miércoles, 16 de agosto de 2017

People Analytics: HR needs a business case


We have a big problem. Few HR professionals know how to build a business case. Other departments like marketing, who do present their business cases, convince management and are able to get the money they ask for.

I propose a simple method here with a compelling story behind it to get the investment you need. You see, you have to do it as if you were planning a trip.

In this post:

1.    What is a business case and what it is for?
2.    The business case as a trip.
You often hear that "people are the principal capital of an organization." HR professionals have many opportunities to improve a company's bottom line. You already know how: By hiring talented employees who are aligned with the company work culture. Making them loyal. Improving their motivation and performance. Developing talent and leadership. Nothing new. And yet many HR initiatives tend to be mistakenly classified as "less vital" to success. If this happens to you too, don't try to dodge the issue and resort to playing the victim. I often work with HR departments that assume their work has value. They know it does, but they aren't able to provide the data that clearly supports it.
Other departments within the organization compete for the same management investments (such as sales, production, marketing, or logistics), and they go to management with data that shows the highest value of their proposals. As expected, when we can't provide data that proves our value, management is compelled to take investments from HR and award them to the other departments that are fighting for the same piece of the pie.
In times of limited budgets (Have you ever heard of an unlimited budget?), management rejects budgetary requests that lack a clearly defined business case.

What is a business case?

A business case is a report that is used to justify investment in a project.
It serves to help others decide if they should invest resources in a proposal. Usually, several business cases compete for investments. Therefore, you have to persuade the decision-makers that your proposal will have value and that it should be a priority over other alternative initiatives.
The logic of the business case is that whenever resources (money, time, etc.) are consumed in an organization, they must be used to meet a specific business need.
A business case provides a clear statement of a business problem and a potential solution. It describes the consequences of specific actions and recommends metrics for the proposed solution. More importantly, a business case provides the opportunity to propose options based on objective data that will offer a greater sense of understanding of the solution.

The business case as a trip


 A business case is a type of gap analysis. It entails determining where we want to go, establishes where we are, and tells us what we need in order to bridge the gap between us and our destination.
This sounds like a trip to me. We are here and we want to reach a new destination: How shall we get there?

Sullivan's Travels

I recently came across this comedy. Since we sometimes tend to take everything too seriously, this appealed to me.
Sullivan's Travels is a 1941 American comedy by Preston Sturges. It's a satire about a successful comedy director who aspires to make a socially transcendent and life-changing drama. So he embarks on a journey of personal discovery that leads him to discover, that in the end, his greatest contribution to society is, in fact, his comedies. The title is a reference to Gulliver's Travels, the famous novel by satirist Jonathan Swift about another journey of self-discovery.
In the first scene of the film, John, the film director, defends his "Business Case" to the producers. The dialog implies that management has a slightly different strategic focus...
John L. Sullivan: I want this picture to be a commentary on modern conditions. Stark realism. The problems that confront the average man!
LeBrand: But with a little sex in it.
John L. Sullivan: A little, but I don't want to stress it. I want this picture to be a document. I want to hold a mirror up to life. I want this to be a picture of dignity! A true canvas of the suffering of humanity!
LeBrand: But with a little sex in it.
John L. Sullivan: [reluctantly] With a little sex in it. Hadrian: How 'bout a nice musical?


Following this traveler approach, the proposed method has four parts:

1) Where do you want to go and where are you: the problem
2) Travelers: the stakeholders
3) Routes: the alternatives to evaluate
4) The travel plan

1. The journey: Where do you go? Where are you now?


To get the resources you need for your project, you should stop looking at just your HR department alone and think as an organization. Avoid presenting results and metrics that are relevant only to HR and instead, focus on evaluating what activities will add value to the entire company.
Truism: A business case must speak the language of business.
And in terms of business problems, they're normally one of these three types:
a) growth,
b) cost reduction, or
c) risk avoidance.

For instance, improvement in the turnover rate expressed as a value-creation activity

Turnover is a business problem that requires many HR professionals' attention. The battle for HR has become a loyalty problem in many cases. A Price Waterhouse Coopers study noted that the costs associated with job abandonment represented, on average, 12% of the total income of any organization. At times, it can reach 40%. The study adds that up to 32% of an organization's voluntary turnover can be prevented.
On average, costs associated with job abandonment represented 12% of the total income of the companies studied.
The incompletely expressed problem, using HR language:
"Our turnover rate is 25% annually, 10% above the average in our field."
The well-expressed problem, adding business language:
[Origin:] Our turnover rate is 25% annually, 10% above the average in our field.
[Destination:] Our most conservative estimates show that if we reduce the turnover rate by 2% we will save the company 10 million euros per year.
Credit Suisse, for example, which has about 46,000 employees, was able to reduce turnover by 1% and achieved a savings of $100 million!

2. Travel Companions


The people who will go with us on this trip include the decision-makers, the case reviewers, and those who profit from it. Management looks for projects and initiatives that conform to the company's strategy and are likely to reject any proposal that's not aligned with it.
We have to get to know our travel companions and their goals. Are we in growth mode or cost reduction mode? Are we in a general expansion phase or focusing on one or two regions?

The decision-makers

The people who decide whether or not to approve our investment proposal will definitely be a small group. Or even just one person, as in "The Boss of It All," the hilarious comedy by the normally very tragic Lars von Trier. In the film, the owner of a computer company, in need of his employees' affection, pretends for years that the real owner ("the boss of it all") lived in the United States. So when there were problems, he had someone to blame. Of course, everything gets messed up in the end.

The case reviewers

Keep in mind that the people who review your business case are not the same as the one who makes the final decision.

Those who profit

- Often, there will be more than one group of people who can benefit from your proposal.
If we propose a new predictive candidate selection program, our plan will benefit all departments and especially those who hire more often.

3. Alternative routes


All roads lead to Rome, but some of them will be faster than others. The reviewers who evaluate a business case expect us to analyze at least three different routes to reach the proposed solution.

Warning, travelers: Beware of your organization's metrics!


Before you start building a business case, keep in mind a big constraint: each organization requires and uses different financial metrics. For example, your organization may want to see a return on investment (ROI), or the total cost of ownership, or a cost-benefit analysis. If you're going to present a business case and are not familiar with these concepts, you'll have to consult someone in the finance department.

Items to compare

Compare the possible routes with each other. Ask and answer the following questions:
-Which option costs the least? -Which is the fastest to implement? -Which has the least risk? -Which brings greater earnings?
By the way, sometimes doing nothing is an option that you should consider. That would be the fourth option. The person who develops the case will often include an option of not doing anything to show what costs will be avoided when approving the project.

4. Planning the Trip


The travel plan has to include concrete actions. A good idea is to separate short-term actions (the first three months) and long-term actions (three months to the conclusion). This section should also include metrics proposed to measure success.

And the essential executive summary

Your audience members are very busy people. You'll have to write an executive summary with a hook if you want your proposal to beat the others. You must tell a concise, convincing story about the business need, its solution, and the impact the solution will have.
Something like this: "We have tough competitors fighting for talent in IT." Many of our workers leave the company for more attractive offers by our competition [the problem]. The analysis of the causes and the improvement plan that we propose will help us to retain up to 10% more of the staff [the solution]. We anticipate recovering the investment in 12 months. When the program is fully operational, we expect to achieve an additional savings of 100,000 euros per month [the impact].
Takeaways:
1.   Building a business case for HR is the key to helping others decide if they should invest resources in our proposal.
2.   Recommendation 1: HBR Guide to Building Your Business Case. It's hard to go wrong when recommending the Harvard Business Review
3.   Recommendation 2: The Appirio field guide, Pitching Transformation. How to Build a Business Case for HR & Talent Management Solutions, which provides a lot of knowledge specific for HR.