SHRM - Business
Accounts Receivable Turnover
*Activity ratio* that measures the efficiency of debt collection. A higher ratio is preferable, but a ratio that is too high could indicate excessively tight credit policies that could hurt sales. Net Credit Sales/Average Accounts Receivable
Source Validity
Determining this involves considering the following information about gathered data: -Does the source have authority? -Does the source have any possible biases? -Are the sources used clearly cited? -Are the facts relevant? -Is the data current? -(If supporting an argument) Is the argument sound?
Data Advocacy
Developing an inquiring mindset, learning what data drives the business and where it can be found, developing partnerships across the organization to promote EBDM, and modeling the skill of EBDM to the entire organization through the decisions HR makes and the plans of action it undertakes
Evidence Based Decision Making (EBDM)
Ben Eubanks recommends 6 steps for HR professionals to consider when making a decision: *1. Ask* *2. Acquire* *3. Appraise* *4. Aggregate* *5. Apply* *6. Assess*
Challenges of Interviews
Challenges include: -Can be time-intensive -Requires strong relationship-building skills -Requires vigilance to avoid bias from influencing questions and interpretation of answers
HR Data Advocate
Denise *Rousseau* and Eric *Barends* recommend the following ways to become a better data-based HR practictioner, or _________________: -Develop a *questioning mind* (don't accept status quo, ask why) -Build *fluency in the scientific literature* for HR (regularly scan resources for new and reliable data sources and monitor discussion topics) -Gather data on a *continuous basis* about the efficacy and efficiency of legacy systems and stakeholder interests -Use evidence when communicating with stakeholders -Institutionalize the competency in the HR function
Profit Margin
Profitability after all expenses have been deducted, expressed as a percentage of revenue (sales) (Total Sales - Total Costs)/Total Sales
Return on Investment (ROI)
Profitability ratio for a specific investment, such as a capital expense project. It is usually used to compare the economic costs and gains of options. Good when > 1. If it is negative, organizations should consider factors whose economic impact is more difficult to measure (Gain from Investment - Cost of Investment)/Cost of Investment
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
Profitability ratio often used as measure of management performance Earnings Before Interest, Tax, and Depreciation/Total Sales
Gross Margin
Profitability ratio showing the percentage of total sales revenue after incurring the direct costs of producing goods and services sold. The higher the percentage, the more the company retains on each dollar of sales to service its other costs and obligations. (Total Sales - Cost of Goods Sold)/Total Sales
Earning Per Share (EPS)
Profitability ratio used by equity holders as a standard expression of earnings Net Income/Number of Outstanding Shares
Organizational Life Cycle
Progression through which organizations evolve as they grow and mature 1. Introduction 2. Growth 3. Maturity 4. Renewal/No growth/Decline
Data Analysis
Being able to organize data so that it reveals patterns and to analyze it to detect logical relationships
Evidence-Based Decision Making (EBDM)
Being able to apply the results of data gathering and analysis to make better business decisions
Debt to Equity Ratio
A *leverage ratio* reflecting how an organization is funding its growth. This varies by industry and strategy type. Total Debt/Shareholders' Equity
Debt to Asset Ratio
A *leverage ratio* reflecting the amount of exposure to risk from debt that an organization has assumed. A number greater than 1 indicates that an organization has more debt than assets. Total Liabilities/Total Assets
Data Warehousing
A component of business intelligence that involves data gathered from different systems that is then translated into a standard format, cleaned ("scrubbed") of errors and duplications, and then stored in databases related to specific uses (e.g. operations, finance, sales, HR). Organizations can use ERP systems to integrate databases and allow everyone access to the current data
Data Gathering
A component of business intelligence where data is routinely gathered through different computer systems in all parts of the organization (e.g. point of sale performance, purchasing and sales transactions, employee and customer records, security terminals). You must know what constitutes sufficient, credible, and objective evidence and be able to find it
Query and Reporting Capabilities
A component of business intelligence where users can access the data they need and use stand-alone or integrated (ERP) business application software to sort, describe, and analyze data in myriad ways and to create report graphics, such as bar or pie charts
Income Statement
A financial statement that compares revenues, expenses, and profits over a specified period of time, usually a year or quarter. This indicates an organization's net income and provides key information about the organization's performance
Cash Flow Statement
A financial statement that shows how money is flowing into and out of the organization over a period of time. Analyzes activities that consume value (production, administration) and activities that produce value (sales, investments), on how much cash or cash equivalents the organization has on hand
SWOT Analysis
A group decision-making tool that allows the group to *brainstorm strengths, weaknesses, opportunities, and threats* and agree on a numerical value for each
Force-Field Analysis
A group decision-making tool that was designed to *analyze the forces favoring and opposing a particular change*. The group identifies and weights factors that could influence an outcome in either a negative or positive manner according to their possible impact. The group then uses these factors to score different opportunities. They agree to pursue those showing favorability for change and avoid initiatives that face very strong resistance.
Cost-Benefit Analysis (CBA)
A group decision-making tool where *group discussion* is critical to identifying all *relevant costs and benefits*
Multi-Criteria Decision Analysis (MCDA)
A group decision-making tool where the team determines critical *characteristics of a successful decision* Examples: -Ability to meet project requirements -Likelihood of success -Least chance of causing secondary risks A matrix is used to score each alternative and compare results
Current Ratio
A liquidity ratio that indicates level of working capital. Creditors prefer this to be high Current Assets/Current Liabilities
Business Case
A presentation to management that establishes that a specific problem exists and argues that the proposed solution is the best way to solve the problem in terms of time, cost efficiency, and probability of success. -Form and level of formality will vary by organization
Focus Group
A small group (usually 6-12 people) invited to actively participate in a structured discussion with a facilitator. Usually last 1-3 hours and are used to follow up on surveys and for various other purposes
Balance Sheet
A statement of the organization's financial position (assets, liabilities and equity) at a particular time Assets - Liability = Equity
Business Intelligence Portal
A user's point of access to the data and applications stored on an information system. When effective: -Can be customized to user's specific needs -Presents information logically -Easy to navigate -Can be scaled to different media -Uses automated tools ("click to open," "drag and drop") -Provides security by restricting access and limiting users' actions/privileges
Conditions that Make Change Possible
According to McKinsey & Company's consultants, Emily Lawson and Colin Price, these include: 1. Shared Purpose 2. Reinforcement Systems 3. Skills required for change 4. Consistent role models
Advantages of Focus Groups
Advantages include: -Provides a format that is flexible and relatively comfortable for discussion -Allows for group brainstorming, decision making, and prioritization -Can provide group consensus -Enables HR to learn about employee needs, attitudes, and opinions in a direct format -Gives employees direct input
Advantages of Interviews
Advantages include: -Safer, confidential environment may generate significant information -Comments can suggest direction for further group research (focus groups and surveys)
Macroenvironment
All the factors that exist outside the organization that could influence an organization's strategic decisions Include: -Industry and market conditions and behaviors -Events and trends in society
Value
An organization's success in meeting its strategic goals -Definition and perception of this can vary and can be influenced by mission and culture
Readiness for Change
Assessing an organization's __________________ ________ _____________ involves asking: -What is the nature of the change? -What is the expected duration? -What key milestones are associated with the change? -Where is the organization in the change process? -Who will have primary responsibility for implementing the change? -What language and cultural factors will impact the change? -What role will HR play in implementing the change? -What fears might people have about the change? -How much resistance is anticipated? From whom? -How will the organization deal with the temporary drop in productivity that may result from the change? -What benchmarks will be established? -How will local interests and needs be gathered and considered during change planning and implementation?
Critical Evaluation
Examining an idea, a process, or an event with an open, objective, and inquiring mind. Includes: Data Advocacy Data Gathering Data Analysis EBDM
Environmental Awareness
HR professionals can improve their ______________ ____________ by: -Reading business press including international publications -Staying current with academic HR research -Analyzing the organization's performance -Monitoring the performance of other organizations and competitors -Using third-party information from government agencies, international bodies, nonprofits, and professional associations -Scanning annual reports from businesses or groups with comparable markets and workforces
Price to Earnings (P/E)
Market value ratio that indicates market confidence in the organization's ability to maintain or increase earnings Stock price per share/Earnings per Share
Quantitative Data
Objective measurements that can be verified and used in statistical analysis Example: # of employees in an organization # of female employees average # of hires each quarter
Rivalry Among Existing Competitors
One of Porter's Five Forces that can be affected by any of the other forces
Threat of Entry
One of Porter's Five Forces that describes how easily *new competitors can enter the industry* -High threat = management and workforce must be nimble
Threat of Substitution
One of Porter's Five Forces that describes how easily competitors can capture customers by offering a *similar product* or product that *satisfies their need in a different way* -High threat = organization may have to compete on price -Low threat = organization has more capital to invest
Bargaining Power of Buyers
One of Porter's Five Forces that describes how vulnerable organizations are to the actions of customers looking for the lowest price or large customers High = marketing competencies are key; may need to align compensation practices to motivate marketing and sales toward behaviors important to strategic objectives
Bargaining Power of Suppliers
One of Porter's Five Forces that describes how vulnerable organizations in the industry are to the actions of upstream supply chain partners High = HR must be sure that job descriptions include skills such as negotiation and managing risk and competencies
Maturity Stage
The HR focus during this stage of the Organizational/Product Life Cycle includes: -Building and retaining a productive workforce to meet a high level of demand -Establish stable leadership through succession planning -Implement policies -Communicate and reinforce organizational culture in policies and practices -Improve channels of communication so that strategy can be understood and aligned at all levels and in all areas -Make sure that formalization does not make the organization less agile and innovative -Consulting to other parts of the organization to solve problems that affect productivity -Modeling awareness of external influences. HR can be a champion of environmental scanning
No Growth Stage
The HR focus during this stage of the Organizational/Product Life Cycle includes: -Maintaining engaged workforce with fewer resources -Dealing with increased turnover rate -Delivering HR services with shrinking budget
Renewal Stage
The HR focus during this stage of the Organizational/Product Life Cycle includes: -Reductions in workforce to right-size the organization as it rebuilds -A change in leadership and workforce requirements -Streamline structures and policies -Add responsibilities to job descriptions and remaining staff
Growth Stager
The HR focus during this stage of the Organizational/Product Life Cycle includes: -Tactical buildup of talent -Tactical increase in complexity of structure and policies -Help leaders redefine their roles and share leadership with others -Formalize job descriptions -Manage changes caused by the organization's growth and increased formalization
Introduction Stage
The HR focus during this stage of the Organizational/Product Life Cycle includes: -Talent acquisition -Defining a culture in line with founders' values -Controlling risks associated with HR
Business Intelligence
The ability to use information to gain a deeper understanding of an organization and its parts, to see how the whole organization and its parts are performing (through business metrics) and to make sound business decisions that are grounded in relevant and accurate facts rather than assumptions or 'gut feelings' Analytics can be distinguished based on the analyses' temporal focus: backward, current, or forward
Secondary Activities
The following are common examples of ______________ _______________ in the Value Chain: -Management -Finance -Legal -Supply Management -HR Management -Technology
Primary Activities
The following are common examples of ______________ _______________ in the Value Chain: -R&D -Operations -Marketing and Sales -Fulfillment
Accounts Payable
The money an organization owes its vendors and suppliers
Value Chain
The process by which an organization creates the product or service it offers to the customer. Sequential and simultaneous contributions of a number of internal and external participants.
Stockholder Equity
The value of all stocks held by investors
Online Analytical Processing (OLAP)
These applications may be included in HRIS products and greatly enhance business analysis. These applications can analyze data faster and in more ways than traditional relational databases due to the way the data is stored. Relational: data stored in separate tables (row: data record, column: attribute) _________________________: uses a server sited between the user and the organization's database. Server takes the data and stores it in a multidimensional "cube". Each dimension contains all the attributes in the database
Non-financial Measures
These examine changes in areas that are not measured in terms of currency but whose effects can be monetized to show their financial effect. Such measures could include: -Share of market (may signify competitive strength) -Reputation among investors, consumers, governments, and political groups -Level of brand awareness among consumers -Recognizable employer brand (useful in recruiting and hiring) -Achievements in social responsibility -Reputation for quality, customer relations, and innovation -Achievements in social responsibility -Reputation for quality, customer relations, and innovation -Efficiency (or use of most current and efficient technology and processes) -Activity ratios (measure the efficiency with which resources are used to generate profit i.e. number of inventory turns in a period, average age of inventory) -Employee retention and job satisfaction ratings -Employee engagement
Dashboard Analytics
These focus on current data that measures performance in key areas. Can present data in different ways (i.e. geographically, functionally, by age or gender)
Group Decision-Making Tools
These include: -SWOT analysis -Multi-criteria decision analysis (MCDA) -Cost-benefit analysis (CBA) -Force-field analysis
Advanced Analytics
These use historical and current data to get a better sense of the future and even to shape the future. These apply formulas and algorithms to data warehouses in order to predict outcomes -Can take advantage of machine learning (the ability of an information system to make its own decisions based on the data it is receiving)
Consultation
This HR competency requires the ability to diagnose problems or identify opportunities, develop effective solutions, win support for the solutions, and then implement them effectively
Progressive
This approach to planning and implementing change holds that change originates at the top and is broadcast to the entire organization. Individuals slowly change with added information, and the change becomes uniform across business units.
Organic
This approach to planning and implementing change relies on *independent centers and multiple origins* of the change within the organization. Points of origin can be at any level. Organic change radiates out unevenly but accelerates when top leadership supports local change and local leaders.
Cascade
This approach to planning and implementing change relies on a *top-down sequence* with complete change at each level. Change at one level or unit high up in the organization eventually transforms the units and levels beneath it
HR Budget
This budget includes *ongoing operational costs* related to essential services and *one-time project costs* planned to support strategies and objectives Operational: -Talent Acquisition -Training and Development -Compensation and Benefits -Philanthropy -IT -Employee and labor relations -Planning -Health, safety, security
Zero-Based Budgeting
This budgeting method "zeroes out" the previous year's budget and no funding commitments for the coming year are assumed. The budget for every item must be proposed anew. -all objectives and operations are given priority -each unit or goal is ranked and available funds are given in order -All expenditures must be justified for each new period and budgets start at 0 (+) Reduces wasteful spending practices that often go unchallenged in traditional budgets (-) Can be time-intensive at first but becomes more efficient with experience EXAMPLE: A department would need to justify its entire budget and show how its funding helps the organization meet its goals
Activity-Based Budgeting
This budgeting method identifies the cost factors for spending activities and uses these to estimate funding requirements. Once historical information about cost factors has been gathered, estimates can be more precise -Recognizes the interrelationships among the various activities required to create value in an organization -Basis for budgeting is not how to divide a set amount of money but how much it costs to perform different enterprise activities -Funding may be allocated based on the strategic significance of the activities (+) Gives leaders more control over spending decisions EXAMPLE: An organization asks functions what resources they will need to produce specific outputs or levels. More resources are transferred from lower-priority areas or areas with excess capacity
Incremental Budgeting
This budgeting method uses the previous year's budget as a starting point for the next year's budget. Program and function leaders are told to increase or decrease it by a certain percentage -AKA "Line-Item budgeting" -traditional form of budgeting -Additional funds must be requested based on need and objectives (+) Less time-consuming (-) Does not recognize changes in business circumstances or practices that should affect spending EXAMPLE: Installing new computer equipment or providing training requires a separate budget request, on top of the usual budget
Formula-Based Budgeting
This budgeting method uses the total amount of a function's budget and apportions it to departments or activities according to defined percentages -Different units or operations receive varying percentages of the budget -General funding is changed by a specific amount, and the unit budgets are adjusted accordingly EXAMPLE: A government agency could experience a system-wide 5% budget decrease, which would be spread among its units according to different percentages
Recommended Solution
This component of a business case *defines the objectives for an ideal solution* (desirable outcomes) and the proposed action is described in sufficient detail to show how it meets these objectives. In some cases, alternatives may be described as well as the reasons they are not being recommended EXAMPLE: HR proposes conducting a customized salary and benefits survey for the targeted growth areas and the current countries in the portfolio and building a policy and practice "culture" for the existing individually run countries that would make acquiring a partner or growing organically more feasible
Estimated Costs and Time Frame
This component of a business case establishes a project budget that should include all foreseeable elements (labor, equipment, fees, travel, etc.) plus a reserve for the unforeseeable based on the project's risk. The time frame should keep in mind not only the project requirements but also the organization's needs. Longer or more complex projects may be structured in phases, with gates or review milestones at which management can decide whether to proceed or not. EXAMPLE: HR provides a cost estimate but also estimates this amount in terms of the benefits this information could provide in the event of an acquisition or merger
Statement of Need
This component of a business case is the *condition or change impelling the function's action* EXAMPLE: HR is aware that the organization's strategy includes growing its South American businesses. Until now, these businesses have operated independently from headquarters and from each other. The lack of common policies and processes for compensation and rewards and talent management and the lack of a shared organizational culture would inhibit the strategy.
Risks and Opportunities
This component of a business case is when outcomes that could decrease the project's chance for success, outcomes that could present new opportunities that would require action, and the risks of doing nothing at all are discussed. EXAMPLE: HR foresees the difficulty of obtaining this information in some businesses with poor data records but has included extra time and resources in its reserves for this. There is a currently unresolved legal issue about obtaining access to data in one country. The opportunity is that this information can come at an opportune time for the company's acquisition strategy and make integration much smoother
Consulting Model
This involves 4 steps to manage change: 1. Define problem 2. Design and implement solution 3. Measure effectiveness 4. Sustain improvement
Qualitative Data
This involves a subjective evaluation of actions, feelings, or behaviors. Measurements can be made by a third-party observer or can be done using self-assessments. -Can include observations of steps in a process or of traits that are present in people who are rated as successful in a job
Lewin's Change Model
This is often used to explain the dynamics through which organizational change takes place. 1. *Unfreezing* Unfreeze the current state. Get people to accept that the change will occur. Reduce factors that work against change 2. *Moving* Move toward the new state. Focus on getting people to accept the new, desired state 3. *Refreezing* Refreeze the new state. Once change is implemented and generally accepted, make it a regular part of the organization
Kotter's Steps for Leading Change
This provides insight into the "how" of the change management process by specifying contributors to successful implementation of change: 1. Create a sense of urgency 2. Assemble a strong guiding team 3. Provide a clear vision 4. Over-communicate 5. Empower action 6. Ensure short-term successes 7. Sustain progress and build on achievements 8. Institutionalize
J Curve
This refers to the change in employee productivity and engagement that is affected by both large shifts in culture, structure, and strategic goals and small changes in roles and processes When change is introduced, there is a *decline* in performance, then a *slow return to previous levels*, and if the change is effective and is managed effectively, this is followed by *rapid growth to a new level of performance*
Aggregate
This stage of Eubanks' EBDM involves combining and organizing the data to prepare it for analysis
Appraise
This stage of Eubanks' EBDM involves determining whether the evidence gathered is relevant, valid, reliable, accurate, complete, and unbiased
Acquire
This stage of Eubanks' EBDM involves gathering information from various sources
Assess
This stage of Eubanks' EBDM involves monitoring the solution that has been implemented and objectively measure the extent to which the objectives have been attained
Ask
This stage of Eubanks' EBDM involves translating the situation into a question that can be answered through information gathering
Apply
This stage of Eubanks' EBDM is when you being to see the logical connections within the data and with the issue. Use the data to draw conclusions, develop possible solutions, win sponsor support for a decision, and take action
Renewal/No Growth/Decline
This stage of the Organizational Life Cycle involves *decreasing demand* (because need no longer exists or need is satisfied more effectively by someone/something new) Organizations can: -*Renew themselves* by completely changing their offerings, where they compete, or how they compete. If they succeed, revenues rise. Organizations must return to their innovative roots. -*Take no action* and accept continued *low revenue.* As time goes on, organizations and products have few resources to take advantage of opportunities that might deliver growth. Fewer employment advancement opportunities arise. Compensation is static. -*Take no action* and experience a *decline in revenue* that will make it impossible to compete or operate. Organization shrinks in size. In-fighting increases. May swing back to more autocratic control by leaders.
Introduction
This stage of the Organizational Life Cycle involves: -*Low revenue* caused by little market awareness (of the organization, product, services, etc.) and the market's resistance to change -Entrants must *create an identity* with customers and develop a *value proposition* -Vision, innovation, and energy are critical -Little structure, no formal policies -May not have a dedicated HR function, may be outsourced, or may be performed by a top manager
Growth
This stage of the Organizational Life Cycle involves: -Increasing revenue -Varying rates of growth (dependent upon industry, enterprise, or product) -Focus shifts to creating processes that will increase efficiency without stifling innovation -Requires awareness of markets and customers -Managers must be disciplined/focused -Competing demands for innovation and efficiency; requires formalization of structure and processes without affecting culture
Maturity
This stage of the Organizational Life Cycle involves: -Market saturation -Growth only through introduction of new products or customer groups or through acquisitions -Profit margins become narrower and efficiency becomes more important -Greater formalization, more complex reporting and decision-making structure, and possible bureaucracy -Need for greater control -Can include loss of connection with the organization's strategy
Aguirre's Integrated Change Model
This uses Lewin's 3 steps to describe *what* is happening and Kotter's 8 steps to describe *how* it is happening: 1. Current State (Unfreeze) -Create a sense of urgency -Assemble a strong guiding team -Provide a clear vision 2. Transition State (Move) -Over-communicate -Empower action -Ensure short-term successes 3. New State (Refreeze) -Consolidate progress -Institutionalize
Investment
To create an effective business case for _______________________, HR professionals should: -Research the proposal carefully (gather facts, investigate alternatives, consider risks) -Align proposal with organizational strategy -Get early buy-in from key decision makers and influencers -Put the proposal in writing (explain the issue and needs, describe the solution using facts, not emotion) -Include specific metrics to evaluate its effectiveness
Equity
What a company owes to its owner(s) or shareholders; what is left of a company's assets after its liabilities have been discharged
Liabilities
What an organization owes Rent, loans, earned wages, tax debts, accounts payable
Assets
What an organization owns, tangible or intangible Investments, Cash/Cash equivalents, property, copyrights and patents, proprietary knowledge
Data Gathering Data Warehousing Query and Reporting Capabilities
What are the 3 main components of Business Intelligence Systems?
1. Cascade 2. Progressive 3. Organic
What are the 3 organizational approaches used to plan and implement change?
1. Statement of Need 2. Recommended Solution 3. Risks and Opportunities 4. Estimated Costs and Time Frame
What are the 4 components of a business case?
1. Incremental 2. Zero-Based 3. Activity-Based 4. Formula-Based
What are the 4 main budgeting methods?
Enterprise Resource Planning (ERP)
a suite of applications called modules, a database, and a set of inherent processes for consolidating business operations into a single, consistent, computing platform -allows everyone in the organization to access the most current data Includes: 1. Finance Resource Management 2. Supply Chain Management 3. Human Resource Management (HRIS) 4. Customer Relationship Management 5. Manufacturing Resource Planning
Decline Stage
and The HR focus during this stage of the Organizational/Product Life Cycle includes: -Reducing the workforce size -Helping the organization's members manage constant stress and workplace changes necessary to survive -Attracting necessary talent. Reduced assets and prospects demand greater creativity in talent acquisition