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Key Tools for Human Resource Management (Collection)

Book Description

HR managers are under intense pressure to become strategic business partners. Many, unfortunately, lack the technical skills in financial analysis to succeed in this role. Now, respected HR management educator Dr. Steven Director addresses this skill gap head-on. Writing from HR's viewpoint, Director covers everything mid-level and senior-level HR professionals need to know to formulate, model, and evaluate their HR initiatives from a financial and business perspective. Drawing on his unsurpassed expertise working with HR executives, he walks through each crucial financial issue associated with strategic talent management, including the quantifiable links between workforces and business value, the cost-benefit analysis of HR and strategic financial initiatives, and specific issues related to total rewards programs. Unlike finance books for non-financial managers, Financial Analysis for HR Managers focuses entirely on core HR issues.


More than ever before, HR practitioners must empirically demonstrate a clear link between their practices and firm performance. In Investing in People, Wayne F. Cascio and John W. Boudreau show exactly how to choose, implement, and use metrics to improve decision-making, optimize organizational effectiveness, and maximize the value of HR investments. They provide powerful techniques for looking inside the HR "black box," implementing human capital metrics that track the effectiveness of talent policies and practices, demonstrating the logical connections to financial and line-of-business, and using HR metrics to drive more effective decision-making. Using their powerful "LAMP" methodology (Logic, Analytics, Measures, and Process), the authors demonstrate how to measure and analyze the value of every area of HR that impacts strategic value.

Table of Contents

  1. About This eBook
  2. Title Page
  3. Copyright Page
  4. Contents
  5. Financial Analysis for HR Managers: Tools for Linking HR Strategy to Business Strategy
    1. Copyright Page
    2. Dedication Page
    3. Acknowledgments
    4. About the Author
    5. 1. Business Strategy, Financial Strategy, and HR Strategy
      1. Is HR Weakest in the Most Critical Areas?
      2. You Don’t Need to Be a Quant to Make Good Business Decisions
      3. Which HR Decisions Are Important?
      4. What This Book Attempts to Do
    6. 2. The Income Statement: Do We Care About More Than the Bottom Line?
      1. Income Statements
      2. Profit Can Be Measured at Various Levels
      3. Seeing the Big Picture
      4. The Bottom Line
    7. 3. The Balance Sheet: If Your People Are Your Most Important Asset, Where Do They Show Up on the Balance Sheet?
      1. Assets on the Balance Sheet
      2. Liabilities on the Balance Sheet
      3. Which Numbers on a Balance Sheet Can You Believe?
      4. Use Caution When Using Published Financial Ratios
    8. 4. Cash Flows: Timing Is Everything
      1. Cash Flow Information from the Income Statement
      2. Cash Flow Information from the Balance Sheet
    9. 5. Financial Statements as a Window into Business Strategy
      1. Common Size Financial Statements
      2. Connecting the Dots
      3. Return on Equity
      4. Differential Impact of Financial Leverage
      5. The Big Picture
      6. The Link Between HR Strategy and Business Strategy
    10. 6. Stocks, Bonds, and the Weighted Average Cost of Capital
      1. Why Is the Cost of Capital Important to HR Managers?
      2. Where Does the Money Come From?
      3. Is Your Company of Above Average or Below Average Risk?
      4. Capital Costs in 2012
    11. 7. Capital Budgeting and Discounted Cash Flow Analysis
      1. Calculating Present Values
      2. Do the Future Benefits Justify the Upfront Costs?
      3. Using DCF on the Job
      4. HR Applications
      5. Money Has Time Value Because of Interest Rates, Not Because of Inflation
    12. 8. Financial Analysis of Human Resource Initiatives
      1. Decisions Involving Cash Flow That Occur at Different Points in Time
      2. Allocating Budgets When There Are a Larger Number of Alternatives
      3. Calculating NPV of Specific HR Initiatives
      4. Determining Program Impacts Using Pre-Post Changes
      5. Determining Program Impacts Using Comparison Groups
      6. What Is Your Firm’s HR Budget?
      7. Is Your HR Budget Allocation Optimal?
      8. Maximizing the ROI on Your Analysis Efforts
    13. 9. Financial Analysis of a Corporation’s Strategic Initiatives
      1. Estimating the NPV of a Strategic Initiative Such as a New Product Introduction
      2. Using the Spreadsheet to Structure the Deal
      3. Using Monte Carlo Simulations to Model Risk and Uncertainty
    14. 10. Equity-Based Compensation: Stock and Stock Options
      1. How Do Stock Options Work?
      2. What Is the Intrinsic Value of an Option? What’s the Time Value of an Option?
      3. Are Options High-Risk Investments?
      4. Do Employees Prefer Options or Stock?
      5. Understanding the Inputs to the Black-Scholes Model
      6. Firms Must Disclose the Methods and the Assumptions They Use to Cost Stock Options
      7. Using Monte Carlo Simulation to Determine the Value of Employee Stock Options
      8. Dilution, Overhang, and Run Rates
      9. Equity Compensation Is One Tool for Aligning Executive and Shareholder Interests
    15. 11. Financial Aspects of Pension and Retirement Programs
      1. Defined Benefit (DB) Plans
      2. Defined Contribution (DC) Plans
      3. Hybrid Plans
      4. The Shift from DB Plans to DC Plans
      5. Pension Accounting
      6. Why Base Costs on the Expected Rather Than the Actual Return on Plan Assets?
      7. How Do Firms Select the Appropriate Discount Rate?
      8. DB Plans Encourage Retirement
      9. The Future?
    16. 12. Creating Value and Rewarding Value Creation
      1. Aligning Pay with Performance
      2. Managing EPS Expectations
      3. Putting It All Together
      4. Appendix A: A Sample of Financial Measures Currently in Use
    17. Bibliography
    18. Endnotes
      1. Chapter 1
      2. Chapter 2
      3. Chapter 3
      4. Chapter 5
      5. Chapter 6
      6. Chapter 7
      7. Chapter 8
      8. Chapter 9
      9. Chapter 10
      10. Chapter 11
      11. Chapter 12
    19. Index
    20. FT Press
  6. Investing in People, Second Edition: Financial Impact of Human Resource Initiatives
    1. Copyright Page
    2. Dedication Page
    3. Acknowledgments
    4. About the Authors
    5. Preface
    6. Chapter 1. Making HR Measurement Strategic
      1. How a Decision Science Influences HR Measurement
      2. Hitting the “Wall” in HR Measurement
      3. The LAMP Framework
      4. Conclusion
      5. Software to Accompany Chapters 3–11
      6. References
    7. Chapter 2. Analytical Foundations of HR Measurement
      1. Traditional Versus Contemporary HR Measures
      2. Fundamental Analytical Concepts from Statistics and Research Design
      3. Fundamental Analytical Concepts from Economics and Finance
      4. Conclusion
      5. References
    8. Chapter 3. The Hidden Costs of Absenteeism
      1. What Is Employee Absenteeism?
      2. The Logic of Absenteeism: How Absenteeism Creates Costs
      3. Analytics and Measures for Employee Absenteeism
      4. Case Study: From High Absenteeism Costs to an Actionable Strategy
      5. Other Ways to Reduce Absence
      6. Exercises
      7. References
    9. Chapter 4. The High Cost of Employee Separations
      1. The Logic of Employee Turnover: Separations, Acquisitions, Cost, and Inventory
      2. Pivotal Talent Pools with High Rates of Voluntary Turnover
      3. Voluntary Turnover, Involuntary Turnover, For-Cause Dismissals, and Layoffs
      4. How to Compute Turnover Rates
      5. Example: Separation Costs for Wee Care Children’s Hospital
      6. Training Costs
      7. Performance Differences Between Leavers and Their Replacements
      8. The Costs of Lost Productivity and Lost Business
      9. Process
      10. Exercise
      11. References
    10. Chapter 5. Employee Health, Wellness, and Welfare
      1. Health, Wellness, and Worksite Health Promotion
      2. Skyrocketing Health-Care Costs Brought Attention to Employee Health
      3. Two Broad Strategies to Control Health-Care Costs
      4. Logic: How Changes in Employee Health Affect Financial Outcomes
      5. The Typical Logic of Workplace Health Programs
      6. Legal Considerations and Incentives to Modify Lifestyles
      7. Analytics for Decisions about WHP Programs
      8. Measures: Cost Effectiveness, Cost-Benefit, and Return-on-Investment Analysis
      9. Solving the Analysis and Measurement Dilemmas to Improve Decisions about WHP Programs
      10. Improving Employee Welfare at Work: Employee Assistance Programs (EAPs)
      11. Future of Lifestyle Modification, WHP, and EAPs
      12. Exercises
      13. References
    11. Chapter 6. Employee Attitudes and Engagement
      1. Attitudes Include Satisfaction, Commitment, and Engagement
      2. Satisfaction, Commitment, and Engagement as Job Outcomes
      3. The Logic Connecting Employee Attitudes, Behaviors, and Financial Outcomes
      4. Employee Engagement and Competitive Advantage
      5. Employee Engagement and Service Climate
      6. Measures of Employee Attitudes
      7. Analytical Principles: Time Lags, Levels of Analysis, and Causal Ordering
      8. Estimating the Financial Impact of Employee Attitudes: The Behavior-Costing Approach
      9. A Final Word
      10. Exercises
      11. References
    12. Chapter 7. Financial Effects of Work-Life Programs
      1. “Remixing” Rewards
      2. Special Issues Parents Face
      3. Work-Life Programs: What Are They?
      4. Logical Framework
      5. Analytics and Measures: Connecting Work-Life Programs to Outcomes
      6. Stock Market Reactions to Work-Life Initiatives
      7. Process
      8. Exercises
      9. References
    13. Chapter 8. Staffing Utility: The Concept and Its Measurement
      1. A Decision-Based Framework for Staffing Measurement
      2. Framing Human Capital Decisions Through the Lens of Utility Analysis
      3. Overview: The Logic of Utility Analysis
      4. Utility Models and Staffing Decisions
      5. Process: Supply-Chain Analysis and Staffing Utility
      6. Conclusion
      7. Exercises
      8. References
    14. Chapter 9. The Economic Value of Job Performance
      1. Pivotal Talent at Disney Theme Parks
      2. Logic: Why Does Performance Vary Across Jobs?
      3. Analytics: The Role of SDy
      4. Measures: Estimating the Monetary Value of Variations in Job Performance (SDy
      5. The Estimate of SDy
      6. Process: How Accurate Are SDy
      7. Exercises
      8. References
    15. Chapter 10. The Payoff from Enhanced Selection
      1. The Logic of Investment Value Calculated Using Utility Analysis
      2. Measuring the Utility Components
      3. Analytics: Results of the Utility Calculation
      4. Process: Making Utility Analysis Estimates More Comparable to Financial Estimates
      5. How Talent Creates “Compound Interest:” Effects of Employee Flows on Utility Estimates
      6. Analytics: Calculating How Employee Flows Affect Specific Situations
      7. Logic: The Effects of a Probationary Period
      8. Logic: Effects of Job Offer Rejections
      9. Logic: The Effect of Multiple Selection Devices
      10. Process: It Matters How Staffing Processes Are Used
      11. Cumulative Effects of Adjustments
      12. Dealing with Risk and Uncertainty in Utility Analysis
      13. Process: Communicating the Impact of Utility Analyses to Decision Makers
      14. Employee Selection and the Talent Supply Chain
      15. Exercises
      16. References
    16. Chapter 11. Costs and Benefits of HR Development Programs
      1. The Relationship Between Training Expenditures and Stock Prices
      2. Utility Analysis Approach to Decisions about HRD Programs
      3. Break-Even Analysis Applied to Proposed HRD Programs
      4. Costs: Off-Site Versus Web-Based Meetings
      5. Process: Enhancing Acceptance of Training Cost and Benefit Analyses
      6. Conclusion
      7. Exercises
      8. References
    17. Chapter 12. Talent Investment Analysis: Catalyst for Change
      1. Better Answers to Fundamental Questions
      2. Intangible Does Not Mean “Unmeasurable”
      3. The HC BRidge Framework as a Meta Model
      4. Lighting the LAMP of Organization Change
      5. References
    18. Appendix A. The Taylor-Russell Tables
    19. Appendix B. The Naylor-Shine Table for Determining the Increase in Mean Criterion Score Obtained by Using a Selection Device
      1. Using the Table
    20. Index
    21. FT Press