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Download NowGoalsharing programs are typically used for cost centers. Often, department-based
goalshares are self-funded and accounted for in the department's salary expense
budget. Since HR often tracks cost statistics, such expenses are palpable.
The first step is determining HR's readiness. Not all departments in an organization
have the same level of organizational maturity. Maturity is critical for program
success.
Funding an HR incentive program is rather easy. For example, assume that 500
of 3,000 total em-ployees voluntarily leave an organization in a year, a 16.7
percent turn-over rate. This is 125 employees per quarter. The average pay of
these employees is $40,000, or total payroll of $20,000,000.
Conservative Society for Human Resource Management data places the estimated
cost of replacing these 500 employees at $6,666,667 (one-third of total annual
salaries), or $13,333 each. This cost includes HR's and the hiring managers'
time in the recruitment process, advertising, and the cost of temporary staff
and overtime to cover services while recruiting.
Let's also say HR has 25 full-time employees, with a total annual payroll of
$1,500,000. To be an effective incentive, four performance levels with corresponding
payouts are determined:
- Performance below threshold = 0 percent payout
- Threshold performance = 50 percent payout, or 10 percent of HR's payroll
($150,000 annually)
- Target performance = 75 percent payout, or 15 percent of HR's payroll ($225,000
annually)
- Optimum performance = 100 percent payout, or 20 percent of HR's payroll
($300,000 annually)
Along with payout determinations, four performance criteria are established
using the 125 employee turnover rate per quarter example:
- Performance below threshold = Reduce voluntary turnover by fewer than 5
employees per quarter
- Threshold performance = Reduce voluntary turnover by 5 employees per quarter
- Target performance = Reduce voluntary turnover by 10 employees per quarter
- Optimum performance = Reduce voluntary turnover by 15 employees per quarter
In addition to reduction in turn-over targets, a circuit breaker of HR effectiveness
should be established. HR may focus too much on turnover targets and lose sight
of other internal customer service obligations. HR can conduct a quarterly management
as-sessment of their overall effectiveness and responsiveness and can establish
a baseline level of service. If effectiveness drops below this level in a quarter,
regardless of reduced turnover levels, there should be no incentive payout.
Pilot the program for two quarters. After piloting, conduct extensive review
meetings with employees. Have HR section managers develop action plans on how
to support overall department efforts. Review the program at fiscal year end
to re-adjust targets accordingly.
Note
- This article was prepared by Astron Solutions, providers of consulting solutions
for HR professionals. Visit their Web site at http://www.astronsolutions.com
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