Lean Means More Green in HR

While the recession hit many companies hard, the best performers came out of it stronger not because they spent more money, but due partly to more efficient and effective HR practices.

According to the "HR Book of Numbers," an annual analysis of HR practices compiled by advisory and consulting firm The Hackett Group, high-performing companies are more efficient with their money, spending 30 percent less than their peers on HR. They are also more effective, with practices correlated to 15 percent higher earnings, 22 percent higher net profit, 12 percent higher return on assets and 51 percent higher return on equity.

"Anybody can become cheaper and anybody can just keep throwing money at a problem," said Harry Osle, global HR practice leader for The Hackett Group."But the balance of the two - driving efficiency while still driving value - that's what we consider world class."

The "HR Book of Numbers" analyzes and compares approximately 200 HR organizations on efficiency drivers such as cycle time, cost, productivity and technology usage, as well as effectiveness measures, including measures of staffing service, workforce development, organizational effectiveness and strategic workforce planning.

From 2004 to 2008, top performers - defined by Hackett as the top 25 percent on both efficiency and effectiveness measures - performed similarly to their peer group. That changed when the recession hit. Top performers were able to make smarter decisions under pressure and began to outpace peers, Osle said.

"World-class organizations have better service delivery models," he said. "They're more disciplined. They have greater focus. They also enable and leverage technology a lot better. That allow[ed] them to become much more nimble and flexible and turn on a dime when the recession hit."

Lagging HR organizations made just as many decisions as top performers during the recession, but saw an uptick in cost. They simply weren't as nimble or well informed to make the right decisions, Osle said.

The difference is top performing organizations have a disciplined approach for activities such as benefit management and other transactional processes. Instead of having three different options to get an answer to an HR-related question, they have a tiered, repeatable approach.

"The world-class companies are more disciplined and [are] enabling technology first and then having a peer system or shared services environment as only a second option," he said. "The peer group[s] typically have two or three options for employees to go to, thinking that they're driving greater value. What they're actually driving is greater cost."

That efficiency enables greater effectiveness at higher-level talent management processes. For many HR organizations, performance management and succession planning are a check-the-box activity, but top performers have a more meaningful approach.

"If you lift the covers off these companies ... they have very defined and detailed competencies, very defined and detailed job descriptions, very defined and detailed roles and responsibilities with proficiency levels mapped out for their organization," Osle said.

To become more efficient and effective, Osle recommended benchmarking against other organizations to understand the existing gaps and weaknesses and then prioritizing where to invest.

"It's almost like building a house," he said. "You want to look at the foundational elements first and then drive to the greater value activities. Organizations tend to want to go to the apex of the pyramid. It's a false way of driving a sustainable model."

It's important to prioritize, but focus on being efficient in transactional HR processes and building foundational elements such as competency development and performance management, Osle said. That level of detail drives better performance in succession planning, strategic workforce planning and recruitment.

"It's about understanding what are the right roles that we want for the function, what are the right jobs for those roles, what are the right competencies for those jobs, what are the right skills needed for those competencies and what sort of proficiency levels should people be delivering on," he said.

While money is important, higher levels of investment won't guarantee results.

"If you want a sustainable talent management program ... that's actually going to drive value for the organization over a period of time, you need to do the hard work."

[About the Author: Mike Prokopeak is editorial director for Talent Management magazine.]



Compiled by; Hemant Gade
Hemant@JobsEnsure.com
http://www.jobsensure.com