Why HR Must Prioritize Its Internal Customers
Prioritization is one of the highest-ROI practices available to HR leaders, but unfortunately most in HR have failed to take advantage of it. It takes very little time or money to prioritize your internal customers, but the results can be dramatic.
Prioritizing can result in a 10% to 20% increase in your business impacts, without any additional budget. In talent management, you can prioritize positions for recruiting, individuals for retention and development, and you can prioritize business units so that you can target and focus your efforts to improve productivity and innovation. The primary reason why prioritization works is because you are able to focus HR resources and speed up your response time on the problem areas and opportunities that can produce the greatest business results.
Some Quick Examples of the Positive Impacts of Prioritization
If you managed an airline, hiring for every position would be important. But if you didn’t prioritize the fast hiring of pilots when a pilot vacancy occurred, your planes will sit idle, and as a result you would lose millions. You also get a larger impact in retention if you prioritize and focus your efforts on critical impact positions. For example, if you managed the NFL champion Giants, you would certainly like to keep everyone on your staff who contributed to your victory, but it would be smart to focus your retention efforts first on your star quarterback, rather than your best Gatorade guy!
Prioritization is Common Throughout the Business
Most in HR are supporters of “equal treatment” because of employment lawsuits. And as a result, HR is usually the largest resister to prioritization. But be aware that whether you realize it or not much of what we do in HR is already prioritized. Some individuals get paid significantly more than others, indicating their relative importance or priority to the organization. Some management positions get different benefits and privileges that most employees do not get. When we lay off large numbers of people, we are essentially prioritizing and releasing the low-priority employees. And finally, if we train replacements for some positions but not for others, we are in essence admitting that one job is more important than the other (because it requires an available replacement).
Most other business functions have long ago shifted to a prioritization schema. For example, in customer service, not all customers are treated the same, because some customers simply spend more money. In retail, all products are not treated the same because some provide much higher margins. Supply chain prioritizes shipments, and advertising prioritizes its channels based on the results they produce. Because the other business functions are so far ahead and prioritization, the first step that I recommend to HR leaders who are considering prioritization is to work with these other functions to learn their best practices and the measures that they use to prioritize.
The Benefits of Prioritization in Talent Management and HR
If increasing corporate revenues is a major strategic goal for your firm, you can help to meet that goal by prioritizing the hiring in revenue-generating jobs that obviously can’t produce revenue when they are vacant. And as a result, if you filled these revenue jobs faster, you would significantly increase corporate revenue. If you also hired better quality and better-performing individuals in sales jobs, you could also show an increase in sales revenue. If you also prioritized your retention efforts, a focused retention effort might be able to prevent your sales manager from leaving for another firm.
Prioritizing jobs, individuals, and business units can also increase productivity, innovation, and profits. By providing a faster and higher-quality response to high-impact jobs and individuals, you would get a moderately higher return than when you spread your resources evenly and a much higher return than when you focus your resources on the squeaky wheel.
For example, two different major quick service restaurant chains prioritized store manager jobs after finding out that a 30+% improvement in sales occurred when top-performing managers (but no other position) were placed at an individual store. A national retail chain found that losing a store manager by itself resulted in one million dollars in lost sales at the store over the next year. There was no similar drop in sales when any other position came vacant. With such a major impact, it is not surprising that many retail operations focus their best hiring, retention, and development efforts on store managers.
Prioritization Doesn’t Mean Bad Treatment or Low Morale
Prioritization is the process of identifying which areas should get the fastest or the most attention. Lower-priority jobs, employees, or managers under most approaches never receive “bad treatment.” The budget may be a little smaller, the service may be a little slower, and it may come from a more junior HR employee, but the same quality level is maintained throughout. Incidentally, if you’re concerned about creating a ruckus, there is no hard and fast rule that requires that HR reveal to managers and employees that it is prioritizing its services or what priority they are given.
How HR Can Ensure That “Non-critical” People Don’t Feel Demoralized
This is by far the most common question from HR practitioners, particularly those who love to argue that all employees should be treated equitably. The short and simple answer is that prioritizing mission-critical or key jobs positively impacts everyone and hurts no one. By focusing on these jobs, the organization optimizes its chances at success which in turn helps drive job security, enhanced rewards (bonuses), career advancement opportunities, and reputation for all. Being on a winning team raises every participant’s value in the marketplace for labor. This is very evident in professional sports where every team member wants the strongest players on the field when the score is tied and only two minutes remain on the clock.
To help employees adjust, organizations need to educate them on the value that comes to them as result of this initiative. I am a firm believer that organizations should not only prioritize jobs, but they should also actively communicate with employees how the jobs are prioritized, why they are prioritized, and what the current ranking looks like. Once they are informed, employees can then see what skills they need to add and where they need to move if they want to be in a high-priority job.
Prioritization Doesn’t Mean Senior Executives
Many assume that prioritization efforts result in identifying executives as the most important employees. And in fact, when HR is asked to prioritize jobs that are mission critical to the organization for the first time, many human resource professionals do come back with the top few rungs of the organization chart. However, when they are forced to really think about what positions in the organization have the ability to immediately impact a firm’s time-to-market or quality of good or service being offered, the list of critical positions changes becomes a lot different. In fact, the focus moves from the top of the organization to positions much lower in the organization that produce revenue, touch the customer, or provide the skill set needed to develop/deliver the primary features that differentiate a good or service line. You see this in major sports, where the emphasis is clearly placed on a few key roles.
Although HR might not like to admit it, there may be a 80/20 rule in effect — 80% of what drives the capability and the success of a firm lies in just 20% of its people. In most organizations and especially in high-tech firms, the key individuals are instead located in the middle of the organizational chart. Starbucks even inverts it organizational chart (putting employees at the top and executives at the bottom) in order to show how important lower-level employees are to their success. Firms like Microsoft have been identifying their top 1,000 most-impactful employees for years and firms like Edwards Lifesciences, Motorola, Valero, and MGM Grand have a history of job prioritization.
It’s Time for HR to Act More Business-like
For years HR has suffered through reduced budgets. One of the best solutions when you are faced with limited resources and time is to develop some logical process of allocating resources, so that the largest amount of resources goes to the most impactful HR problems. It’s time for HR to stop handling “things in the order that they came in” and treating all problems as equal. Instead, it only makes sense to prioritize and put the most time and dollars into hiring, retaining, and developing employees that have the highest “priority” or weight.
Below, you will find a list of the actions and the execution steps that you need to take in order to prioritize your employees, jobs, managers, and business units. In the following sections, I will highlight the methodology and steps that HR leaders need to take in order to prioritize HR’s customers and programs.
Steps in the Prioritization Process
If you going to institute a prioritization schema, the initial steps that you need to take in order to begin the process include:
- Benchmarking and learning — do your research and benchmarking in order to determine how your own internal business units can help. Gather information from benchmark HR firms because some have been prioritizing their internal customers and clients for years.
- Set goals – set your prioritization program goals. Set your goals based on whether you are trying to increase revenue, customer service, productivity, or speed with your targeted efforts.
- Anticipate resistance – don’t be naïve; before you start the process, make sure you understand who is likely to resist prioritization and what arguments it will take to overcome this resistance.
- Your prioritization percentage target – you can’t call it prioritization if nearly every employee and job is rated as high priority. Instead you need to set a target percentage for prioritization. For example, if you’re prioritizing jobs, the percentage of jobs that are designated as high priority should be less than 25%. The general range of prioritization is between 10% and 25%. If you start with too large a percentage, you will inevitably have to use a “shotgun” approach, which will overly spread your limited resources.
- Prioritize what? – categorize precisely “who or what” will be prioritized. The possible categories for prioritization include problems, opportunities, jobs, individuals, teams, managers, functions, and business units.
- HR programs to be prioritized – not every HR program or tool has the same success rate or impact on the business, so you should prioritize your programs and tools. In addition, you might also prioritize individual talent management functions that have large business impacts, like recruiting, retention, and leadership development, so that they receive the most HR resources and talent.
Data-driven Methods to Identify High-priority Employees and Jobs
After completing the above steps, most organizations work with the CFO and COO to determine — using data and financial impacts — what the key positions and employees are that should receive a priority. Some of those employee or job identification methods include:
- Use pay as an indicator – look at pay rates and bonus percentages to identify high-priority jobs and individuals.
- Use the budget – generally positions that are given increased headcount across all business units are high-priority positions.
- Use mission-critical jobs – ask senior managers to identify which jobs, when unfilled, cause operations to stop. These are known as mission-critical jobs.
- Use forced-ranking scores – if your organization uses forced-ranking, use it to identify high-priority employees.
- Use key customer-contact jobs – ask the COO or the head of customer relations to identify the jobs with high levels of customer interaction with high-profit or key customers. These positions deserve a high priority because, even though they may be held by hourly employees, taken together they can have a dramatic impact on revenue.
- Exempt from freezes – any positions that are exempt from hiring or salary freezes are generally high-priority positions.
- Use new-hire failure costs –– do the calculations yourself or just ask the GM which jobs have the biggest negative impact when a new hire fails (e.g. safety, sales, revenue producers, critical patient care).
- Use performance differentials – do the calculations yourself or just ask the GM which jobs have the highest performance differential. That means identify those jobs where a top-performing employee produces 50% or more output than an average performer in the same job.
- Use the cost of an error – ask risk management at your firm to tell you which jobs, when the employee makes a major error, costs the firm hundreds of thousands of dollars or more.
Alternative Methods to Identify High-priority Employees and Jobs
In addition to using numbers, there are other alternative methods that you can use to determine what jobs and employees need to be prioritized. Some of those other options include:
- Ask the senior managers – quite often the senior manager of a business unit or department knows instantaneously which positions or individuals are crucial. Independently, ask several managers in the unit to also identify the top key positions. If there is agreement, you can be assured that you have accurately identified the key positions and employees.
- Ask recruiting – typically the recruiting department has already identified the most critical or hard-to-hire jobs. Obviously if a job is hard to fill, it’s an important job to target for recruiting and retention efforts. Ask them to share with you the most-difficult-to-recruit jobs also because hard-to-fill jobs are often also made a priority.
- Ask training and HR planning – in many organizations, the training and development function or the human resource planning function have pre-identified the key jobs that contain the competencies that are required for the continued success of the corporation. Succession planning may also be able to tell you which jobs that they have targeted. Have the GM of each business unit verify that the jobs with those skills are in fact essential.
- Ask consultants – it’s often a good idea to get a second opinion by working with your own or outside executive recruiters to identify the hard to hire and retain positions. External recruiters can also advise you on which individuals are most likely to be recruited away.
Use the Prioritization Experience of Other Firms
If you don’t have time to use either the data-driven or the alternative approaches for identifying key individuals or jobs, there is a shortcut. You can use the experience of others to guide you. The following section contains three lists which individually highlight the type of individual, the key jobs, and the key business units that are frequently prioritized.
A List of the Type of Employees That Are Prioritized at Many Firms
The following is a list that highlights the type of individuals that most organizations prioritize. Obviously your retention, promotion, and development should focus on these high-priority employees. Some of the types of individuals that many firms prioritize include:
- Top performers – individuals whose performance ranks in the top 20% of their function, team, or job family.
- Innovators – in an era where innovation may be prized over productivity, innovators, game-changers, and pioneers are identified and given the highest priority.
- High revenue generators –– because increasing revenue is so important to most organizations, in most cases individuals who produce large amounts of revenue are targeted for retention, development, and productivity efforts.
- Individuals on the succession plan – these individuals are almost by definition high-priority employees. Individuals on the promotion list are also often given a higher priority.
- Individuals in leadership development –– individuals who have been developed into leaders should be given a high priority.
- Can’t afford to lose – individuals who are company icons or those who hold company secrets certainly can’t be lost to the competition.
- Hard-to-replace individuals – individuals who have unique skills, knowledge, or experience who can’t be easily replaced through training or recruitment should be prioritized. Individuals with extensive contacts may also be of high value.
- Diverse employees — because you worked hard to recruit diversity, it only makes sense to prioritize diverse employees to maintain your diversity.
- Individuals “at risk” of leaving – when it comes to retention, focus your activities on high-value individuals who are the most likely to leave.
A List of the Jobs That Are Prioritized at Many Firms
Many firms prioritize particular jobs regardless of the individuals who are in them or no matter what business unit they reside in. Some of jobs that many firms prioritize include:
- Managers and leaders – in many organizations, all manager and leadership positions are designated as high priority.
- Mission-critical jobs – jobs in which a vacancy means that the entire operation must stop (i.e. pilot, safety inspector, etc.) are almost always made a priority.
- All revenue jobs – at many firms, all revenue jobs are given a high priority.
- Revenue-impact jobs – in addition to revenue-generating jobs, you may also need to prioritize what are known as revenue-support revenue-impact jobs. Because if they badly interact with high profit customers or suppliers, it can negatively impact revenues.
- Hard-to-fill positions – in many organizations, positions that are difficult to fill through recruitment are given a high priority.
- High-loss-potential jobs – jobs that include work where and error can cost millions need to be given a high priority (even if insurance covers most of the losses).
- Positions where employees have critical skills – it individuals in any position have key current or “future skills,” those positions are often given a high priority.
- Jobs filled by executive search – a job that in the past have been filled by external executive search is likely to be a high priority job.
- “Hire them all” positions – positions that are deemed so important that recruiting is not required to have an open requisition to hire someone (i.e. evergreen jobs).
- Embarrassing losses – some jobs, when they become suddenly vacant can be an embarrassment to the organization. These jobs might include a CFO at a financial firm, the CTO at a technology firm, or the founder at any firm (i.e. Jerry Yang at Yahoo).
- “Surplus jobs” are given a lower priority – jobs that are soon to be eliminated or outsourced are often given a lower priority. Jobs and employees in business units that are soon to be sold off are also often given lower priority.
A list of Business Units and Functions That Are Prioritized at Many Firms
In addition to individuals and jobs, many firms prioritize important business units and functions. Some of the areas that could receive high-priority include:
- High profit/margin units – ask the CFO or COO to identify the business units that produce the highest margins, profit, or revenue.
- High-growth business units – the most important business units may be those that have the highest growth rates.
- Geographic area – many firms prioritize geographic areas. If your business is growing rapidly in a certain geographic area or if you find that most of your high-impact jobs are in a limited geographic area, it makes sense to prioritize the employees and jobs within that area.
- Critical departments or functions – some departments or functions may be critical, even though these departments are housed in a low-priority business unit. For example, in an organization where quality is essential, the six sigma function may be a critical contributor to business success in every business unit. In those cases, all six-sigma-related jobs throughout the corporation would be prioritized.
Most in HR and talent management initially resist the concept of prioritization because they think it runs counter to their values. However, remember that business organizations routinely prioritize whenever resources are limited or when it results in superior business results. Just like on a sports team, where everyone knows that the star players get priority, HR must learn that managers and employees will eventually see the rationale and the overall benefit to the firm. After the initial brouhaha, HR can expect at the least an increase in workforce productivity, revenue, and surprisingly, higher manager satisfaction with HR.