97% more paychecks per payroll administrative
  employee                       (31,122 vs.15,807 per
  employee)

• handle 11% more internal placements per staffing services EE
  (23.3 vs. 21.1)

• handle 32% fewer external placements per staffing services EE
  (43 vs. 63)
                                    ….and less administrative
                                    World Class HR Organizations, According to Hackett




            11%                                A - Routine HR administration
                        14%
                                               A - Employee info to external sources
                              2%
 12%                           3%              A - Other administrative tasks

                                               R - Employee problem solving

                                               R - Handling performance management issues

                                    23%
11%                                            R - Crisis employee relations

                                               P - Developing HR plans with line management

       8%
                                               P - Facilitating org. & leadership development
                  16%
                                               P - Employee selection and interviewing
                  WC HR organizations have standards
                                          World Class HR Organizations, According to Hackett

•   have fewer HR systems (2 vs. 5 per 1000 EEs); total HR
    labor increases by $18,900 for each incremental HR system

•   use a common HR application globally
                                                           HR applications per 1000 EEs
    100%                           85%                                   0.2
                                                       Strategic
    75%                  66%
                                                                               0.5                           World-class
                  51%                                                                                        Peer Group
    50%                                            Employee Life                 0.7
                                                      Cycle                                      1.6
    25%

     0%                                                                                    1.3
                                                   Transactional
                 DB               World                                                                             3.3

                Median            Class
                                                                   0.0               1.0               2.0    3.0         4.0


•   use data standards to a high degree in all of their systems
    (50% vs. 17%)
•   have fewer compensation plans per 1000 employees (.8 vs. 3.0)
•   have fewer benefits plans
           > .5 pension, retirement &/or savings plan per 1000 (vs. 1.3)
           > 2 health & welfare plan per 1000 employees (vs. 3)
                               ©SHRM 2007
                        World Class HR organizations……
                                         World Class HR Organizations, According to Hackett

• find the application with the closest fit to their requirements then map their
  business processes to the delivered application. Customizations are only
  done when a business case can be made for doing so

• leverage their HR technology to obtain efficiencies and increase their
  effectiveness

• utilize a high degree of their HR application functionality (75% vs. 55%)

• use automatic triggers to notify TPAs of terminations, to at least a medium
  degree (77% vs. 58%)

• fully automate manager and EE staffing services transactions (50% vs. 16%)

• have a higher degree of process integration
     > between payroll and:                            >   between time & attendance and:
       •   compensation administration (85% vs. 64%)       •   employee info. mgmt. (36% vs. 29%)
       •   general accounting (77% vs. 68%)                •   security (18% vs. 8%)
       •   project accounting (38% vs. 16%)                •   attendance point tracking (37% vs. 15%)
                                                           •   payroll (87% vs. 78%)
                                                           •   project accounting (29% vs. 18%)
                                                           •   project billing (25% vs. 16%)
                               The HR technology investment differential is
                                                               significant
                                                            World Class HR Organizations, According to Hackett

     HR Technology Cost as a % of Total HR Cost                      HR Technology Cost per HR FTE
                                                                                                      $21,882




              91%                           85%                          $12,862




               9%                           15%

            DB Median                   World-Class

         Technology          Labor, Outsourcing and Other              DB Median                   World-Class

            HR Technology Cost per Employee
                                                              World Class organizations allocate a greater %
300.00                                            $271        of IT FTEs to HR applications
250.00
200.00                $180                                          – 7% of development FTEs (vs. 5.2%)
150.00                                                              – 7% of maintenance FTEs (vs. 5.8%)
100.00
 50.00
  0.00
                 DB Median                    World-Class
                                                              HR Self Service self service
                                                  WC HR organizations leverage Comparison
                                                                                    World Class HR Organizations, According to Hackett

                Self Service Utilization
                                                        70%
         Payroll
                                      31%

       Time &                                           71%
                                                                           Peer Group
     attendance                       32%

  Compensation                                    50%                      World-class
     Adm.                  19%

Health & Welfare                                              83%
     Adm.                       24%

                                            40%
Staffing Services        12%
                    0%         25%            50%       75%         100%




World Class HR organizations:
• have direct access to EE life event changes
  deployed @ an enterprise level (54% vs. 39%)
• provide self service for payroll administration (70%
  vs. 31%)
• use self service for time & attendance (71% vs.
  32%)
• utilize paperless payroll advices to a high extent
  (67% vs. 23%)
• leverage self service for learning & development
         > 69% make on-line course description, scheduling and
         tracking available to employees (vs. 48%)
WC HR orgs. have better metrics & reporting
                           World Class HR Organizations, According to Hackett


World Class HR organizations:
• provide self-service for data management, compliance &
  reporting (53% vs. 24%)
• don’t consider their HR applications to be primarily a means of
  data capture & transaction processing; they use their HR
  application(s) for a) information delivery and most importantly,
  b) management decision-making & planning (25% vs. 9%)
• generate 75% of their HR reports from a centralized repository
  to a high extent (vs. 41%)
• automate their HR reports to at least a medium extent
  (77% vs. 27%)
• spend less time collecting & compiling data, and more time
  analyzing data
    > for standard reporting (79% vs. 62%)
    > for ad-hoc reporting (85% vs. 76%)
HR Outsourcing Cost [Component] Comparison
                  World Class HR Organizations, According to Hackett




          DB
         Median



       World
       Class
WC HR Organizations Outsource on a Targeted
                              Basis…..They
                               World Class HR Organizations, According to Hackett

 • outsource 19% of data management (vs. 12%)…….
   to fewer suppliers (11 admin. suppliers per 1000 EEs vs. 22)
 • leverage outsourcing (75% vs. 47%) and shared services (12%
   vs. 14%) for compensation administration
 • leverage outsourcing and shared services for benefits
   administration
     >62% and 38% for pension, retirement &/or savings administration
     (vs. 37% and 45%)
     > 50% and 50% utilization for health & welfare administration (vs.
     32% and 45%)
 • leverage outsourcing (62% vs. 33%) and shared services (8%
   vs. 25%) for payroll administration; on average, outsourcing 17%
   of the process(es) (vs. 27%)
 • leverage outsourcing (50% vs. 22%) for recruiting
 • leverage outsourcing (62% vs. 38%) and shared services (13%
   vs. 17%) for L&D
 • leverage outsourcing (37% vs. 14%) for ER, LR, and exit
   management
WC HR Organizations Reap Lots of Benefits…
                                     They
                               World Class HR Organizations, According to Hackett



• have lower compensation administration error rates (1.4% vs. 2%)

• process fewer (1.07) adjustments per employee

• have lower benefits administration error rates:
    > 1.3% pension, retirement &/or savings admin. error rates (vs. 2%)

    > 1.4% health & welfare administration error rates (vs. 1.7%)

• have lower payroll administration error rates (1.2% vs. 2.69%)

• fill manager, professional, and clerical positions more quickly in 60,
  51, and 30 days respectively (vs. 67, 54, and 30 days respectively)

• more frequently evaluate the quality of candidate channels; 100%
  evaluate @ least annually and 67% evaluate quarterly
  (vs. 67% and 22%)
                                                      And they……
                              World Class HR Organizations, According to Hackett


•   have turnover rates of .7%, 2.1%, and 5.5% for managers,
    professionals & clericals respectively (vs. .9%, 2.9%, and 6.6%)
•   have 47% fewer voluntary terminations (38 per 1000 vs. 72)
•   have 70% fewer involuntary terminations (16 per 1000 vs. 51)
•   have formal retention plans for key employees, to at least a medium
    extent (77% vs. 56%)
                                                                       The WC Service Delivery Model
                                                                                   World Class HR Organizations, According to Hackett

                       Customer Group                 Customer Group          Customer Group                 Customer Group



                                                          Field Support: HR Generalists

          HR Centers of Excellence                                                                            HR Shared Services
                                                            HR Applications
      Design, Planning, Specialist Services                      Self-                Contact Services               Operational Services
                                                                Service
                Total Rewards Planning
Vendors         • Benefits Planning                                                                               Total Rewards Administration
                • Compensation Planning                        Reporting/               Candidate &
                                                                Analytics                Applicant,
                 Workforce Development                                                                                                                Vendors
              • Learning and Development                                                Employee &                    Report Administration
Vendors
              • Performance Management                           Portal                   Retiree,
              • Career Planning                                                         Manager, and              Time/Payroll Administration         Vendors
             Workforce and Talent Planning                        KM                      Vendor
Vendors    • Sourcing, Recruiting, Selection Design                                       Service
           • Succession Planning                                                                                   Data Mgmt. / Event Admin.
                                                                 Case                  Representatives
               Organizational Effectiveness                                                                      • Candidate Intake and Requisition
             • Labor and Employee Relations                      Mgmt.                                             Management
             • Org. Design & Measurement                                                                         • Data Entry and Verification
                                                                                                                 • Employee On-Boarding
                    Employer of Choice                                                                           • HR Information Maintenance
          • Diversity, Wellness, Family, Worksite
          • Communications                                                                                       • Exit Management
          • Recognition Programs
                                                                 HCM                                             • Regulatory Reporting



            HR Portfolio Management                                                      Executive Management
          • Service Request Management                                 • Governance – Process, Policy, Procedure, and Other Standards
          • Project Management                                         • Partnerships & Due Diligence
          • Continuous Process Improvement                             • Service Levels & SLAs
          Talent Management Impact
Lift & Shift vs. Transform & Shift
     World Class HR Organizations, According to Hackett
          Talent Management Impact
Lift & Shift vs. Transform & Shift
     World Class HR Organizations, According to Hackett
                                           The Impact Talent Management Impact
                                                      of Talent Management
                                                          World Class HR Organizations, According to Hackett




• For every $10 billion in revenues, the EBITDA gap is $210
million and the net profit margin gap is $130 million
• For every $10 billion in assets, the ROA gap is $180 million
• For every $1 billion in equity, the ROE gap is $37 million
              Questions or Comments?




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