Role Of HR

“HR is a tool, not the objective”

 Definition Of HR
• A strategic approach means taking a "longer" term, "big picture"
approach to HR. Being strategic means operating HR programs or
initiatives with the goal of making a direct contribution toward
meeting major corporate long-term objectives. Rather than
focusing on internal HR “issues”, a strategic focus means
addressing and solving “business” problems through the effective
use of people management programs. The primary goal of
strategic HR is to increase employee productivity and
corporate revenue.

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 Elements Of HR
 HR increases employee productivity and profits
 An external focus assures HR efforts are aligned with business
goals and with changes in the business environment
 HR helps to build a performance culture
 HR provides a competitive advantage
 There is an “external” focus
 HR is proactive and future focused
 There is a coordinated effort
 There is a global approach
 HR builds a brand
 Technology permeates everything

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 Strategic Human Resources
Actions
Competitive Analysis
Measure and reward managers for good people management
 Pay for performance
SWAT team – (Special weapons & Statistics- CRT- Critical Response team)
Analyzing "failures"
Corporate Headcount “Fat” Assessment Plan Corporate headcount "fat" assessment plan -- Rather than
learning at the last minute that the organization needs to do a layoff, establish a set of assessment tools that will
let you know in advance where headcount may be excessive. Monitor ratios, such as output per employee,
employees to managers, overall department headcount to productivity, and overall labor costs per unit of output,
to identify possible "fat" areas.
“Smoke” Detectors (Predictors)
 Bench Strength (Back Fill) Plan -In a time of high turnover, it's increasingly essential to have a strategy
for identifying and developing individuals who can take over if an employee leaves. A "bench strength" plan differs
from traditional succession planning in that it only covers replacing key jobs within a single department. It is not a
company-wide succession plan. Individual managers are held responsible (and are rewarded) for developing at least
one individual to fill every key job.
Bad Management Identification Program- One of the primary reasons that employees quit their jobs
is the bad management practices of their direct supervisor. Develop a program that can identify "bad managers,"
and then develop strategies for fixing these managers, transferring them back to more technical jobs, or releasing
them.

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UNDERSTANDING THE ROLE OF HR WITH THE
“FIVE LEVELS OF HR CONTRIBUTION“MODEL

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 Level One –Information Management
and Basic Transactions
 Processing of new-hire
documentation, payroll,
separations and benefits
enrollment/changes

 Providing answers to
employee and manager
questions pertaining to policy,
benefits, employment law

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 Level Two – Providing Functional
Services
 This level incorporates many of
the activities that create the
standard functional areas within
HR including: staffing,
compensation and benefits,
employee relations, and training

 The formation of standardized

processes and policies for
requesting more staff, developing
staff, compensating staff, and
performance management

 Basic reporting on the status of

talent management efforts

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 Level Three – Coordination of Efforts to Improve
Productivity

• Improving the over-all productivity of the workforce requires that

HR develop initiatives to continuously increase the dollar value of
employee output while maintaining or reducing the average labor
cost per unit.
• Productivity Defined: The term productivity means different things
to different people;
• In Terms of HR- a measure of efficiency with regards to the use of
human resources within a firm. In either case, productivity is simply
the value of the outputs a firm produces divided by the costs of
producing those outputs. The formula for productivity is simply:

Productivity = Outputs / Inputs

• To increase productivity, outputs must increase more than costs.

There are two basic ways to accomplish this, decrease costs while
maintaining output, or increase output while maintaining

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How to Measure Employee Productivity?

HR must accept that it is their job to influence others within the

organization to increase the productivity of our employees.

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 Calculating HR Productivity Measures
• Revenue per Employee as a Presumptive

• Measure of Productivity :-
This is the first method to calculate Employee
productivity. The formula to calculate this is

Revenue per Employee = Total Revenues /

Average # of Employees

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 Merits:
 A good starting metric, and one fairly easy to calculate is
revenue per employee. The two pieces of date required to
calculate this measure, total current revenues and current
employee count, are often easily available

 This metric is a very good indicator of efficiency when

comparisons are made between firms of similar size in the same
industry.

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 Demerits:
 It fails to include the cost of the employees in the calculation

 This is important because firms with a large number of highly

paid employees would on the surface, report the same ratio of
revenue per employee as a low paying firm even though the
actual cost of employees would be significantly higher.

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 II. People Cost to Total Cost Ratio

Another simple ratio to calculate is to identify what percentage of

total variable costs are people costs. Effective management strategies
reduce costs while simultaneously improving employee output. The
very best firms keep the ratio of labor costs constant and they use
technology and productivity tools to increase output.

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 III. People Cost To Output Value
And Units
The last simple ratio to calculate is to identify the ration between people
costs and the dollar value of the firm’s output. A similar measure calculates
the labor cost per unit of production.

The ratio of people costs to the value of the firms output

= Value of Firm Output / People Costs   

Labor costs per unit of production (Units) = Number of

Units Produced / Labor Hours Used

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 More Complex Productivity Measures
Profit Per Employee -
1-Similar to the revenue per employee calculation,
but the major difference here is that profit is
substituted for revenue. For most firms, profit
: is a more accurate reflection of company
success than revenue.
 
Profit per Employee = Gross Profit / Average # of
Employees

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 More Complex Productivity Measures
2) Revenue Per People Rupee
Another measure of productivity is a ratio between
revenues and total employee costs.
 
Revenue per People Dollar = Total Revenues / Total
People Costs
When calculating total people costs, include the cost of
all wages, benefits, and HR administration.

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 More Complex Productivity Measures

3-People Profit :The

: ultimate measure in productivity is called "people
profit." It is a ratio between profit and total employee costs. Firms that
generate more dollars of profit per dollar spent on employee costs are
the most productive.

People Profit = Operating Income (Gross Profit – SG&A Expense) /

Total People Costs

When calculating total people costs, include the cost of all wages,
benefits, and HR administration.

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Things HR Can Do To Increase Productivity

 Retention tools
 Referral programs
 Metrics (to increase accountability) and rewards that are tied to performance and
productivity
 Identifying what motivates, challenges and frustrates employees
 Performance management programs that drop poor performing managers and
employees
 Incentive systems that focus on rewarding managers for great "people management"
performance
 On the job learning and growth opportunities (job rotations and special projects)
 Rewards for sharing best practices between managers
 Measures and rewards that Cross functional lines in order to increase cooperation
 Forecasting and workforce planning

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 Level Four :Development
: of Competitive Advantage through

Talent

 Level four signifies a major

transition point as HR work
begins to provide a strategic
contribution.
 Increasing competitive
advantage is a focused effort
to ensure that each key HR
program and service is best in
class when compared directly
to that of competing firms.
 The goal in level four is to
identify and exploit
weaknesses found in
competing organizations.

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 Level Five: Develops Solutions to Strategic Business
Problems and Opportunities
 Level five represents the pinnacle of work providing strategic
contribution in HR
 They attempt to address strategic business problems in areas such
as product development, product/service quality, customer
service and corporate position
 Typical strategic business problem and opportunity efforts include:
 HR involvement in turnaround swat teams
 HR consultation in product design and development efforts
 Analysis of workforce management impact on time-to-market and
innovation
 Management of performance culture
 HR involvement in merger and acquisition planning

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Typical competitive advantage building efforts include:

 Competitive analysis of people programs found in competing

organizations

 Workforce planning and productivity forecasting

 Employment branding

 Competitive intelligence gathering

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Thank You

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