Achieving workforce excellence via human capital management

Even though people-related costs average over sixty percent of total corporate expenditures, many organizations pay only 'lip service' to this concept. However, leading firms have embraced the need to better manage their human capital and build a more excellent workforce to drive bottom-line organizational results. Oracle believes that achieving workforce excellence should be the ultimate goal of the HR function, regardless of company size, industry segment, or geography. Achieving workforce excellence requires HR to transform from a predominantly administrative department to a function that develops and delivers programs to improve worker efficiency, effectiveness, and productivity. Effective HR transformation requires adoption of a comprehensive Human Capital Management (HCM) strategy to drive new programs development, process redesign, and technology implementations.

Workforce Excellence Characteristics

If workforce excellence is the goal, then what does an excellent workforce look like? While there are many ways to describe workforce excellence, we believe the following characteristics are paramount:
• Suitable for the job: Excellent workforces have undergone substantial assessment activities (by HR, line management and executives) to ensure jobs are being performed with 'best fit' workers, and that any remaining skill gaps are being addressed through development events (e.g., learning, mentoring, on-the-job training). Ongoing performance management continually fine-tunes the alignment between worker skills and job requirements.
• Engaged/committed: A skilled worker that matches job requirements is only one piece of the puzzle; if the worker is not motivated to perform, results will likely not meet expectations. Firms with excellent workforces have found a way to clearly communicate business objectives, and engage workers at all levels of the organization to meet (and at times beat) those goals. Effective performance management and reward programs (e.g. compensation and benefits) are of particular importance in ensuring high levels of worker engagement.
• Flexible/adaptive: Organizations are constantly responding to changing economic and regulatory conditions, as well as leveraging new opportunities. Firms with excellent workforces have an in-depth view of worker skills and competencies, and can more easily re-allocate resources in response to changing conditions, often avoiding expensive layoff/re-hire cycles that sap morale, productivity and profits.
• Productive: Excellent workforces leverage their skills, commitment and flexibility to achieve and exceed productivity goals set by executive management.

A well-articulated HCM strategy is crucial to enable the organization to develop and deliver cost-effective programs that address all of these, while continuing to perform basic HR activities flawlessly. Proper HCM execution will enhance workforce excellence characteristics, and thus drive bottom-line business results.

Benefits of HCM

HCM is a business strategy whose objective is that every worker, regardless of type (e.g., employee, contractor) or job level ("from the storeroom to the boardroom"), contributes to overall business performance. While the HR function usually drives HCM strategy, significant collaboration with line of business (LOB) management and executives is the most important critical success factor. Successful execution of HCM strategy has yielded major bottom-line business results. For example, Watson Wyatt's Human Capital Index (HCI) identifies 43 specific HR leading practices that together can deliver as much as a 47% increase in market value for the organization. The track record is clear - by reducing costs, increasing service levels, and by improving workforce performance and alignment, HCM can dramatically increase bottom-line business results.

Major Components of HCM

Workforce excellence is never achieved by accident; rather, it is a result of thoughtful assessment, careful planning, and collaborative execution of a comprehensive HCM strategy by HR, line management, and executives. There is a continuum of HCM execution that encompasses all organizations, and every firm is at a different place. Oracle believes that an effective HCM strategy has four major components:
• Comply: This category contains the basic processes concerning the management of worker and organizational data, compensation, benefits, and legal/regulatory compliance This work is considered to be corporate "hygiene" - not necessarily adding strategic value, but absolutely fundamental to the continued operation of the enterprise. HR must perform these duties flawlessly in order to gain credibility for higher-order "strategic" tasks. In addition, organizations are paying increased attention to risk management and corporate governance due to a number of high-profile scandals and resulting legislation, and there is substantial benefit to properly managing risk and avoiding litigation.
• Automate: In this phase organizations initially focus on reducing the cost and cycle time of HR processes, often by deploying internet-based HR systems that include worker and manager self-service combined with electronic workflow for routing, notification and approvals. Other strategies include deployment of shared services entities that consolidate HR processing to improve efficiency, thus freeing up HR staff to focus on more value-added HR programs. Many firms also explore discrete process outsourcing for certain HR functions.
• Measure: There has been dramatically increased awareness of the importance of HCM metrics and measurement over the past three years, yet many firms have just begun to explore this area. The emergence of "Information-driven HCM" will be a critical success factor for firms in the next three years, as measurement is at the heart of any meaningful improvement in HCM processes (see below). In the Measure phase HR moves beyond the provision of basic information via standard reports to electronic distribution of data, metrics dashboards tailored to specific organizational roles (e.g., HR Generalist, Line Manager, HR Executive), and contextual analytics embedded into HR software transactions (e.g., a hiring manager extending an offer has access to salary information on incumbents in order to ensure equitable treatment). Leading firms are beginning to use correlated analytics (tying workforce information to financial and operational data) and various forms of predictive modeling to more accurately determine the value of HR investments. Effective development and delivery of these analytic tools provides a firm foundation for alignment efforts in the final phase of the HCM strategy.
• Align: The ultimate key to achieving workforce excellence is alignment, which impacts the organization along multiple dimensions. Various organizational units (e.g., region, division, department, team) are constructed to achieve business goals and objectives. Problems occur when these units (or the individuals within) are not properly aligned (e.g., lack the proper understanding of what needs to be done, and/or the skills and motivation to do it, lack of communication up and down the line of business). HR investments in this phase focus on improving the selection of workers (both employee and contingent types), clearly communicating business objectives, assessing and managing performance, developing and growing worker skills and competencies, developing specific reward programs, and planning for workforce adjustments based on changing business strategies and/or economic conditions.

Information-driven HCM

Turning data into information that can be used to drive decision-making and bottom-line organizational results is an imperative for many firms. If metrics and measurement do not pervade HCM strategy execution, it is doomed to failure. Each component of the HCM strategy must be architected to maximize the effective use of information. Analytical tools and processes must be married with sophisticated electronic workflow to provide cost-effective, easy-to-use metrics, notifications and alerts for all four components of HCM:
• Information-driven Compliance: Proper restructuring of this component will transform an often-reactive process into one that is much more proactive. For example, yearly renewal of certifications can be almost completely automated by "pushing" reminders to affected workers, and records of completed certification training can be used to demonstrate compliance with legislative requirements.
• Information-driven Automation: HCM automation depends heavily on deployment of employee and manager self-service, as well as use of shared-services consolidation and discrete outsourcing. Building the proper metric framework around each of these functions will enable HR to monitor usage, quickly highlight process bottlenecks, and spot opportunities for further automation.
• Information-driven Measurement: There are literally thousands of possible metrics and combinations of metrics that pertain to HCM strategy execution. Determining the right items to measure is the key, and HR domain expertise as well as industry-specific knowledge are critical to come up with a smaller set of "metrics that matter" to the firm. Application vendors should take a role-based approach to analyzing the needs of each function in order to provide a robust set of delivered HCM metrics that can meet the majority of information needs "out of the box."
• Information-driven Alignment: The need for timely and relevant information drives every aspect of the Align component, including workforce planning, recruitment, learning management, performance management, career development, succession planning, and compensation. Of particular interest to leading firms is to go beyond providing information for each specific process to focus on the development of metrics that measure outcomes across the entire Alignment phase.

Implementation of information-driven HCM concepts will enable the organization to more successfully 'close the loop' of process, information, analysis, and action that is fundamental to effective HCM strategy execution.

Closing the Loop: HCM Strategy in Action

Executing an HCM strategy to achieve workforce excellence is a journey, not a destination - an organization never truly "arrives" at an end result. Rather, the model presumes a continuous series of adjustments, actions and projects based on the interactions between the four HCM components. For example, a firm deploying a new recruitment process and supporting technology for regular employees (Align component) is likely to develop and deliver a set of metrics that will track hiring effectiveness and the resulting impact on business performance (Measure component). Over time the organization might extend the reach of the recruitment system to contingent workers, further improving the cost and cycle time of the hiring process (Automate component). In addition, the legal and regulatory landscape for recruiting will continue to evolve, requiring further investments (Comply component). Firms committed to effective HCM strategy execution need to strive for this continuous closed-loop measurement and feedback system that will help define and prioritize ongoing HR investments.

How Oracle HCM Applications Enable Improved Compliance

Performance of basic data management and compliance activities must be flawless and cost-effective in order to avoid excess costs, regulatory penalties, litigation, or unwelcome public attention. An integrated, core HCM application can help ensure the accuracy and consistency of many processes in the Comply phase, including the following:
• Robust, configurable employee and organizational data management, compensation and benefits administration
• Fast and accurate rules-based global HR and payroll processing capability:
• Global HCM customer presence:
• Keep your employees informed -- document and track critical business processes, determine workflow, and develop and deploy applicable training to ensure compliance
• A single version of the truth for all workforce information

How Oracle HCM Applications Enable Increased Automation

Once the HR basics are covered, organizations are looking to dramatically reduce the cost and cycle time of HR processes. One key element is to move HR transactions as close to the original source of data as possible via employee and manager self-service. User friendliness of the application is critical to ensure user acceptance, as is configurable workflow for routing, notification and approval. An HRMS that delivers these elements as part of an integrated suite of enterprise functionality has the ability to extend the reach of the system to all workers and managers in the organization, thus achieving cost and cycle time reduction objectives.
• Comprehensive self-service transactions for workers to view and update their data, and directly participate in core HR processes such as benefits enrollment and time entry:
• Manager self-service that enables supervisors to view subordinate data, initiate work events (e.g., transfers, promotions), plan compensation, and assess worker performance:
• Configurable workflow that automatically routes transactions and information for review and approval
• Operational metrics to view process inefficiencies (i.e., approval bottlenecks), so processes can be continuously

How Oracle HCM Applications Enable Improved Measurement

Firms that lack a comprehensive framework for measuring HR will find it difficult to determine the success or failure of workforce investments. A vast majority of companies struggle with a haphazard set of reporting and analytical tools that has developed over time and no longer meets their needs. We believe organizations can achieve information-driven HCM by first taking a role-based approach in determining the specific information needs of stakeholders, and then deploying the minimum number of tools required to meet those requirements. A core HCM application that is integrated into a business suite provides a comprehensive, information-driven framework for HCM measurement:
• All workforce information in one place - a single global data model, single global instance
• Users view summarized data through a standard browser and drill down to more detailed information for standard reports
• Key performance indicators delivered for HR management and line managers to facilitate analysis and action
• HR Analysts can do 'slice & dice' sophisticated analysis as needed

How Oracle HCM Applications Enable Increased Alignment

Organizations worldwide are seeking to improve business performance by better aligning individual workers with business goals and objectives. HR can play a major role in facilitating alignment activities, if the HR systems and processes can support a closed-loop approach to measuring the impact of programs on the workforce, and making adjustments on a continuous basis. Firms with an integrated talent management suite as part of their core HRMS will spend less time integrating and reconciling multiple information sources, as the information flows between functions are built-in:
• Evaluate and select the right workers for your business
• Assess worker performance and determine development needs based on skill and competency requirements
• Deliver blended learning to address competency gaps for current and future positions
• Determine succession plans and career development paths for workers -
• Develop, deploy and monitor reward programs, including merit, bonus, commission, incentive, and equity plans