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Making High-Certainty HR Decisions in Uncertain Times

Tuesday, December 23, 2008
At Knowledge Infusion our focus has always been moving the entire HR industry up and to the right in becoming a more strategic asset within an organization.  One of our close friends in the community, Joanne Bintliff-Ritchie recently wrote a great piece about how important HR is within an organization during very uncertain times. 
 
I thought that today was a great day to share this post before we at Knowledge Infusion reveal our 2009 Trends and Predictions.  There is still time to register here!  Thanks Joanne for the post.
 
 
Making High-Certainty HR Decisions in Uncertain Times
Joanne Bintliff-Ritchie
Chief Strategist, DoubleStar
 
According to the Bureau of Labor Statistics (BLS), the US lost more than a quarter of a million jobs in October. This is the tenth straight month of job losses. The housing and credit crises have wiped out approximately 3 trillion dollars in market cap. Many people have seen their savings and retirement funds lose more than 25% of their value in just the last two to three months. The lack of available credit threatens to push thousands of businesses – large and small - into bankruptcy or out of business. There seems to be no doubt that we are in a recession; and, no one really knows for how long and how bad it will be. Companies that intend to survive or even prosper during this period must be nimble, focused, and careful.
 
Decisions made during this downturn are surely a matter of organization survival or failure. Among the most important are those related to an organization’s workforce. Why are these so important? Because for most organizations their workforce expenses represent more than 50% of their overall operating expenses, and the talents and labors of their workforce are what drive productivity. The decisions that arise in uncertain times like these include the following: Maintain or reduce staff levels? Offer voluntary termination incentives or eliminate jobs and lay people off? Eliminate which jobs and where? Cut costs by outsourcing, off-shoring, or reducing benefits, compensation, training spends? Freeze hiring or actively recruit the great people who may be laid off from your competitors? I’m sure you can identify even more. What can you do to increase the likelihood you will make the right decisions?
 
The better use of data immediately comes to mind. However, most HR organizations have struggled with delivering the type of data that can truly help them make critical business decisions. Now we find ourselves in an economic period when there’s no room for poor decision-making, and the implications of taking a wrong strategic turn will be magnified. There’s no better time for HR to finally get a handle on the measurement of human capital. Workforce analytics is currently used by many leading organizations as a key decision-support tool. It brings more certainty to workforce decisions, especially in these uncertain times. Here’s why:
 
1.    Link to strategy.  Key workforce measures can be used to connect business strategy and human capital management. By monitoring these measures, leaders will know if risks to strategy execution are escalating. In times of crisis, immediate operational challenges receive the majority of attention. But don’t take your eye off your core strategy. For example, a strategy that stresses innovation may require a focus on the attraction, performance, and retention of R&D talent. If your strategy calls for fast organic growth, then the time it takes to source, attract, hire, and onboard new employees may be your most critical measure. Identify the key talent dependency/ies in your strategy and then the best measure/s to monitor and manage that dependency. And if your business strategy changes, remember to revisit these measures to insure strong alignment.
 
2.    Identify value drivers. Which of your talent management practices or programs drive meaningful outcomes? When you have to cut costs, you don’t want to cut in the very area that drives the most value. Is it your leadership development and succession management program, or your incentive scheme, or maybe your employee assessment and development center, or your strong branding program? Analytics can show you which of these is driving more value.
 
3.    Retain key talent. If you are faced with reducing staff, you should ask two questions: which talent groups are most critical to strategic and operational execution, and which groups take longest/cost most to hire, develop, and deploy. These two groups should ideally be the last impacted, if at all. The former groups should include strategic position incumbents, key successors, rain makers, and your best performers. Identifying the latter groups requires careful analysis of hiring, training, and other HR costs. Can you produce both lists? HR should be initiating and driving the talent retention discussion armed with this information.
 
4.    Know your workforce. Any conversation about how to reshape the workforce to address what could be a long-term or permanent change in your competitive landscape or internal circumstances starts with the right descriptive information about your workforce. The unfortunate reality is that most HR organizations cannot produce this. What is your total headcount, and what is the breakdown between employees and contingent workers? Where do they work – can you identify every work location, even all those that regularly work from home? Can you easily provide length of service, three years of performance ratings, ethnicity/gender, salary history, job history, education, special skills, for every employee as well as direct and indirect reports, span of control, and effectiveness ratings for every manager? All this information can be critical in evaluating lay-offs, redeployments, reorganizations, third-party arrangements, and other options. A workforce analytics tool can integrate data and provide you with dashboards and charts that have all the information you need organized in the ways you need it and presented for easy analysis.
 
5.    Focus on productivity. Managing in times like these may require that your organization discontinue product lines, close offices, or divest business units. Determining which one/s requires a thorough review of business strategy and current and projected productivity and profitability. Leaders will typically look at financial, customer, market, and operational data in this analysis. Does your organization also consider workforce productivity? Typically not. But not because it isn’t relevant, but because it isn’t available. Workforce analytics can help HR to provide information on the impacts of workforce performance.
 
People-related decision making is particularly crucial in uncertain times. This is the wrong time for guessing. Workforce analytics can give you insight into where to apply limited resources, how to improve process efficiency, and when to intervene to prevent the loss of key people. Without this insight, businesses risk wasting money on low-impact practices, missing opportunities to reduce spending, and incurring costs due to preventable turnover.
 
This critical decision making can have a more certain foundation if you use workforce analytics to turn your data into valuable information. As you evaluate and prioritize your capabilities and objectives, now is the perfect time to leverage or invest in workforce analytics tools and go from anecdote to evidence!
 
As Chief Strategist for DoubleStar (www.doublestarinc.com <http://www.doublestarinc.com> ), Joanne Bintliff-Ritchie is responsible for directing product strategy related to the company’s Talent Measurement practice including DoubleStar’s workforce analytics solution, Workforce Insight. With more than 25 years in the HR industry, Bintliff-Ritchie has a strong background as an HR executive as well as extensive experience in HR management.
 
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