measurement and hr, the path to people analytics

1

Measurement and HR The Path to People Analytics

Human Capital Management Institute

About Human Capital Management Institute

Workforce Assessment Strategic Consulting Training

Best Practices Workforce Analytics and Planning Benchmarking

- We Bring Financial Discipline, Standards and Rigor to the HR Function -


HCMI Background:

World leading tools/methodology

100+yrs experience Analytics & Planning

Deep Finance & HR expertise

Advisory Board CFOs and HR heads

What We Do:

Measure the immeasurable in human capital

Full service tools, consulting & training

Transform workforce data into intelligence

Tools so HR can make the business case

The Human Capital Management Institute (HCMI) was founded on the belief that organizations can and must, find better ways of measuring their investments in human capital. Our vision of the future is one in which human capital measurement and information is as integral to business decision making as financial information is today.

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HCMI Products and Services

3 Human Capital Management Institute

Human Capital Metrics Handbook Training and Advisory Support Workforce Analytics Training Workforce Planning Training Custom onsite training

620+ Metrics and Detailed Definitions

Data Integration Blueprint

Workforce Analytics Assessment

Analytic Consulting On-Demand

Analytics COE and Roadmap Design

Statistical Prediction

Correlation Coefficient ( 0-1)

Factors Leading to Increased Turnover

Job Title or Position

Dissatisfaction With Compensation

High vs. Low Turnover Manager

Commute Distance

Driver #3

Driver #2

Driver #1

.50

.33

.27

.02

Low

Turnover Impact

High

Turnover

Impact

Some

Turnover

Impact

.11

Work Location

Number of Jobs in Last 3 Years .70

Hired Through Employee Referral .19

Initial Reports & Analysis

Data Gathering

First Good Metrics

HR Data Warehouse

Drill-down, standard reportsScenario Analysis

External Benchmarking

Context for decisions

Data

Driven Decision

Making!

Turnover, Headcount, Hiring

HRIS system data

COE Formation

Data Errors

HR Analytics Mandate

HR Standards EstablishedLost HR

Credibility

HR data/systems Assessed

HR Data Cleansed historical data scrubbed

Bus. Units

Reject

Analysis

Data Errors

Historical data

still bad

1st Analytics Study

Advanced Analytic Studies

HR Analysis Validated

Integrated HR Databases

COE Launches Training Courses

Bus. Units Demand

more

Analytics journey steps

Setbacks along the way

Journey path and goal

CONSULTING SERVICES

Integrated Dashboard

DASHBOARDS PRO

TECHNOLOGY SOLUTIONS

Human Capital Financial Statements Human Capital Impact Statement Human Capital Asset Statement Human Capital Flow Statement

Workforce Quantifier ROI Calculator ROI of Workforce Decisions Cost of Turnover, Cost per Hire

Workforce Planning Link Workforce and Financial Metrics Forecast Skills, Costs, Talent and

Productivity

Job Framework Mapping Integrated Taxonomy 15,000+ jobs Map Critical Job Roles

Span of Control Optimizer Tool Benchmark and Optimize Spans Optimize Management Layers

Career Path Quantifier ROI of Career Path Build, Buy or Lease Talent Analysis

$$$ Financial Impact

Metrics

Data Blueprint

Predictive Modeling

TRAINING & SUPPORT

Value Creation in Todays Marketplace

Human Capital Management Institute 4

Intangible Capital Value

Tangible Assets/Value

Human Capital = employee knowledge, training, productivity, experience, culture, leadership, development, performance, creativity, etc.

Are we managing the right things or just measuring what we know how to measure?

Measures are well established for modern Finance as a Decision Support Science

Hard to Measure

Easy to Measure

Market value driven by factors not on a balance sheet

Intellectual or Human Capital

vs.

The Future of Talent = Analytics Attraction, Development, Retention and Performance

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6

The Most Important Metrics for Human Capital

Source: Deloitte Global Human Capital Trends 2015

Gap = Importance vs. Capability


Analytics Adoption Over Time

Source: Gartner 2014

Analytics Are No Longer a Nice-to-Have


Getting Finance to See the Value of HR


What is the Language of Business?

What does Management Care About Most?

What is HR most uncomfortable talking about?

$$$

$$$

$$$

Traditional Financial Statements Whats Missing from this Picture

Financial statements are used by many different stakeholders

But they leave out the company's most valuable asset: The Workforce.

Stakeholder Use

Company Leadership

Tool for business decision making that may affect an organizations continued operations and annual report to stockholders

Prospective Investors Assess the success and viability of investing in a business

Financial Institutions (banks and other lending companies)

Decision to lend to a company or extend debt securities

Government Entities (tax authorities)

Ascertain the propriety and accuracy of information for legal, tax and audit purposes

Vendors who extend credit Assess the creditworthiness of the business

Media and the General Public Variety of reasons


Oops!

Polling Question


A. We measure joiners(new hires), leavers (terminations), and total staff headcount

B. We measure recruiting time to fill and cost per hire

C. We measure turnover rate and management span of control

D. We measure quality of hire and ROI of training

E. We measure workforce productivity and Human capital ROI

What are you Measuring Today

What to Measure Measurement Trick #31

Measurement Best Practices: 1. Metrics that link to business results

2. Metrics that are actionable

3. Metrics that identify, quantify, and clarify issues across the employee cycle

4. Metrics to capture leading versus lagging indicators


SHOW ME THE MONEY!


15% productivity gain and lower costs ($55.0 Billion Package Delivery Co. )

Predicting sales stars pre hire

{$1.0 Billion Bank}

ROI of sales training {$2.0 Billion Retail Co.}

Location optimization for talent growth

{ West Coast Regional Bank}

Employee engagement to revenue impact {$1.0 Billion public Airline}

40% voluntary turnover reduction {public, financial services co.}

ROI of internal vs. external hires {public bank}

$1.1 Billion Annual

$264 Million Annual $1.1 million per sales person

$250 Million Annual $250k per Salesperson

$200 Million 10 years

$96 Million Annual $5 per flight premium

$12 Million Annual

$6 Million Annual

Challenge of Measuring Human Capital

Compensation

Transfers

New Hire Turnover

Succession Data

Turnover

Training

Recruiting

Em

ploy

ee D

ata

Benefits

Span

of Control

Workforce

Planning

Success Advanced

Analytic

Insights

Complexity of Workforce Data

Employee/Full-Time-Equivalent (FTE)

Jobs/Roles/Skills

Time - Tenure

Compensation ($ vs. Equity)

Frequency of Change

Promotions, Transfers, Hires, Terminations

Jobs/Roles/Skills

Time - Tenure

Measuring the Intangible

Lack of Standards in HR

Lack of Analytic Skills

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Start

World Class Analytics

Data Driven Decisions!

Data Errors

Lost HR Credibility

Analytics journey steps

Pitfalls along the way

Journey path and goal


Challenges and Pitfalls on the journey

Data Gaps, Inconsistent Data

Management Support

Standards &Governance

Resources and Analytic Skills

Data Integration

Systems & Tool Limitations

ROI and Success Stories

Avoid analytics journey pitfalls

The Human Capital Analytics Journey Typically a 2-3 Year journey and NOT a straight line

Reporting and Data Quality Overview

Workforce data is complex, but from the right combinations, a fact-based story can emerge

Clean, standard workforce data is foundational

Management buy-in, governance + analytic skills

Define metrics and standardize reporting

HRIS, ERP and workforce system providers do not know what HR data is critical.

If you rely on software and technology vendors for workforce wisdom, it will be a long and expensive wait.

Focus &

Resources

(Center of

Excellence)

Business

Complexity &

Structure

Measurement

& Analytic

Capability

Speed, Systems

Integration &

Automation

Standards,

Processes & Data

Quality

Reporting,

Scorecards &

Accountability

Workforce

Cost and

Productivity

Workforce

Knowledge

Business,

Workforce &

HR Strategy

Linkage

Where are we today?

Where do we start? How can we tell?

What does it all mean?

How do we improve?

I have the foundation, but where are my insights?


Introduction

Keys to Analytics Success:

Asking the Right Questions Are you measuring the right things


What If you could answer the following?

1. Which workforce metrics link to business results?

2. What is our workforce productivity? Is it improving? How do we rank?

3. Is it better to build, buy or rent talent?

4. What is truly the right size and cost of workforce?

5. What is our quality of hire (i.e. Top Talent)? Is it improving?

6. Do we know drivers of employee turnover and retention?

7. Are leaders effectively managing talent? Do leaders correlate to engagement, retention and performance? YES, but you MUST prove it

Case Studies


JetBlue and Net Promoter Score (NPS)

The Net Promoter Score is a numerical representation of Crewmember responses

Calculate the percentage of detractors and promoters

Subtract detractors from promoters

Calculate score

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How likely are you to recommend JetBlue as a good place to work?

JetBlue: Identifying Workforce KPIs Leveraging Workforce Metrics to Drive Business Results

CASM

Load Factor

BELF

Passenger RPM

TCOW

JetBlue Performance

Metrics

Link workforce metrics to key business drivers Employee Engagement, Customer Satisfaction, Revenue and Profit

Build metrics and scorecards to measure results

JetBlue tops J.D. Powers annual customer service survey 7 years in a row

1.1 million following JetBlue Airlines on Twitter

Cost per Available Seat Mile: JetBlue = $.0899 (industry lowest)

Competitors = $.0976

Load Factor: JetBlue = 79.7%

Competitors = 73.1%

Break even Load Factor: JetBlue = $.0888

(industry lowest)

Revenue per Seat Mile: JetBlue = $.1128

Competitors = $.1281

Total Cost of Workforce: JetBlue = 23.6% of revenue

Competitors = 34% of revenue

Does high Employee Engagement increase Profitability? Issue:

Process:

Identified Net Promoters

Created Net Promoter Score, or NPS to measure highly engaged employees

Flights with higher average NPS correlate to increased customer satisfaction and revenue

Employee Net Promoters = Customer Net Promoters = Loyalty = Revenue

Outcome:


Note: JetBlue data illustrative with limited data gathered from

external sources/no internal data used

www.hcminst.com

JetBlue Employee-Customer-Profit Chain

1. Total Cost of Workforce

2. Cost per Hire

3. Cost of Turnover

4. Employee (NPS) Link to Customer Satisfaction

5. Customer Satisfaction Impact on Profits

Workforce ROI Calculator Workforce ROI Dashboard

Increasing the number of Net Promoters by

10% =

$26 - $96 Million

Actionable Intelligence

Quantify and Predict


Linking It Together: JetBlue NPS and Engagement

Net Promoter

Score Engmnt

Customer NPS

Adverse Events

Discret Effort

Revenue

5.0% 6.0% ? ? ? ?

5.0% 5.0% 10.0% -5.0% 5.0% 1.0%

5.0% 8.0% 2.0% 0.0% 3.0% 0.5%

Overall

Management

Pilots

Inflight CMs

Technicians

Customer Support CMs

Airports CMs

Support Center CMs

Systems Operations CMs

If NPS goes up 5% what does the business get?

If crew-leader drives NPS, does it then drive the rest? =


NOTE: CMs = Crew Members aka Employees

Managers Drive Engagement & NPS

Employees with Net Promoter Managers are more likely to be Net Promoters

Employees with Detractor Managers are less likely to be Net Promoters


18.9%

44.7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Manager Detractor Manager Not Detractor

Percent of Employee Net

Promoters

High

Low

Median

Manager Net Promoter

1st 2nd 3rd 4th

Commute Distance Quartile

Turnover Operations StaffSales Staff

Customer Service

Skilled and Semi-Skilled

IT Professional

Professional Staff

Management

Issue: In exit interviews commute is cited as reason for leaving.

Action: Statistical analysis, segmenting workforce by category, job family & job title etc.

Outcome: No correlation, however distinct patterns by location & job category. Senior mgmt longest commute

& lowest turnover Golden Nugget: Relationship

between commute & total compensation

Annual turnover cost = $50M Savings from a 10% reduction $5.0M

Case Study: Challenging Conventional Wisdom Turnover Drivers at Scofield Financial

Med

High

Low

Hypothesis: People turnover/stay because of commute distance


1st 2nd 3rd 4th

Compensation Quartile

Turnover Operations StaffSkilled and Semi-Skilled

Customer Service

Sales Staff

Management

Professional Staff

IT Professional

Operations Staff

Sales Staff Customer Service

Skilled and Semi-Skilled IT Professional

Professional Staff Management

Case Study: Dispel Myths with Facts and Data Turnover Drivers at Financial Services Organization

Hypothesis: People turnover/stay because of compensation

Issue: In exit interviews departing employees cite pay as reason for leaving.

Action: Statistical analysis shows that turnover levels-out starting at 80% of salary range midpoint.

Majority of employees report being satisfied with compensation over last 4 years

Outcome: No correlation, applies companywide, but low pay jobs do correlate to turnover.

Annual turnover cost = $50M Savings from a 10% reduction $5.0M

Med

High

Low


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Correlation Coefficient ( 0-1)

Factors Leading to Increased Turnover

Job Title or Position

Dissatisfaction With Compensation

High vs. Low Turnover Manager

Commute Distance

Driver #3

Driver #2

Driver #1

.50

.33

.27

.02

Low

Turnover

Impact

High

Turnover Impact

Some

Turnover

Impact

.11

Work Location

Number of Jobs in Last 3 Years .70

Hired Through Employee Referral .19

Case Study: Drivers of Turnover Scofield Financial, a Regional US Bank


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Factors Leading to Increased

Retention

Some

Retention

Impact

High

Retention Impact

Low

Retention

Impact

Employees With Stock or Options

Employee Transfer Opportunities

Promotional Opportunities

Compa-Ratio

Above Average Performance

-(.48)

Driver #3

Driver #2

Driver #1

-(.27)

-(.04)

-(.01)

-(.32) Employees Hired Temp to Regular

-(.21)

Case Study: Drivers of Retention Scofield Financial, a Regional US Bank

Should be

Here!


Temp to

Regular

Employee

ReferralInternet

Other

Referral

Newspaper

Ads

Other

Sources

Direct

Sourcing

Placement

Agency

Best Worst

= No Predictive Value

3 Jobs 4 Jobs 5 JobsKEY CRITERIA 2 Jobs

# of Jobs in 8 Yrs

Industry Experience & High Performer Probability

Math, Reading, Writing &

Personality Testing

Education & High Performer Probability

Medium Cost $ High Cost $Low Cost $Recruiting Source &

High Performer Probability

Placement

Agency

High Scores

Masters

Degree

Other

Referral

High

School

Some

College

Associate

s Degree

Bachelors

Degree

Some

Graduate

Temp to

Regular

Employee

ReferralInternet

Newspaper

Ads

Other

Sources

Direct

Sourcing

6 Jobs 7 Jobs

0

1st Job 1 Job

Low Scores

8+ Jobs

1 Yr 2 Yrs 3 Yrs 4 Yrs 5 Yrs 6 Yrs 7 Yrs 8+ Yrs

> Masters

Little to no Predictive Value

Medium Scores

Case Study: Targeted Hiring Profiles ScoField Financial High Performing Sales Staff Positions


What to Include in a Business Case

1. Compelling Questions Ask the Right Questions

2. Objective Measures and Facts Historical Data, Key Metric Indicators, Segmented Data

3. Powerful Visuals Charts Chart(s) that Show Insight (i.e. Story) and Drive Action

4. Use Qualitative Story Telling Two of our Top 3 Salespeople came from other industries

5. Link to Business Impact (ROI/Cost/Profit) The Cost Savings is a range of $1.0 to $3.0 Million

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Sample Business Case Created Using Solve Dashboards

#1. Question) What is our Quality of Hire? Are we hiring better talent? #2. + #3. Clear data with trend and impactful chart #4. Written comments with critical insights + predictions #5. Clear financial impact and ROI

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#2 #2. #3.

#5 #4.

#4.

Contact Information:

Thank You

Jeff Higgins, CEO [email protected]

For more information on products and services:

www.hcminst.com

SOLVE Software Human Capital Training and Financial Statements Consulting

Human Capital Workforce Data Workforce Metrics Handbook Integration Blueprint Planning

Workforce Intelligence Consortium Group

@HCMI


measurement and hr, the path to people analytics

Documents

human capital measurement

hr heads

demand analytics coe

historical data scrubbedbus

yrs experience analytics

financial information

financial discipline

planning benchmarking