This article is the first of a series of blog entries on the business value of a digital HR agenda. This part will focus on ‘Customer Experience of HR’ (CxHR), and more specifically on agile service design and customer experience management.
There are several ways in which HR measures its effectiveness. Some overly sophisticated ways resemble a formal accounting ecosystem for HR and were driven and implemented rather by auditors than senior executives – consequently most of them failed. Those failures reflect a more general problem: There are probably too many HR KPIs in place to still see the wood for the trees. For simplification and focus, we set up a research to better understand how CEOs evaluate HR. Its findings lead to a fairly simple insight: 87 percent of CEOs of Global 2,000 companies demand a combination of high engagement of the workforce at low cost of the HR function. From the CEOs’ point of view, this way of HR performance measuring doesn’t differ from effectiveness assessment of other functions, like finance, sales or supply chain: CEOs rightfully want high business value at low cost.
Hence, it does not come as a surprise that HR Leadership Teams care about both, engagement and cost: The two most discussed KPIs of HR leadership teams are ‘engagement’ and ‘cost’. But HR teams take decisions predominantly on the latter: The two KPIs that most HRLT decisions are based on are ‘cost’ and ‘headcount’. The consequences are obvious: By not being able to provide a better effectiveness KPI than ‘engagement’, HR as a function is doomed to manage – and be managed – only by cost. This wrong approach to transforming HR sparked, during the last 10 years, a cost driven transformation, dubbed as a value adding ‘Business Partner Model’ by HR itself.
In a nutshell: HR must be able to prove that it’s an effective function to earn a seat at the table where business value is discussed. It is still one of the few corporate functions unable to measure whether it is doing a good job. Let’s find out what’s missing.
Conventional way 1: Effective HR = Engagement
Employee engagement is business value and it drives growth: Top companies in employee engagement outperform by 10 percent in customer ratings, 21 percent in productivity and 22 percent in profitability. And they show significantly lower absenteeism (-37%), turnover (-25% to -68%), and safety incidents (-48%). So why should we even debate engagement as a parameter for measuring HR effectiveness?
If companies collect engagement data, two things are bound to happen: First, engagement data triggers fire-fighting, i.e. HR locates engagement issues and starts solving them. While there is nothing wrong with that, this only manifests HR’s role as an emergency responder. Second, engagement data tells HR at a high level about how the workforce feels. But although the most effective engagement driving activities are often HR governed, they are not owned by this function. Considering HRs role in driving engagement, the two most successful streams of HR activity seem to be ‘ensuring that employees fit into the organization’ and ‘ensuring that employees are recognized by the organization’ – which at first glance sounds good and reasonable. But let’s assume HR manages these elements perfectly: For how much of the actual overall engagement of people does the function account? And how much of these elements are embedded in a multiple-stakeholder environment that can only insignificantly influenced by HR?
Put bluntly: Engagement is not a useful category to drive improvement of the HR function in terms of quality and customer experience. And although this approach might be good for fire-fighting and for a high-level understanding of employees’ sentiment, it is not fully owned by HR, and therefore difficult to use as an HR improvement metric and far from being a recommendable management system for the HR function.
Conventional way 2: Effective HR = Process Excellence
The other conventional way to prove HR effectiveness is to manage HR by process excellence. This concept dates back to 1990, its underlying assumption can be credited to Michael Hammer at the MIT: A company that runs excellent business processes will produce excellent business outcomes. At first glance this concept seems to mend our HR performance problem quite nicely: If we can’t manage the outcome (in our case: engagement), let’s manage all the processes we own at least. But let’s take a closer look at a real-life example:
Half of the top process KPIs of a global engineering company are linked to talent acquisition, reflecting that recruiting is closely linked to business value and that the candidate funnel is fairly simple to measure. Recruitment metrics in this engineering company are cost per hire, time to hire, portion of internal hires, internal promotions over external hires. The company is suffering from skill shortage, especially for STEM and digital talent. Their CIO puts it like this: “Our company strategy requires a complete digital transformation of the enterprise. And everybody is throwing their digital requirement at me as the CIO. But as we speak I am facing 1,000 open positions in my IT teams. Without some miraculous development helping to fill these positions, I will have to tell my board colleagues that due to talent shortage our corporate strategy is doomed to fail.” What follows are episodes of finger pointing: Line managers desperately need their open positions to be filled. They will turn to recruiters for help. And often vent some of their frustrations at the same recruiters – saying that they are not doing a good enough job. In return, Heads of Talent Acquisition will say: There is simply not enough digital talent out there. CIO and Head of Talent Acquisition will likely not agree on their respective analysis, the finger pointing will go on.
Can the process KPIs mentioned above help with that very problem? Not really: Cost per hire, time to hire or portion of internal over external hires prove HR activity, but not that HR has done all it can to help our CIO. More importantly, these KPIs can’t direct team leaders to what must be done to resolve the issue. In short, we are facing process KPIs that are descriptive, but – just like is the case with engagement – are not prescriptive.
The better way: Effective HR = Customer Experience of HR (CxHR)
Customer Experience of HR (CxHR) is a decisively better way of measuring and managing an effective HR function. It means running HR while always keeping in mind the perspective of its internal customers. Although the use of term ‘customers’ as applied to HR is still unusual, it is a helpful shortcut to the fact that employees’ or candidates’ perception of HR at decisive moments – ‘Moments that Matter’ – shapes their opinion of the company and impacts their engagement or the likelihood to apply for a job and consequently accept an offer. At these ‘Moments that Matter’, HR should be ready to provide a differentiating, ‘white gloves’ level service. For all other interventions by HR outside of these decisive moments, the service should be ‘effortless’, a lesson learned from marketing, sales, and service, in exactly the way Matt Dixon laid out in his book ‘Effortless Service Experience’. Again: Effortless is table-stakes, sufficient if you want to change your benefits online, if you call up an agent in the shared service department or if you receive your pay-slip. But they are, by definition, insufficient to manage ‘Moments that Matter’. And CxHR helps HR do what its customers expect: Provide an effortless service experience for everything it does, and a concierge-level service at ‘Moments that Matter’.
Let’s dive into the definition, the business case, the re-design of CxHR, and its measurement and management.
a) The definition
The CxHR concept as such is adopted from the world of digital marketing, sales, and service. In that world, ‘digital’ 1/ made customers change buying behaviors through mobile and social technology, it 2/ made them expect immediate, personalized, and convenient service, and 3/ made the customer base more volatile (as an average 25 percent of customers tend to leave after just one bad experience). Companies reacted by actively designing and managing the customer experience. Which again lead to 1/ increased customer loyalty, 2/ enhanced service employee happiness, 3/ enhanced revenue gains by 5 to 25 percent and reduced costs by 15 – 25 percent. The concept was so successful that McKinsey felt obliged to build a 100-pages playbook.
TI People has embraced the concept and – together with 40 global companies – adapted it for HR. CxHR overlaps with Employee Experience, at the same time being deeper and narrower. Employee experience spans three major elements that contribute to the experience of any individual in a company: HR function experience, leadership and culture experience, and workplace experience. CxHR takes the only experience into account, that is owned by the function and can hence be fully influenced by HR – the HR function experience. And it covers all major HR customer groups: Employees, manager, candidates, freelancers, and alumni. By applying this scope to the concept of CxHR, it focuses on what HR really owns and therefore, by design, has the potential to be prescriptive for the HR function – which sets it apart from engagement and process efficiency. While CxHR starts with the HR function experience, it can – after successful implementation – be expanded into leadership & culture and workplace. And if successfully managed across all these dimensions, it has the potential to impact employee engagement significantly.
b) The business case
Since we are talking about engagement impact of CxHR, let’s take a more comprehensive look at the economies of the concept. There are four ways in which CxHR creates business value.
1) It increases engagement. A good and illustrative example is what we call ‘reducing the Sunday-to-Monday frustration’. HR ‘customers’ become more demanding when it comes to service consumption of all kinds. Knowing from their private life how easy, intuitive and instantly gratifying a service can be, people can be frustrated if internal services of companies are cumbersome and just not simple enough.
2) CxHR helps to offer just the right service to HR ‘customers’ at the right time, which in return results in extra time for managers and employees obtaining these service without the need to ask back, search for information, or take all the detours incurred by a service that is not effortless. This can account for a 3 percent productivity gain of the entire workforce.
3) The term ‘effortless’ also has an HR side to it: Chatbots take on HR tasks. Apps can enable employees and managers to resolve amongst themselves employment related issues that before were looped through HR. That way, the HR function has the potential to reduce its cost by as much as 22 percent. And this benefit is not a stand-alone one: You can only achieve the 22 percent if you really identify areas that are sensibly automated. How to find those? Through understanding the customer, which CxHR helps you do.
4) A perfectly managed CxHR also reduces the end-user adoption risk of new HR technology. It blows one’s mind realizing how risky HR tech investments are: The average HR technology infrastructure business case expects a return of 115 $ for a 100 $ investment. But after the new system is implemented, the return on average plummets to only 74$ – a shocking 41% gap between expectation and reality. Looking at the root causes for this gap, missing end user adoption accounts for more than half of it. With CxHR in place, that risk can be minimized.
c) Re-designing CxHR
What does it take to implement the concept and to actually measure and manage by CxHR? Ideally, we want to measure the Net Promoter Score (NPS, ‘would you recommend this service to others?’) and the Customer Effort Score (CES, ‘how easy was it to obtain the desired service?’) at a granular level and in real time. To do so, we need to re-design HR processes strictly from the customers’ perspective. Design Thinking provides the right tools to do so, first and foremost ‘Journey Mapping’.
Below is a journey map for the ‘candidate journey’, depicting the recruiting process strictly from the customers’ perspective:
A journey in HR encompasses design items to look at during the re-design. This usually happens in a well prepared, engaging ‘journey mapping workshop’ with all stakeholders involved.
Moments-that-Matter: We suggest that companies focus on ‘Moments-that-Matter’ (M-t-M), when re-designing their HR processes under the CxHR concept. We found these moments to be the most important ones from an employee perspective: Recruitment, Onboarding, x-functional career move, x-locational career move, management/expert career move, family life balance, personal crisis management, career opportunity, and performance & compensation conversation.
Personas: When cutting the CxHR elephant in pieces, the second slice should be the ‘persona’ – a representative for a specific group of customers of HR. A common mistake when setting up a persona model in HR is to divide employees by classic parameters, like region, function, level, and contract type sometimes ending up at 200 different customer groups. For CxHR purposes, it is more important to cluster people by behaviors and values, arriving at around 10 personas which are sufficient to represent a workforce. Among nine others, our persona model for example has ‘Pedro, the inspiring sales manager’. And we know him well: Pedro admires brands like Under Armour, has a significant 6-digit income, is divorced, … That way we can think about HR by adapting the mindset of HR customers.
Touchpoints: It is the touchpoint, where ‘persona meets M-t-M’. The moment ‘Recruitment’ can feature as many as 54 touchpoints. When re-designing the experience, we do so at touchpoint level. Touchpoints differ in importance by persona. The next step is to identify the few ‘magic’ touchpoints, which matter most for one persona. And then start the actual re-design by using design-thinking methods that help closing the gap between ‘expectation’ and current ‘experience’ of the persona at these touchpoints.
Owners and channels: Finally, we need clear responsibilities for implementing the changes per re-designed touch-points. Hence, we define touchpoint owners and channel owners. In our recruiting example, a touchpoint owner can be the recruiter, the HR shared service center, the hiring manager, the PA of the hiring manager, even the person at the welcome desk. And as IT systems often support a series of touchpoints, we need owners for these electronic channels as well, e.g. the HRIS person for the people portal or the candidate website.
d) CxHR Measurement and Management
Once the ‘magic’ touch-points are re-designed from the persona’s perspective and the responsibilities for improvement are clear, we can start to measure. It is important to carry out measurements at the level of ‘Moments-that-Matter’ (in our example: ‘Recruitment’) and ‘Touchpoints’ (e.g ‘When I 2nd interview’). To collect these data points in real time, we use up-to-date techniques like 1-click micro-surveys sent to the candidates’ mobile devices. In the future, we might even be thinking about using mobile assistants like Apple’s Siri or Amazon’s Alexa. In addition, we can measure CxHR by tapping into ‘2nd hand information’, e.g. click-through-rates of the employee portal, or portion of service tickets that are opened and closed by employees in one session using a career management app. With a robust statistic model now at hand, we can identify the CxHR value that is represented by these 2nd hand informations. Ideally, we also benchmark these data points with peer companies, as it is important to not only improve CxHR against the past but also against talent competitors.
An illustration of measurement and management processes is shown below: It shows the measurement with a 1-click-survey plus optional comment boxes and a dashboard that shows the NPS at the level of the M-t-M and touchpoint, the latter being benchmarked.
Having learned how to re-design and how to measure, we can enter a continuous improvement loop, while applying design thinking: As we can measure CxHR in real time, we are now set for iterations of ‘fast re-design’ and ‘fast experiments’. The recruitment M-t-M can again serve as an example: We collect CxHR data for ‘When I 1st and 2nd interview’ candidates that resemble ‘Alice, the smart data analyst’. We understand from benchmarking that we need to improve. We analyze the ‘negative comments’ for 1st and 2nd interview and we find comments like ‘greeting was confusing’, ‘rooms had no windows’, etc. We gather that the atmosphere during interviews was not inviting. With that information, we can run a small, virtual, 2-hour version of the journey mapping session, informed by our measurement data. During that session we are now set to quickly re-design the experience at these two touch-points. And hand over the implementation of the changes to the touch-point owner – preferably he should be done within the next two weeks. And for the following four weeks we watch how the NPS at these two touchpoints develop.
The effectiveness of HR is hard to describe, measure and manage. But doing so is essential, as the alternative would be to manage HR primarily by cost. The most promising way is to strictly manage HR from the customer’s perspective. Digital marketing, sales, and service have paved the road, and we do have detailed knowledge of how to fare on it. Yet, implementing CxHR is in fact a re-design exercise of existing HR processes, which at times can be painful. Hence, we should consider cutting the CxHR elephant in pieces – and start with ‘pilots’: Select the most pressing ‘moment that matters’ and a small set of ‘personas’, and maybe select only parts of our business. And then follow the concept of design thinking and just get started down the road of fast re-design and fast experiments.
That way, CxHR has the potential to change the HR world!