measurement and hr, the path to people analytics
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Measurement and HR The Path to People Analytics
Human Capital Management Institute
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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 -
Human Capital Management Institute
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
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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
$$$ Financial Impact
Metrics
Data Blueprint
Predictive Modeling
TRAINING & SUPPORT
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Value Creation in Todays Marketplace
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Intangible Capital Value
Tangible Assets/Value
Human Capital = employee knowledge, training, productivity, experience, culture, leadership, development, performance, creativity, etc.
Are we managing the right things or just measuring what we know how to measure?
Measures are well established for modern Finance as a Decision Support Science
Hard to Measure
Easy to Measure
Market value driven by factors not on a balance sheet
Intellectual or Human Capital
vs.
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The Future of Talent = Analytics Attraction, Development, Retention and Performance
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The Most Important Metrics for Human Capital
Source: Deloitte Global Human Capital Trends 2015
Gap = Importance vs. Capability
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Analytics Adoption Over Time
Source: Gartner 2014
Analytics Are No Longer a Nice-to-Have
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Getting Finance to See the Value of HR
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What is the Language of Business?
What does Management Care About Most?
What is HR most uncomfortable talking about?
$$$
$$$
$$$
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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
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Oops!
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Polling Question
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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
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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
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SHOW ME THE MONEY!
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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
$6 Million Annual
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Challenge of Measuring Human Capital
Compensation
Transfers
New Hire Turnover
Succession Data
Turnover
Training
Recruiting
Em
ploy
ee D
ata
Benefits
Span
of Control
Workforce
Planning
Success Advanced
Analytic
Insights
Complexity of Workforce Data
Employee/Full-Time-Equivalent (FTE)
Jobs/Roles/Skills
Time - Tenure
Compensation ($ 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
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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
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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?
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Introduction
Keys to Analytics Success:
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Asking the Right Questions Are you measuring the right things
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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
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Case Studies
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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?
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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:
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Note: JetBlue data illustrative with limited data gathered from
external sources/no internal data used
www.hcminst.com
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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
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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? =
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NOTE: CMs = Crew Members aka Employees
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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
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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
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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
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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!
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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
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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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Human Capital Management Institute
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.
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Contact Information:
Thank You
Jeff Higgins, CEO jeff.higgins@hcminst.com
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
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