Business Acumen Flashcards
Value chain & its primary activities
aka “business model”
process by which an organization creates the product or service it offers to the customer.
R&D–>Operations–>Marketing/Sales–>Fulfillment–>Customer
What is HR’s key contribution to value chain?
Quality and availability of talent pool
Global value chain
Multiple organizations producing parts of a good or service across geographical regions
HR and Organizational/Product Life Cycle: Introduction
Characteristics
How HR can help
Revenue is low because of little market awareness and market resistance to change. The new industry/product/organization must create an identity with customers and develop a value proposition.
Characteristics: little structure; vision, innovation, and energy critical
HR: talent acquisition, culture creation in line with founder’s ideals, EL compliance
HR and Organizational/Product Life Cycle: Growth
Characteristics
How HR can help
As time proceeds (the horizontal axis), revenue begins to increase.
Characteristics: awareness of market trends, strategic discipline of managers to stay on track, demands for innovation
HR: buildup of talent, helping leaders redefine their roles, change management, job descriptions
HR and Organizational/Product Life Cycle: Maturity
Characteristics
How HR can help
market is saturated with competitors and growth occurs only through introduction of new products or customer groups
Characteristics: need for greater control leads to formalization of decision making
HR: retaining workforce, succession planning for strong leadership, improving communication, maintaining culture of workplace
HR and Organizational/Product Life Cycle: Renewal
Characteristics
How HR can help
Organization changes offerings, where/how they compete. If they succeed, revenues rise.
Characteristics: attempts to re-engage with customers, re-envision product, restructure company if necessary
HR: changes in leadership, RIF to right-size, streamlining of policies and job descriptions
HR and Organizational/Product Life Cycle: No Growth
Characteristics
How HR can help
Organization takes no action and accepts continued low revenue.
Characteristics: company is static in compensation, revenue. Few opportunities for EE advancement
HR: maintain engaged workforce and deliver HR with fewer resources; deal with increased turnover
HR and Organizational/Product Life Cycle: Decline
Characteristics
How HR can help
Characteristics: org shrinks in size, return to more autocratic control
HR: manage RIF, help remaining EEs cope with stress, attract new talent
Macroenvironment
all the factors that exist outside the organization that could influence an organization’s strategic decisions
Examples: industry/market conditions, events/trends in society
Porter’s Five Forces - definition
Every industry and its members face similar competitive challenges that affect the business model or how it will create value.
Diagram: 4 forces (bargaining power of buyers/suppliers, and threat of entry/substitution) all point inward toward 5th force: “rivalry among competitors”
Porter’s Five Forces - Threat of Substitution
Competitor taking customers with similar product
HR must focus on cost efficiency (price war) or entrepreneurialism
Porter’s Five Forces - Threat of Entry
New competitor entering industry
HR must allow for rapid decision making/response if this were to happen
Porter’s Five Forces - Bargaining power of suppliers
Assesses the threat that suppliers could have on an industry - for ex.: what if a main supplier went out of business or was bought by a competitor?
If their bargaining power is high, HR must make sure JDs include training for negotiation, managing risks, ethical practice, relationship management
Porter’s Five Forces - Bargaining power of buyers
How vulnerable are organizations to actions by customers looking for the lowest price or large customers who can greatly affect sales and revenue
HR should align compensation practices to encourage marketing/sales to support these clients.
Porter’s Five Forces - Rivalry among existing competitors.
All of the other forces have the potential to increase the intensity of competition within the industry
Business Intelligence
The ability to see how the whole organization and its parts are performing (through business metrics) and to make sound business decisions that are grounded in relevant rather than assumptions or “gut feelings.”
3 main components of business intelligence
Data gathering
Data warehousing
Query and reporting capabilities
Dashboard analytics
Focus on current data that measures performance in key areas.
Advanced analytics
use historical and current data to get a better sense of the future and even to shape the future.
Can also take advantage of machine learning, the ability of an information system to make its own decisions based on the data it is receiving.
Enterprise resource planning (ERP) system
Integrates current data from across an organization’s functional areas, while a stand-alone system would require a customized bridge to access the ERP database.
Allows for shared, current database across all departments
Incremental (line-item) budget
The previous year’s budget determines the current year’s budget. Additional funds are requested as needed.
Function leaders are told that they may increase/decrease by a certain percentage. This is less time-consuming, but it does not recognize changes in business that could affect spending.
Zero-based budget
Budget starts at 0 - no funds promised. All objectives are given a ranking, and then available funds are given out in order.
Ex. A department would need to justify its entire budget and show how its funding helps the organization meet its goals.
Activity based budget
Funding allocated based on strategic significance of activity
Mentality is “how much does it cost to perform these important activities” vs. “how do we divide up this predetermined sum of money”
Ex. An organization asks functions what resources they will need to produce specific outputs or levels. More resources are transferred from lower-priority areas or areas with excess capacity.
Formula based budget
Different business units receive different percentages of the budget.
General funding changed by specific amount and different business units’ budgets are adjusted proportionally.
Ex. A government agency could experience a system-wide 5% budget decrease, which would be spread among its units according to different percentages.
Capital costs
one-time investments in physical assets such as buildings, land, equipment, software.
What does HR budget include?
Ongoing operational costs - directly related to staffing and expenses
One-time project costs
What is first thing HR should do in redoing strategic budget?
Compare previous/current activities and budget allocations with what will be needed to support the proposed organizational strategy.
What is included in a business case?
Statement of need. This is the condition or change impelling the function’s action.
Recommended solution.
Risks and opportunities
Estimated costs and timeframe
Balance sheet
statement of the organization’s financial position—its assets, liabilities, and equity—at a particular time
Balance sheet formula
Assets = Liability + Equity Assets = what you own Liability = what you owe Equity = what you owe to owners/shareholders
Income statement
indicates an organization’s net income, which is often referred to as the “bottom line” and provides key information about the organization’s performance.
Also known as P & L (profit and loss)
Net income equation
Net income = Revenues – Expenses
SWOT Analysis
Strengths, Weaknesses, Opportunities, Threats - agree on a numerical value for each
Strengths and weaknesses: come from internal environment
Opportunities and threats: come from external environment
Multi-criteria decision analysis (MCDA)
For any initiative, a team determines critical characteristics/elements for it to be successful, as well as alternatives to that element.
Matrix created to assign a point rating to each alternative, and from there prioritize results.
Cost benefit analysis (CBA)
Group discussion is critical to identifying all relevant costs and benefits.
Create a benefit/cost ratio (divide) for each idea, and selecting highest
Force-field analysis
identifies and weights factors that could influence an outcome in either a negative or positive manner according to their possible impact. The group then uses these factors to score different opportunities.
group can decide to pursue opportunities with scores showing favorability for change or avoid changes that face very strong resistance.
Diagram: planned change/opportunity in the middle, forces for/against change are on left/right side and assigned a point value.
Critical evaluation - definition and what it includes
refers to examining an idea, a process, or an event with an open, objective, and inquiring mind.
Includes: data advocacy
data gathering
data analysis
evidence-based decision making (EBDM)
Steps in Evidence-based Decision Making
Ask - phrase the problem as a question
Acquire - gather info from varied sources
Appraise - determine validity, reliability
Aggregate - combine and organize
Apply - use data to draw conclusions
Assess - monitor implemented solution
How to become an HR Data Advocate
Gather data on continuous basis
Use evidence when communicating with stakeholders
Institutionalize the competency in the HR function
Ensure all HR activities are measured!!
Interviews as Data Source
Positives:
Rarely sole form of gathering data
Useful to ID topics to use in surveys/focus groups
Confidential environment, intimate conversation
Opportunities for follow-up questions
Negatives:
Can be time consuming
Require consistency and vigilance to avoid bias
Focus Groups as a Data Source - Pro/Con
Positives:
Need to have skilled facilitator
Provides flexible format
Allow for group brainstorming and decision making
Negatives:
Can be difficult to control
Data can be less reliable if participants don’t contribute equally/are not included equally
Mind mapping and affinity diagramming
Focus group technique
Mind mapping begins with generating core ideas (sometimes generated w/ sticky notes)
followed by Affinity diagramming - group categorizes and subcategorizes the ideas found in mind mapping to make connections
Nominal group technique
Group goes around suggesting ideas until there are no new ideas. Then use process of elimination and agree on remaining items.
Ex. employee council
Delphi technique
Meant to avoid groupthink - performed individually but anonymously and is therefore not performed face to face.
Participants anonymously suggest ideas and then build off of previous ideas
Surveys as Data Source
Positive: efficient way to gather data from large group
Easier to quantify data for analysis
Negative: Can be difficult to obtain response rate
Relies on self reporting
Difficult to follow up on
Observation as Data Source
Positives: Provides firsthand and immediate data rather than self-reported data
Is time-efficient for subjects.
Negatives: Requires skill to be unseen, remove personal bias, experience noting significant behaviors
Existing Data as Data Source
Positives: Eliminates the effects of observation and involvement and possible bias of facilitator
Rich, multi-perspective source of data
Negatives: Can be time-intensive
Requires experience to extract key data
May require ingenuity to find data
Artifacts as Data Source
Positives: Provides additional insight into cultural issues
Can be observed without the help of those being observed
Negatives: Requires researcher to understand the principles of culture
Can create misunderstandings if the researcher is not familiar with the culture
Reliability
ability of an instrument or tool to provide consistent results
Ex. all testing is done at the same time with the same questions each day
Validity
ability of an instrument to measure intended attributes
ex. A checklist used to rate suppliers’ proposals results in selection of suppliers who meet expectations
Statistical sampling
Used when sample size is very large or data cannot be obtained from the entire population.
Sample must be representative- it must accurately reflect the key characteristics of the entire population being studied.
Sampling bias
a sample may not represent an entire population
Ex.: a sample contains a higher proportion of older workers than what truly exists in the organization
Selection bias
Participants are not randomly assigned to control/variable groups, or only certain types of participants are selected
Ex.: only enrolling high performing employees in a study
Response bias
A representative group of participants is invited to a study, but the participants who volunteer are not representative.
ex. all employees are sent a survey, but only young parents respond
Performance bias
people know they are being watched so they perform differently
Ex. measuring the effect of factory conditions on worker productivity, and team only increases in productivity due to the design of the experiment. The workers appreciated the increased attention to their welfare.
Measurement bias
Raters are measuring incorrectly whether due to lack of training or personal bias
Weighted average (mean)
takes into consideration how frequently each number comes up
used when some data in the dataset have more significance or effect than other data.
Useful where there are significant outliers in the spread of data
HR could use weighting in assessing job candidates when some of the requirements—like certain degrees or credentials—are considered to be more important than others
Unweighted average
All values added together
useful when all the values are relatively close together and when they represent volume, as opposed to numerical order or numerical preference
Frequency distributions
Used to sort data into groups according to some factor, such as years of employment.
Quartiles and percentiles
describe dispersion across a group of ranked data. Quartiles divide a data set into quarters. A percentile indicates the proportion of the dataset at a certain percentage.
Interquartile Range
The interquartile range applies the concept of quartiles to measures of central tendency. It includes all of the data values in Q2 and Q3,
OR
25% of the values above the midpoint and 25% of the values below the midpoint.
used to indicate a range of confidence in an estimate.
Standard Deviation
represents the distance of any data point from the center of a distribution when data is distributed in a “normal” or expected pattern (often shown as a bell curve)
Variance analysis
identifies the degree of difference between planned and actual performance
Usually used for objective baselines like schedules and budgets
Once the variance is identified, would want to use another data analysis tool to understand the variance
Ratio analysis
comparing the change in a ratio over time - yields a percentage
turnover rate (comparing the number of terminations or resignations in a time period with the average number of employees in that period).
Trend analysis
examines data from different points in time to determine if a variance is an isolated event or if it is part of a longer trend
Trend analyses are important tools in discovering recurring peaks or troughs in an activity.
Regression analysis
used to determine whether a relationship exists between variables and the strength of the relationship.
Data points are plotted on a scattergram - shape of the line formed by the data suggests if there is a correlation
might help determine the most significant indicators of success in a given job, testing variables such as recruitment source, education, job experience, personality type, and so on against job performance ratings.
Scenario analysis / “what if” analysis
The outcome of a particular situation is projected, using different inputs to see what changes have the most profound effects. This analysis is greatly aided with software applications and models.
This can be helpful when analysts fear that historical patterns may not hold in the future.
Root cause analysis
Start at the end with what actually happened, and keep asking “why” to get back to the root cause
Pie chart usage
High level information about data distribution
Histogram
Bar graph
Shows data as relative sizes, supports rapid comparison
Trend diagram
plots data points over time, connect points to show tend
Plots data points on two axes. The horizontal axis usually represents time, while the vertical axis represents volume.
Pareto principle
80% of problems come from 20% of causes
Looks like a fish - one end goes up while other goes down - always adds up to 100%
Scatter diagram
Plots data points against variables. Used to show relationships between two variables (regression analysis)
Online analytical processing (OLAP)
Allows the analyst to sort data quickly in different ways, according to different and multiple variables.
