The art and science of human capital has

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1 From HR to the C-Suite: Speaking the Same Language Mike Psenka The art and science of human capital has continued to expand at a rapid pace over the past several years. Planning for organizational strategy, growth, and change, while ensuring that top-performing employees are acquired and remain engaged, are just a few of the myriad ways HR is essential to longterm business success. Because HR professionals focus a great deal of energy on the critical mission of developing talent within a company, they are left with very little time to quantify the benefits of those efforts financially. This deficit can pose significant challenges to HR professionals when proposing their annual agendas and resource requirements to the C-suite. Both parties care about the organization s employees and future why then does there seem that there is a language barrier? Although the chief HR officer is an active member of the C-suite, often other players of the HR team are called to present initiatives and agendas to the senior leadership group. This article is focused on providing insight to those HR team members who may not be involved with the weekly rigor and process of the senior executive team. Part of the issue stems from the difference in organizational perspectives between HR and the C-suite. Although they do align, one focuses primarily on the talent landscape of the company, whereas the other s scope is comprehensive in relation to the organizational goals. This difference in objectives makes it difficult for the C-suite to understand the unique needs and challenges the HR function faces on a daily basis. In order to improve communications between the two, HR must be able to translate how the work that they do ties in with the enterprisewide company strategy. Doing so is not always an easy task, but if one can remember to talk money, talk simple, talk facts, and talk with a plan, the C-suite becomes a more receptive audience. BECOME FLUENT IN FINANCE Your first task is to ensure you are conversant in the lingua franca of the C-suite: money. This will allow for free communication about the goals, alignment with strategy, and, most importantly, return on investment. When HR professionals can demonstrate how their operations improve the bottom line, they are able to form stronger connections with the C-suite and continue to enhance the value of the HR department to the entire company. Part of engaging in more meaningful conversations with top-level executives is clearly quantifying the issues most important to the C-suite and showing how HR can support their initiatives and positively affect those issues. Ultimately, for the highest levels of leadership at any organization, the subject that will resonate most loudly with them is the financial status of the organization. How does the work that HR is engaged in affect the organization financially? What are the hard numbers that will have the greatest impact? 2013 Wiley Periodicals, Inc. Published online in Wiley Online Library (wileyonlinelibrary.com). DOI /ert

2 Employment Relations Today As an example, one of the metrics HR uses to measure human-capital performance is employee turnover. Simply stating the organization has a turnover rate of 10 percent doesn t give the full context of the issue and how it affects the bottom line. Instead, the 10 percent turnover rate should be broken down in terms of cost to the organization. Consider the expenses associated with losing a topperforming engineer, which entail much more than those involved in finding a replacement. The combined additional expenditures associated with losing this employee, such as costs of separation, vacancy, on-boarding, and training the replacement employee, can often be more than $50,000. When the effects of employee turnover are presented in a way that shows the By showing how HR investments can proactively avoid the larger costs of turnover, executives can better understand the value of HR programs and the multitude of ways in which they create a positive financial impact. impact to the organization on a financial level, executives are more likely to listen. The key to this communication is to not only highlight the costs of losing a valuable employee, but also to show how HR s work can help to avoid such situations. For example, HR can often tell when employees are becoming burnt out by looking at indicators such as attendance and satisfaction surveys, and examining past data for red flags for attrition. Intervention, in the form of bonuses and raises, or offering new development and training opportunities can keep them engaged and on staff. If a valuable employee decides to leave an organization because she finds a new job that pays $5,000 more, a pay increase in this amount is a minuscule cost compared with the $50,000 it would take to replace her. By showing how HR investments can proactively avoid the larger costs of turnover, executives can better understand the value of HR programs and the multitude of ways in which they create a positive financial impact. Modeling is a standard part of the financial process in any organization. The concept of creating a financial model can strike fear in the hearts of those not passionately devoted to spreadsheets. Modeling is not rocket science. Start with a simple model that covers the basic assumptions of your initiatives and shows bottom-line numbers of the initiative. Your models should also allow for the modification of certain key variables so what-if scenario modeling can occur. When presented with a proposal, executives are famous for lobbing dozens of questions that may be perceived by the presenter as criticisms. They are merely looking at what-if contingencies. By having a robust model on hand, the HR professional can immediately respond to questions like What if we open two more stores? What if mortgage rates drop? What if we have to increase insurance premiums? Providing ready answers to those questions, and how they affect your program, increases C-suite confidence that significant risks have been addressed. It also demonstrates that you have taken a holistic approach to the proposed program and understand how it integrates into the larger picture. Effective modeling can be accomplished through both analytics platforms and spreadsheets. Each has its strengths and it depends on the sophistication of the initiative and the data involved in creating an accurate model. Understand the Language of Simplicity Leonardo da Vinci is noted for saying, Simplicity is the ultimate sophistication. To be 52 Employment Relations Today Mike Psenka DOI /ert

3 Spring 2013 effective in communicating with top executives, it is crucial to keep the message simple. It is unfortunate, but generally true, that executives are increasingly strapped for time and their attention is often spread across many initiatives at once. A clear, succinctly delivered message will strike a much stronger chord in the C-suite. The need for simplicity is more than just a matter of engaging with top executives. The C-suite rarely makes decisions in isolation and will often take counsel with other department heads and leaders. This means that any communication or request that comes from HR will be repeated to others. If the message is too complicated, its effectiveness will be lost among the various audiences. Therefore, any thoughts and ideas coming from HR need to be clear enough in purpose that they can be repeated easily and resonate with multiple stakeholders, even second- or third-hand. By stripping away excess parts and processes, HR can develop a simple message that drives home the point. Visual representations, such as slideshows, charts, graphs, and infographics, help to further simplify the message and present it in an easy-to-understand method. Because a picture is worth a thousand words, it holds that data visualizations go a long way in helping HR professionals tell their story to executives in an efficient manner. The use of dynamic visual aids representing detailed information can better highlight the biggest risks the company faces, what HR is currently doing to address them, and the results of such efforts. But in order to create these materials, the company needs to have a method for collecting concrete data. When armed with an analytics solution that drills down into extensive data to produce the most relevant and impactful information, HR can convey its message more simply and effectively. PRESENT THE COLD, HARD FACTS William Farr, the nineteenth-century founder of modern-day medical analytics, famously told Florence Nightingale, We need facts, not impressions! He was imploring her to present Queen Victoria with facts so the lives of British troops could be saved through better sanitation. For HR, jobs are lives. To more effectively make the case, HR can benefit from leveraging the data provided by workforce When armed with an analytics solution that drills down into extensive data to produce the most relevant and impactful information, HR can convey its message more simply and effectively. analytics solutions or manually derived metrics when meeting with the C-suite. Analytics solutions, which are widely available, can deliver easy-to-interpret data about the costs associated with turnover and serve as strong discussion points to connect with C-suite decision makers. In the absence of a workforce analytics solution, HR can (and must) analyze the data that they collect on a daily basis to report on their key metrics and monitor progress on their initiatives. Such analytics and metrics can provide information regarding the average tenure by position, the demographic profile of separated employees, and the financial impact of the company s employee turnover, among countless other metrics. This data is integral to getting executives to understand the factors that have an impact on the bottom line, and why it is so important that HR gets the needed support on processes and technologies that can mitigate risks. From HR to the C-Suite: Speaking the Same Language Employment Relations Today DOI /ert 53

4 Employment Relations Today Consider Four Perspectives In addition to simplified messaging and the use of detailed analytics, HR can better connect with the C-suite by considering both the business s and HR s challenge from the various perspectives by which executives must examine their organization. By recognizing these factors and adapting the script appropriately, HR can craft a message that will align with what the C-suite needs to hear, which often fits into four different perspectives: 1. All industries. Are innovative HR practices driving the success of a particular industry? Are there human-capital trends in other industries that might have a positive impact on your own? 2. My industry. How does the company compare with its industry peers when looking at key benchmarks like salary and turnover? 3. My company. What are the statistics and hard numbers for our human-capital initiatives? If metrics are below our goals, how can we course correct? 4. Problems in my company. Are there compliance risks that need to be addressed? How can we quantify the costs associated with these issues? The discussion on these points can span across both qualitative and quantitative information about the organization s workforce. Although the qualitative knowledge will give HR s presentation depth and color, it is the quantitative data that will truly make the C-suite take notice. Solid data substantiates HR s goals and objectives, and helps communicate how the business unit s efforts are affecting the company s bottom line. When HR can understand the C-suite s point of view from each of these perspectives, it can hone its presentation to be more effective. By showing how its plans can improve the company s standing within its industry, solve internal problems, and bring about competitive advantage, the top executives will be more eager to act upon, and finance, HR s roadmap. A key aspect to keep in mind when dealing with the problems-in-my-company perspective, and compliance risks in particular, is that concrete facts are much more powerful than general observations. Analytics present companies with observable and actionable information that can be used to measure potential problems and take the necessary actions to increase efficiency, mitigate compliance risk, and resolve existing problems, which will all result in increased profits. This transition is especially useful in maintaining compliance. Equipped with analytics for the workforce, HR can identify the locations with the lowest compliance rates, present that information to executives, and ensure the appropriate actions are taken. Moreover, the organization can more accurately forecast the impact of regulatory change and present that information to the C-suite. TRANSLATING IDEAS INTO A PLAN Another critical factor in connecting with the C-suite is developing a plan to address any identified issues. The C-suite often has a full line of people dropping problems on their desk that require complicated and costly fixes. If HR can convey a detailed plan to alleviate the organization s pain points, the C-suite is more likely to listen and approve. It is important to keep in mind that even if there is a lack of resources to fully solve the 54 Mike Psenka Employment Relations Today DOI /ert

5 Spring 2013 problem, or if there are gaps in the implementation phase, HR should still make executives aware of these issues. If problems were simple, they would be solved already. The C-suite is leveraged effectively when teams come in with knowledge of the tools and processes needed to solve the problem; after all, HR professionals are experts in their field and know what is needed to improve operations, performance, and compliance. An overall strategy to consider when presenting to the C-suite is to deliver a clear, fact-driven problem and offer a thoughtful resolution with a focus on how it will save the company valuable financial resources. Entering the C-suite with the ability to talk simply, talk money, talk facts, and talk with a plan will be a good basis for a productive dialogue. Of course, any solution should be built on information derived from accurate data, which can provide HR with the support needed to develop a compelling case and an actionable solution. Through visualizations, dashboards, industry benchmarks, and predictive analytics, HR can employ strategic insights when communicating with the C-suite. As a result, they can show their value to the entire company and demonstrate the crucial role that HR plays in improving organizational performance. Follow-through is an often-ignored component of a successful plan. By employing the right solutions to communicate ongoing progress of these initiatives, HR gains critical visibility. By marketing the success of past initiatives, HR significantly improves its position for future initiatives. Measurement is a key component to understanding how current and past programs made a material difference to the organization and why resources were appropriately allocated. The right analytics solution can automate this process and integrate effectively with your foundational model. It can also distribute vital answers to key stakeholders. Once again, facts are important here, not impressions. FINDING HR S VOICE At the 2012 H Revolution conference, a majority of respondents acknowledged that an understanding of finance is important to their roles in their organizations. Yet, only 20 percent of attendees indicated that they were comfortable presenting a business case to executives, and most said they were not An overall strategy to consider when presenting to the C-suite is to deliver a clear, fact-driven problem and a thoughtful resolution with a focus on how it will save the company valuable financial resources. comfortable developing the financial models needed to make a strong argument to the C-suite. Without that skill, however, the HR professional will lack a critical tool necessary to gain the resources they need to help the company reach its overarching business goals. With a comprehensive analytics solution in place, and a dedication toward understanding finance, HR can access the hard facts and data needed to create such models. By leveraging facts, HR can express its workforce needs in a simple and straightforward way, and make a strong case for additional investment in its initiatives. And by combining the power of talking money, talking simple, talking facts, and talking with a plan, HR can be certain that it s speaking the C-suite s language and achieving the common goal: success. From HR to the C-Suite: Speaking the Same Language Employment Relations Today DOI /ert 55

6 Employment Relations Today Mike Psenka is the founder of ethority, a provider of world-class analytics to the human capital, higher education, commercial, and government markets. In 2011, Equifax Workforce Solutions acquired ethority to offer an unparalleled analytics tool to its customers. Prior to founding ethority, Psenka worked with PricewaterhouseCoopers within their Open Systems Technology group implementing financial and manufacturing systems. Psenka has focused a great deal of passion toward the creation of userobvious platforms. When not executing day-to-day business operations, he dedicates himself to the development of innovative solutions that provide vital answers to the marketplace. He may be contacted at vitalanswers@equifax.com, or visit workforce.com. 56 Employment Relations Today Mike Psenka DOI /ert