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Keys To Success In Restructuring Hr.Ppt

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Keys To Success In Restructuring Hr.Ppt

  1. 1. January 15, 2009 Keys to Success in Public Sector HR Restructuring Michelle Lewis-Blossman, Houston Jim Sowers, Houston www.mercer.com
  2. 2. Introductions Mercer presentation team Michelle Lewis-Blossman, Principal, Southwest Region of Mercer Human Resources Consulting Michelle is a Principal and Market Representative for Mercer’s HR Effectiveness consulting practice. She has 15 years of professional experience working with public and private sector companies and organizations in various stages of their lifecycle from start-ups, healthy, mature companies to those that require restructuring and turnaround. Prior to joining Mercer, Michelle was a Director for Alvarez & Marshal’s Public Sector Restructuring practice, where she served in interim human resource roles for clients facing severe financial and operational distress. Her primary focus was on cost containment and cost reduction within the HR function. Jim Sowers, Global Human Resource Effectiveness Segment Leader of Mercer Human Resource Consulting Jim is the Global leader of Mercer’s HR Effectiveness consulting practice. He has more than 25 years of professional experience that includes a mix of practice leadership, project management, client service, and academic activities. Prior to joining Mercer, he was the national managing director of Buck Consultants’ HR Management practice, a regional service leader of Deloitte Consulting’s Organizational and Change practice, as well as the firm’s competency leader for organization strategies. Jim was also managing principal for Towers Perrin’s Houston office, and regional leader for the firm’s Strategy and Organization practice. He was also a principal with Holland and Davis, a Houston-based management consulting firm, and the general manager for International HR Development Corp.’s energy sector consulting group. He began his business career in finance with Citicorp and ADP, Inc., and in consulting with Arthur Anderson. Mercer 1
  3. 3. Desired outcomes By the end of our session, you will have: A framework to review your HR department; A list of potential steps to take to examine sources, reduce uses and increase value in your HR Department; A sample case study; and A list of potential tools and resources to assist you. Mercer 2
  4. 4. Setting the global context for public sector organizations GAO issued multiple warnings about federal fiscal crisis – Minimal reform programs underway Federal slowdown in domestic spending State budget deficits driven by housing crisis and increasing costs in state health care Global credit – 20+ states face fiscal deficits of $34B Housing crunch or more markets Mortgage decline crisis Stock Job Limited availability of capital market cuts volatility Global Volatility of the stock market recession Increasing community and tax payer pressure Industry culture of late adopters Mercer 3
  5. 5. In the absence of strategy, action may be driven by bad news Mercer 4
  6. 6. 2009 will be tougher than 2008; 2010 recovery will be slow Surviving (and thriving) in uncertainty requires change Financial and trade protectionism may increase Emerging markets still have appeal, but growth is declining Changes in consumer More government Impact of behavior intervention and credit crunch re-regulation is still ahead Unemployment is rapidly deteriorating Mercer 5
  7. 7. Economic crisis adds new urgency to managing human capital Outsourcing Executive pay Employee Health Outsourcing Executive pay Employee Health “The financial crisis and global Germany, Sweden, “Australia, “The World Health Organization recession will accelerate adoption Switzerland, UK and US are projects that by 2015, about 2.3 of global outsourcing and leading a global movement to billion adults will be overweight offshoring as strategic business Unemployment curb executive pay.” Unemployment and more than 700 million will be tools as organizations respond to obese.” economic adversity with a forceful “The average unemployment rate push toward cost-reduction.” in the OECD area, estimated at 5.9% this year, is forecast to climb to 6.9% next year and reach Investment management 7.2 percent in 2010.” Investment management Retirement funding Retirement funding “The current economic environment has led to falling returns from commercial real estate, a sector that pension funds are more exposed to than any other “The financial crisis wiped alternative asset class and where global assets over $4 trillion (€3.2 trillion) Healthcare managed on their behalf reached over US$512 billion Healthcare from global pension assets in 2007.” between January and “Total health-care costs October, according to the under current policy will OECD; pension fund returns nearly double across the Downsizing across the OECD are falling Downsizing Employee savings developed nations from the by an average of more than Employee savings current 6.7% of GDP to 20%.” “Only 47% of the large companies engaged in major 12.8% by 2050.” downsizings actually met their cost reduction goals.. “One in five workers have 54% of companies surveyed hired back many of the reduced the amount they people they laid off…in the past recession, save into a pension because shareholders actually punished rather than rewarded of the credit crunch.” companies involved in the biggest job reductions.” Mercer 6
  8. 8. Economic stress impacts business segments differently Actions will vary based on business conditions Economic Impact on Performance So far, so steady Bend, but don’t break Hardest hit Example Players Example Players Example Players − Public sector − Consumer staples − Financial services − Low cost retailers − Pharmaceutical − US auto industry − Select global companies − Airlines − Select energy companies Workforce Actions Taken Workforce Actions Taken Workforce Actions Taken − Prune low performers − Make performance-based − Significant layoffs and limits on staff reductions all hiring − Ensure top performers are aligned with top opportunities − Implement one-time health − Freeze salaries for all care program savings employees − Opportunistically scout talent − Freeze salaries for some − Eliminate bonuses − Invest in workforce planning categories of employees − Focus on retention for select − Limit salary increases − Reduce bonus payouts key leaders − Increase use of variable reward (tighten goal and target elements setting) − Reduce training costs − Rescind outstanding offers; − Shift costs/risks to employees delay hire of non-essential talent Mercer 7
  9. 9. Organizations are taking steps to address economic concern Balancing cost-cutting with short- and long-term value are somewhat/very likely to invest in addressing drivers of health care cost increases are somewhat/very likely to invest in wellness programs to improve employee engagement and ensure employee health-related behaviors are somewhat/very likely to reduce investments to improve overall HR services are somewhat / very likely to invest more in outsourcing additional HR functions Mercer 8
  10. 10. HR plays a critical role in shaping an organization’s response to the business conditions Effective HR functions are designed to adapt to both challenging and growth-oriented business environments. In any case, HR must always be prudent in its investments and in its cost management efforts. When times are tough, it is especially critical for HR to help their companies navigate through challenging human capital issues. Being creative and speedy with HR approaches to drive the right behaviors in an uncertain environment is the most important work HR can do. The talent pool is the deepest during the toughest times. While focusing on cost management is immediately important, targeted recruiting of key talent, positions the company for the recovery. Mercer 9
  11. 11. Examining Sources Reducing Uses Increasing Value in HR
  12. 12. Preparing the HR Response Sources, uses and HR value 1 Whether evaluating the Whether evaluating the Plan Plan department to identify department to identify immediate cost immediate cost reductions or preparing reductions or preparing 2 for more positive for more positive Do economic times with Do economic times with systems and process systems and process changes, there is a changes, there is a 3 productive way to evaluate productive way to evaluate and restructure your HR Review and restructure your HR Review department. department. Mercer 11
  13. 13. Understand sources and uses of your funds Make decisions that impact the bottom line 1 Plan Deepen your understanding of the budget Plan Build from bottom up Conduct aafunction-by-function Conduct function-by-function (budget review) (budget review) Organizational knowledge – Understand primary sources and uses of + revenue by function, activity and role within HR strategy + HR department. detailed understanding of budget = – Understand the effectiveness of your uses Business and HR Strategy aligned with and the value your “customers” place on HR Operating Strategy them, as well as the potential gaps between them. – Account for how every dollar comes in and how every dollar goes out. – Include “new needs” in the budget, not on top of it. Mercer 12
  14. 14. Account for every dollar Sample allocations by HR function Retirement Benefits Time & 2% In this sample case, HR devotes the Attendance Compensation Non-HR 1% largest amount of labor hours and cost 5% Payroll 1% 2% to the Staffing function performing Staffing HRIS/HR Applications 20% activities such as Staffing Customer 6% Service and Candidate Assessment. Organization Development The second largest investment of time 8% HR Department is spent on HR Department Management Management, which involves tasks 17% Employee Relations such as HR Department Administrative 9% Support and HR Department Meetings. Non-Retirement Benefits Training Tim e (%) 13% 16% Function Tim e (Hrs) Time (%) Cost C ost (%) FTE Staff Staffing 13,062 21% $333,562 18% 6.3 15 HR Department Management 10,807 17% $263,386 14% 5.2 31 Training 9,855 16% $283,091 15% 4.7 19 Non-Retirement Benefits 7,978 13% $267,953 15% 3.8 13 Employee R elations 5,728 9% $202,810 11% 2.8 22 Organization Development (OD) 4,720 8% $179,186 10% 2.3 23 HRIS/HR Applications 3,794 6% $76,367 4% 1.8 13 Compensation 3,078 5% $122,440 7% 1.5 11 Payroll 1,506 2% $32,621 2% 0.7 6 Retirement Benefits 1,111 2% $36,182 2% 0.5 7 Non-HR 790 1% $23,524 1% 0.4 8 Time & Attendance 354 1% $7,550 0% 0.2 4 Grand Total 62,784 100% $1,828,673 100% 30.2 Mercer 13
  15. 15. Understand where your resources are spent Sample allocations by activity 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 (HR’s) HR Department Administrative Support 6,094 2,350 Employee Health and Wellness Program Administration Staffing Customer Service 2,288 HR Special Projects 2,033 1,988 Employee Records Management Employee Data Maintenance 1,726 Candidate Assessment 1,643 1,568 New Hire Data Administration In this case, when examining the data Training Program Coordination/Administration 1,539 at the activity level, HR dedicates the largest amount of resources to HR HR Department Meetings 1,522 Department Administrative Support. 1,244 Orientation Program Delivery This activity is defined as providing Workers’ Compensation Administration 1,206 general secretarial or administrative Background/Reference Checking 1,169 support to HR department staff. 1,115 Employee Relations Customer Service Activities may include processing Job-Specific Training Delivery 1,061 department mail, copying, scheduling meetings, filing, greeting and receiving visitors, and receiving and coordinating incoming calls. Mercer 14
  16. 16. Build from the bottom up Plan HR budget to execute HR strategy 1 Plan Define relationships and delineate HR organizational ROI Plan Compare with prior year’s budget and spend Why do they vary? – Challenge historical assumptions – Don’t transfer the problem to someone else – Determine core and non-core services How do you know which services are core? And non-core? – Which services ensure alignment and support the business strategy? – Which services put the organization at strategic, regulatory or legal risk by not providing them? – Pay close attention to redundancies across departments Are any lines of business providing duplicate HR services? – Are any vendors providing duplicate HR services? – Evaluate the ROI on each vendor contract What leverage do you have to decrease your cost with your existing vendor or by changing vendors? – Can you cancel non-core contracts, renegotiate others? – Can you extend payment terms or challenge vendors to increase the value of their services? – Increase the involvement of the HR department How are you engaging the HR team? – Mercer 15
  17. 17. Build from the bottom up Plan HR budget to execute HR strategy 1 Plan Define relationships and delineate HR organizational ROI Plan Benchmark your performance against peer organizations Do you have a larger or smaller HR staff? Are you getting half the work done with twice as many people? – How do you compare to the national average? If you are larger, does your staff level provide you with flexibility to – redeploy staff in times of crisis? Are there key departmental processes and controls that are undefined, limited or missing altogether that have – indirect costs associated with them? Is there a lengthy termination process that encourages workarounds? – Mercer 16
  18. 18. Sample HR benchmarks Benchmark your HR department against comparable organizations Time Allocation by Function: Benchmark Current vs Desired 25% HR FTE Ratio By Function 21% 20% Company X 2,001-5,000 FTEs 17% 16% 16% Benchmark Benchmark 15% Function Staff (FTEs) EEs per FTE by Size by Industry 15% 14% 13% 13% 13% 13% Recruitment 6 473 400 592 9%9% 9% 10% 9% 8% 8% 8% 8% 7% 7% 7% Benefits 7% 2.5 1136 676 840 6% 6% 6% 6% 5% 5% 4% 4% 5% 3%3% Compensation 2.5 1136 1692 2016 2% 2% 1% Learning & 0% 8.3 342 422 853 Development l g g ns e ol t s its t n ns ns en f in en n nc it io yr ef ni tio ef io ti o af m at m a Pa ai en en at nd ica St op a ge ns Tr l el Employee Relations tB tB Re 1.3 2185 1529 1529 te el pe pl a rR At an Ap ev en en om ee bo M D d em em R oy an C La t n /H en io ir pl ir e et S et Field HR & at Em tm m RI R -R 1.3 2184 381 446 z Ti ar ni H Generalists on p a De rg N O R H Sample Organization Current Benchmark Desired Benchmark Trends in Time Allocation by Roles Percentage of Time Spent by HR Staff: Benchmark Current vs Desired 60% 53% 50% 40% 33% 30% 28% 27% 26% 30% 21% 20% 14% 13% 13% 11% 9% 7% 7% 6% 10% 0% s s g g g ic e ce n in t in pi er i di rv rv ee rtn Au Se Se dk Pa e/ R HR or nc H c ec gi ia g ng R te rin pl g/ ni ra m iv e in sig St Co ct l De De sa an Tr Mercer 17
  19. 19. Connecting the Dots Getting from where you are to where you want to be 2 Do Do Develop a solid plan on which you can execute 1 Strategy How does the current HR strategy support and positively impact the business strategy? Does the HR strategy make the best use of the core resources and assets that you have or are you trying to force a square peg into a round hole? If there is a gap between present and needed resources, how will you develop or acquire them? 2 Structure How does the departmental structure support the new departmental strategy and overall operating model? How much harmony is there between functional and corporate/overhead functions? 3 Systems and How well do your systems and processes support the revised strategy and structure? Processes How aligned is your compensation and incentive-based pay structure to support use of new systems and processes? Given that public sector is now competing for the same talent as the private sector, how competitive is your compensation with the labor market for the talent in harder to fill roles? If there are gaps, then how can systems and processes have a greater impact? What training are you providing to clarify and calibrate performance expectations across the organization? How are you tapping into your employee value proposition and considering implementing things your employees may have been asking for, like flextime, mentoring, work-site development and career advancement (especially for your best and brightest – if you know who they are), or access and exposure to senior leaders? How are you building your bench? What kinds of revisions and investments are in order? 4 People Do you have the right people, with the right skills, in the right roles at the right time? To what degree are current personnel professionally and technically proficient? What is gap between where they are today and where they need to be? What kind of training is in order to keep pace and to be a market leader? How many people fill a gap instead of maximize their abilities or potential for the role? Mercer 18
  20. 20. Restructure HR department Next time change is in order, the HR function will be ready for it 3 Review Remain a key contributor to organizational success Review Continuously review budgets and contracts on a regular basis to make sure that they reflect the truth. Take a pragmatic look at core services, systems, processes and technology behind them to ensure that as the market changes they continue to support the strategy. Create feedback loops to ensure people are heard and that you are alerted to potential issues before they become problems. Mercer 19
  21. 21. Potential Tools and Resources
  22. 22. Potential tools and resources http://www.mercer.com/unprecedentedtimes Available Podcasts, Web Articles and Special Reports include: Changing times: The impact on employer-provided health benefits Sculpt benefit programs to cut costs, retain talent Tough economic times: Rapid cost savings opportunities for employers Focus on the markets Mercer’s investment consultants speak about the current market events Heads up: Communication strategies for tough times Fast forward: Accelerating business change through effective communication Strategic funding policies for pensions Volatility affects pension funding status Surviving uncertainty: Benefits in a time of recession Chaos in the markets…so what’s my pension budget? Managing health care benefit expense in today’s unprecedented economic times Is spending on health and benefits a good investment? Turbulent financial markets: Impact on DC plans Mercer 21
  23. 23. About Mercer Mercer is a leading global provider of consulting, outsourcing and investments services, with more than 25,000 private, public NPO and public sector clients worldwide. Mercer consultants help clients optimize workforce performance and maximize the effectiveness of their health, retirement and other benefits. The firm also provides customized administration, technology and total benefit outsourcing solutions. Mercer’s investment services include global leadership in investment consulting and multi-manager investment management. Mercer’s global network of more than 18,000 employees, based in over 40 countries, ensures integrated, worldwide solutions. Our consultants work with clients to develop solutions that address global and country-specific challenges and opportunities. Mercer is experienced in assisting both major and growing, mid-size companies. For information contact: Michelle Lewis-Blossman (713) 276-2277 michelle.lewis-blossman@mercer.com
  24. 24. www.mercer.com