From CRM to ERM: Employee Relationship Management
“It’s not a far cry to take customer relationship management principles and apply them to employee relationship management.” – Kristie Evans
Recently, I was interviewed for an article about Salesforce’s acquisition of Rypple and the investments vendors were making in the HCM space. Human Capital Management consulting and technology is big business – in the billions of dollars – and it is not surprising to me to see organizations like SalesForce seek to penetrate that market. During that article, I made the comment that it isn’t a far cry to take the principles of CRM and apply them to ERM. During the Lunch Break, we dug a little deeper into that – because – it’s about the relationship.
Pure and simple.
The Value Chain
If we start with Harvard’s Michael Porter and his work around an organization’s Value System and its impact on strategic planning which has spanned the last 25 years, an illustration of the value chain shows us where the CRM processes support the organization – in Marketing and Sales and their efforts to increase “demand” for products or services. CRM processes and technology “enable” the organization to execute timely and succinctly, manage the data, and identify opportunities and trends.
Dinesh Pratap Singh’s visualization for Michael Porter’s Value Chain
The identification of opportunities and trends is the most important yield of the data because it directly impacts the organization’s ability to gain new customers or increase the relationship with current customers, helping the business to increase its market penetration and grow stronger.
At first glance, customers and employees seem distantly related. Part of the same “value system” but not directly interacting or impacting one another unless the position is connected to the value chain’s primary activities.
The “customer” or “consumer” side of the business is outward facing and the customers are “outside” of the organization. Any person or process that impacts customers is working within one of the primary activity areas with both internal and external inputs and outputs.
The “employee” side of the organization or “human capital management” is self-contained within the organization and a “support” activity as are the people and processes dealing with human resources and the workforce primarily contained within the organizational structure.
So these two stakeholder groups could be perceived as distant relatives within the organization.
The Power of Technology
Technology enables the tracking of data but it is the human context that supports the development of the relationship. By tracking the data, a holistic picture emerges that tells the story of how this customer relationship was formed and what its status is – evangelist, content, concerned, or dissatisfied.
- How many communications occur on a regular basis to ensure the customer is continuing to receive value from the relationship and they are being listened to?
- What products and/or services do they find most valuable? Are there other products or services that could be of value?
- Have they had any issues with service, delivery, or quality that need to be addressed?
- What efforts have been made to enhance the relationship and move them closer to evangelist?
- Is the relationship mutually valuable and trusting? Do both parties share information that impacts the other in a proactive way to ensure the relationship continues providing value?
You can see that a lot of effort is put into customer relationship management – to protect and nurture this relationship.
If we use SalesForce’s CRM as an example of a technology enabler, we see tracking of contacts in ways that are very similar to many other applications as it asks for the basic demographic information such as name, address, and contact information. The next step of tracking “leads” – or contacts that have a need or interest in the business and its products and services – becomes a bit more granular.
The goal – of course – is to guide a contact through the marketing and sales funnel and convert them into a customer. The CRM tracks accounts in various stages and associated roles within the value chain.
HRM and the Value Chain
Now, what if we re-position where Human Resources Management sits within the Value Chain above? Instead of HRM as a supporting activity, what if we consider how HRM impacts Operations and the delivery of products and services by considering the impact HRM has on talent management? Products and Services are not delivered without a human element involved and the ability to secure and nurture employees’ and their talent in a way that impacts Operations positively has a direct impact on the bottom line by improving the value chain. The more efficient and cost effective the management of primary activities, the greater the profit margin for the organization.
Dinesh Pratap Singh’s visualization for Michael Porter’s Value Chain
This is an opportunity for HRM to provide direct value and impact to the stakeholders of the business.
By moving HRM from the position of “support activities” and being the policy police to being a strategic component of delivering value to customers and part of the value chain. This shift is the shift to human risk management – to:
- identifying opportunities to enhance the talent in the workforce and increase productivity,
- to managing the costs of talent through competitive benchmarking, efficient delivery of programs and tools, and data analysis,
- and to mitigating risks associated with loss of talent and increased costs through succession and workforce planning, trending, innovation, and proactive initiatives.
Customers are stakeholders who find the products/services valuable enough to support them by purchasing or funding (as in the case of a nonprofit) the development and delivery of those products or services for their use. It is with customers that the organization begins to gain strength and grow and without which, the organization cannot survive.
Talent is the opposite side of the coin, i.e. part of the value chain that provides goods or services to the customer. So, both of these components are inter-related as they are both engaged in the exchange of goods or services. The customer spends money to pay the organization for delivery. The organization takes that money and spends it on talent to pay for delivery to the customer. Both of these components are necessary in order to deliver the output – the product or service that has value.
So how does the ERM Value Chain work?
Talent Pipeline à Productivity à Workforce Planning
The employee relationship value chain is built upon the impact talent has on Operations.
We begin with filling the pipeline with talent in the same way the “customer relationship value chain” starts with filling the pipeline with prospects. Some of the metrics I hear associated with marketing are 100 contacts to yield 1-2 prospects or 1%. Of those 1-2 prospects, it now takes an average of 17 touches to nurture the relationship. There is a saying about customers that “they love to buy but they hate to be sold.” Perhaps a talented professional acts similarly – they love an exciting new opportunity but hate to look for it. That’s filling the talent pipeline and this is the beginning of nurturing the stakeholder relationship – the future talent is the stakeholder.
Once hired – the opportunity is in impacting productivity in a positive way as quickly as possible. By improving the process of integration for the new talent and partnering to identify potential future opportunities, the relationship becomes more firmly bonded and increases the loyalty of the new employee. Loyalty has tremendous value to the organization whether it is in the form of a customer or an employee.
Continue to enhance the relationship through workforce planning with your talented new source. Consider their current state of skills, how they perform and what helps their performance the most and consider how you can develop them for future opportunities. Similar to cross selling new services within a customer – look for opportunities where the new employee can enhance their experience with the company in the future which will increase loyalty, retention, and productivity – all impacting Operations and the value chain leading to the customer in a positive way.
From CRM to ERM
So if we compare CRM activities to talent management activities, we can see the correlation between various task and initiatives. When we are recruiting, we are selling our organization and the position to the prospective candidate – something that may have been lost during the recent years of the recession where the buyer was king. But business is cyclical and recruiting will once again require marketing.
Sales is our effort to qualify the lead or the candidate. We have all been involved in evaluating candidates and considering their fit with the position and this is no different from qualifying the prospect and determining if the products or services fit their needs.
Retention is king as retention keeps the value high if well managed. Keeping customers and keeping employees is more stable and value is compounded as the relationship deepens and becomes more loyal and trusting.
Consider if all employees were tied directly to the value chain through their digital employee records. Each employee has a role to play in delivering the product or service to the customer and it is clearly identified in the system. Departments now come under the heading of the value chain and reports can be written to analyze skills, costs, and risks associated with the workforce and its impact on the value chain.
Consider the enormous value this could have to an organization in strategic planning. And then finally, Human Capital Management then transitions to “talent risk management” – the risk of getting it, keeping it, and replacing it.
Our next HRL Lunch Break is Thursday, February 16th, 2012 – same time – 1:15 – 1:45 ET and our topic is “Piecing Your Business Case Together with Market Analysis”.
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Thanks for reading – hope to see you next time.