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H E A L T H W E A L T H C A R E E R
M E R C E R | C O M P T R Y X
U N D E R S T A N D I N G P E O P L E C O S T S : Y O U R K E Y T O U N L O C K I N G T H E W O R K F O R C E A N A L Y T I C S C O N V E R S A T I O N
Patrick Gutmann Frankfurt
JUNE 2016
© MERCER 2016 1
W E L C O M E T O D A Y ’ S P R E S E N T E R
Patrick Gutmann
Sector Leader Europe [email protected]
Questions To submit a question, use the floating panel on the top of your screen and click the Q&A button:
CLICK HERE TO ASK A QUESTION TO “ALL PANELISTS.”
© MERCER 2016 2
G l o b a l S a l a r y S u r v e y
L a b o r C o s t
M o d e l i n g
D A T A F E A T U R E D T O D A Y H I G H L I G H T S M E R C E R | C O M P T R Y X
O n - d e m a n d a n a l y t i c s a n d i n d u s t r y p e e r b e n c h m a r k i n g f o r 2 0 + c r i t i c a l m e t r i c s i n c l u d i n g p a y r o l l c o s t , p r o d u c t i v i t y , o r g a n i z a t i o n a l l e v e r a g e a n d t u r n o v e r
W o r k f o r c e M e t r i c s
G l o b a l p a y d a t a w i t h a d a t a b a s e o f n e a r l y 3 m i l l i o n r e c o r d s f o r 2 5 0 + j o b s
E n a b l e s i n s t a n t v i r t u a l o r g a n i z a t i o n d e s i g n t o m o d e l p a y r o l l c o s t s i n 8 5 + c o u n t r i e s a r o u n d t h e w o r l d
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U N D E R S T A N D I N G P E O P L E C O S T S
C A S E S T U D Y
W H Y P E O P L E C O S T S
M A T T E R
W R A P U P
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FACT H R i s r e s p o n s i b l e f o r e m p l o y e e s b u t r a r e l y m e a s u r e s p e o p l e c o s t s , t h e l a r g e s t e x p e n s e i t e m i n m o s t f i r m s .
P e o p l e c o s t s a r e i n f l u e n c e d b a s e d o n h o w E E s a r e :
A L L O C AT E D B Y F U N C T I O N
D I S T R I B U T E D B Y L E V E L
D E P L O Y E D B Y L O C AT I O N
I n d u s t r y b e n c h m a r k i n g w i t h W o r k f o r c e A n a l y t i c s c a n h e l p H R p r o v i d e e x e c u t i v e m a n a g e m e n t w i t h c r i t i c a l i n f o r m a t i o n .
© MERCER 2016
S o h o w t o g e t t h e r e ?
© MERCER 2016 5
M E R C E R | C O M P T R Y X W O R K F O R C E M E T R I C S
IF WORKFORCE METRICS CAN HELP IDENTIFY JUST $12M IN SAVINGS, SHARE PRICE COULD RISE 5%
Company A Improvement to Net Income: $12M
Revenue 1,800,000,000 Revenue 1,800,000,000
Net Income 250,000,000 Adj. Net Income 262,000,000
Shares Outstanding 300,000,000 Shares Outstanding 300,000,000
EPS $0.83 EPS $0.87
Multiple* 26.6 Multiple 26.6
Current Share Price $22.17 Current Share Price $23.23 *Multiple: factor used by investors to express how companies are valued
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Q U E S T I O N : C O N S I D E R T W O C O M P A N I E S …
• SAME BUSINESS, SAME HEADCOUNT, SAME REVENUES – BOTH USE SAME SALARY SURVEY WHICH SAYS BOTH
PAY ON MARKET – PEOPLE ARE THEIR SINGLE BIGGEST EXPENSE
DO THEY HAVE SIMILAR PEOPLE COSTS?
COMPANY A COMPANY B
– Majority of EEs in Silicon Valley
– Large Salesforce
– Small but well-experienced R&D staff
– Big executive team, low SOC*
– Majority of EEs in India
– Relatively small Sales team
– Use lots of less experienced Engineers
– Small executive team, high SOC*
*SOC: Span of control
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C A S E S T U D Y
N O T E : • M A R K E T D A T A I S A L W A Y S S H O W N I N D A R K B L U E • M A R K E T I S N ’ T “ R I G H T ”
SOFTWARE COMPANY $2B REVENUE
5,000 EMPLOYEES PARTICIPATE IN MERCER | COMPTRYX
© MERCER 2016 8
C A S E S T U D Y : B A S E P A Y A N A L Y S I S
ANALYSIS CONFIRMS: COMPANY A PAYS ON MARKET FOR BASE AND TOTAL TARGET CASH
0
40000
80000
120000
160000
Job 1 Job 2 Job 3 Job 4 Job 5 Job 6 Job 7 Job 8 Job 9 Job 10 Job 11 Job 12 Job 13 Job 14 Job 15 Job 16
Company A Market
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C A S E S T U D Y : P A Y A N A L Y S I S
TRADITIONAL SURVEY ANALYSIS RESULTS IN A MERIT BUDGET DECISION REPRESENTING
$19M IN COST
CO A. TARGET CASH
PAYROLL MERIT BUDGET PAYROLL RISE
$625,000,000 3% $18,750,000
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Revenue per FTE (in USD)
C A S E S T U D Y : F I N A N C I A L A N A L Y S I S
WHAT YOU PAY AND HOW MANY EEs YOU HAVE = PAYROLL COST 4% DIFFERENCE REPRESENTS $25M HIGHER PAYROLL COST
125,000
110,000
0
20000
40000
60000
80000
100000
120000
140000
Company A Market
EE Weighted Average (in USD)
400,000 425,000
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
Company A Market
31.3%
27.5%
0%
5%
10%
15%
20%
25%
30%
35%
Company A Market
Payroll as a % of Revenue
4%
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C A S E S T U D Y : L E V E L A N A L Y S I S
LOWER SPAN OF CONTROL REPRESENTS $20M IN HIGHER PAYROLL COSTS!
Level Analysis: % of Headcount Span of Control
5.0%
74.4%
18.0%
2.6% 4.7%
79.2%
14.6%
1.5% 0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
Support Professionals Management Executives
Company A
Market
3.9
5
0
1
2
3
4
5
6Company A
Market
$625M $605M Δ $20M
BUT, SPAN OF CONTROL CAN VARY BY FUNCTION!
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C A S E S T U D Y : S O C B Y F U N C T I O N
Level Analysis: Management Span by Function
2.3
3.8 4.1
7.9
10.7
8.2
3.5 3.2
4.1 3.5
8.5
10.9
6.9
7.8
2.4
3.7
0
2
4
6
8
10
12
Finance HR IT Ops Services R&D Mkt Sales
Company A
Market
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C A S E S T U D Y : L E V E L A N A L Y S I S -P R O F E S S I O N A L S
BUT REMEMBER, THE MARKET ISN’T RIGHT!
Level Analysis: % of Headcount
4.0%
12.0%
35.0%
32.0%
15.0%
2.0%
5.4%
18.2%
29.8% 30.5%
13.0%
3.0%
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
P1 P2 P3 P4 P5 P6
Company A
Market
2,4M 16,4M -18,3M -6,5M -11,9M 7,1M Δ $10,5M =
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C A S E S T U D Y : F U N C T I O N A N A L Y S I S - H E A D C O U N T
Level Analysis: % of Headcount
6.0%
2.0%
8.0%
2.0%
15.0%
38.0%
7.0%
22.0%
4.2% 1.4%
5.6% 4.0%
21.6%
42.0%
5.5%
15.7%
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
Finance HR IT Ops Servcies R&D Mkt Sales
Company AMarket
Level Analysis: % of Payroll
4.0% 1.0%
5.0% 1.0%
8.0%
48.0%
8.0%
25.0%
3.0% 1.3% 5.0% 4.0%
17.0%
38.0%
7.0%
24.7%
0
0.1
0.2
0.3
0.4
0.5
0.6
Finance HR IT Ops Servcies R&D Mkt Sales
Company AMarket
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C A S E S T U D Y : L O C A T I O N A N A L Y S I S - H E A D C O U N T
1.1% 0.5%
67.7%
5.4%
0.7%
6.8%
13.7%
3.0% 2.9% 0.5%
60.0%
3.7% 3.5% 5.5%
19.9%
2.4%
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Canada Mexico United States China India S&E Asia Europe Africa
Company A
Market
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C A S E S T U D Y R E S U L T S
H R i d e n t i f i e s a b u s i n e s s p r o b l e m f o r
e x e c s
H R t a k e s o w n e r s h i p o f
w o r k f o r c e o p t i m i z a t i o n
H R c o n t r i b u t e s b u s i n e s s s o l u t i o n s
© MERCER 2016 17
M E R C E R | C O M P T R Y X W O R K F O R C E M E T R I C S
Payroll as a % of Revenue (Last FY): by Sector and
by Company Size
26.0%
37.8%
24.4%
37.1%
27.1%
35.8%
41.7%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Systems
Software
Semiconductor
Professional Services
Large Companies (>50k ee's)
Medium Companies (5k-50k ee's)
Small companies (<5k ee's)
© MERCER 2016 18
M E R C E R | C O M P T R Y X W O R K F O R C E M E T R I C S
Financial
Level Location
Function Demographics
Prof i le your organizat ion!
Track pay levels, cost structures, headcounts, turnover, demographics, promotions and top performers across your organisation and compare with the market
© MERCER 2016 19
Q U E S T I O N S ?
Patrick Gutmann Sector Leader Europe
QUESTIONS Please type your questions in the Q&A section of the toolbar and we will do our best to answer as many questions as we have time for. To submit a question while in full screen mode, use the Q&A button, on the floating panel, on the top of your screen.
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