people measurement and reporting: from theory to practice · people measurement and reporting: from...
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People measurement and reporting:From theory to practice
Chartered Institute ofManagement Accountants
Better people measures, better decisions, better business
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Contents
About this report
This report was written by Edward Houghton, Research Adviser at the CIPD, and Peter Spence, Performance Management Expert at CIMA. We would like to thank the many business professionals who participated in the case studies, roundtables and at various engagement events across the period of the research programme.
Appendix 1: action case studies 29
Capgemini case study: Building from expertise – using in-house talent to create a new approach to managing and using data 30
Coca-Cola Enterprises (CCE) case study: The thirst for HR analytics grows 39
London Councils case study: The power of expert networks 42
Network Rail: Building the workforce of the future through talent analytics 45
ASDA People analytics and the changing business model 49
British American Tobacco Building centres of excellence for people analytics 53
Appendix 2: valuing your Talent framework People Measures 54
References 74
Valuing your Talent 5
Context: the changing world of work 9
The business model 14
The Valuing your Talent framework: from theory to practice 20
The external stakeholder perspective: roundtable feedback 22
Reporting human capital: illustrating your company’s true value – executive summary 25
Where to next? 28
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Valuing your Talent
Published in 2014, Managing the Value of your Talent: A new methodology for human capital measurement provided an innovative approach to exploring human capital value in organisations, and detailed the significant opportunities and barriers facing organisations today wishing to unlock the value of their people. The research, conducted by Dr Anthony Hesketh of Lancaster University Management School, included an extensive study of senior business leaders and a case study exploration of leading global institutions. This work laid the foundations for the Valuing your Talent programme, on which this new work has been built.
Fundamental to the programme is the belief that ‘talent’ should not be reserved for high-flying elite individuals, but instead that all people have a role to play in contributing to the success of their organisations, whatever its size or sector. Valuing your Talent provides a framework and methodology that enables business professionals to explore the full potential of their workforce through the use of key people measures, and will deliver true value by improving insight and decision-making and encouraging more strategic investment in people to achieve business performance over the short, medium and long term whilst enhancing the wellbeing of all employees.
Above all, Valuing your Talent seeks to deliver a fundamental shift in the mindset of businesses and investors alike, driving a shared interest in transforming how organisations value what they often term ‘their most important asset’: the knowledge and expertise of their people.
Valuing your Talent is a collaborative, industry-led movement to build a greater understanding and appreciation of how people create and drive value in business. We are working with employers, investors and other stakeholders from finance, management and HR to better understand and demonstrate the benefits of human capital reporting and people measures.
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The Valuing your Talent partners
Chartered Institute of Personnel and Development (CIPD)The CIPD is the professional body for HR and people development. The not-for-profit organisation champions better work and working lives and has been setting the benchmark for excellence in people and organisation development for more than 100 years. It has 140,000 members across the world, provides thought leadership through independent research on the world of work, and offers professional training and accreditation for those working in HR and learning and development.
Chartered Institute of Management Accountants (CIMA) CIMA is the world’s largest and leading professional body of management accountants. Our mission is to help people and businesses to succeed in the public and private sectors. CIMA has 203,000 members and students in 173 countries and works at the heart of business in industry, commerce and not-for-profit organisations. CIMA has a strong relationship with employers, and sponsors leading research. CIMA is constantly updating its qualifications, professional experience requirements and CPD programmes. CIMA is committed to upholding the highest ethical and professional standards, and to maintaining public confidence in management accounting.
Valuing your Talent is a collaborative project bringing together the professional bodies for finance and human resources. The work will help employers better understand the impact their people have on the performance of their organisation.
For more information about Valuing your Talent, visit the website and follow us on Twitter and LinkedIn
www.valuingyourtalent.com
Twitter: @valuingtalent
LinkedIn: Valuing your Talent
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Supported by:
Investors in People (IIP)Investors in People is the standard for people management. Since 1991 Investors in People has defined what it takes to lead, support and manage people well for sustainable results. Comprising nine key management indicators and a performance model to map progression over time, assessment against the standard is a simple way to measure, track and benchmark performance. With a community of over 14,000 organisations across 75 countries, achieving the Investors in People Standard is the sign of a great employer, an outperforming place to work and a clear commitment to success. In April 2010, strategic ownership of Investors in People transferred to the UK Commission for Employment and Skills (UKCES), on behalf of the Department for Business, Innovation and Skills. The UKCES are responsible for the quality and management of the Investors in People Standard.
Chartered Management Institute (CMI) The CMI is the only chartered professional body in the UK dedicated to promoting the highest standards of management and leadership excellence. With a member community of over 100,000, the CMI gives managers and leaders, and their organisations, the skills they need to improve their performance and create an impact.
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Context: the changing world of work
The world of work is changing and the way that human capital is managed, measured and reported on by organisations must also evolve. The global outlook for organisations is one influenced by volatility, uncertainty and increasingly complex relationships with marketplaces and customers.
Global economic activity is subdued (International Monetary Fund 2016), and competitive advantage is becoming even harder to secure for multinational organisations as its nature is fundamentally shifting (McGrath 2013). How organisations appreciate the value of their human capital (the knowledge, skills and abilities of the workforce) is also changing.
The importance of human capital to organisation, communities and wider society cannot be underestimated – it is one of the most important determinants of long-term economic success and must be leveraged in combination with other economic resources over the short, medium and long term to deliver value (World Economic Forum 2015).
the workplace, and it is in this context that organisations must now operate by maximising the value it generates through the knowledge and skills of its workforce (CIPD 2015a). If they don’t, it is unlikely that organisations and wider economies will flourish and grow.
Global organisations are investing in the capability to meet the needs of the future trends detailed in Table 1. Using the expertise of professional service firms, they are exploring these issues in detail and are adapting their business models to fit their future requirements. The predictions of professional service firms which advise some of the world’s biggest organisations map closely to the trends in Table 1.
Businesses are under considerable pressure from economic, social and competitive factors to improve their business models and build more innovation, agility and resilience into their strategies and practice. Against this backdrop, many fail to make good use of a vital resource in economies driven by knowledge: human capital.
Work trends: how the world of work is evolving
Recent research conducted by the CIPD highlights the trends which are believed to be influencing how human capital management will evolve in the future. Academic and business literature considers a variety of forces which have the potential to drive considerable change in
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Table 1: Trends and their potential impact on human capital measurement and management (adapted from CIPD 2015a)
Trend Prediction Impact on human capital management and measurement
Utilisation of technology
Steady growth in jobs that require degree qualification
Demand-led business models grow in prominence
Normalisation of 24/7 ‘always on’ services
Continual organisation change
Management of knowledge capital and individual human capital as opposed to units of human resource
Ever increasing availability of customer and employee data requiring sophisticated analytics
Technology use for ‘always on’ working will require specific employee knowledge and capability, including autonomy and self-motivation
Workforce diversity
Growing competition for entry-level jobs
Growing demand for flexible working arrangements as working patterns evolve
Increased diversity of thought and opportunities for knowledge-sharing
Increased requirements on organisations to provide data as to how human capital is developing and improving
Greater need for communication technologies to link individuals to share knowledge and skills and generate organisation knowledge capital
Globalisation Integration of talent management techniques from local scale to global scale with regards to culture and corporate management
Offshoring of jobs for efficiency savings and to alleviate local skills shortages
Mass movements of people due to increased political, social and environmental instability
People management and HR processes will become more project based – human capital utilisation will focus on the delivery of discrete projects via matrix-based collaborative working
Measures of culture on global scale will be required to steer human capital development towards strategy-based priorities
Industrial change
Steady growth in the proportion of jobs that require degree-level or professional skills
Evolution of business operating models to provide demand-led services, matching customers with (often independent) contractors
Normalisation of 24/7 services, and remote working to become standard practice
Ongoing organisational change, as the business responds to the repercussions of the changing external context
Knowledge capital has more value, beyond individual human capital, as organisations look to capture the skills and expertise of individuals in organisational systems, processes and policies
Workforce skills and knowledge will require continuous development and investment through strategically aligned learning and development practices
Evolving performance management drivers needed to tap into the intrinsic motivators of individuals, particularly beyond task- or process-oriented performance measurement
Individualism Demand for better work–life balance with a pattern that suits workers’ individual circumstances
High-skilled employees expressing their personal ambitions, rather than negotiating working conditions via traditional collective channels, such as trade unions
Both customers and employees expect systems to flex to meet their needs
Human capital management that is more aligned to the needs of individuals, including their development requirements, through improved flexible working arrangements
Human capital development opportunities will be a requirement for knowledge workers entering the organisation, and will become a fundamental part of the knowledge business brand
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Trend Prediction Impact on human capital management and measurement
Social responsibility
Greater alignment between society and business agendas, with sustainable business models becoming the norm
Pressure to introduce technologies for a more efficient use of resources, such as with reducing carbon footprint through smart working initiatives
Core focus on managing reputation and building trust to attract both customers and talent
Human capital measures and reporting will point towards the greater social good of the organisation, and be used to demonstrate the materiality of human capital to the organisation
Resource efficiency will drive greater emphasis on management techniques that drive long-term thinking and awareness of resource issues and opportunities for resource reduction
Quality of education
Improvement of educational standards worldwide, stimulated by governments seeking to boost their competitive position in the global marketplace
Greater onus on continued individual development, lifelong learning, retraining and multiskilling
Rise in accessible educational opportunities, open universities and peer-to-peer learning
Overqualified individuals with high human capital may need their expectations to be managed as to the scope and potential of their role
Alternative forms of employment may also need to be designed
Human capital development through mentoring schemes and other forms of workplace support to help new employees integrate into the organisation and role
Diversity of employment relationships
Diversity of working patterns, as well as the types of employment contracts, driven by the changing needs of organisations in when and how they want to provide services, as well as by the evolving expectations of individuals about the ways of working
Two-tiered workforce, with the traditional core comprising permanent staff, complemented by a large group of contractors and freelancers
Fragmentation of organisations into smaller units, representing collaborative networks of contingent workers
Customer service data will drive employment demand, and matching of human capital to customers will require data and measurement of value created
More transparent collection and reporting of human capital data with regards to diversity, measuring aspects of thought diversity as well as protected characteristics; increasing emphasis on the development of diverse talent pools against varied employment types
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Table 2: Three worlds of work
Scenario Characteristics
The blue world
Corporate is king: big company capitalism continues to grow as individual preference overrides social responsibility.
Integrated Individual
The green world
Companies care: social responsibility dominates the corporate agenda, where concerns regarding climate and demographic change influence the strategy of organisations.
Integrated Collective
The orange world
Small is beautiful: companies break down into small collaborative units, which build and sell specialist expertise and products via larger connected networks.
Fragmented Collective
This research shows that there are radically different scenarios that today’s organisations must plan to navigate. PwC note that to achieve true competitive advantage, organisations must adapt and understand their business model in each scenario. Businesses must heed the information available to them, through external evidence such as this practitioner-focused research, and look to include its thinking in their strategy. Combining internal and external data will help to formulate a clear view of what the future may hold, and it is this internal data which may provide the greatest level of insight into how the organisation can drive value through its intangibles.
For example, PwC researched the future of work in 2015 and found that business professionals considered three significant transformative factors which they believe are exerting pressure on their business models: technology innovations, scarcity of resources (including the impact of climate change), and shifting of global centres of economic power. These factors are thought to be driving rapid change in many organisations globally, creating opportunities and challenges in new, previously unconsidered ways. In their research, PwC highlight three theoretical scenarios in which organisations will need to operate in the future – characterised as being fragmented or integrated, and individualistic or collective (PwC 2015) (see Table 2).
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0
20
40
60
80
10083 68 20 1632
17 32 80 8468
Intangible assets Tangible assets
*Source Ocean Tomo, LLC January 1st 2015
1975 1985 1995 2005 2015*
Figure 1: Components of S&P 500 market value (%) (Ocean Tomo 2015)
locked into physical assets (Hesketh 2014). A considerable force for change has been the emerging digital economy in which digital technologies and social media are rapidly changing how consumers interact with products and services, and have in the recent past filtered into the workplace, influencing how employees work (CIPD 2013).
The gravity of this change is stock. Recent research by CIMA and the CGMA highlights that Uber, the car service which owns no cars, has been valued in the past at US$51 billion (CIMA 2016). Elsewhere in the hotel industry, for example, relatively young services such as Airbnb are challenging the established business models of large hotel chains, and are being recognised through highly competitive valuations: in 2015 the service was offering 1 million listings across 190 countries and in October 2014 was valued at more than US$13 billion, while the Intercontinental Hotel Group, an established brand and the largest hotelier chain in the world, had a market cap of US$10 billion in March 2015 (Wallsten 2015). Part of the ‘sharing economy’, organisations such as Uber and Airbnb demonstrate the rapidly evolving landscape in which organisations are now operating and competing.
The importance of intangible assets
The companies which today hold and create the most value for their stakeholders are not those with the most tangible physical or financial assets – instead, it is those companies which manage the intangibles effectively which hold the most value, and which are driving the knowledge economy. Research which investigated the constituent capitals of organisations on the S&P 500 has shown how over time the type of capital has shifted towards intangible assets. As of 2015, around 84% of the value on the index is tied up in intangible assets according to corporate valuations, up from just 17% in 1975 (Ocean Tomo 2015) (see Figure 1).
The value of organisations today is clearly held in intangible assets, and as such the way in which they manage, measure and report on their intangible assets is changing. Entire business models of organisations are evolving and enabling value-creation in creative new ways, revolutionising sectors where value has been traditionally
To understand exactly how organisations can operate in this changing environment and make the most of the valuable human capital they have access to, we must look to their business models (Ovans 2015). These models represent how organisations approach markets, customers, competitors, technology, values and behaviours, and are an important indication of exactly how strong or weak an organisation and its strategy may be (Drucker 1994).
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‘Business is all about money and people. Money to
build the resources and relationships to create and preserve value
through their business models and, since nothing happens
without people, people to bring their business models to life.
Management accounting has long been concerned with joining the
dots between non-financial drivers across business models and financial performance, which is why CIMA is proud to partner with the HR and
management professions, together with boards, investors and other
key stakeholders, to advance knowledge on how people create
value in businesses.’
Charles Tilley Executive Chair of the CGMA Research and Practice Foundation
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The business model
At an organisational level, business leaders and their stakeholders need to understand how the business uses the resources available to it to create value. It is the ability of organisations to create value that generates financial returns to the providers of financial capital, and provides security to the enterprise to continue to generate further value in the future.
The business model articulates what value the organisation provides, how that value is created and what resources and activities are required to deliver that value – in short, what is required for the organisation to meet their objectives and obligations. The business model demonstrates to business leaders, investors and other stakeholders how the knowledge, skills and experience of an organisation’s people are the foundation of this value-creation and growth over the short, medium and long term.
Understanding the business model, therefore, is integral to understanding and achieving business success.
People in the business model: integrated reporting and integrated thinking
The International Integrated Reporting Framework (International Integrated Reporting Council 2013) defines an organisation’s business model as its:
‘system of transforming inputs, through its business activities, into outputs and outcomes that aim to fulfil the organization’s strategic priorities and create value over the short, medium, and long term.’
It shows how a firm defines, creates, delivers and captures value for, with and to its key stakeholders. It is important
An organisation’s business model sits at the heart of its business strategy, and at the centre of the business model sits people. Valuing your Talent is about ensuring that all organisations measure, understand and communicate how effectively they are making the most of the knowledge and skills of their workforce.
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to consider the stages in the business model, which can be defined as shown in Table 3.
Integrated reporting: <IR>
The increased importance of human capital within organisations, as well as its links to the other organisational resources that drive business value, is reflected through the Integrated Reporting initiative or <IR>.
The integrated reporting approach illustrates the way in which the business model creates
Table 3: Stages of the business model
Stage Description
Inputs Inputs are the resources, relationships and other forms of capital that the organisation depends upon or which provide a source of differentiation. Integrated reporting describes those inputs that are key to understanding the strength of the organisation’s business model. Human capital – people and their interactions, skills and experience – is a fundamental component of any organisation’s business model.
Activities Central to the business model is understanding how inputs are converted into outputs through business activities. These activities may include the planning, design and manufacture of products or the deployment of specialised skills and knowledge in the provision of services. Business activities are what the organisation does to create value for itself and its stakeholders (including society).
Outputs An organisation’s outputs can be identified as its key products and services, as well as any by-products, waste or emissions that require discussion, based on how important they are in understanding the robustness of the organisation’s business model.
Outcomes Actually producing something or making a service available does not necessarily create long-term value. What is crucial is the internal and external consequences that occur as a result of the organisation’s business activities and outputs – their business outcomes. Do customers purchase the output? Do they make repeat purchases or recommendations to other potential customers? And does the output generate brand loyalty? Outcomes can be both internal (employee satisfaction and engagement, revenue) and external (customer satisfaction, tax payments) as well as either positive or negative.
It is this need to identify and describe outcomes, particularly external outcomes, which drives an organisation to consider the kinds of capital it uses beyond just those that it owns or controls.
value from the six capitals, as designed by <IR>. Of central importance to the business model process is the role of people management and the people development process, as part of the HR or people function.
Integrated reporting <IR> provides a format for organisations to report on how their strategy, performance and prospects enable their business to create value in the short, medium and long term. It promotes a more cohesive and efficient approach to corporate reporting by providing a broader range
of higher-quality information to providers of financial capital.
<IR> aims to highlight the complex inter-relationship between human capital and other forms of capital, such as financial or manufactured, and how these relationships create value within organisations.
Although <IR> is primarily used by those providing funding, an integrated report will be of benefit to a wide range of stakeholders, including employees, customers, suppliers, local communities and policy-makers.
The capitals
An integrated report aims to provide insight about the resources and relationships that are used and affected by an organisation in the course of its business activities – these are collectively referred to as the ‘capitals’.
The capitals most commonly reported on by organisations are financial and manufactured, but <IR> takes a broader view by also considering intellectual, social and relationship, and human capitals (all of which are linked to the activities of people), and natural capital (which provides the environment in which the other capitals exist).
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IntellectualManufacturedFigure 2: The six capitals (adapted from Interantional Integrated Reporting Council 2013)
Financial
the funds available to an organisation
physical objects that organisations can use in the production of goods or the provision of services such as buildings, equipment or infrastructure
organisational knowledge-based intangibles such as copyrights, patents, tacit knowledge and procedures
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Social and relationship NaturalHuman
renewable and non-renewable environmental resources
the relationships, networks and ability to share information, including common values, brand reputation and key stakeholder relationships
people’s competencies, experience and motivation to innovate
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The value-creation process
<IR> combines an emphasis on conciseness and future orientation with a strong focus on strategy, the business model and value-creation. It is an organisation’s business model which is the driving force for value-creation. However, the business model does not exist in isolation; it operates as part of a system together with the organisation’s mission, its vision and its governance structure.
The organisation’s strategy identifies how it intends to maximise opportunities and mitigate or manage the risks identified in the external environment. Continuous review of all these elements, together with internal measures such as performance measurement, results in a system that is not static. <IR> aims to provide the information required for business decision-making on all the elements of this value-creation process. This includes, crucially, the interactions, connections and
Value-creation
Traditionally the meaning of ‘value’ has been associated with the present value of expected future cash flows. Integrated reporting <IR>, however, is based on the understanding that future cash flows are dependent on a wider range of capitals and relationships than those directly associated with changes in financial capital.
‘Value’ for <IR> encompasses other forms of value that the organisation creates through the increase, decrease or transformation of the capitals. Each of these will ultimately affect financial returns. It is not the purpose of an integrated report to measure the value of an organisation or of its capitals, but rather to provide the information that enables report users to assess the ability of the organisation to create value over time.
trade-offs that occur between each element and each of the capitals over the short, medium and long term.
<IR> makes transparent the connectivity of information and the interdependencies between the various forms of capital and, in so doing, enables a more efficient and productive allocation of capital, both between businesses and within businesses.
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In developing plans to implement strategy, HR and finance must clearly define what will be required by human capital in the implementation of the business’s strategy. This includes the formulation of people initiatives, people process refinements and analysing ongoing people activities to deliver the business outcomes targeted. This is the people plan or strategy.
Businesses are good, or getting better, at thinking about and measuring the value of the ‘other capitals’, described in Figure 2, in an integrated way but deal with human capital separately. If the planning and management of human capital is detached from the processes, initiatives and ongoing activities of the rest of a business, it becomes difficult to gain an understanding of the value contribution of human capital as part of an integrated whole. It is vital that organisations appreciate the value generated by human capital as well as that of the other five capitals. This is where Valuing your Talent can help.
Creating value depends on the capability and infrastructure of the firm. It usually involves motivating and mobilising partners identified when defining value, and locating and accessing resources, markets and technologies needed by the business for creating its unique customer value proposition. To convert these inputs into outputs, the business must design, develop and deploy processes, initiatives and activities that provide the infrastructure to convert partner inputs and the business’s resources into goods and services.
The resources available to any business are the six capitals, as illustrated in Figure 2. A combination of some or all of these capitals is always required to generate value. An organisation’s strategy describes how a business plans to deliver value over time and its business model is its mechanism for executing its strategy.
Defining value for the business
Defining value involves identifying the unique value proposition of the business, linking this unique value proposition with its customers and other stakeholders and designing, developing and refining a business model fit to serve its customers and other stakeholders. The purpose of the business defines what it is in business for and focuses on its core capabilities, which must be aligned to its business model. Not all customers and stakeholders are equal. Some will best be served by competitors, for example. So, the business must rank and prioritise to clearly identify its primary customer and key stakeholders, which must include its employees.
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'People are fundamental to the success of organisations today: their knowledge,
skills and experience are central to driving organisational success, but we still don’t have a common language in business to describe
their importance and value. While there is now more focus on people metrics, without a more common framework and language it is hard to connect across business on this shared agenda. Equally important, is the fact that we need to
enable better engagement with all stakeholders, including investors, regulators, customers
and even future employees, about how we are developing the workforces for the future, building resilient organisations and cultures, and aligning to improve business outcomes.
This includes important issues from improving productivity to building greater trust and
transparency. The Valuing your Talent initiative which brings together the different functions
and stakeholders to develop a common framework is an important step towards
defining a common language, and agreeing exactly how we express the importance of
people to business today'
Peter Cheese Chief Executive Officer Chartered Institute of Personnel and Development
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The Valuing your Talent framework: from theory to practiceAn organisation’s people are its unique resource. People can learn, develop and grow – they are the only part of a business that can improve itself and they are fundamental to creating value in organisations.
People measures, and the field of human capital analytics, can help business professionals to understand how purposeful investment in the workforce can create and preserve this value, and in doing so, improve productivity, innovation and business performance.
The Valuing your Talent framework enables business leaders, managers and investors to better understand an organisation’s people management strategy and the ways in which it drives business performance. It provides a basis for conversation between all parts of the business to understand how best to ‘join the dots’ and unlock the value of their people.
The Valuing your Talent framework: driving value through people insights
The framework (Figure 3) is made up of the four levels corresponding to an organisation’s business model: its inputs, activities, outputs and outcomes. The first level represents basic people data and fundamental aspects of people strategy. As organisations move up the framework, each level offers greater insight, moving from people strategy to business strategy and increased business impact.
The framework describes the measures that an organisation may use and illustrates their value to the organisation by positioning them in a business model hierarchy. The four key stages in the framework are inputs, activities, outputs and outcomes, which ties directly to the business model stages as discussed earlier:
Updating the Valuing your Talent framework
Managing the Value of your Talent: A new framework for human capital measurement, published in 2014, set the foundation of the first Valuing your Talent framework. Building on the conceptual model theorised in that report, the updated framework represents modifications advised through a series of case study interviews and roundtable engagement events.
The fundamental structure of the framework remains as originally devised, with a clear link to the business model process emphasised through the refinement of outcome-level strategic measures. The framework now includes greater detail of the quality and types of people measures operationalised in practice today.
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Workforce composition and diversity
Regulatory compliance
Attraction and recruitment
Workforce costs Workforce potential
Performance management
Knowledge management
Learning and development
Organisational design and
development
Reward andrecognition
Workforce planning
Employeerelations
Employeewelfare
Innovation, agilityand resilience Culture Organisation
performance
Value-creation, risk and opportunity
Input Measures
Activities Measures
Outputs
Outcomes
Engagement and well-beingWorkforce performance and productivity
Leadership capability Business operatingmodel
Table 3: The Valuing your Talent framework
• Inputs: Inputs are the fundamental building blocks for achieving value through people. At any point in time, this is the stock of human resources that an organisation needs to build from to sustain and improve overall organisational performance, and to respond to new opportunities and challenges. This is the most basic level of measures available to an organisation.
• Activities: Activities are the key investments and processes that organisations choose to make to ensure their people are able to work productively and healthily, and deliver value for all of the organisation’s stakeholders. Data at the activities level includes tangible information about the processes through which human capital is mobilised through people management processes.
• Outputs: Outputs are the results of the investments in activity-level processes.
They provide the means for evaluating the impact of the human capital development and people management processes at the activities level, and describe how the return on those investments can be improved, optimised and adapted to meet an organisation’s ongoing needs.
• Outcomes: Outcomes tell organisations and their stakeholders whether outputs are translating into value. Value to the organisation will include financial, human, intellectual, social, enviromental and customer value, and will be prioritised according to the business model operated by the organisation. Outcomes measures describe how the organisation is sustaining itself to deliver value not just for today, but into the future.
Valuing your Talent is designed to be a flexible tool for organisations to apply in various situations and contexts. The framework does
not propose a one-size-fits-all solution, given the simple fact that organisations will all have different needs, (Hesketh 2014).
The flexible approach means that organisations are not encouraged to apply the methodology in a tick-box fashion. Instead, professionals should look to apply the concepts of the framework to their business and, through using their own professional judgement, decide which areas of the framework are most appropriate.
Ultimately, what Valuing your Talent offers is a tool through which an organisation can work through the choices it needs to make as it strives to build the capabilities which are aligned to its objectives, and highlights through improved data the areas of investment in which attention should be placed.
For more information about the framework and to see example people measures, see Appendix 2.
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‘The number one driver of productivity and business growth is the quality of
management and leadership, because that’s critical to how far organisations get the best from their people. But if managers don’t have sight of good
people measures, they have a huge blind spot about performance and can’t make the best decisions about their business.
The Valuing your Talent framework gives managers a clear model for talking with
colleagues in HR and finance about what they need to measure and report
when it comes to their people.’
Ann Francke Chief Executive Officer Chartered Management Institute
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Discussions at each session were guided by five key questions:
1 What are some of the challenges and opportunities that you are facing with regards to people measurement and reporting?
2 How would you apply the Valuing your Talent framework in your organisation?
3 What information would you look to explore using the Valuing your Talent framework?
4 Which measurement categories would be most useful to define and standardise in your industry?
5 Which measures in the framework would help your organisation to drive value-creation?
The external stakeholder perspective: roundtable feedbackPeople measures describe the way in which the workforce generates value for the organisation. We convened a number of Valuing your Talent roundtables to explore how organisations are tackling the people measurement and reporting challenge, and to investigate how the Valuing your Talent framework may be operationalised in a number of settings.
We hosted roundtables in a number of locations and were focused to engage a number of business professional cohorts (see Table 4).
Table 4: Roundtable information
Cohort Number of attendees
Roundtable 1 13 October 2015 London
6
Roundtable 2 16 October 2015 Birmingham
6
Roundtable 3 20 October 2015 London (Hospitality)
12
Roundtable 4 10 November 2015 London (Financial)
7
Roundtable 5 19 November 2015 Manchester
4
The facilitated roundtable discussions allowed ‘deep dives’ into parts of the Valuing your Talent framework and engaged leaders and practitioners to explore new research and content in an open forum.
Discussion at each event focused around four broad themes, which are summarised below.
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Feedback on the framework
Feedback on the utility of the framework was positive, with many attendees across the roundtables reflecting that their organisations required a step-change in their approach to measuring and reporting people data. Attendees also felt that the measures in the framework broadly described the data that they currently use, or aspire to use in the near future. Participants recommended a number of ways by which the framework could be improved or applied to organisations in practice:
• Simplify the language in the framework to describe real people processes and activities which professionals in all disciplines will understand.
• Clarify the purpose of the framework through the design; use the structure to illustrate progression towards the objective/goal and explain the intended outcomes that will come from applying the framework.
• Connect more clearly the outcomes of the framework to the business model: show how investment in aspects of the business model can improve success against defined business and strategy objectives.
• HR professionals believed that some measures are too focused on financial performance, and prefer to see an outcome-level measure concerned with improving workforce skills and capability, alongside financial measures of performance. They also noted the importance of culture, and that a number of the measures in the framework are likely to interact to directly and indirectly demonstrate culture in different ways.
• Finance professionals reflected that they want the framework to tie directly to business outcomes, and include clear language of financial measures that may be of value to users of the framework. They also reflected that culture is a hard concept to articulate through measurement, although they agreed that measuring it is fundamental to driving business performance over the short, medium and long term.
Barriers to more effective measurement and reporting
A theme throughout many of the roundtables was the need for clear language to articulate the capitals and how they interact and work together to generate value. HR and finance professionals reflected on the importance of the relationship between their professions and functions, but noted that there is some way to go to come to agreement on the type of language for communication and reporting. A number of participants noted that the framework is a potential route to break down the barrier of inconsistency in language and unclear people metrics.
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Consultants and those working across professions in an advisory capacity noted alignment and clarity are vital if the business, including other professions, is to engage and use the framework. Without alignment, consultants felt that vital information that can enable the business to operate optimally may be missed. Experienced in working across sectors with various clients, consultants noted that many human capital issues can be considered ‘horizontally’ – operations at the same stage in the value chain can be present across different functions and business units – and ‘vertically’ – meaning that throughout the value chain there are recurring issues related to the same human capital challenges. Consultants believed that the framework can help alleviate issues on both of these planes, but show the connections between value-adding processes within the human capital value chain and the measures which can be developed to evaluate and improve human capital management processes.
Differences across sectors and contexts
Technology implementation was believed to play a fundamental role in enabling human capital measurement to be successful. Without clearly defined technology and systems which enable measurement and management of data, many participants reflected it would be difficult to move towards consistent and more standardised ways of measuring and reporting on data.
Sectoral differences were also highlighted during the roundtable events. For example, participants noted that in the financial services measures of interest may include those related to risk measurement and demonstrating cultural improvement. This was considered different for the manufacturing and utilities sectors, where the measures believed to be of more interest include health and safety and workforce capability. Finally, the hospitality roundtable illustrated that a key indicator of workforce performance is customer service data – within this sector there needs to be a direct link between organisation culture and customer outcomes.
Roundtable summary
Overall consensus from the roundtables was that the degree to which the framework could be implemented is dependent on the maturity of the organisation with regard to human capital measurement and reporting. Many participants reflected that it is well suited to driving performance in larger organisations, and if it is to gain a wider audience it should be built with elasticity and adaptability, with flexible measures that can be used to different degrees across sectors and organisations.
The key question that roundtables focused on was that of value: where in the framework can organisations determine value and materiality? This forms the basis of research and development moving forward.
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Reporting human capital: illustrating your company’s true value – executive summary
Introduction
An organisation’s people are its unique resource. People can learn, develop and grow – they are the only part of a business that can improve itself and they are fundamental to creating value in organisations. People measures, and the field of human capital analytics which looks to measure the value of people’s knowledge, can help organisations to understand how purposeful workforce investment can create and preserve this value, and in doing so, improve productivity, employee well-being and commitment, innovation and business performance.
Recent research from both the CIPD (CIPD 2016a) and the Office for National Statistics (ONS 2016) indicate an increasingly buoyant labour market in the UK. For example, according to the official February 2016 statistics from the ONS, unemployment in the UK fell by 60,000 between October and December 2015 to 1.69 million. Furthermore, over half of the employers in the latest CIPD representative survey, investigating the state of the UK labour market, indicated that amongst over 1,000 employers, hiring difficulties are becoming more commonplace and what are termed as ‘hard-to-fill’ vacancies are also on the rise in many economic sectors.
Given this background, ensuring that organisations understand and report in a transparent way to existing and prospective employees, shareholders and other interested parties on their human capital (HC) assets is
becoming increasingly important. Additionally, the rising number of high-profile scandals illustrating poor or unethical behaviour involving employees has resulted in increasing scrutiny of organisations from both media and government agencies. In summary, organisations need to take the issue of HC reporting seriously and understand that key stakeholders need to be able to access true and accurate company information.
Purpose and methodology
Valuing your Talent is helping organisations realise the full potential of their workforce through understanding and measuring the impact and contribution of people to business performance. The business-led initiative is driving a greater appreciation of human capital in organisations, and is enabling organisations to better appreciate the value of their workforce, so as to drive more sustainable investment in people and organisations. An important consumer and beneficiary of human capital data, alongside business and employees, is the investor community, which must appreciate both present and future human capital value in their valuations.
This study was commissioned to assess the current standard of HC narrative reporting amongst the FTSE (Financial Times Stock Exchange) 100 companies and to ascertain if the most up-to-date guidelines (see main report) have improved current practice. After undertaking a comprehensive review of the literature relating
to HC and its key constituents in any organisation, an analytical framework was developed to allow us to carry out a systematic content analysis of key HC terms in the annual reports of the FTSE 100 companies in the UK. The key HC elements were grouped under four main categories: knowledge, skills and attitude (KSA), human resource development (HRD), employee welfare/stability, and employee equity. To enable us to understand and calculate any change in how HC was reported, we reviewed the 2013 and 2015 reports of these companies.
Additionally, to further augment our understanding of HC narrative reporting amongst these companies, we carried out an analysis of three major media outlets: the BBC website, the Financial Times and The Economist. This analysis was designed to allow us to compare and contrast companies’ annual reports with media outputs and ascertain if the companies concerned were reporting HC issues accurately, particularly those that might be linked to ‘workforce risk’ factors such as poor people management practices, negative employee relations incidents, toxic organisational cultures or inadequate training and development provision.
Findings
The research shows that there has been an overall increase in the reporting of HC issues, particularly in the area of HRD (see Figure 3); however, the item reported upon that showed the largest increase comes under
In 2016 the Valuing your Talent partners commissioned Ulster University Business School to explore the type and quality of FTSE 100 human capital disclosures. The research explored how human capital information is shared through corporate reporting, and mapped whether quality of reporting is changing over time.
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the heading of employee equity, namely human rights, which had increased by 127%. Within the KSA category, the biggest increases over the two time periods were for the key terms of innovation (41%), entrepreneurship (26%) and flexibility (20%). In the employee welfare category, the biggest increases were for the key terms of ethics (22%) and employee well-being (21%). Surprisingly, corporate social responsibility showed a decline in reporting of –16%. In the employee equity category, equality had increased by 34% and diversity by 29%. Finally, in the workforce risk category, which was made up of key terms from the other categories, the biggest increases were in talent management (43%), succession planning (32%) and ethics (22%).
On a sectoral basis, companies working in the areas of property, recreation and what was categorised as ‘other’ saw the biggest increase in their HC reporting (see Figure 4). However, in a large number of cases companies had actually reduced the number of references to HC issues (see Figure 5). Companies also had different ways of referring to, and mitigating against, workforce risk, with the three main areas seen as relevant to HC being health and safety, ethics and the recruitment and retention of key employees. Following the media analysis, it was clear that while some companies’ reports reflected stories appearing in the media, others left out important details or did not report an adverse incident at all.
When we analysed various categories in more depth, it was clear that a number of HC issues attracted particular attention and there were many specific examples of excellent reporting practice:
• In the general category of HRD we found clear evidence that organisations are focusing on workforce and succession planning. There were many instances of good practice where companies reported on the value of successful talent pipelines.
• In terms of employee welfare, there were a number of consistent elements relating to employee engagement referred to by companies. Although the traditional employee survey was still a common occurrence, alternative methods are being reported on – for example, qualitative methods designed to understand employee commitment and motivation which are being used to understand employee voice.
• Again under the employee welfare general category, companies attached a high importance to illustrating how they cared for the well-being of their employees. We found clear evidence of companies going beyond statutory health and safety requirements in order to ensure employee welfare.
• There was also clear evidence that in terms of the KSA category, many companies are extremely focused upon understanding the capabilities of their workforce and in their reports frequently illustrated how their approach to skills development is connected to risk issues such as skills shortages. The report also detailed mitigation activity against these workforce risks.
• An important issue that emerged under the employee equity general category related to human rights. Our study found that some companies clearly understood the vital
importance of looking after employee human rights and adopted a stakeholder approach, which allowed them to develop policies that were aligned with the needs of employees, suppliers, customers, trade unions and activist organisations.
• Also under the employee equity general category we found numerous instances in company reports evidencing formal mechanisms to promote diversity. It was clear that innovations such as diversity councils and enhanced training and development programmes were designed to investigate and improve issues related to equality and diversity.
Conclusion and recommendations
This study has shown that both the quantity and quality of HC reporting has increased across the FTSE 100 companies between 2013 and 2015, although whether this increase may be solely attributed to changes in legislation is open to question. Moreover, given these findings, it would seem that FTSE 100 companies are addressing the inadequacies regarding HC issues, which have been voiced in relation to the content of annual reports. It is clear from our analysis that the majority of FTSE 100 companies are doing more than simply fulfilling their statutory duties in terms of reporting. It is also clear from our analysis that companies are conscious of FRC 2014 guidance (FRC 2014) and corporate governance codes that are drawn up by major institutional investors (Tricker 2015).
However, even though it would appear that there has been an overall increase in HC reporting, it is debatable whether investors and other stakeholders will be able to make informed decisions based on what are, on the whole, generally positive reports on
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a variety of HC issues. Indeed, when we carried out our media analysis, we found that although the majority did cite incidents that could be labelled under the workforce risk banner in their reports, some organisations seemed to avoid reporting HC risk incidents that appeared in the media. We believe that this approach is being chosen so as to minimise the impact of the events on the firm’s corporate reputation and share price, and to avoid deterring potential investors who may pay particular attention to annual reports.
With this in mind, the key recommendation from the study is that companies continue to focus on the reporting of HC issues, but adopt broadly consistent terminology to describe the human capital items, thereby making universal comparison easier. However, this does not mean that they should all use the same wording or take a ‘boilerplate’ approach to HC reporting, which we believe would not adequately reflect the contextual nature of the HC issues present in organisations.
Ultimately, we feel that our findings have shown that companies are reporting many of the elements and metrics in the Valuing your Talent framework (CIPD 2016b). In addition, this model may provide a useful foundation for HC reporting in the future and may offer a solution to the challenge of communicating HC issues that are of considerable material importance to organisations today.
About this report
Reporting Human Capital: Illustrating your company’s true value by Professor Ronan McIvor, Dr Martin McCracken and Mr Tony Wall of Ulster University Business School is available now at www.valuingyourtalent.com
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Where to next?
Valuing your Talent recognises that all value is created through people – so identifying key people measures, applying them to business decisions, and reporting on them consistently to external stakeholders should be a central concern for all organisations. We recognise, however, that all too often this is not the case.
Through our work to date we have identified a number of key measures and developed the Valuing your Talent framework to provide a platform which supports finance, HR and general managers, informed by rich dialogues and supporting research, to provide invaluable insight and powerful case studies. We are enormously grateful to the UKCES in particular for their significant contribution as cornerstone partners for Valuing your Talent in this exciting and critical first phase of the programme.
In taking Valuing your Talent forward, we are committed to continuing to build the foundation of support to enable organisations to improve practice, by recognising that organisational success rests mainly on two things: money and people: money, to build the resources and relationships to create and preserve value through organisation business models, and – since nothing happens without people – people, to bring their business models to life.
Reflecting our future priorities for Valuing your Talent, we will be developing two related areas of focus:
1 convening a leadership team of chairmen, CEOs, investors and other key influencers and stakeholders, as well as CFOs, HRDs and others, to champion and advocate for the programme, and lead a movement of change towards the better measurement and reporting of human capital
2 agenda-setting thought and practice leadership, focusing on identifying the next-generation people measures which will be critical for the creation and preservation of value through the business model.
We therefore look forward to broadening and deepening the community of interest and engagement and working closely with the business community to deliver real change in how organisations value their talent.
Looking ahead, Valuing your Talent will build on all that we have achieved so far – reinforcing relevance and driving impact for the leaders and key decision-makers in business and other organisations, as well as investors and other stakeholders.
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Appendix 1:
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Appendix 1: Action case studies
The case studies developed were used to update the Valuing your Talent framework and to encourage more effective utilisation of people data by organisations.
Themes explored through the case studies include:
• Human capital measurement, which explored the measures which are in common use in HR and finance, how they are defined, and whether they are being standardised across organisations and functions.
• Human capital analytics and reporting, which includes understanding of the analytical methods being used, how HR analytics activity is being resourced, and the types of capability available to conduct analytics.
• Impact of human capital insights, which explored how human capital data is informing the development of insights from analytics and whether analysis processes are delivering value to the organisation.
• The future of HR analytics: under this section business professionals were asked to consider how they believe people analytics will change in the future, and if they expect their business to continue to invest in people analytics capability.
Six case study organisations participated in the research:
• Capgemini
• Coca-Cola
• London Councils
• Network Rail
• ASDA
• British American Tobacco.
We conducted a series of case studies with organisations to explore how HR and finance are approaching human capital measurement and reporting in practice.
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Appendix 1
Capgemini case study: building from expertise – using in-house talent to create a new approach to managing and using dataCapgemini employs over 180,000 people across 40 countries and is a global provider of consulting, technology and outsourcing services. Built around highly experienced and skilled technical experts, the organisation relies fully on the expertise of its workforce to drive performance and continue its trend of strong financial performance.
The challenges that Capgemini face are similar to those of many operating in the fluid and uncertain economic and social environment in which global organisations must now function. For a business with such reliance on human, knowledge and intellectual capital, there is a firm desire from the leadership teams to understand more about the workforce, and how they can be mobilised through HR activity, to increase the productivity and performance of the business.
The business does, however, have to tackle some of the common challenges other businesses will recognise, not least the issue of siloed working, which can prevent teams from collaborating and working more productively together. Nowhere is this truer than in the HR function, where
the different activities which the HR teams manage sit separately to one another with varying degrees of overlap and cohesion. This structural and functional separation of activity meant that the way teams connect and use data was also very different. Reporting was ad- hoc and piecemeal, and the language that the business used to speak about people concepts was equally disjointed (Figure 1).
Keen to draw value from the organisation’s extensive HR data estate, which was of good quality but siloed, HR
Business Partner Maja Luckos saw the potential for an alternative approach at the CIPD HR Analytics Conference in 2014:
‘We have always done the same thing, as have most organisations, which is to report on the past by producing static reports, using multiple data systems which are not integrated. As the systems are separate, we naturally report in silos; so L&D is reported separately, as is recruitment etc. Everything is collated monthly to review progress against our KPIs.
Everyone produces their own slide which tells a different story on headcount etc. So I saw the need to change this because at the end of the day we’re working as one organisation with one set of KPIs and one HR agenda. I really started thinking, “How can we pull it all together into one version of the truth?”.’ Maja Luckos, HR Business Partner
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Appendix 1
Maja’s vision was to enable better informed decisions by the business at the point of action, through a completely new approach to HR analytics; to find an alternative to spreadsheets that would use engaging and meaningful visualisations, facilitating dynamic and real-time data discovery driven by the user (Figure 2).
Getting started: finding expertise and experience and building buy-inThe first step on the journey was to generate an appetite for this new approach from the HR Directors and convince them of its achievability.
‘I started by approaching the Insights and Data team who work with our clients to build analytics products and solutions. They were very supportive of the idea and instantly connected me with Qlik, one of our partners. After discussing our requirements, Qlik saw the potential and gave me access to a consultant for a couple of days, free of charge, to build a proof of concept.’ Maja Luckos, HR Business Partner
Building a proof of concept for the tool was the first major step in moving from ideas to implementation. Three simple applications were built over the course of the two days with the Qlik consultant, focusing on Attrition, Talent and L&D. All were underpinned by the same data feed from Oracle HR, providing a consistent picture throughout. It was important to prepare thoroughly before meeting with the consultant, organising the data and making decisions on the key areas that would instantly grab attention, in addition to the most critical KPIs.
‘Talent was definitely key. We’re quite good at identifying our talent, using a nine box grid that is well established. We designed one example for talent that was dynamic so you could pick and choose different dimensions, e.g. grade, and the application would tell you how many of the population were in each position on the grid (Figure 3). This immediately highlighted some inconsistencies in the data, which helped to show how useful the tool could be. You could
also understand the succession pipeline; which is something that the HR Leadership team liked.’ Maja Luckos, HR Business Partner
The applications were presented to the HR Leadership team and they were instantly sold on the approach. Seeing their own data presented in this new way really captured their imagination and they agreed to invest in further development of the tool. The aim was defined; to build one application covering all key HR areas; Headcount, Talent Management, Attrition, Career & Employability, Recruitment, Sickness & Absence and L&D.
Defining the audience and the users for the tool was also critical during this scoping phase. Whilst the HR team knew that they needed to gain better insights from their people data, there was little understanding of how the tool could be used by other functions. A process of consultation was undertaken to ascertain exactly how the business may use the data, and what format the final tool should take to deliver the best insights.
Figure 7: Management of data before the change
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Appendix 1
‘There were two intended types of primary user for the tool so we initially rolled it out to the HR teams that would benefit most as they work closely with decision makers in the business, but also eventually wanted to share it with the line managers, team leaders and capability leads, who manage large teams of 50 plus people, so they could use the insights to better inform decisions.’ Maja Luckos, HR Business Partner
Setting up definitionsThe model had to be able to compute data from various established systems and data sets which were already well used across HR and other business functions. Integrating these established systems was a significant undertaking which took considerable time:
‘We had to include a few different data sets – the biggest one came from our Oracle HR system, which is very comprehensive and holds good-quality data. This accounts for around 70% of the data requirement in the application. The rest came from different data owners across other functions – which took a little longer as we needed to get their buy-in to feed into the process. For example, you have to get your respective heads of talent, recruitment, L&D, etc, involved and excited about this as well.’
Maja Luckos, HR Business Partner
Then the process of setting up definitions began. Maja and her colleagues had to define the measures that were to be computed in the system, according to those who were running the analytics, and those who would be using the outputs. Deciding which elements needed to be measured was also an important consideration, as there are various measures that can be applied, often for the same concept. Maja recommends focusing on the priority measures, which can be understood more by considering:
Figure 8: Management of data through QlikView
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Appendix 1
‘Once we had requirements we had to go through the process of defining what each measure was, so what recruitment cost equals, and the formula you would use to calculate it. You end up with a long list which must be prioritised. I think you have to constantly challenge yourself; what is the value in looking at those KPIs? Why should we be measuring this process?’ Maja Luckos, HR Business Partner
Through exploring how the business understands specific HR terms, the team soon realised that there were few set definitions that ran across all functions and HR teams. This meant there was no common language when talking about people measures, either within HR or with colleagues from other functions including finance:
‘We found that in some parts of the business the definition for ‘Top Talent’ differed to ours. So although we have a similar 9 box grid, we define two of our boxes as ‘Top Talent’ while they just include the top right-hand one. So we had to factor these differences in so that anybody could use the tool.’ Michelle Steele, HR Business Partner
Building the toolOnce the scope, definitions and data feeds were agreed, the structure of the tool could be put in place. The design of the tool was incredibly important as it had to be easy to use and understand, whilst illustrating data in a clear and coherent way. The application was built section by section by a QlikView Developer, keeping in touch with the main stakeholders throughout. The main focus was on the data model as it was the quality of this that would give users the freedom to draw real insights from the data. Maja and other team members also attended the QlikView Designer training course so they could adapt the tool themselves.
Figure 9: HR dashboard, Talent 9 box grid
Figures provided for illustrative purposes only
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Appendix 1
The application consists of one dashboard which illustrates key performance indicators, and seven areas of interest which Maja defined through a consultation exercise across the business (Figure 4). She looked to the different functions that were already using the data in spreadsheet format to appreciate which particular areas
should be considered as key themes in the data model.
‘The main area of the tool holds the key performance indicators, and then linked to this are seven analysis areas; Headcount, Talent Management, Leavers, Joiners, Recruitment, Sickness & Absence, and Learning & Development.’ Maja Luckos, HR Business Partner
Figure 10: HR dashboard: Top measures
Figures provided for illustrative purposes only
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Appendix 1
The tool was given to users to test as soon as it provided enough information for them to draw insights from. The decision to go live partway through development was taken to explore real feedback from users and potential users whilst changes could still be implemented. This allowed the tool to become fit for purpose through real testing, and to highlight any conflicts for different user groups:
‘We spent a long time considering how we should build different requirements into the tool, for example, whether we should have different apps for the various user groups or personalise the talent matrix to user needs. In the end we felt that because we could pull all the UK data from
most of the feeds, it made sense to have one single application so everyone is looking at the same thing. But it can get complicated when parts of the business have different definitions. In the case of talent management, the long term goal would be that everybody is using the same matrix - I think the application itself might help us get there at some point… by encouraging everybody to work in the same way.’ Michelle Steele, HR Business Partner
Introducing the HR business to data: using the tool to build capabilityThe tool was initially launched in one part of the business (covering the data of approximately 4,500 employees). It was then rolled out country-wide and is today active across HR teams responsible for around 8,000 employees in the UK. There are over eighty users in the HR Community, including HRDs, HR Business Partners, operational HR Managers, recruitment partners, and specific L&D functions. To embed the tool and ensure that it is used appropriately across the business, a programme of training and development was rolled out to users as they explored and used the new system:
Table 9: Seven analysis areas in the analytics tool
Analysis Area Examples of Indicative Metrics
Headcount • Number of FTEs, flexible and part time labour
• Cost of employment: Average Remuneration Cost by grade
• Gender split (M/F)
Talent • Population by talent grades (performance and potential)
• % talent against total headcount
Leavers • Regretted and non-regretted leavers
• Managed leavers – cost and saving
• Top Talent leavers
• Reasons for leaving – using survey data
• Leavers by length of service
Recruitment • Cost of recruitment
• Average cost of hire
• Source of hire
• Quality – performance and potential of hires after one and two years
Sickness & absence • % days lost to sickness
• Cost of short to medium-term and long-term sickness
• Average days’ sickness per employee
Learning & Development • Completion rates
• Global hours of training / month & YTD
• Classroom and virtual hours
• Compliance on mandatory training
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Appendix 1
‘We created some material to help users understand how to use the tool and what the outputs show. It is quite intuitive but you have to understand the data inputs and definitions in detail before discussing it with the business leads. They know their areas best and will therefore always have questions about the data. The future aspiration is to give direct access to the managers themselves.' Maja Luckos, HR Business Partner
Driving value: connecting people analytics to real business issuesThrough using the tool, the team has started to explore specific aspects of their workforce which they believe will help the business to perform. One particular aspect is how attrition differs across business functions. The application enables teams to cut attrition data according to function and role, and compare across the business. An objective for the year is to ensure that non-regretted attrition is managed and regretted attrition remains low.
The impact on the business? The HR team is noticeably more curious about the data that they collect and the performance of some of the core processes of HR. There is now a much greater appetite for the organisation to question the efficacy and impact of certain HR projects and to share the insights with the business, to inform and drive people performance:
‘It’s revolutionary for us as an organisation… users kept telling me that what they now get in terms of data analysis is amazing. We had a meeting with someone who’s worked with our organisation in HR for a long time, and different regions across the globe, and she was stunned by the amount of detail in the tool. I think the HR teams now use their curiosity to investigate, analyse, and get to the bottom of the problem. They use the skills they already have as HR professionals but aided by the application.’ Maja Luckos, HR Business Partner
Sickness and absence are also areas of real interest to the business. A lot of time was spent considering definitions and understanding how the business would view and use the analytics being provided – particularly because trends are displayed for both short-term and long-term sickness, and the associated costs. The tool is opening up new conversations around sickness which are based more firmly on evidence. The real-time application of data is helping to assess and alter business activities, such as campaigns to reduce sickness- absence (Figure 5):‘‘Sickness has been a much bigger subject than I ever thought it would be. Many users are interested in sickness trends and analysis. It is probably the area that I spent most of my time on because everybody had a different view of what the definitions should be. Once we got it working, the HR teams really valued being able to see at a glance whether their activities to tackle sickness were making a difference. Before we had the application, it wasn’t as easy to compare month on month
Figure 11: QlikView Data view: sickness and absence
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Appendix 1
via the spreadsheet reports.’ Michelle Steele, HR Business Partner
When it comes to saving costs in the organisation, a knowledge-based company such as Capgemini relies on the significant, and expensive, expertise that its consultant, development and research teams have. For the HR team, few measures have been as useful and fascinating for the business to consider in real-time than the measures of recruitment, such as cost and rate.
‘The highest impact measure is cost of recruitment because once is visible and you can cut it in many ways you can relate it to so many other things.
I think it is interesting that in my interactions with the business recruitment always attracts a lot of attention. It is easy to compare the measure in many different ways to our profitability and performance as a business. Anything you spend on recruitment fees hits your bottom line, and that’s the message that everybody gets in the business and that is a start of many
interesting and more focused conversations for example around retention.’ Maja Luckos, HR Business Partner
Turning the HR tool into a commercial productThe aspiration is to take the framework of measures and the indicative definitions and develop a commercial product that customer facing teams at Capgemini can begin to share with clients. The dashboard in particular is something the business is keen to introduce its clients to. Building commercial viability from the beginning has been important for the HR team, who knew that for the business to commit resource to the HR product, there was some requirement to understand its business value. The business believes that the direct value that the tool could generate as a commercial product is high, and also suggests that the business can start to build and learn from sharing the tool externally:
‘We’ve taken the application back to the part of the business that supported it initially and they
want to start using it as one of their credentials when developing proposals. So now, when we bid for HR analytics work, we can say that we have intellectual property and expertise that we can share and use with the client.
Obviously every business will be different, so some people will have a slightly different view on how they measure and identify their talent, and what KPIs they want to look at, but as a framework it could potentially work for any company once you understand their specifics.’ Maja Luckos, HR Business Partner
Figure 12: Diversity and inclusion (D&I): QlikView dashboard
Figures provided for illustrative purposes only
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Appendix 1
Within a year, the HR team have moved from ad-hoc, disjointed operational reporting - where 56% of companies are according to the Bersin by Deloitte maturity model - to proactive advanced reporting which makes Capgemini one of 30% of organisations. The next step isto join the exclusive 10% through strategic analytics in 2016.1
1 Bersin, J. (2012) Big Data in HR: Building a competitive talent analytics function – the four stages of maturity. Bersin by Deloitte. April.
Now that the tool has gained strong reputational impact across the organisation, there is real appetite to explore how it can be applied to other areas, with an application focused on Diversity & Inclusion already in production (Figure 6). This incorporates a predictive analysis slant which is a very exciting development for the HR team and demonstrates the next step in the HR analytics journey that Capgemini wants to take.
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Appendix 1
Coca-Cola Enterprises: The thirst for HR analytics grows ‘It’s a great opportunity for HR, and we should not pass up on it, because, if executed well, HR analytics combined with business data allows us to highlight the impact of people on business outcomes.
‘It’s about small steps, pilots, where you start to demonstrate the power of combining HR and business data. If you understand the business problems and can come to the table with insights that had previously not been seen, you enhance HR’s credibility and demonstrate the value we can add as a function.
‘What amazes me as an HR professional, with a lean six sigma background, is that companies are often great at measuring and controlling business processes but very rarely consider the importance of people in that process. People are without doubt one of the most important variables in the equation.’
Data analytics journeyThe HR analytics journey within Coca-Cola Enterprises (CCE) really began in 2010. Given the complexity of the CCE operation, its global footprint and various business units, a team was needed which was able to provide a centralised HR reporting and analytics service to the business. This led to the formation of an HR analytics team serving eight countries. As a new team they had the opportunity to work closely with the HR function to understand their needs and build a team not only capable of delivering those requirements but also challenge the status quo.
‘When I first joined Coca-Cola Enterprises in 2010, it was very early on in their transformation programme and reporting was transitioned from North America to Europe.
‘At that point we did not have a huge suite of reports and there was limited structure in place. We had a number of scheduled reports to run each month, but not really an offering of scorecards or anything more advanced.’
The first step was to establish strong foundations for the new data analytics programme. It was imperative to get the basics right, enhance credibility and automate as many of the basic
descriptive reports as possible. The sheer number of requests the team received was preventing them from adding value and providing more-sophisticated reports and scorecards.
CCE initiated a project to reduce the volume of scheduled reports sent to customers, which enabled them to decrease the hours per month taken to run the reports by 70%. This was a game changer in CCE’s journey. Many of the remaining, basic, low-value reports were then automated, which allowed the team to move onwards in their journey and look more at the effectiveness of the HR function by developing key measures. The analytics team was soon able to focus on more
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‘value-adding’ analytics, instead of being overwhelmed with numerous transactional requests which consumed resources.
‘In the early stages requests were very basic. For example, how many people am I supporting? How many people have started or left? How many promotions have there been in my part of the organisation? The majority of requests were therefore very descriptive in their nature. There was an obvious need to automate as much as we could, because if we could not free ourselves of that kind of transactional reporting, there was no way we were going to add any value with analytics.’
Standardising and reporting: towards a basic scorecardThe team soon found that the more they provided reports, the more internal recognition they received. This ultimately created a thirst within HR for more data and metrics for measuring the performance of the organisation from an HR perspective. The HR analytics function knew this was an important next step but it wasn’t where they wanted the journey to end. They looked for technology that would allow them to automate as many of these metrics as possible while having the capability to combine multiple HR systems and data sources.
A breakthrough, and the next key milestone in the journey for CCE, was when they invested in an ‘out of the box’ system which provided them with standard metrics and measures, and enabled quick and simple descriptive analytics.
Instead of building a new set of standards from scratch, CCE piloted pre-existing measures within the application and applied these to their data. The result was that the capability to deliver more sophisticated descriptive analytics was realised more quickly and began delivering results sooner than CCE business customers had expected.
‘We were able to segment tasks based on the skill-set of the team. This created a natural talent development pipeline and ensured the right skill-set was dedicated to the appropriate task. This freed
up time for some of the team to focus on workforce analytics.
‘We implemented a solution that combines data from various sources, whether it is our HR system, the case management system for the service centre, or our on-boarding/recruitment tools. We brought all that data into one central area and developed a lot of ratios and measures. That really took it to the next level.’
As with any major transformation, the evolution from transactional to more advanced reporting took time, resource and commitment from the business, and there were many challenges for the team to overcome.
‘There were a lot of lessons. With the workforce analytics implementation we probably underestimated the resource and the time needed. Sometimes less is more and we provided too many metrics at first. The key was to really collaborate with our HR leaders and understand what the key metrics were.’
With the standards in place, CCE then turned to establishing a basic scorecard approach to illustrate the data. Scorecards are a common instrument used by many organisations to provide an overview of the performance of a function. Typically they consist of clear targets illustrated in a dashboard fashion and are utilised by senior management to guide their leadership of the organisation. The leadership team’s familiarity with the scorecard methodology meant that the analytics team could simply fit into a standard reporting process. But for CCE to create its HR dashboard, it was apparent that a clear purpose and objective for the analytics was needed, and that the development of future scorecards should be as automated as possible.
Consulting to the business: HR as a centre of ‘people expertise’At CCE it’s clear that HR analytics, insights, and combining HR and business data is an illustration of the value that HR can add to the business. CCE has developed a partnership approach which demonstrates the power that
high-quality analytics can deliver, and its value as a springboard to more-effective HR practices in the organisation. By acting in a consultative capacity, HR is able to better understand what makes CCE effective at delivering against its objectives, HR ensures both parties within the partnership use the data which is extracted, and find value in the insights which HR are developing.
‘To be a consultant in this area, you have to understand the business you’re working in. If you understand the business problem, you can help with your understanding of HR, together with your understanding of all the data sets you have available.
‘You can really help by extracting the right questions. If you have the right question, the analysis you are going to complete will be meaningful and insightful.’
Moving from descriptive reporting towards correlation analysisThere are numerous examples where the HR reporting and analytics team have partnered with the HR function and provided insights that have helped to develop more impactful HR processes and deliver greater outcomes for the business. As with many organisations, it is the engagement data with which the majority of HR insight is created. Developing further insight beyond standard survey outputs has meant that CCE has begun to increase the level of insights developed through the method, and by using longitudinal data they have started to track sentiment in the organisation. Tracking sentiment alongside other measures provides leaders with a good indicator for sense-checking the power of HR initiatives and general business processes. The question is whether the relationship between engagement and business results is causal or correlative. For CCE this point is important when explaining the implications of HR data insights to the rest of the business.
‘There have definitely been a number of examples where we are starting to share insights that are being acted upon. One example is
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our engagement survey that is run every couple of years. Within the survey there are three questions related to communication.
‘The business was keen to understand if there was a correlation between how an employee scores a manager, in terms of communication, and key performance indicators across our sites.
‘We demonstrated that across all of our sites there was a positive correlation between how leaders communicate and business outcomes. That is great but it is not implying causation. There is something there to explore further, but we cannot go and say, good communication causes better business performance.’
Building analytics capability within HR at CCEFor CCE’s analytics team one of the most important next steps is to share the experience and knowledge gained from developing the analytics function with their colleagues, and build capability across HR.
‘We are also reviewing the learning and development curriculum for HR to see what skills and competencies we need to build. One of the competencies that we have introduced is HR professionals being data analysers.
‘For me, it is not only understanding a spreadsheet or how to do a pivot table, it is more understanding what a ratio is, or understanding what their business problems are, or how data can really help them in their quest to find an intervention that is going to add value and shape business outcomes.’
BarriersAs with any long journey, the analytics team at CCE have faced numerous barriers. The challenges they list are common to most HR professionals attempting to establish a significant new process, but it is the challenge of establishing new capability and embedding fit-for-purpose technologies which has created the greatest challenge at CCE.
‘In terms of barriers, technology is one. For example, having the right data warehouse in place
that allows you to extract the data very quickly. From an HR perspective we are well placed; however, extracting data from the rest of the business is a challenge. At CCE HR is trying to branch out and get the data from other parts of the business, which is probably quite unusual. People probably do not expect HR to be that kind of driving force.’
CCE recognises a recruitment challenge centred on sourcing the capabilities to develop high-impact HR analytics, which includes hiring individuals with the ability to analyse data, develop insights and the communication know-how to share across the business. One challenge for HR is to sell the profession as suitable for analytical high-potentials to build their broader business acumen: to move away from the traditional view of transactional HR with little or no analytical capability, to a function based around high-quality data and business insights. For CCE this represents a significant opportunity – high-calibre analysts must see HR as a profession in which they’re able to build a lasting career.
‘At conferences I have listened to major firms who have PhD students in their business intelligence teams, who appear to be very good at not only analytics but also presenting information. They are few and far between, and I believe that people who have that skill-set would not naturally go into HR. If I reference the recent big data conference I went to, and the projects that some of these companies were doing outside of HR with customer data, Twitter data, really what I would call “big data”, it may seem a lot more appetising and appealing than HR analytics. If I was a PhD student, I am not sure I would consider HR as a place to go to develop my career and also, whether I would see any longevity in it. As a function we need to change that.’
Utilising predictive analytics: CCE’s approachFor organisations such as CCE, natural progression in analytics is towards mature data processes that utilise the predictive value of HR and business data. For most organisations this can
too often remain an objective that exists in the far future, and one which, without significant investment, may never be realised. Alongside the resource challenges in building capability there also exists the need to understand exactly how data may provide value, and the importance of objective and critical assessment as to how data can be exploited. Without appreciation for methodological challenges, data complexity and nuances in analysis, it may be that organisations use data without fully understanding the exact story the data is telling.
‘Predictive analytics is difficult. We are very much in the early stages as we are only starting to explore what predictive analytics might enable us to do, and what insights it could enable us to have. If we can develop some success stories, it will grow. If we go down this route and start to look at some predictive analytics and, actually, there is not the appetite in the business, or they do not believe it is the right thing to do, it might not take off.
‘If you think about the 2020 workplace, the issues that we have around leadership development, multi-generational workforces, people not staying with companies for as long as they have done in the past, there are a lot of challenges out there for HR. These are all areas where the use of HR analytics can provide the business with valuable insights.’
For CCE it appears that analytics and HR insight are gaining significant traction within the organisation. Leaders are engaging at all levels and the HR function is increasingly sharing insights across business boundaries. This hasn’t been without its challenges: CCE faces HR’s perennial issues of technology and the perceived lack of analytics capability. However, their approach of creating quality data sets and automated reporting processes has provided them with the foundations and opportunity to begin to develop real centres of expertise capable of providing high-quality insight to the organisation. It is clear CCE remains focused on continuing its HR analytical journey.
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London Councils: The power of expert networks London Councils is a lobbying organisation that promotes the interests of London’s 32 borough councils and the City of London. A public organisation, London Councils operates across political parties to deliver services on behalf of the public, by ensuring that its member authorities have the correct resources, freedoms and powers to deliver their services for residents and local businesses.
London borough councils have faced the biggest financial challenge of any part of the public sector since 2010. The Spending Review 2015 confirmed further funding reductions of around 30% in real terms over the next four years, on top of cuts to core funding of over 40% since 2010. Fundamental changes to the way services are delivered will be necessary to deliver the savings required.
London Councils offers a number of services to support London boroughs to meet the challenges they face during this period of change. This includes supporting professional networks, one of which is the Workforce Planning and HR Metrics group that enables HR professionals working at London boroughs to explore people data and share ways of using it to improve performance.
‘The London Directors of HR sponsor a number of council network groups. We have recruitment, pay and employee relations and OD networks and we wanted to develop a network
to work together on workforce planning and in particular the benchmarking of HR data, and that’s why the group came together.’ Mark Porter, Operational HR Manager, OneSource and chair of the London Councils Workforce Planning Group
The group consists of the HR professionals in each council who are responsible for or use HR data most frequently. They are often technical experts with an understanding of the specific measures and technology their council has access to which can provide them with people data. The group meets quarterly at London Councils.
‘Most group members are the HR metrics expert or lead within the councils: either performance people, on the HR side; or sometimes people who are involved with the payroll system. Meetings usually start with a presentation, often from one of the group’s members on a new system or application and move on to discussing upcoming issues on data collection and
presentation. At our most recent meeting the Department for Education attended to receive feedback on changes they are proposing to one of their statutory surveys. The meetings are lively and a good place to share ideas.’ Tessa Mapley, HR Metrics Service Lead, London Councils
For many HR managers, one of the biggest challenges can be developing business confidence and buy-in. By encouraging the use and benchmarking of HR data, the network enables HR professionals to facilitate evidence-based decision-making and helps them to make their organisations more effective.
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Benchmarking: developing standards and improving practice across London boroughsLondon Councils conducts a range of benchmarking surveys which have been developed using the shared expertise of the Workforce Planning network. In addition to enabling benchmarking and analysis at a regional level, the surveys promote the local collection and use of best practice HR metrics.
‘Working with London Directors of HR, London Councils had already developed an HR metrics survey and there was interest in expanding this. With the support of the Directors of HR network, we compiled a list of all the HR metrics in use locally. A subgroup of the Workforce Planning network met and, using the list as a basis, produced draft sets of HR metrics for benchmarking. These included many of the metrics from the original survey with others added to give greater insight. The subgroup also produced draft definitions and guidance for the surveys. The group’s drafts were shared with the Workforce Planning network to produce the sets of HR metrics questions now in use.’ Tessa Mapley, HR Metrics Service Lead, London Councils
Regular review and monitoring by the Workforce Planning network ensures the definitions are kept relevant and up to date. This also led to the development of an appendix included with survey results providing comments from survey contributors adding context if required, and letting other users know if they have been unable to follow guidance in the calculation of any of their metrics.
‘We are lucky because the members of the Workforce Planning network have in-depth expertise in HR metrics, years of experience and practical know-how and are generous in sharing this with the network and the survey service. We are also supported by the Directors of HR network and we have a designated director lead for HR metrics who champions our survey and benchmarking work
and gives us invaluable feedback and advice.’ Tessa Mapley, HR Metrics Service Lead, London Councils
Focusing on performanceThe benchmarking of HR data from the London region enables evidence-based decision-making on key issues. It empowers individual councils, groups of councils and the region as a whole to assess performance and drive improvement.
Councils can compare their performance on HR indicators ranging from the reasons why staff leave to diversity in the workforce, HR casework and sickness absence. Each council can see where its performance sits in relation to the others and they can share policy/procedure development and innovations that work.
Online tools provide systematic analysis of data and offer instant, up-to-date outputs that would take weeks to produce manually. They offer a cost-effective solution to collecting and processing large quantities of benchmarking data.
‘We use an online tool which has been set up to conduct our HR metrics surveys. Boroughs input their own data locally and can generate sophisticated results, reports and scorecards each with their own council’s branding. This has reduced the manual processing of the data and enabled instant reporting and updating of results outputs.’ Tessa Mapley, HR Metrics Service Lead, London Councils
When resources are limited and reducing, sharing best practice and ideas is an important way that councils can be more cost-effective and improve performance – learning from the best performers among their comparators and not having to come up with their own solutions in isolation.
‘We use the benchmarks at a local level at Havering and at Newham not only to continually assess and improve performance in day-to-day HR activities but also to focus on emerging priorities.’ Mark Porter, Operational HR Manager, OneSource
‘The fact that all London boroughs subscribe to the HR Metrics Service and participate in providing data is testament to its value and success. Sharing and benchmarking HR metrics supports our continuous improvement, both as individual councils and as a region. Having the service and the network in place also enables us to quickly access London-wide data to provide insight and evidence to support the development of new strategies.’ Jon Turner, Divisional Director of Human Resources at Harrow Council – Lead Director of HR for the HR Metrics Service
‘The London HR Metrics Service is recognised across the regions for producing some of the most highly reliable and relevant data and analysis. Key London-wide facts and figures are available and can be used to support London’s case on the wider national stage that includes government departments, parliamentary select committees and other decision-making bodies. It has been utilised by the national employers to maintain and build the reputation of the sector.’ Selena Lansley – London Councils, Head of London Regional Employers’ Organisation
Tackling real business issuesThe network also works collectively to explore issues that they all face – for example, the recruitment and retention of staff in specialised roles that are often in high demand and low supply.
‘I am in regular contact with the director lead for HR metrics and once a year I attend a Directors of HR network meeting to talk about the work of the group, the things that we’ve delivered, and find out from them what they want the group to deliver next year. One of the key issues this year was difficulty in recruiting children’s social workers that had led to an over-reliance on agency workers. There is high demand for these roles and agency worker rates had become inflated, adding to costs for councils.
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‘At the request of the network the HR Metrics Service surveyed councils on agency pay rates for children’s social workers and produced an analysis of the rates across London. The London Directors of HR used this information as part of a project to broker a memorandum of understanding (MOU) to be signed off by chief executives, directors of children’s services and directors of HR across London. The MOU sets standardised pay rates across London for agency workers and an agreement not to go above those rates. At present there are 27 councils of 33 that have signed the MOU. Councils are now working collaboratively to manage the market and not compete with one another.’ Mark Porter, Operational HR Manager, OneSource
This demonstrates the clear financial benefit in using HR data to inform and enable collaboration across stakeholders, particularly within public services – further cost-saving measures are also being developed across London, particularly with regards to managing workforce reductions to retain talent and avoid the potentially significant cost of redundancies.
Skills to be an HR analyst‘An HR analyst needs a combination of skills. It’s good if they have some background knowledge or understanding of the organisation but it’s also important that they have good knowledge of the systems they will be using to collect and analyse data. They will also need expertise in data analysis and in presenting data to different audiences so it can be understood and used effectively. There is also an important role for HR analysts in working with other HR professionals to identify and define HR metrics for which good, collectable data is available and which provide useful insight.’ Tessa Mapley, HR Metrics Service Lead, London Councils
HR analysts who develop a sense of curiosity about the workforce, and want to ask questions of data and explore its relationships, correlations, and so on, can discover new things about their workforce and potentially find ways of increasing performance.
‘HR metrics people should be playful. If you get a bit of spare time, run some reports and compare things, see if you get a correlation. Sometimes you come up with a new insight.’ Tessa Mapley, HR Metrics Service Lead, London Councils
HR analysts need to be able to communicate and present data in a way which is clear and usable by functional leads within the business.
‘I think another important role of the Workforce Planning group is sharing ways of presenting data, communicating what your data is telling you and understanding the context, or the reasoning behind it. If you get the story right, and you understand it, people take your data more seriously as well.’ Mark Porter, Operational HR Manager, OneSource
Sharing ideas with other public service providersHaving solved some of the practical challenges, London Councils is in a good position to share ideas and demonstrate the benchmarking processes and systems it uses to other public service organisations, including a recent presentation to the Civil Service.
‘Benchmarking is something we can all benefit from. There is potential to reduce costs in the public sector if we are able to look at our data more closely and make good use of it.’ Tessa Mapley, HR Metrics Service Lead, London Councils
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Network Rail: Building the workforce of the future through talent analyticsNetwork Rail is a public sector body for the maintenance and infrastructure management of the rail network in England, Scotland and Wales which employs over 34,000 people across the three nations. Nearly 1.7 billion passenger journeys are made each year on railways managed by Network Rail, which in 2015 reported revenues of £6 billion. With a diverse workforce of highly skilled, technical engineering and planning experts based across a broad geography, Network Rail relies fully on the expertise of its workforce to deliver high-quality performance for its public rail customers and the franchised railway services which operate on its network.
Delivering a public service 365 days of the yearRailways in England, Scotland and Wales continue to be some of the busiest in the world, and are often operating on some of the oldest infrastructure. For decades Network Rail has been investing in improving infrastructure across the three nations, while the level of usage has continued to rise year on year. At no time since the 1920s, when the rail network was almost twice in size, has the railway been as busy. This has raised significant infrastructure, design and maintenance challenges for the business, if it is to operate and perform in a sustainable way.
‘The demand for the use of the railway has grown significantly. In the last 20 years we have seen a 100% increase in customer traffic. It is predicted that in the next 20 years it will double again. There aren’t many businesses that are seeing that amount of growth.
‘At the same time we must improve the technology in our business to deliver high levels of safety while using what is basically a Victorian railway which is over 150 years old. The challenges are phenomenal.
‘There is also a great deal of media and government scrutiny. In September 2014 our balance sheet was reclassified, an EU regulation stated that we are to be treated as part of the public sector. This brought challenges around disclosure, accountability and restrictions on our funding, which are new and complex for the business to have.’ Ian Iceton, Group HR Director
The size and scope of Network Rail means that the organisation operates with a long-term vision in mind, and utilises the high level of human and knowledge capital available to it through its people. The breadth of skills and knowledge covers many areas, including safety,
operations, engineering, digital, information management, project and programme management, strategy, planning, research and development, finance, procurement, property, legal, audit, tax, communications and human resources. As a result of this diverse workforce skills base, the organisation has implemented an HR model which allows flexibility and accessibility for the line management community to enable them to manage and tackle their own issues. The focus on business-relevant HR processes has meant that the HR operating model has been designed around the needs of the functions in the business.
HR within the organisation is structured in an Ulrich model, that is, shared services and centres of expertise, using established business partners to work across the organisation to drive performance, through focused work on business issues
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and delivering expertise directly to the business function.
‘We have devolved business partners throughout the business based across the country. Our centres of expertise include resourcing, reward and benefits, employee engagement, pensions, diversity and inclusion, industrial relations, employee relations, organisational design and talent, and training delivery. Our shared service also exists to carry out transactional activity. The model helps us to deliver a consistent service across the business, but is something we need to adapt for the future as the business evolves.’ Ian Iceton, Group HR Director
The workforce itself can be split into four groupings: day-to-day operations management, project management, technical expertise and engineering, and corporate business functions. To deliver railway services for customers and organisations operating in partnership with Network Rail, the business operates 365 days a year to maintain and develop the nation’s railways. Because of the high levels of usage there are significant challenges with regards to access and availability, which mean that employees are required to work outside of regular working hours, often overnight, on weekends, and on bank and public holidays. As a result engagement is a key measure for the business to keep track of workforce health and well-being.
‘We have a lot of people that work evenings, weekends and particularly on bank holidays. With both our own employees and workforce from our supply chain, we had more than 20,000 people working over the Christmas and New Year period on more than 500 projects.
‘Bank holidays are one of the times when we can get access to the railway for a long enough period to do some of the much needed major upgrades to the network that is being demanded because of the growth in traffic. This impacts a lot of the travelling public and line-side neighbours, which is sometimes portrayed negatively in the media for infrequent disruptions to service.
Engagement is so important for us.’ Ian Iceton, Group HR Director
Using people data to evolve Network RailAs an engineering and infrastructure management organisation, Network Rail relies heavily on the use of data, from the early days of ordnance survey and geotechnical survey data to modern and complex modelling of how passengers use the network. The organisation is inherently a data-driven business, but given its long history, various legacy processes and data management activities remain unchanged.
‘We have inherited a legacy of a lot of data that wasn’t always recorded properly or accurately, which we are moving to modern technology. We have invested significantly in the last couple of years in terms of trying to be able to use data and information in a more intelligent way than ever before.’ Ian Iceton, Group HR Director
Moving from legacy systems to updated HR and IT systems is a big challenge for an organisation that is spread geographically across the breadth of England, Scotland and Wales, and has TUPE’d in a number of maintenance contractors. Legacy systems such as payroll, and HR processes such as employment contracting, mean that there are many processes or policies that are not uniform across the business. The transition to a more integrated and strategic approach is one which the organisation knows will take some time given the complexity of the external environment and the relationship with stakeholders, particularly the trade union community.
‘We operate a number of payrolls on different systems. We also have a variety of terms and conditions for people, and different working patterns and arrangements for individuals sometimes in the same role. Some of that is tied up in quite emotive industrial relations agreements, which we work hard in partnership with trade unions to maintain. We would love to simplify it all but it is not that straightforward. We would like to do it in a way that is
very consultative and that does not happen overnight – it won’t be something we can do in one step.’ Ian Iceton, Group HR Director
Accelerated Leaders Programme: developing future Network Rail leadersA core strategy of HR is to invest in and develop the leadership capability of those with potential in the business. The business created the Accelerated Leaders Programme (ALP) to develop future leaders and in year 3 (2016 intake) of the programme, creating focus on building succession pipelines for key risk roles at a very senior level. The organisation identified a need for a formal high-potential programme to develop leadership capability and help individuals understand themselves and their capability at a deeper level.
‘The Accelerated Leaders Programme (ALP) is aimed at those who have been identified as “high potential” and tracking to one of the 25 key risk roles as a successor within five years. ALP participants complete formal group modules, personal tailored development and are encouraged to use peer-to-peer learning, maximising on their growing network. The programme aims to create agile, emotionally intelligent leaders for the future.’ Nita Devshi, Head of Organisational Design & Talent
Data plays a crucial role in steering the development of the initiative, and evaluating its success. The business holds the HR team to account through the performance data collected from the ALP. Reporting data on a frequent basis means that the ALPers can be tracked using agreed key measures, and should there need to be any ‘in-flight’ modifications, the business can adjust and steer accordingly. It also enables the HR team to effectively work with the business to push particular strategies and people priorities – for example, to ensure a good diversity of talent flowing through the programme.
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‘We corporately set targets, which is quite challenging to meet as we’re reliant on devolved businesses providing a sufficient pool to meet them.
‘For example, a target of 30% female representation on the programme is only achievable if we have 40–50% nominated for assessment in the first place.
‘The measures set are representative of the total population within the organisation. Gathering such data in the first place is therefore critical for us to demonstrate progress and success.’ Nita Devshi, Head of Organisational Design & Talent
Data in the form of feedback forms and performance management information is also collected, particularly at the stage of assessment and selection. This stage of data use is important because it allows the assessors to make informed decisions about who is currently suitable to join the ALP, and then track their progress through the programme.
‘As part of the assessment centres we collate evidence about the individual’s aspiration, ability and engagement. Performance data is provided by the line manager to support the individual’s initial nomination.
‘We have yet to agree a set of consistent performance measures for the ALP across the business because of the variety of roles included, which creates complexity. This is something we are working on at the moment, looking at more general measures where data can be available.’ Nita Devshi, Head of Organisational Design & Talent
Developing internal capability to complete HR analyticsAs well as bringing the business up to date with new technology and innovations for managing data, Network Rail must also build the capability of staff to use data and new technologies. The shift to being more data-driven as a business is one which will take time and commitment from the organisation.
‘One of our challenges is that if we change systems or processes, a large number of people will need to be trained. We are making use of new technology, but we have to go at the pace that it can be trained and absorbed in the business.
‘We recognise that some employees in our business don’t use technology in their day-to-day life. Therefore we can’t make assumptions about what they do and don’t know to start with – we have to be considerate and take them on the journey with us. For example, the maintenance workers’ focus is not necessarily the technology but more on delivering a good function job. That may mean laying new pieces of track or ballast. This relies a lot on experience, not necessarily being data-driven. There can certainly be a cultural dimension to it.’ Ian Iceton, Group HR Director
The HR function recognises that shifting the business to new ways of working will take time and commitment by HR, and also the line management community the HR function works closely with. Clear and transparent use of people data is one of the ways by which Network Rail’s HR function will develop capability within the business.
Using scorecards to report on vital human capital dataFor an industry driven by performance and strict adherence to timelines, the business uses extensive reporting to keep track of its human capital and project management data. Frequent reporting by HR through a balanced scorecard allows the senior leadership team to keep track of those topics which are important and timely within the business and, where necessary, make leadership decisions to steer the organisation.
‘We use a number of communication channels to reinforce the messages to our senior leadership team. Our CEO does a regular briefing on our intranet. Our business scorecard is published every month so that people can look closely at the data. There is an expectation within each function that the
scorecard is considered and used in functional meetings. Support is also given to line managers to provide knowledge and awareness on how to use the scorecard in more-local team briefings.’ Ian Iceton, Group HR Director
The people data in the scorecard is one of the most important categories, as it relays key performance indicators regarding health and safety and performance of the workforce, two hugely important concepts at Network Rail which permeate throughout the organisation’s leadership and management culture:
‘We are a business that is really focused on safety and performance going hand in hand. We also use a lot of opportunities to talk about safety-related matters … when we talk about the health and well-being of ourselves, our colleagues and avoiding safety issues, everyone listens. It is more powerful if we can provide metrics to illustrate why it is so important for well-being and performance. There is a way to tie the two together.’ Ian Iceton, Group HR Director
The future of people data at Network RailConsistency and standard measures are the desired objective for people analytics at Network Rail. For the organisation to be able to effectively drive performance and link HR activity to business outcomes, it recognises that it must have a set of standardised measures which can be used across the business to clearly communicate the link between people and performance.
‘Within the next five years we will move to being clearer and more consistent about the things that we are measuring and why we are measuring them. This will help us to identify the levers that we can pull to effectively change the business. We will be able to report improvements and see that we’re not just capturing something for the sake of it, but it was absolutely leading to improved business performance. This is our goal with HR data and analytics.’ Ian Iceton, Group HR Director
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ASDA: People analytics and the changing business model As one of the UK’s largest supermarket retailers, ASDA recognises the importance of its colleagues. With a workforce of over 170,000 people, serving 19 million customers a week and generating £21 billion of revenue in 2014, the footprint of the business is vast.
The changing landscape of retailInnovation and change are driving forces for organisations such as ASDA. Changing consumer behaviour means that for the business to operate in the highly competitive retail market, employees must be equipped to operate within complex and challenging environments. For example, over half of in-store transactions at ASDA now go through a self-scan checkout; employees are now hosting customers, helping with queries and managing multiple checkout sites at one time. This shift in customer service and customer management within the business model is challenging the traditional supermarket retail skills that ASDA has built ever since being founded in 1965.
Where once repeatable and predictable tasks could be trained and operationalised through training of customer service staff, now more complex and individual-based skills are required. Decision-making and autonomy are a pair that are
thought to be of particular importance to ASDA in the future, as Hayley Tatum, Senior Vice President for People and Stores at ASDA, explains:
‘The challenges are about helping our colleagues to understand that delivering great service and meeting future business needs requires an acceptance that the business must change and adapt quickly. Therefore, being able to manage with autonomy and agility is an essential skill and is something to be relished and prized, not something to resist and be afraid of.’ Hayley Tatum, Senior Vice President for People and Stores
Rapid growth in online and mobile shopping is also acting as a catalyst for the business, pushing for innovation throughout operations and people development. Workforce planning is one particular aspect of ASDA whereby innovation, and in particular automation, will radically alter the makeup of the retail business. New skills and capabilities are therefore being planned into the future
workforce, and mapped against current capabilities – the gaps being addressed through new HR interventions, training and deployment of workforce skills. With this disruption only on the increase, the business is tracking its performance through two key HR measures: customer satisfaction and engagement:
‘From an HR point of view, some of the key questions at the moment are around how many colleagues we need, and what skills they will need to develop. For example, what is the optimum level of service for our customers, and how many customers should one colleague be serving at any one time? This is not just an operational question – this also affects who our people are and their suitability with their role … our colleagues are dealing with different technology, different customer reactions: their own capability is suddenly being challenged. We have to support them to continue to be happy and productive in the future' Hayley Tatum, Senior Vice President for People and Stores
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People as the drivers, analytics as the enablerASDA’s people are at the heart of the organisation’s growth and success, and reflecting the diversity of the communities in which the business operates is important for the business to continue to meet the high expectations of its customers. Utilising this diversity in the workforce is a powerful way, then, for the business to connect with customers and deliver the type of service they desire – as a result HR strategy and operations are tailored to reflect the individual needs of employees. This is particularly apparent when considering workforce demographics and the very personal needs of staff, which, if met correctly, can drive long-term performance. Working at this individual level is just one of the ways by which HR analytics is bringing HR teams closer to the needs of individual employees and is enabling them to tailor the function accordingly:
‘In ASDA we’ve got more than five generations under one roof. We were celebrating a gentleman’s 90th birthday the other day; he works for us 12 hours a week. The best part of the whole story is he has ten years’ service, so he was 80 when he joined us. What he might need and his needs as a colleague versus someone on our graduate scheme might be quite different, so it is very important to me that I’m engaging with the colleague on an individual basis and not broad-brushing. On some things we might all be the same, but on others we might not be.’ Hayley Tatum, Senior Vice President for People and Stores
As a result, the organisation’s HR strategy is built around the three key pillars of culture, talent and ways of working. Engagement in particular is an area which the business focuses on within the culture and engagement pillars, with considerable attention paid to appreciating the relationship between engagement and performance. The organisation has a dedicated role within
the function: the engagement analytics manager, who leads the organisation’s push to better appreciate this relationship, and is responsible for managing and reporting on engagement data:
‘My role is within the engagement space at ASDA and concerns the measurement and quantification of engagement, the planning and development of engagement proposals and how we as a business drive engagement. I am interested in exploring the return that we get from our employees and which measures we can put in place to track mood, aspirations and motivations. This is of real importance to ASDA as a business.’ Engagement Analytics Manager
As a driver of performance ASDA is aware that engagement is one of the major levers that can be used to ensure that customer satisfaction remains high. Senior leadership teams are most interested in this because, along with developing and providing quality goods, customer engagement is one of the most important activities the business can deliver on to create value. By exploring engagement data the leadership team is encouraged to sense-check how HR processes and systems are driving the right behaviours in employees, and particular aspects of engagement which are believed to be directly correlated to crucial measures of business performance, including both sales and customer satisfaction:
‘Segmentation analysis is really important to me. It saves me a lot of money if I can be precise and tailored about how I am talking to my teams. Equally, it helps me with engagement and I’ve got direct correlation between our engagement scores and things like shrink performance, waste performance, wages, sales and obviously customer satisfaction. This shows the importance of engagement as an HR measure when we are looking to create competitive advantage in our business.’ Hayley Tatum, Senior Vice President for People and Stores
But while many organisations may view surveys as the be-all and end-all of engagement, ASDA is clear that it is the conversation and behaviours that result from surveys which are of value. The engagement team recognise the value of this ongoing dialogue and discussion with employees, and therefore communicate openly during and outside of the survey period. Instead of forcing responses and driving the wrong behaviours in the line management community, team leaders are encouraged to lead powerful conversations within their teams that are proactive and open, designed to create dialogue and create the right conditions for high-quality customer interactions:
‘If I just talk about response rates: it’s really important for us to get as many people through the surveys that we do, so they have a voice. That’s what we want to encourage in our colleagues, but actually we know that it doesn’t make a difference in terms of the output of numbers that we get, because of convergence of the data.
‘We say to our senior stakeholders, “It’s not really that important if you don’t get 100%, but actually make sure you’re encouraging your colleagues, as many of them as possible, to participate. Don’t force them.” That can be quite conflicting, I think, for our leaders, so we help them to understand it as much as possible.’ Engagement Analytics Manager
The people analytics functionRetail, with its significant workforce and vast geographic footprint, is naturally driven by operating costs, one of the biggest being its workforce. Payroll then is one of the most important data-rich activities within the wider HR function; and given the desire of the organisation to drive performance while efficiently using resources, productivity is a key performance
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indicator for both internal and external stakeholders:
‘Analytics has been used in retailing for many years because it’s a people business and people are your biggest cost, other than your cost of goods. The largest bill is your payroll bill. So understanding how long each task takes, whether it is done well, and then being able to refine and value-engineer tasks to modify your wage costs accordingly is very important. Many retailers challenge themselves every year on how many millions they can take out of their cost base as a result to re-invest for the customer and shareholder.’ Hayley Tatum, Senior Vice President for People and Stores
To drive these cost-control activities, the business draws on basic productivity and performance measures which help to illustrate how employees across the business are delivering in their roles. Based around time to delivery, these measures of productivity play an important role in maintaining service-level standards, and help focus the training and development of staff:
‘In terms of employee analytics we measure service, transaction times on a checkout, time to restock, time to deliver, and so on. We centralise this data and use it to manage and maintain standards. We can see optimum pick rates, optimum scan rates, and transaction times and then we set targets and standards that we train towards, encouraging and coaching our colleagues to achieve certain levels of performance for the customer.’ Hayley Tatum, Senior Vice President for People and Stores
The analytics team has worked hard to develop core measures that the business holds as standard measures. These standard measures are applied by HR, the custodians of people data, to all the information they manage, with the aim of drawing comparisons and moving the business towards potential benchmarking against peers and competitors. For ASDA the metrics order into a logical hierarchy of value to the business:
‘I think if we were to order them in importance to the business at
present, wages would be at the top, as this tells us how much we’re spending on our employees. Then it would come down to how much they’re costing us when they leave, and also absence. Our sector is highly focused on cost management, and this is reflected in our HR measures. Those two quantitative sets of data are important for us in the financial sense. Then if we were to move through the spectrum, measures regarding engagement, performance tracking, and qualitative data such as how they feel, and so on.’ Engagement Analytics Manager
The size and scope of ASDA mean that within the organisation there is real talent and capability available and ready to be leveraged. Following ASDA’s acquisition by American retail giant Walmart in 1999, ASDA has been able to access people analytics capability which was previously unavailable. And while UK-based ASDA has only recently started to delve into HR analytics and explore how people data may help drive performance, the Walmart team has long invested in attempting to answer the people performance question. So much so that the Walmart function has a highly capable people analytics team and is now driving insights in collaboration with their ASDA-based counterparts:
‘I am very lucky because, obviously, ASDA is owned by Walmart. There are dedicated people inside the analytics team, not only in ASDA, but they can work with and leverage, from a systems and a capability point of view, into Walmart.
‘It also allows me to share information and learning with other markets. Obviously, ASDA being in the UK is one of 29 countries in which Walmart trades. So I’m able to utilise global insight and understand if somebody else has already cracked a problem which perhaps I’m only just beginning to face. I’m able to get information and guidance from across our expert network.’ Hayley Tatum, Senior Vice President for People and Stores
This global perspective on people data is now helping ASDA to build its own capability and deliver
insights across its UK operations. Investment for the business is now in building individual capability by sourcing highly capable analysts with a basic understanding of people and the HR function. At present analytical skills at ASDA are based around an equal weighting of data understanding, plus the ability to communicate and influence using evidence. For ASDA, both skill-sets are needed: one without the other can lead to misinformation to the business with potentially damaging results:
‘The skills that I would say my own team have, they’re tech-savvy, and so they know how to get around quickly and present and get information. They’re disciplined in working through things like algorithms and finding patterns and trends in information. But they have a very personable style that they can then go and test. So they don’t only take the information at face value: they’re able to then go out and run focus groups and check it, and then present it, which is a very important skill to have. It gives me and our leadership team confidence that the right tests have been taken to provide robust and valid insights.’ Hayley Tatum, Senior Vice President for People and Stores
Customer data and employee data to create insightWhile measuring standard metrics is important for HR operations, the value of data grows significantly once it is used in the form of insights across the business. A fundamental role of the HR analytics team is to build clear reports which deliver timely insights across functional teams and senior leaders. And because data availability is increasing, the number of potential reports that HR must develop and understand is also going up. It is for this reason that ASDA is now looking to rationalise their HR measures and present them as a simple dashboard which illustrates key performance indicators connected to the three HR strategic priorities. The business is working with external experts to use HR data within the dashboard report
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which will feature alongside other business metrics. Accompanying the dashboard will be narrative information which is intended to provide a holistic perspective of ASDA’s people, in the context of focusing on business and customer performance. This tool is now in development by the HR team and is one which they believe will radically change the way the business uses HR data:
‘We’re in the process of creating a dashboard. We’ve never really achieved it … on our retail side we’re looking at how our key performance indicators in HR link to the overall business performance indicators. We’ve worked with a consultancy that has been able to link output measures back to input drivers. Now we’re going to look at some of the HR angles in that data, for example, what makes the difference in terms of our home shopping picking accuracy, and how that impacts on sales. What we want to do now is join everything up. At the moment we don’t bring everything together, for example, by talking about data holistically and how it impacts wider business. We tend to be quite siloed in the way that we work. We need to develop greater integration between our different types of data.
‘The dashboard that HR is building will help to change this as it will use HR data and engagement data to tell the story clearly. It will show absence and turnover, and so on. We’re also working on how we would reduce some of the reporting of requirements, which are very manual, to feed into that so that it would then be a very holistic view.’ Engagement Analytics Manager
It is clear then that ASDA recognises the importance and value of high-quality people data. Across the business data is used in multiple ways and is now being utilised alongside other types of business information. ASDA has put in place senior leaders with oversight and governance responsibilities within the data and analytics space, predominantly around customer data, where value is driven from insights through to increased sales. Market insight in particular
is important in the highly competitive retail environment, where customer loyalty is shrinking and customer behaviour is increasingly fickle.
‘We have a chief customer officer whose role is to oversee customer insight and intelligence and how the business uses this information. This capability provides data frequently. For example, it provides an ongoing pulse of what our customers are saying and how they’re behaving. Because what customers say isn’t necessarily what they do, you have to continually measure and monitor their actual behaviour.
‘You can then compare a lot of that information with competitive market information so you can see how we sit by comparison. We’ll do a whole variety of things, for example in our stores where we’ve got focus groups and listening groups with our own customers and with our competitors’ customers, just to understand different reactions and behaviours. Then we’ll analyse this data and choose what to do in our business that might affect competitive service.’ Hayley Tatum, Senior Vice President for People and Stores
This direct action from market insight through to alterations in customer service or operational delivery models is driving real value-creation in the business. Leaders too are now using this data in various ways, and it is during its combination with employee data when truly powerful people insights can occur. ASDA has recognised this and is focusing much of its analytical development on building this multidimensional analytics capability – and while there is some way to go until the business is able to benefit from these insights, there is definite belief that utilising data in this way will drive business performance in unique and innovative ways.
Data as the weapon in the war for talentASDA then is very much future-focused, and in preparation for the increasingly competitive retail environment the chain is building
its capabilities in analytics and focusing on modifying its human capital through various HR activities and interventions. Through all of this, data is playing a vital enabling role, and the analytics that HR is applying to data is uncovering fascinating concepts the business is now building into its workforce, engagement and customer service plans. Management capability is one area of focus which the business now believes should be enhanced and made to be future proof. The new context and evolved business model mean that managerial roles are expected to decline in number, but the need for strong capability to innovate and drive customer service will continue to grow:
‘In the future I believe we will have fewer managers and more engaged, contributing teams of colleagues who figure stuff out for themselves. I’m certain those closest to the customers will come up with brilliant and the best solutions.’ Hayley Tatum, Senior Vice President for People and Stores
For Hayley and her colleagues, it is HR analytics which holds the key. By applying the same techniques of customer segmentation and analysis to their engagement and people data, the team believe that they will unlock the ability of employees to behave and engage with customers in such a way that they deliver high-quality service every time, and deliver the competitive advantage the business needs to succeed today and well into the future:
‘I’d like the data to tell me how to get the most engaged colleague that I possibly can to give the best level and noticeable, industry-leading service in the market. If I could find that, that would tell me, “What does that colleague do, say, and sound like?” From a behavioural point of view I believe that would give us a real competitive advantage.’ Hayley Tatum, Senior Vice President for People and Stores
Appendix 1
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British American Tobacco: Building centres of excellence for people analyticsBritish American Tobacco (BAT), one of the world’s biggest listed tobacco producers, has delivered solid earnings growth in recent years despite a raft of regulatory challenges.
IntroductionThe London-headquartered group’s tenfold share-price increase since 2002 to become a £75 billion behemoth is due in part to its commitment to a high-quality people strategy.
According to Gordon Barrie, BAT’s outgoing head of corporate HR, at the heart of the strategy is the group’s rigorous talent assessment and regular reviews, which surpass anything that he had seen previously.
Barrie – who held finance roles at BAT until 2012 when he became head of HR for IT and finance, then global head of corporate HR two years later – says: ‘In my previous finance career it was always numbers and plans and cycles, but at BAT for the first time I saw detailed succession plans for every role.’
The company’s investment in succession planning, leadership development, talent management and business partnering training for the global finance pipeline really dates back to the 1980s, when finance partnered with Cranfield University professor
Keith Ward: ‘As a result, we created an integrated, aligned and joined-up global community of people,’ says Barrie, who is leaving the group in late spring 2016.
Ward’s influence was key in driving a partnership approach between finance and consumer and trade marketing in the end markets, enabling BAT’s evolution from an audit and control-oriented financial operating model to a more commercial finance approach. The new commercial capabilities also helped build a more meritocratic and nationally diverse talent pool across one hundred different markets, with local rather than solely expatriate career development and succession. At the same time BAT started a long-term relationship with Human Qualities, a business psychology practice, to jointly run leadership capability assessment and development centres for its international finance talent: ‘The result is an incredibly diverse talent pool in terms of high-potential and succession. This incredible offer in people development and leadership
investment has defined the agenda for leaders within the company at all levels,’ Barrie adds.
Centre of excellenceTo ensure that the same level of career development was rolled out across the whole group, BAT launched a global centre of excellence for talent and organisational effectiveness three years ago. Didem Aydin, who looks after BAT’s talent development for finance and IT functions worldwide, says: ‘The centre has achieved better investment resource-allocation decisions in different functions and across geographies.’
BAT’s global business had migrated from a largely dispersed holding company to a centralised, integrated enterprise, with a single chart of accounts and common systems ‘Now it is completely integrated. Resource-allocation decisions that were previously dispersed and inefficient are now centralised, including the people and talent strategy,’ says Barrie.
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Barrie says there is no requirement to push for a more inclusive group at BAT as the talent model, sourcing talent from its business units all over the world, means it is already very nationally diverse: ‘This headquarters has people of at least 85 different nationalities,’ he declares.
There is also an emphasis on hiring and stretching leaders from the countries in which growth will be generated: ‘That is a huge alignment between the people strategy and the business growth strategy,’ says Barrie. ‘It’s about finding the right balance between succession for the board and getting the right teams in the marketplace.’ The many nationalities on the board confirm the success of the approach.
The analytics of the centre of excellence include a detailed dashboard, shared with all the regions, and the functions that can be sliced by markets, geography, grade and management population. The centre’s impact will be felt even further when a global HR transformation using SuccessFactors, a SAP cloud solution, converts data stored in multiple sources into one source by the end of the year, says Aydin.
The value of the analyticsThe analysis gives insights into attrition rates, turnover, promotion rates and identification of high-potential people, says Aydin. ‘For global junior management and global non-management, it’s hugely relevant and significant,’ adds Barrie.
Such insights are particularly valuable in addressing challenges such as high turnover in competitive talent markets in Asia and increasing female representation among the company’s top 200 leaders.
Where global strategy and people strategy are most aligned is in correlating business scale and potential value with the best talent: ‘We prioritise our investment on those seen as outranking their peers in terms of potential,’ says Barrie. ‘The leaders in the biggest businesses – such as Brazil, South Africa, Russia, Germany, Australia, Japan, Malaysia – will have typically been identified as management or board potential in this way. Likewise, finance directors and marketing directors in the major markets will usually have the potential to be at least a regional functional head,’ he says.
Reporting When it comes to reporting BAT’s people strategy, Barrie says the company’s four strategy pillars – growth, productivity, sustainability and winning organisation – are covered within the governance section of the annual report. Details of staff turnover appear in sustainability reporting submitted to the Dow Jones Sustainability Index, he adds.
‘The decision-making landscape is becoming more focused on scorecards and dashboards based on global business information data from a single source-data warehouse,’ says Barrie. ‘We have spent the last four years implementing the world’s biggest single SAP instance.’
Barrie says this investment underlines BAT’s drive to become an increasingly agile and integrated company. ‘The tobacco industry can be perceived as being somewhat complacent as a defensive, high-margin, high-cash-flow stock, but maintaining profit growth keeps management on its toes. You cannot be complacent – you have to be impatient for change, agile, imaginative and ambitious to continue delivering to shareholders’ expectations,’ he says.
Aydin says the group’s people strategy will play a key part in maintaining that momentum in a world where regulatory risks to the business are likely to increase. ‘It is good to see that our leadership capabilities are very aligned to becoming an agile company, by focusing on business and people,’ she says.
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Input measures
The input level of the framework represents the fundamental people-data building blocks which help an organisation understand their human capital. This is people data at its most basic – it is absolute and cannot be broken down any further. By combining input-level data, it is possible to build more complex types of data and indicators.
Table 4 details definitions of each input measure, and indicative people measures that may be applied.
Appendix 2: Valuing your Talent Framework People Measures
Table 4: Valuing your Talent input measures
Workforce composition and diversity
The characteristics of an organisation’s workforce, which includes basic descriptive demographic measures – diversity is a measure of the differences and similarities between these characteristics
Common measures Example
Employee profile: age, gender, race, sexuality % of employees between 18 and 25
Departmental ratios: gender ratios at senior leadership level
60 female : 40 male
Headcount: number of employees Total N of employees
Modes of employment: a measure of the ratio of labour types
45:1 full-time to part-time labour split; buy new labour, build new labour or rent new labour
Leadership diversity: a measure of the diversity of senior leaders in the organisation against defined measures in the organisation’s diversity strategy
% LGBT employees in senior/leadership positions
Appendix 2
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Workforce costs
The sum of all costs associated with the workforce
Common measures Example
Total compensation: all direct and indirect compensation received during a specified time period
£N/annum salary and benefits
Guaranteed pay: a fixed monetary (cash) reward paid by an employer to an employee – the most common form of guaranteed pay is base salary
£N/hour
Variable pay: a non-fixed monetary (cash) reward paid by an employer to an employee that is contingent on discretion, performance or results achieved. The most common forms of variable pay are bonuses and incentives
£N/annum, where N is determined through assessment of performance
Benefits: programmes an employer uses to supplement employees’ compensation, such as paid time off, medical insurance, company car
N employees accessing additional benefits (for example life insurance)
Equity-based compensation: stock or pseudo stock programmes an employer uses to provide actual or perceived ownership in the company which ties an employee’s compensation to the long-term success of the company – the most common examples are stock options
N employees taking out company stock
Employer costs: taxes and insurances mandated by law and regulation
Total workforce cost: a measure of the total cost of the workforce – a key indicator of the financial value the organisation places on managing, maintaining and developing its workforce (SABA 2014)
Total compensation cost + benefits cost + other workforce costs = total cost of the workforce
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Regulatory compliance
The organisation’s adherence to laws, regulations, guidelines and specifications relevant to its human capital – violations of regulatory compliance regulations often result in legal punishment, including fines. Adherence to different regulatory frameworks will need to be measured for some organisations and sectors to operate in various geographic regions.
Common measures Example
Health and safety measures: a measure of the number of incidents required to be reported under statute, for example Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013
N number of serious incidents in 2015
Competence compliance: measure of professional competence required to practise, for example professions requiring a licence to operate, measure of compliance with anti-bribery and corruption guidance
N number of registered practitioners
Measures of critical people risk: in high-stress environments measures regarding behavioural risks can help to monitor behaviour of individuals against predefined values (included as part of the broader culture category)
Workforce potential
The organisation’s adherence to laws, regulations, guidelines and specifications relevant to its human capital – violations of regulatory compliance regulations often result in legal punishment, including fines. Adherence to different regulatory frameworks will need to be measured for some organisations and sectors to operate in various geographic regions.
Common measures Example
The availability of key skills, knowledge, competency and experience across the workforce. The terms ‘competency’ and ‘competencies’ focus on the personal attributes or inputs of an individual. They can be defined as the behaviours (and technical attributes where appropriate) that individuals must have, or must acquire, to perform effectively at work. (CIPD 2015b)
Distribution of qualifications in the workforce: for example, number of employees with graduate-level qualifications
for example, N number of employees with graduate degree qualification or above
Technical qualifications: a measure of the technical capability available to the organisation for mobilisation
for example, ratio of project management trained managers/total number of managers
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Activities measures
Activities measures are the processes available to the organisation through which it activates the human capital available to the business. At this level activities are based around human resource and financial management processes – data at this level illustrates a process within the organisation’s business model which manages human capital.
In Table 5 we detail definitions of each activity measure, and indicative people measures that may be applied.
Table 5: Valuing your Talent activities measures
Attraction and recruitment
The initial stage of the employee lifecycle provides the business with important data as to the incoming human capital available to the business (CIPD 2011).
Common measures Example
Employer brand warmth: a measure of the employer brand, important for attracting new talent to the organisation
for example, % of new recruits joining organisation as a result of targeted role advertisements
Cost per hire (CpH): the total cost of recruiting and on-boarding a new employee
CpH = recruitment costs/(compensation cost + benefit cost)
Time to fill (average): a measure of the time taken to fill an open position (ERC 2014)
Time to fill = total days taken to fill a role/number of successful new hires
Time to competence: time it takes new recruits to reach adequate level of capability to complete their role
for example, Time = 5 months
Talent identification: development of people in priority talent segments
for example, % of identified talented individuals per department/team
Rate of retention of new starters: % of new starters retained over a given timeframe – useful in service industries with traditionally high levels of employee turnover
for example, N of new starters leaving within 6 months/total number of new starters
Recruitment effectiveness: questions to hiring manager regarding their satisfaction with the recruitment process and its outcome
% satisfaction with hired employee
% satisfaction with hiring process
Turnover (annual): a measure of the rate of employees leaving the organisation over a one-year period
N leavers/year
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Performance management
The management of the performance of people, teams and groups in order to obtain predetermined objectives and key performance indicators – process-based management against targets
Common measures Example
Feedback breadth: ratio of people undergoing feedback process (Mayo 2001)
= number of employees in performance review process/total number of employees
Performance goal success rate: a measure of the percentage of performance goals which have been met by employees; a measure of overall employee performance against objectives
= number of performance goals met or exceeded/total number of performance goals set
Performance management effectiveness: percentage of people finding positive satisfaction from the performance management process (Mayo 2001)
% rating their performance management activity as good or very good
Performance management efficiency: a measure of whether jobs are delivered in line with plans
(budgeted hours/actual delivered hours) *100%
Performance against objectives: a measure of whether performance goals are being met by employees (Department of Trade and Industry 2005)
% of objectives met during defined period
performance against benchmarks per role
New hire high-performer rate: a measure of the quality of new hires entering the organisation
% new hires rated at highest level of quality
Learning and development
The process which builds the workforce capabilities, skills or competencies required to ensure a sustainable, successful organisation (CIPD 2015c).
Common measures Example
Return on investment: the benefits that are realised as a result of investment in learning and development programmes
(realised £benefits – £costs)/£costs *100
Improvement in desired behaviours: measure of whether employees are behaving in the desired way alongside the required values of the organisation
% of employees reporting improvement in operation with desired behaviours
Improvement in knowledge: a measure of the impact of training on the knowledge of individuals – a measure of training effectiveness
% of employees demonstrating an improved understanding of the topic being trained
Hours training received: hours or days training per person over given time period
N days/employee in given time period
Capability development: a measure of increases in job-related capabilities (Mayo 2001)
change in N capabilities/person
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Reward and recognition
The extent of financial provisions made to employees, including cash pay and any additional benefits package, including pensions. The purpose of employee benefits is to increase the economic security of staff, improve engagement and drive retention. Discretionary benefits, such as free or subsidised meals and leisure time, may also be included as part of employee reward and recognition. The term ‘total reward’ encompassing non-pay benefits.
Common measures Example
Comp ratio (CR): a measure of the relationship between the salary of an employee or a position, and the midpoint of the pay range for that employee or position (Payscale 2010)
CR = salary/salary range mid-point
for example £25,000/£30,000 = 0.83; salary is 83% of the mid-point for the range
Salary range penetration (SRP): a measure of salary in relation to the whole pay range (Payscale 2010)
SRP = (salary – range minimum)/(range maximum – range minimum)
for example, (£25,000 – £22,000)/(£35,000 – £22,000) = 0.23; salary is at 23% of the range of potential salaries
Average compensation per employee: a measure of the average compensation paid to all full-time-equivalent employees
average compensation = compensation/headcount
Market index: a measure of the ratio of internal salaries compared with market rates for external benchmarked roles; requires external benchmark data
MI = (internal average pay – external benchmark pay)/external benchmark pay
for example, MI = £40,000 – £36,000/£36,000 = 0.11
Bonus pay percentage: a measure of the percentage of annual bonus paid relative to annual base salaries
bonus pay percentage = bonus pay/compensation *100%
Employee relations
The process of two-way communication between employer and employee – employee voice focuses more on opportunities for employees to be involved in decisions collectively, whether through trade unions or by other means (Bucknall & Wei 2006).
Common measures Example
Average time for dispute resolution: length of time for which a dispute continues to exist in an organisation. The shorter the resolution time, the more effective the dispute resolution process
N of days taken to resolve disputes/total number of disputes
Number of live disputes: total number of live grievances in process at any given point in time
N of live disputes
Type and number of live consultations with trade unions: number of consultations by category which are live with trade unions, and their performance against defined targets
N by type
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Employee welfare
Describes the various services, benefits and facilities offered to employees by the employers, which are designed to create a healthy and happy workforce. The welfare measures need not be monetary but in any kind/forms.
Common measures Example
Quality of working conditions: a measure of the physical and environmental conditions of the workplace that affect individual employees and their ability to deliver against their objectives in a productive and healthy way. Measures here will depend on the sector, organisation and local regulatory framework
for example, in a chemical plant, the airborne concentration of airborne hazardous chemical does not exceed the administrative control level at most (more than 95%) points
Infrastructure for health and well-being: a measure of the provisions provided by the organisation that create a healthy workplace for individuals and enable the organisation to deliver against its duty of care to employees. This may include measures of uptake for cycle-to-work schemes, career break provision, and corporate gym membership.
% employees benefitting from corporate gym membership
Knowledge management
Systematic process of finding, selecting, organising, distilling and presenting information so as to improve comprehension of a specific area of interest. Specific activities help focus the organisation on acquiring, storing and utilising knowledge for such things as problem-solving, dynamic learning, strategic planning and decision-making (CIMA 2005).
An emerging set of organisational design and operational principles, processes, organisational structures, applications and technologies that helps knowledge workers dramatically leverage their creativity and ability to deliver business value (Gurteen 1998).
Common measures Example
Increase in knowledge asset stock: measure of increase in the stock of knowledge assets, typically year-on-year
% increase in knowledge assets (including patents, intellectual property)
Employee perception of managerial collaboration: a measure of whether employees believe management is creating a culture of sharing and appreciating knowledge between individuals, teams and functions
Knowledge-process-oriented structure planned and established: a measure of how the organisation is structured to deliver knowledge-based processes
percentage of required changes satisfactorily implemented
Mentoring and relationship development for new starters: a measure of whether less senior members of the organisation are supported by senior teams to share and develop organisation knowledge
percentage of employees with less than five years’ service who have a godparent and percentage of experienced employees who act as a godparent
Value-adding processes: a measure of the increase in the number of implemented value-adding continuous business processes
maintain a register of new value-adding continuous business practices implemented, identifying the projected and actual present value of each initiative
Work-process development: elimination of 40% of redundant work activities within five years
cumulative percentage of identified redundant work practices successfully eliminated
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Appendix 2
Organisational design and development
The planned and systematic approach to enabling sustained organisation performance through the involvement of its people. Activity includes organisational redesign and restructuring, organisation strategic alignment, and job design (CIPD 2015e).
Common measures Example
Management ratio/span of control: ratio of subordinates per manager – a measure of management depth and breadth (SABA 2014)
total management and non-management population/total management population with direct reports
Strategic delivery: number of strategic priorities delivered within the stated timescale – a measure of organisational effectiveness (FOSTER 2013)
N priorities delivered; N priorities outstanding
Goal consensus/conflict: a measure of consensus and conflict between organisational goals and priorities and individual objectives; a measure of co-operation between teams and departments
number of goals in conflict vs number of goals in consensus
Evaluation of organisation development activity: measure of the impact of organisation development investment, including through return on investment, and additional programme key performance indicators
change/uplift in specified KPIs
Workforce planning
The continual alignment of needs and priorities of the organisation with those of its workforce to ensure it can meet its legislative, regulatory, service and production requirements and organisational objectives. Includes the management of flows into and out of the organisation, and planning for changes in personnel in roles of key importance.
Common measures Example
Succession roles: number of roles identified for succession with succession individuals allocated
N/potential position
Progress against targets: number of management trainees recruited against agreed local targets
N recruited against target
Minimum strength time: minimum time in post for managers in global key roles
t time
Successors in place: planned successors for global key roles
N:pivotal roles
Succession planning depth: percentage of key roles that have a succession pool of one or two unique candidates (PwC 2008)
key roles with 2 successors in play/total number of key roles
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Appendix 2
Average time to promotion: average time that an individual is in role before the progress to a more senior position (Oracle 2011)
total T for progression upwards/N promotions
Average time in current management position: the average time that managers and executives have been in their current positions (PwC 2008)
total time in position for managers/total number of managers
High-performer turnover rate: a measure of the rate at which the organisation is losing talented employees (SABA 2014)
total high-performer terminations/average high-performer headcount = high-performer turnover rate
Career path ratio: a measure of the ratio of promotions against sideways moves (transfers), to show the breadth of capability and illustrate alternative development opportunities to promotion
for example, total promotions/(total promotions + total transfers)
Talent management index: an index of defined talent measures by the organisation that describes key aspects of the talent management process from across the entire employee lifecycle
combination of select key metrics, weighted by importance and impact to the organisation
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Appendix 2
Table 6: Valuing your Talent output measures
Workforce performance and productivity
The quality or fact of individuals operating against role-based objectives and targets to be able to produce outputs and outcomes, including operational and behavioural aspects.
Common measures Example
Performance against objectives: performance against defined key performance indicators for individuals and roles
Per-unit full-time equivalents: the measure of how many FTEs are required to fulfil a unit of work
Volume of work completed: measure of completion of work against defined targets
Behavioural performance: performance of individuals in line with defined behaviours set by the organisation
% of targets met
N FTEs/unit produced
% of employees demonstrating compliance in line with organisational values and behaviours
Stakeholder satisfaction: measure of stakeholder warmth/engagement with the organisation; measure of the quality of relationships with key stakeholders
% stakeholders reporting positive experience with employees
% of stakeholders reporting that objectives were met to the desired level/standard
Labour utilisation: measure of how employees are assigned tasks and the efficiency at which they are able to deliver against their tasked objectives
Overall labour effectiveness: a measure of the utilisation, performance and quality of the workforce and its impact on productivity
OLE measures availability, performance and quality.
• availability = time operators are working productively/time scheduled *100%
• performance = actual output of the operators/the expected output (or labour standard) *100%
• quality = saleable parts/total parts produced *100%
availability – the percentage of time employees spend making effective contributions
performance – the amount of product delivered
quality – the percentage of perfect or saleable product produced
overall labour effectiveness = availability * performance * quality
Effectiveness: utilisation of resources such that the output of the activity achieves the desired result
actual output/expected output * 100%
Output measures
Output measures are the results of the investments in activity-level processes. They provide the means for evaluating the impact of the human capital development and people management processes at the activities level, and describe how the return on those investments can be improved, optimised and adapted to meet an organisation’s ongoing needs.
As this data becomes more strategic, there may be less tangible measures. Consequently, proxy measures (or approximate indicators) are often used at this level to describe human capital outputs.
In Table 6 we detail definitions of each output measure, and indicative people measures that may be applied.
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Appendix 2
Efficiency: achievement of either maximum useful output from the resources devoted to an activity or the required output from the minimum resource input
resource actually used/resources planned to be used * 100%
Expected productivity: the forecasting of potential/desired productive effort
expected output/resources expected to be consumed
Actual productivity: the measure of real efficiency of production
actual output/resources consumed
Leadership capability
The capacity to establish direction, influence and align others towards a common aim, motivate, and commit them to action and make them responsible for their performance. Leadership ability is a mix of skills and knowledge, applied with authentic behaviour and attitude, which enables individuals to lead others towards a stated objective or goal.
Common measures Example
Leadership bench strength: number of leaders trained to defined standard are exhibiting required behaviours
N leaders trained to defined level
Quality of leadership: the assessment through performance management processes, including 360 assessment
% defined high leadership grade
Leadership review process measures: measures defined for the quality of the leadership process, for example quality and outcomes of project
Talent distribution: a measure of where identified talented individuals are deployed in pivotal roles
N pivotal managers/total key roles *100%
Talent distribution: proportion of top managers in pivotal roles, or global key roles, as defined by the organisation’s HR and talent development strategy (Mayo 2001)
N defined top managers/total number of key roles
Development plan impact: a measure of the success rate for achieving agreed development plans for progression managers
N development plan objectives completed to good quality/N development plan objectives set
Executive Stability Ratio: The ratio of executives with less than 3 years’ experience over the number of executives with more than 3 years’ experience.
69
Appendix 2
Engagement and well-being
A workplace approach resulting in the right conditions for all employees of an organisation to give their best each day, committed to their organisation’s goals and values, motivated to contribute to organisational success, with an enhanced sense of their own well-being, and the wellbeing of others (Engage for success 2016).
Common measures Example
Engagement index score: An index score of the responses of individuals to questions exploring aspects of their employment which may impact on their engagement. These can often include: organisation purpose, team relationships, inclusion and fair treatment, relationship with manager, relationship with work, and quality of development opportunities.
Engagement Index: 70% engaged
Commitment People responding that they have high levels of commitment, satisfaction and recognition (Mayo 2001)
% positive opinion survey responses re: satisfaction questions
Ill-health retirements: number of retirements due to issues relating to ill mental or physical health, as a result of work
N
Voluntary resignations: number of voluntary resignations as a result of dissatisfaction with and/or health standards and work
N
Absenteeism rate: a measure of number of incidences when employees fail to report for work when scheduled to do so; can also be measured and reported by job category or by performance category (Bucknall & Wei 2006)
N days lost in specific period/total N of staff working days available in the period
Mental health well-being rate: days lost due to incidences of low mental well-being
N days/year
Employee assistance service usage rate: number of incidents reported during a defined period to the employee assistance line
N assistant issues/month
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Appendix 2
Quality of support received through employee assistance service: a measure of quality on the part of the employee as to how the employee assistance service performed, using a number of measures
% satisfaction with support received
% likelihood of recommending the service to a colleague
Business operating model
A business operating model is the combination of roles, skills, structures, processes, assets and technologies that allow any organisation to deliver on its service or product promises. In effect, it is the way the business is set up to deliver.
The operating model of the organisation can be split into five categories: (Amito Zott 20120
1 process
2 information systems
3 locations and buildings
4 organisation and people
5 suppliers and business partners.
Common measures Example
Process measures: measures of the effective delivery of process-based activity according to ideas of productivity, performance and efficiency. Process measures are part of the measure of the ability of the organisation to drive value from groups of activities.
process efficiency = value-added time/total time
efficiency (transactional) = execution time/cycle time
Information systems measures: measures that describe the quality and effectiveness of the organisation’s information systems to deliver value to the organisation. These can include measures of system quality, information quality, use, user satisfaction, individual impact and organisational impact (Palmius 2007)
measure of user feedback exploring:
• satisfaction
• democracy/voice
• influence
• learning
Location and buildings measures: measures of the geography and dimensions of the buildings and sites used by the organisation
geographic location information
Organisation and people measures: a summary of the human capital measures that can be used to describe the people in the organisation, selected at the discretion of the senior leadership team of the organisation
Suppliers and business partner measures: measures of the quality and effectiveness of activity throughout the supply chain, including immediate and distance partners of the organisation. Performance of the partnerships and supplier relationships, including price, total cost, service, on-time delivery, efficiency and responsiveness
measure of quality assessed by survey that includes:
• delivery against objectives
• cost-efficiency
• responsiveness to enquiry
71
Appendix 2
Outcome measures
Outcome measures tell organisations and their stakeholders whether outputs are translating into value. Value to the organisation will include financial, human, intellectual and customer value. Outcomes also describe how the organisation is sustaining itself to deliver value, not just for today but into the future. They help answer the question of whether the organisation is able to meet its stakeholder needs today and whether it has the capacity to be innovative, agile and resilient to meet the challenges and opportunities of the future.
Data at this level of the framework is of considerable value to the leadership and management of an organisation. It consists of a mix of financial and people measures but is typically built of proxy indicators. To consistently measure this most complex level of data requires significant investment, but can offer significant reward.
In Table 7 we detail definitions of each outcome measure, and indicative people measures that may be applied.
Table 7: Valuing your Talent outcome measures
Innovation, agility and resilience
Innovation describes the process of changing or creating more effective processes, products or ideas which can increase the likelihood of the business succeeding. Agility is the capacity of the business to identify and capture opportunities more quickly than rivals do. Resilience is the organisational capability to anticipate key events from emerging trends, constantly adapt to change and rapidly bounce back from disaster. (Mckinsey & Co 2009).
Common measures Example
Innovation activity: a measure of the introduction of new, improved products or processes (Rogers 1998)
N new processes implemented
£ spending on innovation
Percentage of sales from new/innovated products: ratio of sales against total sales which have resulted in recent innovation activity on new product lines, or established products (Rogers 1998)
sales of recently innovated products or services in the period/total sales in the period * 100%
Intellectual property statistics: measures of development of new intellectual property for the organisation (Rogers 1998)
Number of patents
Number of trademark applications (successful and failed)
Successful trademarks
Total amount of research grants successfully awarded to the organisation
N
N
N of successful trademark applications/total N trademark applications
£ of grants successfully awarded to organisation
Cybersecurity KPIs: measures of cybersecurity risk that illustrate the compliance of an organisation against measures to protect knowledge and intellectual capital. Measures here can include those which point to numbers of incidence, as well as type and frequency of cyber espionage activity
Critical IT update lapse time: the time between an IT provider supplying a critical security update and the organisation’s full IT system installing it
T time
72
Appendix 2
Culture
The values and behaviours that contribute to the unique social and psychological environment of an organisation (Business Dictionary 2018).
A set of beliefs and values shared by members of the same organisation that influences their behaviours (Schein 1990).
Common measures Example
Knowledge: measures of employee knowledge of the values of the organisation; measures of whether individuals can recognise the organisation culture and understand when behaviours are inconsistent or misaligned (Business Finance Magazine 2011)
Perceptions: employee opinion of the culture of the organisation, its leadership, and their peers; focus on identifying desired values and priorities and that which exists in reality
Behaviour: reporting on incidents of good behaviour which are related to the stated values of the organisation, and the values of individuals within the organisation
for example, N incidences highlighting prioritising individual merit over employee well-being
for example, N of employees fired for acting outside of stated behaviours and organisation culture
Alignment of business and team strategies against defined objectives: measure of how aligned individual, team and function objectives are to overall business objectives (Kissmetrics 2015)
for example, increase in management behaviours aligned to business objectives and defined business culture
Organisation performance
An analysis of an organisation’s performance as compared with goals and objectives. Within corporate organisations, there are three primary outcomes analysed: financial performance, market performance and shareholder value performance (in some cases, production capacity performance may be analysed) (Business Dictionary 2016).
Common measures Example
Earnings before interest, taxes, depreciation and amortisation (EBITDA): a non-GAAP (Generally Accepted Accounting Principles) measure of profitability, which can be used to compare companies and industries from the external/investor perspective – best used in combination with other financial performance measures (Investopedia 2016)
revenue – expenses (excluding tax, interest, depreciation and amortisation)
Earnings before interest and tax (EBIT): a non-GAAP (Generally Accepted Accounting Principles) measure of operating profit – does not include tax burden or capital structure
revenue – operating expenses
or
net income + interest + taxes
73
Appendix 2
Organisation efficiency: how well the organisation is using its resources to meet its strategic objectives; this includes both its financial and human resources
(Vanbruaene 2011)
Cycle time: the time it takes for a process to be completed
Average response/customer service time: the average time it takes to complete the desired service for the customer/client
total time for processes/total number of processes undertaken
total time serving customer/total number of customers
Organisation effectiveness: extent to which the service provided meets the objectives and/or expectations of the organisation and/or a customer (Vanbruaene 2011)
Coverage: number of customers/clients served, often by geography, business unit, and so on
Quality: the proportion of service provided without error
• the proportion of services provided without a complaint or the ratio of complaints to total services provided
• the proportion of services produced at a specified standard
• the proportion of services provided with compliments from customers
Customer/user service: customer/user satisfaction as measured by a predefined survey
N customer in Region X
Market capitalisation: the market value of a company’s outstanding shares, and an indicator of company size
Stock price * total number of shares outstanding
Share performance: measures of the value of company shares, and therefore the value of the organisation
Earnings per share: a measure of company profit – shows the amount of money being made per share, but does not include information about expenses
Price to earnings ratio: a measure which compares the current price of the company to its per-share earnings
Return on equity: a measure of a corporation’s profitability; reveals how efficient an organisation is at making profit
Compound annual growth rate: a measure of the annual growth of investments
(profit – dividends)/number of outstanding shares
price per share/earnings per share
profit/amount of equity (investment)
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Issued: August 2016 Reference: 7256 © CIPD 2016