Structure of the HR Function Flashcards
HR’s strategic role includes
- Participating in creating the organization’s strategy
- Aligning the HR strategy with the organization’s strategy
- Supporting other functions in their strategic roles
How HR can participate in creating the organization’s strategy
- Broaden focus to include global, long-term and forward-thinking considerations
- Provide perspective on human factor on strategic decisions
HR can provide human factors to strategic decisions by
- Providing info on the organization’s human capital
- Identifying the implications of the strategy across functions
- Applying knowledge on external forces and how they can affect the strategy
- Communicating info on workforce planning and management that will be necessary to implement the strategy
How HR can align with the organizations strategy
- Prepare the organization for change
- Forcast staffing needs and skills/knowledge required to achieve strategic goals
- Increase organizational effectiveness through appropriate strategies (organizational structuring and cultural alignment)
- Develop talent
How HR can support other functions in strategic roles
- Assist in identifying new skill requirements
- Acquire and retain talent
- Support succession planning and mentoring projects
Transactional activities
The administrateive side of HR
This includes
- Managing compliance issues
- Record keeping
How HR completes functional activites
- Use technology to capture and analyze data
- Use technology to reduce transactional time
- Focus on core competencies
How can HR focus on core capabilities
- Outsource tasks low in strategic value and not considered core HR functions (allows HR to focus on strategic activities)
- HR must develop skills in outsourcing (negotiating, performing due dilligence and monitoring/correcting performance)
Third-Party Vendors in HR can provide
- Benefit administration
- Payroll administration
- Background checks
- Anything not strategic and more administrative
Operational role of HR
Transforming operational activities by aligining then to the strategic objectives
The operational role of HR includes
- Knowledge management
- Capture and share knowledge
- Show leaders where talent is to get closer to goals
- Targeted talent acquisition and development
- Incentive systems
- Designed to promote rather than discourage behavior
- Employee engagement programs
- Increasing productivity and retention
McKinsey 7-S Framework is
Describes organizations as haveing 7 interconnected elements
Each eliment is considered in creating sustainable change
McKinsey 7-S Framework Includes
- Strategy
- Shared values
- Structure
- Systems
- Staff
- Skills
- Style of leadership
To deliver better service HR may
- Create a process of meeting periodically with internal customers to udnerstand their current needs
Service-level agreement (SLA)
Part of a service contract where the service expectations are formally defined.
Core Business FunctionsInclude
- Finance and accounting
- Marketing and sales
- Research and development
- Operations
- IT
- HR
Executive management is over all of these
Most effective strategies are driven by
Cross-functional collaboration because it participates in the strategic planning process for the organization
HR can act as a cross-functional bridge by
- Facilitate a high degree of cross-functional understanding and collaborationto deliver results
- Use mission to advise core functions on how to align with organization’s strategy and best way to increase organizational performance
- Identify and support for need of more resources/training
- Deliver talent through the organization
Executive Management is also referred to as
The C-Suite
Executive Management
- Responsible for all of the core business functions and their effect on the organization’s performance
- Ultimate control over resources and responisbility
- Reports to board of directors
Primary responsibities of executive management are to
- Develop and communicate strategy to organization’s components
- Monitor and control implementation of strategic and operational activities through control of financial resources
- Primary interface to organization’s stakeholders (investors, regulators, customers and communities)
- Lead organization through shared vision and values through their model
Board of directors are
- Compensated individuals from outside an organization
- In non-profit sometimes they also get reimbursed for expenses
- Can also include heads of other departments “doube-hatted”
Board of directors are responsible for
- Reviewing and approving strategic plans
- Appointing and approving executive management compensation
- Oversee organizational governance
HR interaction with executive management
- Direct interaction
- Contributes to the development of organizational strategy
- Advise on human capital implications on strategic decisions
- Work directly with board to advise on compensation matters of those in C-suite
Finance
- Focus on how financial assets are used in the short and long term
- Supports operations and strategic incentives by creation and minitoring of operating and capital expenditure budgets
- Provides financial analysis in strategic planning
- Managing organization’s “treasury” trhough short and long-term investments and borrowing
Accounting
- Tracts financial transctions
- Reports financial information to finance (to suppor its strategic management decisions) and external stakeholders (to support compliance and demonstrate governance)
Accounting activities include
- Tracking revenue and expenses
- Procedures must comply with acceptable standards
- Support governance by maintaining records of finances
- Audits
- Producing financial statements such as income or P&L statement
- Report information to government agencies, regulatory bodies and overseeing publically traded companies, and investor/stockholders
- Public interest has demanded greater transparency
Finance and accounting are challenged by
- Changes in laws and regulators
- New technology that affects processes and creates new vulnerabilities
- Changes in workplace ethics that make fraudelent behavior and abuse of fiduciary responsibilities more common
HR interactions withfinance and accouting
- Plan and monitor annual functional and special projects
- Manage relationships with suppliers
- HR
- Provide governance and ethics training to board members and employees
- Participate in risk pervention programs
- Support conduct of external and internal audits
Marketing and sales
- Bring in revune
- Depending on the organization
- Can be separated into two equal areas
- Included as sub-function inside the other
Marketing
- Responsible for positioning and selling services to customers
- Manages the 4Ps
- Knows the most about cusomter needs, marketing needs and competitive threats
- Global companies: balancing advantages of brand identity and local preferences/needs
The 4 P’s
- Price
- Product
- Promotion
- Place
Types of marketing strategies
Push or pull
Push marketing strategy
Foused on getting products/services infront of customers
Pull marketing strategy
Attracts customers to the product (ex: advertising)
Sales Strategy
- Influenced by industry’s distribution practices and marketing strategy
- Includes
- Sell to consumer
- B2C
- B2B
- Sell directly or indirectly
How HR can support Marketing
- Ensure activities are aligned with brand identity and that it will bring in future employees
- Create teams and team cultures that embody brand characteristics (ex: customer service, tech)
How HR can support Sales
- Creating compensation systems that motiviate sales behavior
- Providing skills and knowledg training
Research and Development
- Commercial - new product design and development or research
How HR can support R&D
- Hire employees with the skills and knowledge
- Create inclusive and diverse culture
- Protect intellectual property rights
Operations
- Develops, produces, and delivers products and services to customers
- Builds the products and services that marketing and R&D define and sell
- Products can be tangible, intangible or service
How HR can support operations
- Workforce planning needs to predict gaps in resources
- Implement union contracts and advise on managing grievances and disipline
IT
- Manages the storage, access, exchange, and analysis of information across the enterprise through hardware and software systems
IT challenges
- IT systems grow - smooth integration is difficult or impossible
- Charged with maintaining security and reliability of organization’s data
- Manage IS for efficiency and security
How HR works with IT
- IT
- Supports HR technology and consults with HR tech projects
- HR
- Provide qualified employees
- Develop and communicate technology policies
HR team members
- Leaders
- Managers
- Specialists
- Generalists
- HR business partners
Leaders
- Part of orgs senior leadership team
- Ideally report to CEO or COO
- Helps HR preform strategic role
- Develop and direct strategy, priorities and focus of HR team
- Titles include
- CHRO
- HR director
- Vice president of HR
Managers
- Responsible for units in HR function
- Employee relations, talent acquisition, organizational development
- Plan, direct and coordinate the activities of their unit
- Provide input to leader of HR strategy
Specialists
- Also known as functional experts
- Expertise in an area
- Role is to apply best practice in their discipline to advance HR strategy
Generalists
- Also called HR practitioners
- Familiar with all HR services
- Expertise in one or more specialty area but able to provide advise and direction to employees and managers
- Work closely with specialists to ensure info and programs are accurate and complete
- May be embedded within countries or business units
HR business partners
- More experienced than generalists assigned to represent HR services directly to other business functions
- User deeper understanding of business to find ways HR can help functions achieve goals
- Requires many competencies
- Key to demonstrating HR value in the org
HR structures
- Centralized
- Decentralized
- Functional
- Dedicated
- Shared services
Centralized structure
- All HR personnel located within HR department
- Delivers services to all parts of the organization.
- Headquarters makes all HR policies and strategic decisions and coordinates to all HR activities and programs
- Goal - standardized HR policies and practices
- Allows large organizations to be efficient in delivering HR services
Centralized structure advantage
- Provides more control and consistency across organization
Centralized structure disadvantages
- Can inhibit flexibility and responsiveness
- Decrease effective communication
Decentralized structure
- HR staff within each function, business unit, or location carrying out required activities.
- Each part of the organization controls its own HR issues
- Strategies and policy may happen at headquarters - HR staff in each business unit or location cary out required activities
Decentralized structure advantages
- Allows more direct contact between HR and other functions
- Facilitates communication and responsiveness
Decentralized structure disadvantages
Lack of consistency among HR policies and standards
Functional structure
- Headquarters HR is staffed with specialists who craft policies.
- HR generalists, who may be located within divisions or other locales, implement these policies, adapt them as needed, and interact with employees.
- Allows multiple units to meet each unit’s specific needs
Functional structure advantages
- Facilitates consistency between headquarters policy
- Practices and implementation in business units.
Functional structure disadvantages
Can isolate headquarters HR from business realities perceived by all staff and employees.
Dedicated structure
Allows organizations with different strategies in multiple units to apply HR expertise to each unit’s specific strategic needs.
Dedicated structure advantages
Promotes strategic alignment between headquarters and units.
Dedicated structure disadvantages
- Risks isolation of dedicated HR units and loss of shared knowledge and experience
- May lead to duplications and inefficiencies.
Shared services structure
- Each business unit can supplement its resources by selecting what it needs from a menu of shared HR services (usually transactional) that the units agree to share.
- Typically used in organizations with multiple business units
Shared services advantages
Offers expertise efficiently, reducing load of transactional activity in favor of value-creating activity.
Shared services disadvantages
Risks underuse of service centers when their existence is not widely known.
Shared services outcomes
- Reduced staff time spent on administrative tasks.
- Reduced administrative costs.
- Consolidation of redundant functions.
- Better tracking of employee data.
Third-party contractor forms
- Outsourcing
- Cosourcing
Outsourcing
- Third-party vendor provides selected activities
- Cost savings
- Little managerial control
Cosourcing
- Third party provides dedicated services to HR
- Often locating contractors within HR’s organization
- More expensive
- More managerial control
Third-party contractor’s performance objectives
- Must be aligned with strategic goals of HR and org
- Ethics, reliability, capability and expertise of contractor must be confirmed
- Agreement should define specific deliverables and criteria
Outsoucing process
- Analyze needs and define goals.
- Define the budget.
- Create a request for proposal (RFP).
- Send RFPs to the chosen contractors.
- Evaluate contractor proposals.
- Choose a contractor.
- Negotiate a contract.
- Implement the project and monitor the schedule.
- Evaluate the project.
Request for proposal (RFP) to third-party contractors should include
- Executive summary
- Synopsis of vendor product/service
- Company information
- Vendor size, financial stability, experience
- Project/team resources
- Who will be involved
- Deliverables
- How vendor will meet client needs
- Outlined development process
- Project plan
- Cost
How to evaluate third-party contractor
- Scope of resources
- Ability to meet specifications
- Results of site visit
- Price
- Commitment to quality of product/service
- Schedule
- Reputation/references
- Customization options
- Additional value-added capability
- Previous/existing relationship
- Flexible contract terms
- Location
- Cultural match
Reasons why meauring HR performance is important
- Reinforces HR role in strategic development by measuring HR strategies and implementation of the strategies
- Identifies opportunities for redirection and improvement
- Strengthen relationship with internal business partners
- Support future investment of HR program
Balanced scorecard
- Links defined department objectives and preformance to organization’s strategic business goals
- Demonstrates HR strategic value by defining and measuring HR contribution in concrete, clearly understood terms
Effective HR balanced scorecards
- Have accountability and measurable results
- Are valid
- Contain only measures that are most important to objective of organization’s strategic plan and result in actionable items
- Focus on results
- Carefully planned and executed
Common HR metrics
- Absence rate
- Accruals
- Applicant yield ratio
- Cost per hire
- Human capital return on investment
- Human capital value added
- Key talent retention
- Promotion pattern
- Success ratio
- Training return on investment
- Transfer
- Turnover costs
- Turnover rate
- Vacancy costs
Absence rate
- Ratio of lost days to number of employees
- Reflects benefits of a change in workplace conditions
Accruals
- Comparison of budget to actual assignee costs
- Measures expense accruals and makes sure that assignment budget and financial goals are met
Applicant yield ratio
- Percentage of applicants who proceed to the next step of the selection process
- Demonstrates effectiveness of recruiting methods
Cost per hire
- Total cost of hiring divided by number hired
- Demonstrates increased efficiencies in recruitment and hiring process
Human capital return on investment
- Ratio of employment-related expenses to revenue minus nonemployment expenses
- Demonstrates value of HR programs
Human capital value added
- Revenue minus nonemployment expenses divided by number of full-time employees
- Used comparatively to indicate increase in employee productivity as the result of HR activities
Key talent retention
- Percentage of key talent retained
- Demonstrate effectiveness of employee development and reward strategies
Promotion pattern
- Percentage of internal promotions
- Demonstrate effectiveness of development programs and strong culture
Success ratio
- Proportion of selected applicants who are later judged to be successful on the job
- Indicates effectiveness of recruiting, selection, and orientation methods
Training return on investment
- Economic benefit of enhanced performance minus costs of developing, producing, and delivering training
- Demonstrate value of strategic choice to invest in training
Transfer
- Number or percentage of employees moving across divisions to new jobs
- Track internal competency development and global talent management
Turnover costs
- Costs associated with separation, vacancy, replacement, and training
- When turnover rate is combined with costs of turnover, to demonstrate economic benefits of a change in pay or benefits
Turnover rate
- Proportion of exiting employees to all employees
Vacancy costs
- Costs of substitute labor (temporary workers, contractors, outsourcing partners) minus wages and benefits not paid because vacant
- To support decision to outsource function or area and decrease internal head count
HR audit
Systematic and comprehensive evaluation of an organization’s HR policies, practices, procedures, and strategies.
Types of HR audits
- Compliance
- Best practices
- Strategic
- Function-specific
Compliance audit
How well the organization is complying with current employment laws and regulations
Best practices audit
Helps maintain or improve a competitive advantage by comparing its practices to those of employers identified as having exceptional HR practices
Strategic audit
Focuses on the strengths and weaknesses of systems and processes to determine whether they align with the HR departmental and/or the organizational strategic plan
Function-specific audit
Focuses on a specific area in the HR function (e.g., payroll, performance management, records retention, etc.)
HR audit process steps
- Determine the scope and type of audit.
- Develop the audit questionnaire.
- Collect the data.
- Benchmark the findings.
- Provide feedback about the results.
- Develop action plans.
- Foster a climate of continuous improvement.
