In this practical article, Gregory Lee maintains that HR analysis can make a huge difference in our organisations. He says that we need to understand the intricacies of the parts and links in the value chain and react out of localised knowledge, giving us an edge that others lack. He also shares the five major steps of HR analysis.
by Gregory Lee
The copyright of this article is held by Gregory Lee. No text or diagrams may be used without the explicit permission of the author.
ABOUT THE AUTHOR
Dr. Gregory Lee lectures Human Resource Management at the School of Economic and Business Sciences at the University of the Witwatersrand, Johannesburg. He also consults widely to industry, especially on HR metrics and analysis, and will be releasing the first practical book on HR Analysis in 2010. His current research interests include human resource metrics and analysis, the interface between HRM and customers and employee turnover. His publications include articles in the International Journal of Human Resource Management, European Journal of Operational Research, Journal of Business-to-Business Marketing, Journal of Human Resource Costing and Accounting, South African Journal of Psychology, South African Journal of Business Management and many others. He is on the editorial team of the Journal of Occupational and Organizational Psychology, is the author of the Kelly Human Capital Review, which is the only major study of generations in the South African workforce, and belongs to various academic and professional bodies.
Turning the Edcon group around When CEO Steve Ross turned around the struggling Edcon group in the late nineties, he attributed his most important management decision to his HR choices. After appointing a new HR Director, they started analysing the HR of the chain, looking at multiple metrics from turnover rates to recruitment to HR costs. Their conclusion: major changes were needed with regards to the chain’s way of doing HR. In the process many things changed. Instead of turnover comprising one-third of the chain, this dropped dramatically. Many other changes occurred: the company is now rated as a preferred employer. This was the key in restoring a South African retail empire. It all started with HR analysis.
The ability to analyse human resources is a key competitive edge in the modern economy. HR is increasingly difficult in an era of talent wars, complex environments and a deluge of information. The ability to apply analysis tools to make sense of it all, and to choose the correct HR responses for their situation, can create significant competitive advantages.
Human resource metrics is a major contemporary business buzzword. Metrics are really a part of the broader picture of HR analysis, which entails the ability to apply analytical tools to personnel situations, including quantitative, strategic and financial analysis tools.
To begin the HR analysis journey, one needs a broad overview of what I call the HR value chain. This article will take us through the HR Value Chain as the first crucial step.
The HR Value Chain The core mandate of HR is to have a positive impact on the things that really matter (‘outcome criteria’). The set of linkages between HR and desirable outcomes is what we will refer to as the HR value chain. Figure 1 shows a very broad model of the HR value chain, including examples of assessment criteria.
Figure 1: Expanded HR value chain and examples of assessment criteria.
Practical Financial Analysis of HR Programmes and Outcomes
Dr. Gregory Lee will be presenting upcoming one-day courses on Practical Financial Analysis of HR Programmes and Outcomes (Tuesday 8 September 2009), Practical Incentive Programme Design and Analysis (Monday 21 September 2009) and Forecasting HR Requirements and Issues (Monday 5 October 2009). Contact him on gregory.lee@wits.ac.za for more details.