HRMN 395-Week 5 Discussion: Possible Pitfalls, Evaluation, & Metrics AND Assignment 2: Report on Metrics

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HRMN395MetricsAssignmentTwonotes.pdf

Assignment Two HRMN 395 Total Rewards

Metrics for Evaluating the Effectiveness of Total Rewards in an Organization

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This presentation was created by Joyce Henderson, Ed.D. to clarify assignment 2 & the important tool metrics. Memo to CFOs : Don't Trust HR A seemingly curious statement from Dr. Richard Beatty, Professor of Human Resources at Rutgers University to a conference of CFOs in Florida. Among the controversial views he offers on HR, he cites that many of the metrics HR professionals report do not show evidence of the correlation between common metrics such as turnover, employee satisfaction, performance and financial returns. He says for those employees who make a negative impact, organizations would be better off paying them NOT to come to work or better still, paying them to work for their competitors. Another metric such as being an 'employer of choice' is 'silly' and is an invitation to those who want somewhere 'to hide out', rather than those who 'are excited, excited and understand how to contribute to what you do.' HR taking on the 'St. Bernard role' by treating most employees the same way and 'spending considerable time trying to defend or fix poor performers. He says that the language of organizations is numbers and that HR isn't very good at data analytics. Beatty said. "They don't think like business people. Many of them entered human resources because they wanted to help people, which I'm all for, but I'm also for building winning organizations.“ Dr. Beatty and I are hoping to equip our students to address these concerns. See the full article here: http://www.cfo.com/human-capital-careers/2009/03/memo-to-cfos-dont- trust-hr/

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Deliverables for Assignment Two

Design and share a PowerPoint presentation that: Describes and justifies three metrics that evaluate the effectiveness of the total rewards for the organization used in the first assignment Provides a “script” in the notes section articulating the bullet points as if you are making a presentation to the class

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Assignment two focuses on a crucial action that HR professionals must perform – selecting and reporting on key metrics for their function which is to ensure the organization has requisite competencies for organizational success. While the HR team may report several metrics, in this assignment we focus on metrics that will measure the effectiveness of the total rewards program.

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Metrics are a Core Element of the Total Rewards Philosophy

Source for definition: UMUC Course Module 1 Commentary

We must evaluate the effectiveness of the total rewards package offered to employees. Total rewards are one of the major expenses for organizations when we combine compensation, benefits, training and other costs of the total rewards. The measurement criteria of the metrics should include two elements which are: 1) do the rewards help the organization attract, hire, retain, and engage employees and 2) are the rewards aligned to support the goals of the organization?

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Why measure?

Organizations measure what matters for the success of their organization. What gets measured, gets managed. With the right measurements in place, an organization can gauge the effectiveness of their Total Rewards programs and make changes, if necessary. Metrics answer questions - so the right questions need to be asked.

Source: UMUC Course Module 5 Commentary

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As was shared in the notes section of slide 2, we measure the effectiveness through metrics of the total rewards package offered to employees because total rewards are one of the major expenses for organizations when we combine compensation, benefits, training and other costs of the total rewards. The measurement criteria of the also, if we do not offer an effective total rewards package, we may not be able to recruit, hire, retain, and engage employees which can mean failure of the organization. Metrics should include two elements which answer the questions of : 1) do the rewards help the organization attract, hire, retain, and engage employees and 2) are the rewards aligned to support the goals of the organization?

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The Language of Business is Numbers – Numbers that Communicate Success or Failure of Initiatives

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Sales are up by 10% Market share has increased by 20%

Profits have eroded by 3% Stock price is up by 2 points

Our brand has 50% name recognition

Customer satisfaction has Increased by 12 percentage points

Non-profit organizations, government agencies, and the military also use numbers to communicate their success or failure. For example, funding, donor participation, clients served, and name recognition are typically tracked by non-profit organization. And military readiness, recruits attracted, retention, funding, and more are reported by the military branches. Government agencies at all levels also report metrics such as their funding, budgets, key mission or goal accomplishments.

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HR Professionals Must Communicate in the Language of the Business (Numbers) in Order to be

Credible, Heard, and Understood

Intent to leave due to the rewards offered is down by 10%

Market comparison of compensation shows our organization in the upper 1/4th

Skills training of employees has resulted in 100% availability of requisite competencies for expansion of production

Exit interviews report that 80% of the employees leaving is due to rewards offered and 20% is due to negative culture of the organization

One again, we see that metrics for total rewards need to answer the questions of : 1) do the rewards help the organization attract, hire, retain, and engage employees and 2) are the rewards aligned to support the goals of the organization?

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What is a Metric? • Metrics, also known as measures or key

performance indicators, are tools that assess and report the impact of a particular project or activity.

• Metrics may be quantitative or numeric in nature such as increased in retention because of rewards by 20 percent. Metrics may also be qualitative such as improved staff satisfaction levels with rewards from 55% to 75%.

• Both quantitative and qualitative metrics are typically reported in numbers such as percentages or indexes.

• Metrics answer questions – such as - is the organization meeting its goal to offer rewards that attract, retain, and engage employees?

Source for definition: UMUC Course Module 5 Commentary

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When the term metric is mentioned, for some it seems to be a confusing term. The term metric is nothing more than another word that means measurement of our actions or initiatives. Many of us use metrics to track our own personal fitness or health such as our Body Measurement Index (BMI) is a metric, as is our weight, our blood pressure, our cholesterol level, our blood glucose level. These are metrics.

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Metrics Need to Matter to the Organization • What Human Resources assesses and

reports to the organization should be important to the organization or else it is ignored or marginalizes the work of HR

• CEOs report that Human Resource professionals do not share metrics that matter. Instead they report useless ones.

• How do we determine if our metrics are important? Ask, do they link or align with:

• Organizational capabilities • Requisite employee competencies • Challenges of the organization • Strategic plan for the organization

• Recall that these 4 items were presented in Presentation One

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Some CEOs say that HR reports that others cannot relate to as important such as turnover, employee satisfaction, costs of benefits. We need to share metrics that are readily seen as ones that MATTER. They matter if they answer the questions of : 1) do the rewards help the organization attract, hire, retain, and engage employees and 2) are the rewards aligned to support the goals of the organization which can be Organizational capabilities, Requisite employee competencies, Challenges of the organization, or the Strategic plan for the organization?

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Metrics are key performance indications of the successful

achievement of goals

Metrics are important key performance indications for organizational goals; they track success related to financials, customers, and business processes and can be used for Total Rewards Metrics need to measure the outcome in a direct, not indirect manner The direct linkage between rewards and customer satisfaction, employee satisfaction, revenue, profits, and productivity are hard to prove

Sometimes HR teams make the mistake of reporting metrics that are good ones to track but by themselves, they are not seen as a measurement of total rewards. Turnover, for example, is important to track but the reason employees are leaving can be related to something other than rewards. The employees, for example, may merely be reaching the age for retirement. And, employee satisfaction is good to know – who doesn’t want happy employees – but is that satisfaction due to the rewards being offer or perhaps something else?

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What are the Right Questions Metrics Should Ask About Total Rewards?

• Are we offering rewards that attract, retain, and engage employees?

• Are we offering the right rewards? • Are our rewards competitive? • Are we communicating our rewards to the

employees effectively? • Are our rewards such as training and

promotions preparing the organization for tomorrow?

• Are our rewards retaining our key essential employees?

• Do our rewards allow us to distinguish between the top and lower performers?

• Is the cost of the rewards offered worth the price?

• Are our rewards helping the organization achieve it’s major objectives or organizational capabilities?

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Evaluate the Metric – Does it Matter? Does It Answer the Right Question?

The right metric will directly assess Total Rewards (monetary, non-monetary, or the work environment such as training, promoting, or the work itself)

Total Reward Metric Example 1: Percentage of employees who intend to leave the organization because of rewards Total Reward Metric Example 2: Percentage of employees in key positions rating rewards as satisfactory or above Total Reward Metric Example 3: Comparison of compensation for key positions to the competition for same potential applicants

The right metric will be linked to the organizational capabilities, requisite competencies, challenges, or strategic plan

If a core capability is to be mission ready, retention of employees is critical

Employees must be retained and if the rewards are not attractive, they may leave

With unemployment low and wages not increasing significantly over the past 5 years, employees may leave if they can receive higher compensation elsewhere

Before you select your metrics for the second assignment, ask yourself, does the metric directly assess Total Rewards (monetary, non-monetary, or the work environment such as training, promoting, or the work itself)? Does the metric in some way linked to the organizational capabilities, requisite competencies, challenges, or strategic plan?

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Metrics Answer the General Question: Are our Rewards Effective for Attracting, Retaining, and Engaging Employees with the Requisite

Competencies our Organization Requires?

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TotalRewards-294x300.jpg

This graphic found at https://www.helioshr.com/2015/07/compensation-vs-total-rewards-whats-the-difference-really/

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Before finalizing your metrics, ask yourself if each metric ...

• Specifically measures total rewards and not another organizational outcome such as customer satisfaction, revenue, or profit that is only indirectly related? Does it prove that the rewards are worth the cost?

• Reports on a specific outcome related to total rewards rather than a broader, albeit important, HR metric such as turnover, retention, time to hire, cost of benefits, or employee satisfaction?

• Matters for achieving any of the following? • Organizational capabilities • Requisite employee competencies • Challenges of the organization • Strategic plan for the organization

• Can be calculated (does data exist that can be used for this metric)? • Is void of incorrect terms such as using the term matrix rather than metric, metric

system rather than metrics, and incorrect grammar such as metrics is or metric are.

HR professional, as do all managers, when they use incorrect terms.

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Have Questions about Assignment Two or the Term/Tool of Metrics?

Please place the questions in the Questions Forum so all will benefit.

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