Strategic HRM and HR Business Partnering

STRATEGIC HRM AND HR BUSINESS
PARTNERING
CHARLES COTTER PhD, MBA, B.A (Hons), B.A
SEA CLIFF HOTEL, DAR ES SALAAM
www.slideshare.net/CharlesCotter
27-29 JUNE 2018

3-DAY TRAINING
PROGRAMME
OVERVIEW
• Fundamental strategic HRM concepts
• Applying the strategic HRM process and -
principles
• Strategic HR Performance Advising (SPA) -
Best Practice Principles
• Future fitness of HR Consultants
• HRM Risk Management - process and
principles
• HRM Metrics and Analytics - Best Practice
Principles and Process
• HRM Auditing – tools, process and
principles

STRATEGIC HRM
“One of the mission-critical strategic HRM objectives
is to mainstream HRM into the core business
processes. HRM should be embedded in the business
strategy and their value proposition should be
ingrained in the organizational culture fabric. Key
business decisions should not be taken in the
absence of consulting with HRM.”
(Cotter, 2018)
AGREE OR DISAGREE?
WHY?

• Individual activity:
• Complete the statement by inserting one (1) word only. In
order for HRM to be strategic, HR managers/professionals
need to/to be .…………………………………..
• Now find other learners with the same word as you.
• Jot these words down on the flip-chart.
• Each learner will have the opportunity to elaborate on their
chosen word.
INTRODUCTORY ACTIVITY

OBJECTIVE #1:
Defining the fundamental Strategic HRM
concepts

DEFINING STRATEGIC
HUMAN RESOURCES
MANAGEMENT (SHRM)
• SHRM is defined as an approach to managing
people that deals with how the organization’s
goals will be achieved through its human
resources by means of integrated HR strategies,
policies and practices (Armstrong, 2016).
• SHRM propositions:
 The HR of an organization play a strategic
role in it’s success
 Human capital is a major source of
competitive advantage
 It is people who implement business
strategy
 A systematic approach should be adopted
to planning and implementing HR
strategies
 HR strategies and plans should be
integrated with business strategies and
plans

STRATEGIC
PERFORMANCE
ADVISOR (SPA) –
3 PIVOTAL
POINTS
(COTTER, 2017)

STRATEGIC PERFORMANCE ADVISOR (SPA) –
3 PIVOTAL POINTS (COTTER, 2017)
• Strategy (e.g. embedding HR strategy into business
strategy; the use of strategy maps; adopting a strategic
mindset and applying strategic management principles
and processes);
• Governance (e.g. HR policies and procedures;
HR/people risk management, compliance with ethics
and King IV corporate governance principles and -
Human Capital reporting and HR Auditing) and
• Business Intelligence (e.g. competitive predictive HR
metrics and analytics and trouble-shooting solutions
architects)

HRM SCORECARD
• Refer to template
• Given that the HRM function is often the steward of the people elements of the strategy, the
HRM function is often charged with overseeing and guiding the key people measures i.e.
the return on investment in people for the organization.
• HRM measures should be ones that help the HRM function in its stewardship role of
maximizing the people equity of the business. So, the first thing on the radar of the HRM
team should be the key people measures from the organization’s scorecard.
• The second class of measures should be the HRM measures – the key drivers that HR guides
or controls that directly influence the key people measures.
• Becker et al (2001), define the four essential elements of the HR scorecard as HR
deliverables, a high-performance work system, HR system alignment and HR efficiency. This
reflects a balance between the twin HR imperatives that have been previously mentioned –
cost cutting and value creation.
• These last three elements of the HR architecture trace a value chain from function to
systems to employee behaviours.

CURRENT: HRM-BASED ARCHITECTURE

REQUIRED: BUSINESS-BASED ARCHITECTURE

LEARNING
ACTIVITY 1
• Group Discussion:
• By referring to Cotter’s Strategic
Performance Advisor model;
HRM processes and systems; the
HRM architecture and
compliance with strategic
management principles e.g.
Balanced Scorecard and Strategy
Mapping etc. evaluate whether
your organization’s HRM
function is currently strategic.
• Identify areas of improvement
(gaps) and recommend
improvement strategies i.e.
identify how the HR function can
enhance performance
(efficiency) and value add
(effectiveness).

LEARNING
ACTIVITY 2
• Conduct an environmental
scan – both internal and
external – by means of a
SWOT Analysis of your
organizational HRM
department/function.
• Identify at least x5 Strengths;
x5 Weaknesses; x5
Opportunities and x5
Threats.

OBJECTIVE #2:
Strategic Performance Advising (SPA)

DEFINING HR BUSINESS
PARTNERING
• Partnership: A relationship between individuals or
groups characterized by mutual co-operation and
responsibility, for the achievement of a specified
shared goal.
• HR business partners are HR professionals who work
closely with an organization’s senior leaders in order to
develop an HR agenda that closely supports the
overall aims of the organization. The process of
alignment is known as HR business partnering.
• Strategic business partners: A long-term relationship
(alliance) to achieve defined objectives common to all
partners.
• In the context of strategic human resource
management, the HR function and activities are
intended to ensure the organization's financial success
and prosperity (business continuity).

DIAGNOSIS: 10 BEST PRACTICE
GUIDELINES FOR SPA
• https://www.surveymonkey.com/r/5X9BTT9
• #1 Embedding HRM strategy in business strategy and able to translate that
strategy into deliverable actions
• #2 Well-defined, implemented and reported HRM performance and ROI metrics
(creating credibility and accountability)
• #3 Generating business intelligence e.g. predictive and strategic analytics (that
shapes, informs, guides and ultimately, influences strategic business decisions)
• #4 Offering a professional, value-adding business proposition sensitive to and
supportive of business needs, interests and strategic priorities
• #5 Ongoing line management consultation, engagement, coaching and building
trusting, collegial and mutually beneficial business relationships

DIAGNOSIS: 10 BEST PRACTICE
GUIDELINES FOR SPA
• https://www.surveymonkey.com/r/5X9BTT9
• #6 HR Management and practitioners possess business and industry knowledge,
acumen and insight
• #7 HRM collaborates with line management to broker meaningful and impactful
business solutions
• #8 HRM processes, systems and practices are horizontally integrated (bundled),
agile, responsive and stream-lined (that enhance productivity and efficiency)
• #9 HRM is a transformational initiator, driver and implementer of business
change
• #10 HRM is technology-savvy innovator, enabling and leveraging best practices
(e.g. CoE; Shared Services and e-HRM)

LEARNING
ACTIVITY 4
• Individual Activity:
• Critically review and
evaluate your current HR
performance advising
processes and function
against the ten (10) best
practice criteria. Refer to the
link:
https://www.surveymonkey.
com/r/5X9BTT9
• Identify gaps and
recommend improvement
strategies.

HRM STRATEGIC MATURITY MODEL
(Cotter, 2017)
Level 4: Strategic
HRM
(80%+)
Level 3: Transformational
HRM
(65-79%)
Level 2: Transactional
HRM
(41-64%)
Level 1: Traditional
HRM
(0-40%)

MEASURING THE STRATEGIC IMPACT AND
VALUE OF HRM/L&D
• Over the past 12 months, I’ve developed Survey Monkey quizzes, based on compliance of current HRM/L&D
practices, measured against 10 best practice criteria, that I’ve used on various training and conference speaking
assignments in South Africa, Ghana, Zambia, Mozambique and Kenya.
• The respondents from these five (5) countries were HR/L&D managers and -professionals, representative of
both public and private sector institutions.
• The seven (7) focal points of these mini surveys include the following HRM/L&D value chain processes:
 Strategic Performance Advisor (SPA)
 Strategic HR Planning
 HRM Metrics and Analytics
 Strategic Total Rewards Management (STORM)
 Skills Auditing
 Strategic Learning Partner (SLP)
 Ethics of S.A trainers
• Refer to the following links:
• https://www.linkedin.com/pulse/reality-check-chief-human-resources-officers-africa-hrm-cotter-phd/
• https://www.slideshare.net/CharlesCotter/measurement-of-the-strategic-maturity-of-hrm-and-ld-practices-
africa

OVERALL FINDINGS
HRM/L&D Value chain process Number of
respondents (N)
Mean Score Relative Difficulty
ranking
Standard
deviation
Level of Strategic Maturity
Strategic Performance
Advisor (SPA)
38 60% 6 15% Level 2 (Transactional)
Strategic HR Planning 33 57% 4 14% Level 2 (Transactional)
HRM Metrics and Analytics 61 53% 2 11% Level 2 (Transactional)
Strategic Total Rewards
Management (STORM) –
Principles and Best Practices
13 48% 1 8-9% Level 2 (Transactional)
Skills Auditing 29 56% 3 17% Level 2 (Transactional)
Strategic Learning
Partner (SLP)
23 60% 6 13% Level 2 (Transactional)
Ethics of S.A trainers 54 58% 5 12% Level 2 (Transactional)
OVERALL 251 56% Level 2 (Transactional)

0
10
20
30
40
50
60
70
OVERALL FINDINGS
Strategic Performance Advisor HR Planning HR Metrics
STORM Skills Auditing Strategic Learning Partner
Ethics of S.A trainer

0
2
4
6
8
10
12
14
STRATEGIC PERFORMANCE
ADVISOR
31-40 41-50 51-60 61-70 71-80 81-90 90-100

STRATEGIC PERFORMANCE ADVISOR (SPA)
– WIDEST COMPLIANCE GAPS
Range Median Mean Standard Deviation
38-93% 57% 60% 15%
BEST PRACTICE CRITERIA RELATIVE
DIFFICULTY
RANKING
MEAN SCORE
Your organization's HRM function generates business
intelligence e.g. predictive and strategic analytics (that
shapes, informs, guides and ultimately, influences
strategic business decisions)
1 49%
Your organization's HRM function has well-defined,
implemented and reported HRM performance scorecards
and ROI metrics (creating credibility and accountability)
2 50%
Your organization's HRM strategy is embedded in business
strategy and HRM are able to translate that strategy into
deliverable actions
3 54%

STRATEGIC PERFORMANCE ADVISOR (SPA)
– MOST COMPLIANT CRITERIA
DIFFICULTY
RANKING
MEAN SCORE
Your organization's HRM function
collaborates with line management to
broker meaningful and impactful business
solutions
10 69%

SABPP HR AUDITED RATINGS
(X39 COMPANIES)

HRBP CRITICAL SUCCESS FACTORS
• Strategic focus and thrust (on issues that contribute to business growth and
competitiveness)
• Adopting a “big picture” perspective (regarding the organization’s priorities
and goals)
• Having personal impact and credibility (to influence key decision-makers)
• Adopting an Key Account Management, (internal) client-centric approach
• Possessing a set of value-adding skills and knowledge (customers and
business)
• Being a diplomat and negotiator (in harmonizing the HRM agenda with
business needs)

AON INSURANCE EMEA HEALTH STUDY
(2018)

SYNOPSIS OF THE STRATEGIC
IMPACT AND VALUE OF HRM
“Seemingly, current HRM
practices are administrative,
compliance-driven and
transactional and not
strategic, commitment-driven
and transformational.”
(Cotter, 2018)

EXPECTATIONS AND PRIORITIES OF
BUSINESS EXECUTIVES
• CEO’s expect the Human Resources function to play a
much more active and participatory role in enabling
business strategies.
• Senior business leaders consider talent to be perhaps
the critical factor in the push for sustainable growth
and the need to manage new opportunities and risks
in a more complex and interdependent world.
• According to The Conference Board CEO Challenge
(2013), Human Capital is rated 10% higher than
operational excellence as a major challenge for
businesses.

WHAT BUSINESS EXECUTIVES
ARE LOOKING FOR IN HRBP?
• Catalytic Driver of Change
• Pro-active Business Thinker
• Collaborative Consultant
• Purpose-directed Coach
• Delivery (results-oriented HR
practices)
• (Credible and Accountable)
Performance Advisor
• Strategic Facilitator

ENABLERS OF
TRANSFORMATION/RE-
POSITIONING TO SPA –
“RIGHTING THE SHIP”
“HR needs to follow the right
process, applying the right skills,
in the right manner/method,
fulfilling the right roles, for the
right reasons, to achieve the
right results.”
(Cotter, 2014)

HRBP TRENDS
• Optimization of systems, processes and structures (architecture)
• Re-organizing HR service delivery and operating models e.g. Shared
Services
• Sourcing “Stars” from outside HRM
• Establishing HR Centres of Excellence/Expertise (CoE’s)
• Implementation of HR Academies and Business Partner training
programmes
• There is a particular focus on developing consulting, project and change
management skills as well as general business and commercial acumen

THE FUTURE-FIT CODE: 10 STRATEGIES TO
FUTURE-PROOF YOUR HRM CAREER
• Future-fit, career-minded HRM consultants will
apply the following strategies:
#1: Relevance
#2: Differentiation
#3: Unique Value Proposition (UVP)
#4: Specialization
#5: Agility

THE FUTURE-FIT CODE: 10 STRATEGIES TO
FUTURE-PROOF YOUR HRM CAREER
• Future-fit, career-minded HRM consultants will apply
the following strategies:
#6: Re-invention
#7: Value Amplification
#8: Next Dimension Thinking
#9: Digital Literacy and -Citizenship
#10: Hyperconnected Collaborator
• Refer to link: https://www.linkedin.com/pulse/future-
fit-code-10-strategies-future-proof-your-career-charles-
cotter/

SOURCE OF RELEVANCE: MINDSET
FUTURE-FIT HRM CONSULTANT FUTURE UNFIT HRM CONSULTANT
Growth Fixed
Abundance Scarcity
Optimalist Perfectionist
Investment Cost/expenditure
Future-focused (strategist) Present and short-term (tactician)
Aspires to success and sustainability Aspires to safety and stability

TAKING THE TEST:
FUTURE-FIT HRM
CONSULTANT HEALTH
CHECK
• In light of the above
Future-fit Code, do
you believe that you
are ready for the
future workplace?
Please refer to the
following link:
• https://www.survey
monkey.com/r/HWJR
5FW

CHANGE MESSAGE TO
HR MANAGERS
(Cotter, 2018)
• “Stop fixating on best
practice and rather
concentrate on
conceptualizing next
practice. This is the
fundamental differentiation
between industry
followership and
leadership.”

CHANGE MESSAGES TO HR
MANAGERS
(Cotter, 2018)
“Stop trying to re-invent the
wheel. The wheel is not the future
of mobility. Rather take a
quantum leap to attempt to re-
engineer and harness drone-like
technology.”
“Stop thinking HR for HR and
start practising HR for business.”

STRATEGIC CHANGE AGENDA - IMPROVEMENT
RECOMMENDATIONS – SPA (COTTER, 2017)
• #1: Transition from transactional to transformational HRM;
• #2: Transition from a cost to a profit centre;
• #3: Acquisition of more advanced, business relevant skills by HR
Professionals;
• #4: Migration from manual to automated/digital HRM – 1G to 4G
technology;
• #5: Migration from fundamentals of people science to the
complexities of data science and
• #6: Transition from administrative expert to strategic
performance advisor.

ACTION STEPS/PLAN TO
TRANSFORM HR INTO A SPA
• Step 1: Strategic Review and Analysis
• Step 2: Strategic Role Clarification and
Contracting
• Step 3: Formulation and Development
of Transformational Strategies
• Step 4: Implementation of
Transformational Strategies
• Step 5: Measure and evaluate
business impact and results

STEP 1: STRATEGIC
REVIEW AND ANALYSIS
• Objective: The focus of the analysis
should be on understanding the
needs of the business as a
sustainable entity, its strategic
direction and identifying initiatives
that will help your business grow.
• Review of current HRM and
business strategies
• Identification of resources and
capabilities
• Tools:
 Environmental scan (PESTEL)
 Gap Analysis
 S-W-O-T Analysis

STEP 2:
STRATEGIC ROLE
CLARIFICATION
AND
CONTRACTING
Objective: The concluding of Service
Delivery Agreements with
line/operational and
senior/executive management
Consultation, engagement and
communication with operational
management
Clarification of expectations, needs
and value-adding roles of HRBP
Contracting agreements

STEP 3: FORMULATION
AND DEVELOPMENT OF
TRANSFORMATIONAL
STRATEGIES
• Objective: Development of HRBP
transformation strategic plan
• Formulation of goals and objectives
• Development of alternative
transformational strategies
• Choice of most appropriate strategies
 Viability
 Feasibility
 Sustainability

STEP 4:
IMPLEMENTATION OF
TRANSFORMATIONAL
STRATEGIES
Monitoring and Controlling
Leading and directing (the
implementation process)
Organizing, assigning and
deploying resources
Project-based, cross-functional
team approach

STEP 5: MEASURE AND
EVALUATE BUSINESS
IMPACT AND RESULTS
• Measure and calculate the ROI
• Amend and review strategies
(remediation action)
• Report back to business
partners (to demonstrate
transparency and
accountability)
• Aspire to continuous
improvement processes

LEARNING
ACTIVITY 5
• Review the business
executive expectations,
roles and process of
transforming HR to a
strategic performance
advisor (state of
readiness).
• Apply step 3 of the
action steps/plan of
transforming HR to a
strategic performance
advisor.

OBJECTIVE #3:
HR Risk Management

DEFINING HR RISK MANAGEMENT
• HR risk is thus any people, culture or governance factor causing
uncertainty in the business environment that could adversely
impact on the company’s operations.
What are the HR risks that could jeopardize management in achieving its
business objectives?
How serious are these risks, i.e. what are the impact of these HR risks?
What can we do about it, i.e. how can we mitigate the HR risks?
• HR Risk Management is a systematic approach of identifying and
addressing people factors (uncertainties and opportunities) that
can either have a positive or negative effect on the realization of
the objectives of an organization. (SABPP)

HUMAN CAPITAL INSTITUTE RESEARCH

DISCUSSION QUESTIONS
• Indicate whether you believe that people risk is a
serious/priority risk and a strategic imperative in
your organization. Substantiate your answer. If not
a priority/strategic imperative, describe how HRM
can transform this process.
• By referring to the guidelines to HR Risk
Management, critically review and evaluate
current HRM Risk Management practices. Identify
gaps and recommend improvement strategies.

STEP 1: IDENTIFY HR RISKS
• The identified risks must be recorded and documented in a HR risk management
register.
• This process will be guided and defined by the organizational Risk Management
procedure.
 Identify the HR risks that you'll either need to manage or accept
 List all of the likely HR risks that your organization faces
• Every activity of an organization poses a risk so brainstorm and document the risks.
Consider both the general risks and the risks specific to your organization.
• Refer to list of typical risks
• Tip: Involving staff, volunteers and board members in the risk identification process
will give you a comprehensive picture of the risks based on different people's
involvement in different areas of the organization.

BUSINESS PROCESS MAPPING
(AON HEWITT)

STEP 2: ANALYZE HR RISKS
• The chart allows HR Managers to rate potential risks on these two
dimensions.
The probability that a risk will occur is represented on one axis of the
chart
The impact of the risk, if it occurs, on the other.
• HR Managers can use these two measures to plot the risk on the
chart.
• HR Managers can then decide what resources they will allocate to
managing that particular risk.
• Risk Impact/Probability Chart.

STEP 4: RISK RESPONSE AND
IMPLEMENTATION

RISK RESPONSE IMPLEMENTATION
• When you have decided which risk management strategies
will be the most effective & affordable for your organization,
practically outline the steps and who is responsible for each
step in the risk management plan.
• Provide training for all organizational staff and volunteers so
they understand the rationale of the risk management plan as
well as the expectations, procedures, forms etc.
• Crafting of a HR Risk Register.
• Communicate the plan and ensure that there is buy-in from
all who are involved in the organization.

STEP 5: RISK EVALUATION
• Risk Monitoring
Is your plan working?
Have your risks changed?
Have you expanded or reduced your programs and services?
Are changes or updates required?
Are staff and volunteers following the risk management plan?
Do they need re-training on the details?
Do we need to better communicate the plan?
• Tip: Risk management is an evolving field. Therefore, it is a good
practice to keep current and re-evaluate your organization's risk
management system on an annual basis.
• Risk Control

LEARNING
ACTIVITY 3
• Group
Discussion:
• Apply steps 1-
5 of the HR
Risk
Management
process to a
selected
organization.

OBJECTIVE #4:
HR Metrics and Analytics

HRM METRICS/ANALYTICS TASK TEAM – 2018?

• What type of HRM Metrics does your organization currently
utilize?
• Describe the organizational impact, level of maturity and
credibility of these HRM Metrics
• What does your organizational HRM Metrics architecture look
like?
• What is the current degree of HRM practitioner competency of
HRM metrics/analytics?
• Review the benefits of HR Metrics. Is there a business case for
applying HR Metrics?

DEFINING THE
FUNDAMENTAL
CONCEPTS
Metrics are simply measurements. Metrics
track activity, but don’t necessarily show a
causal relationship.
HRM Metrics - Measurements used to
determine the value and effectiveness of
HR strategies.
Differentiation between People and HRM
Measures
Human capital analytics examine the effect of
HRM metrics on organizational performance.
In more general terms, analytics look for
patterns of similarity between metrics. By
using analytics over time, HRM can
become predictive.

THE FUTURE OF HRM METRICS &
ANALYTICS?
“HRM will have to migrate from the
fundamentals of people science to the
complexities of data science.”
(Cotter, 2017)

10-POINT FOUNDATION AND “STARTER-PACK” FOR
STRATEGIC HRM METRICS
https://www.surveymonkey.com/r/CSQW25V
#1: Adopt a strategic
mindset
#2:Change
management must
run parallel to HRM
Metrics in “business
unusual”
environment
#3: Streamline and
systematic HRM
metrics process
#4: HRM Metrics is
not a “desktop”
exercise
#5: Adopt a
measurement
culture & build
capacity & skills
for digital literacy

10-POINT FOUNDATION AND “STARTER-PACK” FOR
STRATEGIC HRM METRICS
https://www.surveymonkey.com/r/CSQW25V
#6: Re-inject
scientific principles,
processes and tools
& credibility into
HRM Metrics
e.g. 3 E’s
#7: Drill down &
segment HRM
metrics
#8: Apply the 4 C’s
to HRM Metrics
Reporting
#9: Don’t adopt a “Big
Bang” approach –
start small, think big
and scale up
#10: Automation -
utilize a 4-G digital
data analysis solution

DIAGNOSTIC
ACTIVITY
• Individual activity:
• https://www.surveymonke
y.com/r/CSQW25V
• Please rate your
organization’s current
degree of compliance on a
10-point scale (with range
of 1 = absolutely non-
compliant and 10 = 100%
compliant)
• Identify gaps and
recommend improvement
strategies.

HRM ANALYTICS MATURITY MODEL
(BERSIN BY DELOITTE)

0
5
10
15
20
25
30
35
HR METRICS AND ANALYTICS
21-30 31-40 41-50 51-60 61-70 71-80 81-90

HR METRICS AND ANALYTICS – WIDEST
COMPLIANCE GAPS
Range Median Mean Standard Deviation
22-83% 53% 53% 11%
BEST PRACTICE CRITERIA RELATIVE DIFFICULTY
RANKING
MEAN SCORE
Your organization has re-injected scientific principles,
processes and tools and credibility into HRM Metrics
e.g. 3 E’s - evidentiary, empirical and ethical.
1 49%
Your organization harnesses automation, utilizing a 4-
G digital data analysis solution.
2 50%
Your organization applies the 4 C’s to HRM Metrics
Reporting i.e. causes, costs, consequences and cure.
3 50%

HR METRICS AND ANALYTICS – MOST
COMPLIANT CRITERIA
DIFFICULTY
RANKING
MEAN SCORE
HR professionals "walk the floor" and
actively engage organizational
stakeholders in metrics/analytics
processes and, therefore, do not manage
it like a detached “desktop” exercise.
10 61%

Source: The State of Workforce Analytics and
Planning 2014 Survey Report

5-STEP
HRM
ANALYTICS
PROCESS
Step 5
Project and take action to communicate
metrics and related insights information to
provide a robust basis for strategic change
and improvement
Step 4 Draw out insight from the data
Step 3 Obtain data relating to relevant metrics
Step 2 Develop appropriate metrics around
these areas
Step 1 Identify where HRM can make a strategic
impact in the organization

THE 5 E’s OF HRM
ANALYTICS
• Exploration
• Examination
• Extraction
• Evaluation
• Extrapolation

STEP 1: IDENTIFYING WHERE HRM CAN MAKE A STRATEGIC
IMPACT (EXPLORATION)
• This process step focuses on determining the areas where
HRM can make a strategic impact within the organizational
context.
• It enables HRM management team to identify priority areas
for measurement which are aligned with organizational
goals and strategies.
• Identify capability opportunities or problem areas from a
business partner perspective.
• Sources for information collection, retrieval and analysis.

SOURCES FOR INFORMATION COLLECTION,
RETRIEVAL AND ANALYSIS
• Employee and management surveys and interviews (for
employee contentment, communications, rewards system)
• Performance appraisals (to measure productivity,
attendance)
• HR records (to track communications, turnover, recruiting
efficiency, retention, promotions, and succession planning)
• Employee files (to research productivity, attendance, training)

STEP 1: EXPLORATION
• A critical first step is to ensure that HRM is measuring the right things.
• The design and development of relevant HR metrics requires reflection
and discussion in order to determine what it takes for the organization to
succeed and to understand how HR can add value.
• Identify organizational burning issues
• Three issues underpin effective measurement (CIPD, 2011):
 Aligning measurement with goals
 Take a business partner perspective
 Adding value by focusing on building capability

STEP 2: SELECTING APPROPRIATE
METRICS FROM WHICH
ORGANIZATIONAL INSIGHTS CAN BE
DRAWN (EXAMINATION)
• HRM Measures:
 Efficiency (10%)
 Effectiveness (20%)
 Impact (70%)
• Categories of HRM Metrics:
 First Tier (most valued)
 Second Tier (lesser valued)
• Commonly used HRM Metrics
• Refer to Annexure A: HRM Scorecard Template
(pages 125-126); Annexure B: Comprehensive
HRM Metrics (pages 127-165) and Annexure C:
HRM Effectiveness Metrics (pages 166-174)

STEP 2: EXAMINATION - HRM
MEASURES

BROAD CATEGORIES
OF HRM METRICS
 Workforce Demographics
 HR Efficiency
 Remuneration
 Skills Development, Training &
Education
 Productivity
 Provisioning and Recruitment
 Risk Analysis
 Staff Retention

FREQUENTLY USED HRM METRICS
(PWC)

10
TYPICAL STATISTICS OBTAINED IN COMPILING HRM METRICS
 Revenue factor, which is company total revenue divided by the amount of full
time employees
 Human capital value added (revenue minus operating expense and cost of
compensation/benefit divided by the total amount of full time employees)
 Human capital return on investment: Revenue minus operating expenses and
cost of compensation benefit divided by cost of compensation/benefit
 Total compensation revenue ratio which is cost of compensation/benefit
divided by revenue
 Labour cost revenue ratio, which is cost of compensation/benefit plus other
employee costs (bonuses, mileage paid, incentives) divided by revenue

10
TYPICAL STATISTICS OBTAINED IN COMPILING HR METRICS
• Training investment factor equals the total cost of training divided by total
amount of training attendees
• Cost per hire, which includes advertising, agency fees, relocation, and
others divided by operating expenses
• Health care costs per employee (total health care cost divided by total
amount of employees)
• Turnover costs, which is equal to hiring costs plus training costs plus other
costs (turnover rate during first year of employment is key)
• Voluntary separation rate is the total number of people who quit or retired
divided by the total amount of employees

Present x Productive 
Productivity
Q: Are your employees contributing to the success of the organisation.
Are you connecting human capital & business measures.
? Productivity measures on an annual and a quarterly basis
? Compare to national averages
Specific metrics -
 Return on Human Capital Investment
 Revenue per Full-Time Equivalent (FTE)
 Profit per FTE
Critical HR Measures - forTrue Business Impact

Time to fill vacancy x Quality of hire 
Recruitment Effectiveness
Q: Are you recruiting new talent of a high calibre. Are they staying.
Are they performing.
? Business-impact shortfalls in capacity
? Consistently increasing organization’s performance through
improved talent
Specific metrics -
 Vacancy Rate
 FirstYearTurnover Rate
 New Hire Performance
 Time to Fill

Rate ofTurnover x Retention of critical top talent 
Critical Talent Retention
Q: Is your top talent / your vitally important workers / your competitive
advantage – resigning, or at risk of resigning, at a greater rate than your
less crucial employees.
? Overall tenure trends
? Career development
Specific metrics -
 Resignation Rate
 Resignation Rate ofTop Performers
 Promotion Rate and PromotionWaitTime
 Engagement Index
 Market Compensation Ratio

STEP 3: OBTAIN DATA RELATING TO RELEVANT
METRICS (EXTRACTION)
• The top performing companies were using a variety of
drilled-down metrics, having the people to analyze them, and
communicating them effectively.
• This process step focuses on how HRM can most effectively
communicate the insights drawn from metrics to inform
action and hence enable HRM to deliver maximum strategic
impact.
• Effective decision-making, based on robust measures and
metrics, therefore, requires HR professionals to think
carefully about the relationships that need to be established
to enable appropriate information-sharing of these insights.

STEP 3: EXTRACTION – PROCESS STEPS
• #1: There is the initial “harvesting” or gathering of unstructured
data from the web.
• #2: The normalization stage—preparing harvested data for
analysis. Normally, a relational database such as MySQL is used,
but NoSQL can also be used.
• #3: The data is given additional structure with metadata, or
tagging. Analytics can then be presented through a dashboard.
• The process of collecting and updating the data from the myriad of
internet sources has to be automated. Advanced Programming
Interfaces (APIs) can enable different digital platforms to share
dynamic data and feed it into other applications, such as a
company’s own database.

STEP 3: EXTRACTION – CHALLENGES
CONFRONTED
• Struggling to use unstructured data
• Difficulty tying talent acquisition data to business results
• Problems with storing, retrieving and integrating data
• There is rarely a systematic approach to integrating disparate systems. Legacy data
systems often don’t talk to each other. There are missing links between ATS and
HRIS systems.
• The data exchange is often clumsy at best, requiring rekeying of data and manual
interventions.
• The successful transfer of data from multiple sources, such as an ATS, a recruiting
site or a social network with an HRIS System is the most problematic part.
• Failure to get the most of ATS

STEP 4: DRAWING OUT INSIGHTS
FROM DATA (EVALUATION)
• The HRM function and measurement capability
• HR professionals have long been data collectors, amassing and keeping
track of employees’ personal information, salary rates and the annual
number of retirements. But to grasp the potential of HR analytics, HR
managers need to become data interpreters.
• Top performing companies invest in personnel who have analytic and
process-oriented capabilities, those people who can install the necessary
methodological disciplines necessary to use the information effectively.
• Identify root causes and cause-effect linkages and -relationships
• Action planning – interventions and solutions

HRM ACTION PLAN (INTERVENTION)
TEMPLATE

STEP 5: PROJECT AND TAKE ACTION TO COMMUNICATE METRICS AND RELATED
INSIGHTS INFORMATION TO PROVIDE A ROBUST BASIS FOR STRATEGIC CHANGE AND
IMPROVEMENT (EXTRAPOLATION)
• Projection of data – forecasting (PREDICTIVE ANALYTICS)
• To communicate HRM Analytics, tell a story (NARRATIVE)
• “Data is abundant, but if you don’t give it context, it’s just a
bunch of numbers.”
• Internal benchmarks (to compare their business units to others in
the organization)
• Support comes after results are delivered, not before. “It really
comes back to how credible you are. You get buy-in when you
show up repeatedly with accurate numbers and you can relate the
story to how the company’s performing.”

STEP 5: EXTRAPOLATION - REPORTING
• HR analytics reporting
• How the information is communicated to the organization, particularly the C-suite,
is critically important.
• Companies simply produce spreadsheets that offer no easy and timely way to
present what is happening in the business.
• Like any good research report, it is vital to present meaningful information and
identify actionable insight that can be used to make positive change.
• Tactically, the best practice organizations, distribute multiple reports to multiple
levels. Tailored reporting to address the specific needs, and ideally focuses on very
specific business impacts.
• If the metrics being shown convey business impact, quarterly reporting of 5-10 of
the most critical, agreed-to KPIs is warranted.

HR METRICS REPORTING
– 4 C’S
• COSTS
• CAUSES
• CONSEQUENCES
• CURE

DIFFERENT OBJECTIVES, DIFFERENT
METHODOLOGIES
http://www.inostix.com
(Reporting)

Historical metric
 “Last year’s corporate turnover rate was 8%.”
Predictive analytic
 “As a result of a drop in the regional unemployment rate, there is an 86% chance that the turnover rate
in this job family will dramatically increase from last year’s 8% up to 12% within the next six months,
and up to 16% within 10 months.”
Actionable Predictive Analytic
 Adds a cost element - “We project that this 100% increase in turnover will reduce your group’s
productivity over the next 10 months by 17% resulting in a reduced output value of R812,000.”
 Also adds a ‘recommended action’ - “we should implement personalized retention plans for the top
performing 20% in this job family; they cost R2,000 each to develop and have a 89% success rate.
ACTIONABLE, PREDICTIVE ANALYTICS —
THE NEXT BIG THING IN TALENT MANAGEMENT
Dr. John Sullivan, Professor, Talent Management Speaker and Advisor

LEARNING
ACTIVITY 6
• Group
Discussion:
• Apply steps 1-5
of the HRM
metrics
process.

THE FUNDAMENTALS OF HRM
AUDITING
• Defining a HRM Audit
• The driving forces of HRM Auditing
• The purpose, objectives and functions of HRM
Auditing
• Benefits and costs (drawbacks) of HRM Auditing

ORIGIN OF THE WORD, “AUDIT”
• The word audit originates from the Latin word
‘audire’ which means to “listen”.
• An audit is a systematic, objective risk
management tool for how well the workplace is
complying with regulatory and policy requirements.

DEFINING HRM AUDIT
• An HR Audit as “an intensely objective look at the company’s HR policies,
practices, procedures and strategies in order to protect the company,
establish best practices and identify opportunities for improvement.”
(SHRM)
• A Human Resources Audit is a review of current Human Resources
practices, policies, procedures, documentation and systems and will assist
you to identify strengths and needs for improvement.
• It will provide direction and recommend the courses of action to be taken
to ensure compliance with ever-changing laws, rules and regulations.
• A HR audit is a way to diagnose problems in a company’s HR department.
• Auditing is evidence based.

DRIVING FORCES OF HRM AUDITING
• Alignment of HR strategies and practices with strategic objectives of the
organization;
• Managing employment practice liability risks;
• Government compliance (skills audit);
• Understanding and determining the impact of HR policies, procedures and
practices;
• People investments need to be quantified to demonstrate a return on
investment; and
• Roughly, over two-thirds of an organization’s money is spent on people.

PURPOSE OF HRM
AUDIT – V-C-R
• Value
• Compliance
• Risk

MAIN GOALS OF HRM AUDIT
• The goal is the independent and objective evaluation
of the efficiency and quality of a company´s HR
management, including its compliance with the legal
requirements of employment.
• Determine whether company's employment-related
materials and practices are complying with the law
and the employer's own policies; and
• Identify and bring into compliance, any area that may
not be in compliance. An audit should identify what the
employer is doing right or wrong, as well as grey areas
that could use improvement.

5 C’s – THE KEY
BENEFITS OF A HRM
AUDIT
• Compliance
+
• Competitive
+
• Cash
+
• Credibility
+
• Competence
= Clean HRM Audit

V-I-P HRM AUDITING
• Valid (accurate & correct
Measurement)
• Interrogative (3rd degree)
• Protective (against HR, people & reputational risks)

8 CRITICAL SUCCESS FACTORS OF HRM
AUDITING
• #1: Organizational readiness for HRM Auditing
• #2: Adequate resources
• #3: The right people
• #4: The audit requires the support of all trade unions and key role players in the SBU
• #5: Guided by a policy
• #6: Under the supervision of a subject matter expert.
• #7: The auditing of HR should be put in the HR calendar and should synchronise properly
with other business processes in the organization
• #8: Senior management commitment and support and the general co-operation of key
stakeholders

10 KEY PRINCIPLES OF HRM AUDITING
• https://www.surveymonkey.com/r/FQD27Q7
• #1: Need for independence;
• #2: Audit activities should be budgeted for properly;
• #3: Acknowledgement that there are many types of audits;
• #4: Each type of an HR audit has its own purpose and
objectives;
• #5: Establish timeframes for every phase/step of the audit;

10 KEY PRINCIPLES OF HRM AUDITING
• https://www.surveymonkey.com/r/FQD27Q7
• #6: Training of auditors is a must;
• #7: Set standards for the HR Audits;
• #8: Agreement on reporting template;
• #9: Auditors should sign a confidentiality agreement; and
• #10: Auditors should agree beforehand on communication
strategy.

70-20-10%
APPROACH TO
HRM AUDITING
• Primary - HRM Audit
conducted by HRM
department (70%)
• Secondary – HRM Audit
conducted by
internal/external audit
(20%)
• Tertiary – HRM Audit
conducted by external
verifier and/or
professional authority e.g.
SABPP (10%)

DIAGNOSTIC
ACTIVITY
• Review the degree of compliance of
your current HR Auditing practices
measured against:
• X8 Critical success factors
• X10 Key Principles – refer to link
https://www.surveymonkey.com/r
/FQD27Q7
• Identify gaps and recommend
improvement strategies.

TYPES OF HR AUDITS
• Skills audits;
• Effectiveness audits;
• Performance audits;
• Value-add audit;
• Cultural audits;
• HR systems audit;
• Compliance;
• Best Practices;
• Strategic;
• Function-Specific

HR AUDIT
MEASURES
• Planning and staffing
• Recruitment efficiency
• Recruitment effectiveness
• Compensation measures
• Benefits
• Orientation cost per employee

HR AUDIT
MEASURES
• Counseling/disciplinary costs
• Lost time costs
• Turnover rates
• Training and development
costs/measures
• Organization development
measures

HRM AUDITING PROCESS
• Design and develop HR policies, procedures and
practices for your organization;
• Assess current HR policies, procedures and
practices against set criteria;
• Analyse the results from evidence and
• Take action: to close gaps,
make recommendations/set improvement goals.

HRM AUDITING PROCESS - ILLUSTRATED

HRM AUDIT ACTION
PLAN
• Phase 1:
Foundational/Initiation
• Phase 2: Assessment
• Phase 3: Concluding and
Reporting

PHASE 1:
FOUNDATIONAL/INITIATION
• Audit set-up actions
• Audit planning actions
 Determine the purpose and objectives of the audit
 Determine the scope of the audit
 Determine the organizational components to be
audited
 Determine the auditing tool to be used
 Determine costs and resources needed to perform
the audit
 Determine audit team governance

THE SCOPE OF HRM AUDITING
• Evaluation of the organization’s operational HR policies,
practices and processes and their effectiveness in achieving
strategic organizational goals.
• Assessment of current HR metrics for reasonableness and
results.
Efficient
Effective
Ethical
Economic use of talent to achieve organizational goals.

PHASE 2: ASSESSMENT
• General comments
• Identify key organizational
metrics - determine
employment issues
accountability
• Formulating auditing
methodology and tools
• Developing a checklist (Refer to
Annexure D)

PHASE 3: CONCLUDING AND
REPORTING
• Report preparation
• Report presentation
 Quantify your results - start with
outcomes
 Include an executive summary
 Identify risks
 Identify and prioritize solutions to
problems identify. Where possible,
frame your solutions from a bottom
line perspective, i.e., Calculate the
benefits and costs of proposed
solutions
 Evaluate and discuss the
organizational, financial and
employee relations impact of action
or inaction
• Develop a HR improvement plan

LEARNING ACTIVITY
7
• Describe how you will
audit the strategic HRM
function.
• Apply the 3-step HRM
Auditing process.

CONCLUSION
• Key points
• Summary
• Questions
• Training administration
• Certification

CONTACT DETAILS
• Dr. Charles Cotter
• (+27) 84 562 9446
• charlescot@polka.co.za
• LinkedIn
• Twitter: @Charles_Cotter
• https://www.facebook.com/CharlesACotter/
• http://www.slideshare.net/CharlesCotter

Strategic HRM and HR Business Partnering

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