As seen on TLNT, January 29, 2018.
All major business functions operate numerous subprograms and initiatives. And among those dozens of subprograms, a normal statistical curve would reveal that some of them would be well-managed while others would be poorly managed, and as a result, they would produce subpar results.
Fortunately, we know from a study by the Boston Consulting Group which individual HR programs have the highest impact on business results (i.e., revenue and profit). At the top of that list were recruiting, retention, onboarding and employer branding.
But have you ever wondered which HR subprograms routinely produce little evidence of bottom-line impact because they are what I call “under-managed?” “Under-managed” determined by these four factors:
- An uptick in performance– The sub-program doesn’t prove that there is an uptick in performance after an employee/manager uses their services or after their budget goes up.
- No ROI calculation– They simply report their costs, so they don’t routinely calculate and report their program’s ROI.
- Not data-driven– They utilize intuition best practices, instead of data-driven decision-making.
- No measure of quality– Their performance metrics are weak and they omit metrics covering the important area covering the quality of their outputs.
Based on the hundreds of major corporations that I have worked with over three decades, and using the above 4 criteria to assess them. I have listed the most under-managed * HR subprograms or activities, with the most poorly managed ones listed first.
1. Performance appraisals
Nothing in HR is more universally disliked (i.e., by employees, managers and HR itself) and time-consuming than the once-a-year performance appraisal (PA) process. If the feedback from this yearly appraisal were effective, in the two months immediately before an individual employee’s assessment, their performance would be declining (due to a lack of feedback). And immediately after their assessment, it would increase. But clearly, there is no evidence that PA has any positive impact on employee performance. And turnover may actually increase immediately after the appraisal when the employee is frustrated with their assessment. If the amount of time that employees and managers put into this process were included in its costs, the ROI would clearly be negative.
There is no evidence that the PA assessment is even accurate because those that manage the process allow managers to be highly subjective and managers can make their assessment without referring to actual performance data. The only metrics that are usually kept are the number of PAs that are completed on time. The fact that more than a handful of major corporations have recently dropped or severely modified the process is an indication that HR leaders finally realize the futility of the current approach.
2. Performance management programs
The basic premise is that after someone is put on a performance management (PM) program, the resulting discipline, coaching and training will result in a significant uptick in performance. Unfortunately, few track and report that correlation or the cost and the time required to change performance. All of the evidence that I’ve seen reveals that most PM programs don’t increase performance significantly, so in the end, they do little more than postpone the decision to terminate poor performers.
3. Educational assistance programs
If educational assistance programs were effective there would be data showing how much the on-the-job-performance of grads that your firm supported increased within one year after their graduation. Few collect it. But I have seen data that reveals that recent grad turnover actually increases when employees get frustrated when nothing happens after they graduate.
Everyone knows that these programs are incredibly expensive, but no one calculates program’s ROI. The intensity of the educational experience, while the student is pursuing a degree, may also be so intense and draining that as a result, their regular work suffers over multiple years. Few metrics are utilized beyond counting the number of participants and total costs.
4. Employee engagement
If these programs were well-managed, they would be the first to show that proactive actions can change employee engagement. And second, the resulting increase in engagement would directly increase employee productivity and retention. Unfortunately, individual programs can’t show either of these impacts. And, if the tremendous cost of the required employee and manager time were presented alongside their engagement survey results, these surveys would stop immediately.
This overemphasis on engagement is a distraction away from the more important goal of identifying and managing the multiple factors that directly increase productivity. And finally, when employees fill them out and see no change, they can get extremely frustrated with HR and the firm.
5. Attempting to categorize generations
This is a thinly disguised overgeneralization effort to treat young people differently than old people. If you tried to generalize the traits of any other group (e.g. women, gay employees, the disabled or diverse employees) you would be intensely and justifiably criticized. In addition, the definition of each generational category is so vague that it adds little value when individual managers are actually trying to manage their employees. And because the basic premise of the need to recruit new generation employees often results in discrimination against older workers, any generational recruiting initiative is fraught with legal issues. These initiatives seldom have any performance or ROI metrics.
6. Exit interviews
With turnover rates increasing dramatically, finding the real reasons why top employees leave is now critical. Unfortunately, exit interviews are an afterthought, seldom designed or executed well. Many times the interview results go directly to the file, and no action is taken regardless of what is discovered during the interview. The process has literally no metric that measures whether the problems discovered during the interview are ever addressed or improved. The pressure “not to be honest” is so intense during standard last day exit interviews that as many as 40% of the answers provided by exiting employees are inaccurate. Delaying these interviews for 3 to 6 months provides much more actionable and accurate answers.
7. Employee benefits
They used to be called fringe benefits, but now they may consume as much as 25% of salary costs. Program managers often infer that these incredibly expensive benefits have some impact on recruiting, retention or productivity. However, you won’t find a single program that has data proving those impacts or the program’s ROI. In many cases, there is no data showing that employees are actually aware of the various benefits, and without awareness, they can’t have any positive business impacts.
8. Internal movement programs
There is evidence that internal hires are among the highest quality of all hires. Yet the internal movement process is barely coordinated and certainly not effectively managed. Internally, there are no metrics measuring quality-of-hire, ROI, or the barriers that restrict internal movement. The process is not data-driven, and as a result, it’s often incredibly political. And in many cases, the internal employee movement between unrelated and distant business units is almost zero.
This program, when it is done well, has a high potential impact. Unfortunately, it is often barely managed, with only participation metrics. And there is no evidence that onboarding shortens new-hire “time to productivity” or that it increases new-hire retention. In my experience, there is no aspect of onboarding that is frequently data-driven.
10. Workforce planning
This program has the potential for having a huge impact because it allows a firm to build a pipeline of new skills and new talent. Unfortunately, most WP programs in HR are so shallow that they do little more than allow HR to say “we have a program.” In addition, there is little evidence to show that executives ever actually follow the workforce plan during recruiting and when they promote. Program metrics that cover the accuracy of workforce forecasts or the impact of workforce planning on business results are nonexistent.
The following HR initiatives receive honorable mention because they provide no evidence showing their business impacts and that they increase productivity, innovation, attraction or retention. They universally have weak metrics, and they provide no ROI calculations. These poorly managed initiatives that deserve an honorable mention include: happiness, diversity, managing the corporate culture, non-technical training, leadership development, 360° feedback, HR off-sites, behavioral interviews, motivational speakers and mentorship programs.
One of the main differentiators between most business functions and HR is that HR almost universally assumes that all of its current programs actually work. Where “working” means that these subprograms have measurable goals that include business impacts, productivity impacts, the quality of their outputs and the ROI of the program. For example, if you offered a training program to half of your salespeople, it only makes sense you would have a process for measuring whether the sales performance of those trained went up a measurable amount when compared to the sales of those that have not yet been trained.
However, in my experience, a clear majority of HR subprograms make no attempt to show their business impacts in dollars or their ROI. A “must be a working assumption” and the fact that most human resource management programs are not data-driven or well managed should be an embarrassment to a function that has management as part of its title.
If these subprograms are to be well-managed, they must also calculate their program’s ROI, because it is literally the most commonly calculated metric in business. The fact that employee and labor costs often exceed 60% of the corporate variable cost, would be another powerful reason why the managers of HR programs need to become more businesslike, more metrics and data-driven and to require every HR program or initiative to prove both its business impacts and its ROI.
Incidentally, I have found that even the above-listed HR programs that operate at powerhouse firms like Apple, Facebook, Amazon and Google don’t fare much better than the average when assessed using these under-managed criteria.
* The author specifies upfront that any list of this type involves some degree of generalization. So there are obviously some exceptions in each category. But that doesn’t prevent individual corporations from collecting their own data on the effectiveness of each of their subprograms.
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