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If Enterprise Performance Management Is a Machine, Are Its Workers Robots or Humans?

Performance Management - From Managing to Improving

I referenced the bipolar managerial styles of Newtonians and Darwinians in my 2006 DMReview.com article “The Many Rooms of the Organization Mansion.”1 The Newtonians like to manage quantitative-oriented things such as operations management and finance. Their mechanical thinking relies on an MBA run-by-the-numbers management approach. They see the world and everything in it as a big machine, and they seek the levers, pulleys and dials. This managerial approach speaks in terms of production, power, efficiency and control, where employees are hired to be used and periodically replaced, somewhat as if they were disposable robots.

 

In contrast, Darwinians like the soft behavioral areas such as change management, ethics and leadership. They recognize that people and human behavior matter most in improving performance. They view an organization as a living organism that is ever-changing with sense-and-respond reactions to its environment. This Darwinian way of thinking speaks in terms of evolution, continuous learning, natural response and adapting to changing conditions.2

 

I sense that more managers of organizations are Newtonians, which is ironic. An organization’s employees represent a significant component of its total value and an equally significant component of its expenses. Yet few organizations manage this enormous and essential asset in a strategic way. Human resources (HR) and personnel departments have traditionally been mired in daily administrative activities and viewed solely as tactical support. Shouldn’t HR look for ways to perform more strategically as part of the executive team and as a critical partner with business managers?

 

What Prevents the HR Department from Being More Strategic?

 

Some HR teams reinforce the perception that they are tactical rather than strategic by focusing on recruiting and benefits administration rather than on optimizing human capital to align with the executive team’s strategic objectives. Even with this administrative emphasis there are problems. In my opinion, HR departments are not reacting quickly enough to the imminent retirement of an aging workforce. These workers are being replaced by a considerably less organization-loyal generation that is more focused on their individual careers. A skills gap for organizations is inevitable. Most organizations haven’t quantified the effect of this gap, which could explain why they are slow to respond. Inevitably, traditional HR recruitment and training options will need to be revamped to attract the younger “millennial” workforce.

 

Admittedly, data and information about an organization’s workforce can be a problem. Most organizations do not have all their relevant and specific human capital information in one place. It is scattered and often resides in disconnected spreadsheets, which makes it tough to think strategically about matching future workforce skills with the organization’s needs. In some cases, HR may not even know how many full-time employees are on the payroll, or they may have different headcount numbers than the finance department.

 

At some point, HR needs to demonstrate its value in training and developing its existing and future workforce.

 

Advancing from HR to Strategic Human Capital Management

 

Similar to Newtonian-style managers who are being equipped with technologies that support their enterprise performance management methodologies, HR teams also need decision-support methods to help their organizations achieve constantly changing strategic objectives (and gain a seat for themselves at the executive table). Fortunately there is hope. Current information technology can give HR new insights and value from the data they already have, from systems that are already in place throughout their organization and third-party data. This is strategic human capital management (HCM), often referred to as workforce analytics. HCM aids in aligning the behavior, priorities and work of managers and employee teams with the executives’ strategic objectives derived from their strategy formulation.

 

One area where HR can use help is in determining the chasm between the skills and abilities of what an organization has and what it needs. With a robust HCM workforce planning system, an organization can project the number and types of employees needed to execute its executives’ strategy. It would no longer have to muddle its way through periodic layoffs and tardy recruiting of new employees. It would better anticipate workforce needs and, in many cases, retrain employees for approaching needs.  

 

A good HCM system can provide a talent scorecard and dashboard viewing of key performance indicator (KPI) metrics that is similar to those executive teams monitor for their enterprise performance - but these measures are customized for the HCM function. Some of the aggregate KPIs of the talent scorecard should appear in the executives’ scorecard reporting. Examples of talent KPIs might include return on employee, predicted turnover of critical workers and employee absenteeism or skills gaps segmented by various employee types or groups. By including predictive information, managers can test which planned workforce changes might have the greatest effect on performance and strategy execution.

 

Reducing Employee Turnover and Improving Employee Retention

 

Imagine tapping a few computer keys and pulling up a list of those in your organization who are most likely to quit next and why - rank-ordered from the most to least likely employee. This is feasible.

 

Human capital analytical software analyzes data such as historical wage raise amounts, frequency between raises, ages, time employed and other data over the last five to 10 years, along with who left the organization and why. It then applies and layers those statistics onto the current work force, ranking the employees most likely to quit. This listing allows an employer to intervene - if they want to - by taking actions for those employees before they resign or are tempted to take jobs elsewhere. These actions mitigate risks and minimize adverse impacts of losing employees.

 

In short, more sophisticated technology and a growing acceptance of the value of business intelligence software are making predictive analytics a necessary management tool, from HR or the CFO’s office to frontline marketing and sales functions. Predictive analytics uncover relationships and patterns within large volumes of data that can be used to predict behavior and events. They are forward-looking, using past events to anticipate the future.

 

Human Capital as a Component of the Performance Management Framework

 

An HCM, or workforce planning, system works best by integrating data that currently resides in a multitude of silo systems and purchased databases, such as personnel systems, enterprise resource planning applications, Microsoft Access databases, learning management systems, applicant tracking systems and payroll. An HCM system can also be integrated with third-party data, such as university recruitment lists, insurance data or salary surveys. This information can ideally be loaded into a single repository - a human capital database - where it is continually updated, validated, reconciled, cleansed and managed for integrity. This can provide accurate and credible answers to fundamental questions about the workforce and talent mix to help managers acquire, grow and retain the right types of employees for the organization’s future requirements.

 

It would be myopic to omit HCM from inclusion in the performance management portfolio of methodologies. People are key. People matter.


References:
  1. Gary Cokins, “The Many Rooms of the Organization Mansion.” DMReview.com, November 2, 2006.
  2. Stephan H. Haeckel. Adaptive Enterprise: Creating and Leading Sense and Respond Organizations. Harvard Business School Press: 1999.

Gary Cokins is the global product marketing manager for Performance Management solutions at SAS, a market leader in data management, business intelligence and analytical software. He is an internationally recognized expert, speaker and author on advanced cost management and performance improvement systems. He is the author of five books, An ABC Manager's Primer, Activity-Based Cost Management: Making It Work, Activity-Based Cost Management: An Executive's Guide (Wiley), Activity-Based Cost Management in Government and his latest work, Performance Management: Finding the Missing Pieces to Close the Intelligence Gap (Wiley). You can contact him at gary.cokins@sas.com. For more of Cokins' unique look at the world, visit his blog at http://blogs.sas.com/cokins/.

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