Over the course of time, HR management has been transformed from its classic role of business administration to a strategically oriented department. On top of this, personnel departments are coming under increasing pressure to justify their existence and demonstrate tangible contributions to the value-added of the business. This trend is exemplified by growing demands from companies to measure performance systematically, in quantitative and qualitative terms, and introduce comprehensive evaluation techniques, such as the Balanced Scorecard. Adrian Scherer looked in more detail at the subject as part of his MBA studies at the School of International Business and Entrepreneurship at Steinbeis University Berlin (SHB).
Business management is increasingly looked at from the angle of personnel management. The role of human resources management (HRM) is also gaining a more strategic profile within businesses. Yet it is difficult to point specifically to the strategic advantages of the workforce – and with it, HRM – as the value-added of personnel management is based largely on soft factors, such as “values”, motivation or satisfaction. This was the challenge faced by Adrian Scherer, a project manager in HR auditing at Munich-based Loyalty Partner. The topic was also the main focus of a company-sponsored project as part of his “Project Competence Degree” at the SHB.
Personnel auditing in its modern guises should be a stand-alone activity, yet no-one would dispute that it is an integral part of management accounting. So it is not just about gathering and processing HRM data, or examining deviations from plan. When Adrian Scherer analyzed the current situation at the beginning of his company project, he found that key business indicators were being measured in each division in completely different ways. Very little was being done to link successful work (e.g. quality, attendance) to remuneration (such as bonuses or performance-related pay). Costrelated figures were being measured in conventional terms, e.g. costs per person, and all measurements were numerical. Key indicators relating to personnel retention and motivation were restricted to staff turnover levels, and wage or salary structures. The value-adding aspects of the key business indicator system was underemphasized. The underlying aim – that announcements or business decisions should be underpinned by personnel figures and cost-related indicators – was not being fulfilled. As a rule, key indicators were being used within individual parts of the company. Nothing was being done to share information throughout the whole company.
Based on his analysis of the current situation, Adrian Scherer laid down his project goals: a value-based personnel auditing system should be introduced to optimize corporate management. Second, standard and uniform key indicators were needed across the whole company. Third, these must go to senior managers and personnel management. Fourth, there should be binding underlying structures across the whole company, which could be matched to individual needs within each division through a selection of other key figures. Scherer could see that people needed to be encouraged to compare their experience more with others, based on key indicators (internal benchmarking). Further, suitable methods and tools needed setting up. Also, some thought should be put into ways to integrate future issues in existing set-ups. The foundations for this integrated personnel auditing system would be laid by linking up existing systems, removing obsolete systems, and setting up standard reports which could be expanded into a regular reporting system. The emphasis lay in ensuring that legacy data would be transferred properly, without compromising data quality, as this was central to personnel auditing.
The first stage of Scherer’s plan was to introduce new HRM software and migrate data. The requirements placed on the new software included extensibility – so that more modules could be added to the system later down the line – and the ability to customize screens – so that users of the hitherto stand-alone solutions would see a interface similar to the ones they were already used to.
After the long-winded task of data migration and processing of legacy data, step by step new extensions were added to the system. After the original master data management module came a vacancy management module and a seminar management module. While they were transfering personal data to the Loyalty Partner management accounts and finance department, a personnel costs management module was added to make it possible to compare data automatically and even make corrections in the linked up systems. The data warehousing solution has now been extended to off-site staff such that the overall system can now be used to administer all aspects of human resources management – from classic processing of master data, to pay slip data, clocking-in data and even calculating daily allowances for internal and external clients – in short: everything that was previously managed differently, on different systems.
Over and beyond logging key indicators, integrated personal auditing involves introducing corresponding measures to improve these key indicators. Apart from the actual numbers and data, departments within the business are offered interpretations of the data and recommended actions. The departments can than introduce measures to improve key indicators, individually or with the support of the HR department. Once these measures have taken effect, this is once again measured by the personnel auditing department and the process goes back to the beginning.
By standardizing the system and making everything uniform, there has also been a huge leap forward in terms of the time invested in financial auditing processes.
School of International Business and Entrepreneurship at Steinbeis-Hochschule Berlin
Dipl.-Betriebswirt (DH) Adrian Scherer, B.A., MBA
Loyalty Partner GmbH (München)