Strategic HR Risk Management Model (with 10 'value levels')

The model, replete with examples of increasingly strategic value across many HR Risk Management areas, can be found at:

http://www.hreonline.com/HRE/view/story.jhtml?id=534354685

The Emergence of Strategic HR Risk Management … Finally

HR Risk Management, as a functional area within the broader Human Capital Management domain, seems poised to evolve beyond defensive (i.e., mostly compliance-related) strategies, programs and capabilities.  Since this is an area that I’ve thought about and operated within since the mid 80’s, I will be focusing my remaining blog posts in 2012 on the opportunities that exist for organizations to turn potential risks into major sources of strategic or competitive advantage. 

Proactively managing the Human Capital risks inherent in building, running, re-structuring and/or transforming a business is arguably as important to having a successful enterprise as having winning products and services, the best sales and marketing machines,  highly efficient back-office operations etc.

So here is a list of 4 "Strategic HR Risk Management" opportunities that most organizations can still focus more attention and resources on to drive improved business results:

1.       Strategic, Advanced Human Capital Due Diligence … in the context of hiring new business leaders,  M&A transactions (pre and post deal closing), corporate re-structurings around key executives, investing in businesses largely due to key personnel or people capabilities, etc.  As two concrete examples:

·         Confirming previous accomplishments or the scope of former positions that a key employee decision is partially or largely being made on … since the average person exaggerates at least to a modest extent when promoting themselves, and some embellish in ways that place personal integrity (and possibly the health of the business) in question.  A type of claim such as … “grew the business from $10M to over $50M” is often made by multiple people talking about the same company during the same time period!

·         Assessing degree of culture or “work style” fit, as well as the fit with a direct manager’s style or particular team dynamics … while most people intuitively recognize these issues to be legitimate areas to think about, many organizations simply do not make a serious attempt to evaluate these factors – PARTICULARLY when other factors such as revenue production history or impressive credentials are creating a “halo effect.”  Moreover, while validated assessment tests can be employed to identify some of these potential risks or gain assurances that there’s no major cause for concern, proven techniques and processes which look at work history patterns using the right analytical models/ frameworks can often serve the same purpose as sophisticated assessment tests while perhaps covering a broader area of potential risk.

2.       Leadership Risk Management … including ensuring an adequate bench of future leaders and successors from both inside and outside the company, since externals bring new perspectives, internals should ideally measure up to the best people the external market has to offer, and very few organizations have enough “potential successor coverage” for all key positions relying exclusively on internals – particularly when unplanned vacancies occur in critical roles at the same time.  Leadership continuity issues = business continuity issues.
 

3.      Ensuring that all major sources or indications of “actual or potential business value” associated with each employee are known, catalogued on an appropriate system (e.g., as “Employee Value Indicators”) and considered when making employment or career-impacting decisions about that employee.  As an example, an employee may only be a “slightly above average” performer in a non-mission critical role but (a) could be a much better performer if they could bring some of their other competencies to bear in a different job; or (b) is perhaps a major contributor in non job-specific ways such as referring many new employees each year who are ‘A’ players, or is considered a mentor by many younger employees, or is a key ‘connecting node’ within that organization’s internal social network.
 
4.  And finally, not just identifying key employee retention risks, but predicting key employee retention risks and taking appropriate steps to mitigate.  Similarly… not just identifying employee engagement downturns, but predicting employee engagement downturns.  Both retention risks and engagement downturns are typically triggered by a workforce-related event -- such as changes in Comp and Benefits plans, the announcement or aftermath of an M&A transaction (which might result in staff redundancies in particular areas of the business), change in HR policy (e.g., eliminating a work from home policy), payout of deferred bonuses, etc.  Some organizations have the analytical models ready before the event so that risks can be appropriately mitigated.

Steve Goldberg
HR Technology Advisor
October 2012

Getting Headcount Reporting Right -- How Napkins and Yankee Stadium Helped

It goes like this ... in the 90's I was brought to Zurich as an expat to run global HRIS for the investment banking division of 1 of the 'big 3' Swiss banks at that time. I spent the first month gathering the perspectives of my key internal customers and was then summoned to Basel to meet with the #2 executive in the overall bank. The first half hour of that meeting focused on what the bank was paying in expat costs for me (and my family) to be there. The exec then lit up his cigar, took out a napkin, drew criss-crossing horizontal and vertical lines on it, and said the following: "If you can help us get and maintain a truly accurate headount by business unit / by region (filling in the boxes on the napkin with illustrative numbers), your 3-year stay here in Zurich will be well worth the cost." We then each had a small cognac in his office for good luck and off I went.

In retrospect, that astute executive knew that the global rollout of an HR-ERP, innovative comp planning and workforce planning tools, and even HR process re-engineering to leverage the new tools (i.e., the global HRIS function's mandate) would all be compromised if consumers of headcount and 'people cost' data didn't believe the numbers ... or the numbers didn't match the excel s/sheets they felt compelled to maintain. Fortunately for me, I had been down this road before. In the late 80's I received my one and only call from the Chairman of Paine Webber as I ran HRIS there as well. He said the following ... "I would like you and your team to suspend all headcount reporting until we can get all employees in the company to Yankee Stadium to raise their hands -- so we can finally get an accurate headcount." We were obviously forced to get it right.

The answer or solution was twofold: Data Standards and Effective Education -- including mandatory education and training for all consumers of HR data / reports / metrics ... so they (a) understood how ALL numbers were being arrived at; and (b) understood why Finance, HR, Payroll and Business Units might report numbers that were different -- even though all might still be accurate based on their reporting methodology! The training also included real-time 'learning tidbits or booster shots' in how to properly interpret every report or specific data when delivered.

There are appropriate reasons and purposes for counting or not counting employees on salary continuance, or on paid or unpaid leave, or long-term or short-term contractors, or summer interns, or part-timers under or over 20 hours/week ... and on the comp costs side, whether to count deferred comp, or sign-on's, or employee referral bonuses, or other imputed income (e.g., club memberships) or whether to blend different salary rates if multiple assignments for hourlies, etc, etc.

There are 2 choices for getting this right as I see it: Let your line managers, sr execs, HR, Finance and other admin staff throughout the organization spend untold hours (and perhaps millions of dollars) forever reconciling and explaining why numbers are different depending on who reports them (the "1 source of the truth" notion is not enough ... purposes will vary) --- or aggressively attack this near-universal problem with HR-related data standards and very effective training for all consumers of the information.

Steve Goldberg
HR Technology Advisor
July 2012

Next 3 (of 5) Often Overlooked Questions to ask your HR Technology Provider

Again, based on procuring and implementing the solutions of over 20 HR Technology vendors as a global HRIS practitioner (in the 80's and 90's), and then moving over to the solution provider side in various executive roles, I would urge all companies evaluating HR technology vendors to ask the following 5 often overlooked questions.

The last 3 questions below are discussed in this post ... the first 2 were discussed in my previous post.

(1) Can you provide some data on how you've executed in recent years against your product roadmap?

(2) How do you define the word 'solution'?

(3) What are the various ways that you specifically ensure customer success?

(4) Which of your product capabilities would you say are "truly game-changing" if any, and can you provide examples of customers that have experienced this type of business impact?

(5) How do you deal with a situation where a large and strategic customer requests product changes or enhancements that would likely not be applicable to -- or leveraged by -- many other customers?

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What are the various ways that you specifically ensure customer success?

A comprehensive program for ensuring customer success is one of the key things that separates solution providers that otherwise have comparable technology and people capabilities.  Such a program typically begins with fully understanding -- and then tracking to -- the customer’s definition of success.  The ‘tracking to’ part of this relates to having a variety of mechanisms and means for effectively intervening (ideally as a partnership) when the trajectory of success metrics does not foretell a good outcome.  Those various "mechanisms and means" are the heart of any customer success program and should be fully understood and well documented.  It should also be noted that success metrics might appropriately look different for the “initial go-live” phase than for a broader roll-out phase, a solution optimization or maximum adoption phase, etc.  Finally, the role that “driving user adoption and understanding adoption impediments” plays in ensuring customer success cannot be over-stated.

Which of your product capabilities would you say are "truly game-changing" if any, and can you provide examples of customers that have experienced this type of business impact?

Game-changing is, of course, beyond “wow factor.”  We’re talking about a solution or suite of solutions that fundamentally if not radically changes the way a business operates – leading to new (and often material) sources of value and/or competitive advantage.  One example in the world of HR/Talent Management technology is the ability to better understand cause and effect in the context of what people-related factors are behind a precipitous decline in sales, or an exodus of some strategic customers.  While this “game changing” capability relies on leveraging science or sophisticated statistics in HR/HCM, a game-changing impact can also be the result of a simple feature or capability that allows the potential benefits of a system to be unlocked or fully realized. 

An example from my background was the introduction of a “Challenge Feature” in a Global Workforce Planning & Decision Support Tool which allowed global line managers the ability to easily flag and comment on questionable or incorrect data on employees in their charge.  Due to a combination of well-designed workflows and internal service level agreements involving all data owners, “challenges” were automatically routed to and addressed by the appropriate data owner within 24-48 hours.  The manager’s free-form comments in a “Challenge Box” also helped the data owner – wherever they resided in the world -- research the problem if necessary.  This fairly simple feature totally elevated confidence in the data … inextricably tied to confidence in -- and use of -- the system, which drives ROI of course.  

How do you deal with a situation where a large and strategic customer requests product changes or enhancements that would likely not be applicable to -- or leveraged by -- many other customers?

There is probably no correct or perfect answer to this one; rather it’s perhaps a “test of vendor integrity.”  The vast majority of solution vendors will have to deal with this situation at one time or another to win a very large/strategic account or generally take their business to the next level, so it is probably wise to be dubious about claims of “our roadmaps are never hijacked or dominated by any one customer.”  That said, a SaaS multi-instance or "secure SaaS" architecture is often able to solve this dilemma for the vendor and their ‘unique’ customer.  When this is not an option, the feature could perhaps also be tied to a particular customer/user profile, so other SaaS customers would not even see the particular functionality.  

Steve Goldberg

HR Technology Advisor

July 2012

First 2 (of 5) Often Overlooked Questions to ask your HR Technology Provider

As mentioned in my last post ... based on procuring and implementing the solutions of over 20 HR Technology vendors as a global HRIS practitioner (in the 80's and 90's), and then moving over to the solution provider side in various executive roles, I would urge all companies evaluating HR technology vendors to ask the following 5 often overlooked questions.

The first 2 of the 5 questions below are discussed in this post ... the next 3 in my subsequent post.

(1) Can you provide some data on how you've executed in recent years against your product roadmap?

(2) How do you define the word 'solution'?

(3) What are the various ways that you specifically ensure customer success?

(4) Which of your product capabilities would you say are "truly game-changing" if any, and can you provide examples of customers that have experienced this type of business impact?

(5) How do you deal with a situation where a large and strategic customer requests product changes or enhancements that would likely not be applicable to -- or leveraged by -- many other customers?

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Can you provide some data on how you've executed in recent years against your product roadmap?

Product Roadmaps should be viewed as a general indication of the solution provider's R&D (not just product) priorities -- and associated timing of having those releases commercially available.  Most vibrant solution providers will (or at least should) be allocating a percentage (e.g., 10-15%) of their business analyst, development and marketing resources to researching totally new products, technologies, solution concepts, etc.  As customer and market demands change -- and business / economic conditions ebb and flow, Product Roadmaps are of course adjusted.

This is not a negative reflection on the solution provider --- IF --- adjustments can be explained in a way that don't raise other questions.  For example, if the solution provider consistently relies on explanations along the lines of "we under-estimated the complexity of the new functionality", that raises questions about their ability to estimate their development and testing efforts -- a core competency for development organizations.

Roadmap adjustments are totally normal, particularly if they are modest in nature; e.g., 1 or 2 quarters -- vs. a 2-year adjustment; although even a 2-year adjustment in a particular component of a release can have a legitimate explanation ... such as some other market-driven priority took its place. 

The key point here is that the absence of a Prodct Roadmap and supporting/accompanying set of processes for producing one that represents the "intersection of customer/market benefit, vendor benefit and true product innovation" is a much more telling and concerning issue than one that is adjusted after being published.

How do you define the word 'solution'?

Anytime an HCM / Talent Mgt software provider equates the word 'solution' with one thing -- e.g., "technology or software for automating a particular process", that is a preliminary indication that you are likely dealing with a vendor that is minimizing the many other critical components of a holistic and well conceived solution.  These include consulting and guidance as needed, data model construction and implications, process changes and best practices to be considered, analytics frameworks, integration with other systems and data repositories, change management and appropriate training (and marketing) to drive user adoption, addressing competency issues as needed, etc. 

A solution provider that doesn't have these other components of a total solution (i.e., for solving a business problem) on their radar, or in their customer interactions, has perhaps not evolved to the extent that the customer requires.  However, this dynamic can also be a function of the limited bandwidth of a smaller supplier -- in which case discussions should still be held with the customer to ensure all of these components are somehow accounted for in the implementation plan and have owners attached.

Steve Goldberg
HR Technology Advisor
June 2012