unlocking the value of human capital analytics for the cfo · pdf fileunlocking the value of...

Unlocking the Value of Human Capital

Analytics for the CFO Mick Collins, Vice President, Workforce Analytics & Planning, SuccessFactors

October 9, 2015 Public

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 2

The goal of human capital

analytics is to drive business

outcomes by optimizing

investments in talent

The reality is that HR often

defaults back to traditional

metrics with little connection to

business strategy…


Example of an HR Metrics Dashboard


The CFO’s role is to assist in

taking the “raw” human capital

insight and helping quantify

the extent to which it creates a

material risk that could impact

strategy and growth

Source: CFO.com


For every 1

percent increase in

terminations…

Source: Kiwook Kown and Deborah Rupp, “High-Performer Turnover and Firm Performance: The Moderating Role of Human Capital Investment and Firm Reputation” (Journal

of Organizational Behavior, May 2012).

How Terminations Harm Firm Performance

How does the voluntary

termination of

high-performers…

…correlate to financial

measures of firm

performance?

…research showed a decrease

in Return on Assets (-3%) and

Return on Equity (-8.2%)

The effect is greater for those firms that invest less in human capital

(selecting, training, and compensating high-performers) and thus have

smaller talent pools with fewer high-quality replacements


-7,0%

0,4%

9,8%

-2,7%

5,7%

25,4%

10,9% 12,9%

26,2%

14,8%

19,9%

28,0%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Low-Performers Mid-Performers Top Performers

Human Capital ROI Ratio Return on Human Capital Investment

Stock Price Market Value (Capitalization)

Human Capital Metrics Link to Stock Price Human Capital Metrics Track With Stock Price

Top quartile companies improved workforce productivity 9.8% & 25.4% annually,

seeing 26.2% annual stock price gains, double the market average improvement

Source: Human Capital Management Institute, “Human Capital and Market Capitalization, Financial Services”, October, 2015

Financial Services Industry Change Rates (CAGR) 2012-2014


One Question, Two Approaches

“How Many People Do We Have?”

“Finance has the

answer”

“Wait…HR has the

answer”

“We have our own

definition” “So do we”

“We use this data to

identify talent gaps”

“We use this data to

plan our budgets”

“Where does this

data go?”

“Please fill in the

spreadsheet”


How can CFOs and

Heads of HR collaborate

to use workforce data and

impact business results?


CFOs Expect CHROs to Develop Financial Acumen and to

Align Workforce & Financial Strategies

Improve

Knowledge

of Metrics

Monitor

Headcount

& Costs

CHRO Competencies

Develop financial expertise to

engage in cost–benefit analysis

and strengthen the financial

acumen of the HR team

Business Alignment

CFOs and CHROs set realistic

expectations - for line managers -

about workforce needs, allowing

for disciplined decision-making

Source: Bridging the CHRO/CFO Divide: Four Areas Where CFOs and CHROs Disagree, www.executiveboard.com/blogs/bridging-the-chrocfo-divide-four-areas-where-

cfos-and-chros-disagree/?business_line=finance


Human Capital Risks, Revenues, & Costs:

How Well Do You Know Your Organization?

What is your revenue per FTE, compared to your

competitors’? Which BUs have the lowest?

How many units of profit are generated for every

unit invested in compensation & benefits?

What is the increase in workforce performance

resulting from every 1 percent increase in pay?

What “hidden costs” – such as contingent labor

spend - does your business not track?

What percentage of HR programs actually

achieve the ROI stated in their project proposals?

Is the human capital ROI higher than working

capital, invested capital, or plant/equipment ROI?

Are you understaffed in areas that, if you were to

add people, you could increase our profitability?

What new sources of revenue will require a very

different type of employee that those of today?

What is the percentage increase in performance

as a result of every $1,000 spent on training?

What is the Total Cost of Workforce required to fill

long-term talent gaps?

In the last five years, has workforce productivity

increased, decreased, or remained the same?

Which executive roles face the greatest

vacancy/readiness risk?

Do you retain your key/most productive people at

a higher rate than our best competitors do?

Which BUs have the greatest annual knowledge

loss from terminations, transfers, & promotions?

How many workplace injuries occur each year?

Which locations have the highest incident rates?

What will be the five most important

competencies for your firm in 2, 3, or 5 years?

How do you define talent “innovation” and what

data will you use to measure it?

What percentage of your workforce will retire in

the next five years?

What percentage of your high performers are at

high risk for departure?

Which demographic trends (aging population,

outsourcing, etc.) will most impact your business?

Near-Term Mid/Long-Term

Revenue

& Costs

Risks


1. Shaping and Executing a Workforce Plan

CHRO

Align HR & Corporate Plans

Identify Critical Talent Needs

Director of Operations

Determine Organizational Design

Establish Productivity Baselines

HR Business Partner

Incorporate BU Needs

Execute Workforce Plan

Director of HR

Assess Supply of Talent

Review HR Strategies

Chief Financial Officer

Review Total Cost of Workforce

Allocate Budget for Talent Spend


2. Improving Operational Efficiency

Operational

Efficiency

Manage

“Hidden” Costs

Manage “Human

Capital Supply

Chain” Risks

Workforce Mix

Contingent Labor

Span of Control

Unscheduled Absence

Controllable Turnover

Productivity


3. Driving New Revenue Opportunities


Start With a Business Hypothesis, Use Big Data, Change Behaviors

Wawa finds a high correlation between

terminating employees that are younger than

30 and have <3 months tenure, prompting the

firm to use big data to investigate related trends.

The company finds that the “danger zone” for high

turnover risk is employees working seven to 16

hours per week and those with less than 39 days of

tenure. If the firm can get employees to 39 days, their

probability of staying one year rises dramatically.

Wawa educates their managers on policies for

new-hire scheduling and working hours. The

company plans to revisit recruitment, onboarding,

training and other engagement practices to ensure

employees receive full cultural immersion…

Sources: Wawa Uses Analytics to Bring Fresh Insights to Strategic Workforce Planning and Corporate Strategy,

SuccessConnect 2015; “America’s Favorite Convenience Store Finds Recipe for Fresh Workforce Analytics,

http://news.sap.com/wawa-americas-favorite-convenience-store-finds-recipe-for-fresh-workforce-analytics/

…with turnover cost savings estimated at

$1 million per year.

$1M


How SuccessFactors Workforce Analytics & Planning Can Help

“On my desk is one of the most amazing pieces of HR work I’ve ever run across. At 600 pages, the spiral bound

book is a ream of paper devoted to the

documentation of HR Metrics.”

John Sumser (HR Examiner.com)

What SuccessFactors Offers:

30 years of domain expertise,

including workforce planning

GAAP-like industry standard

metrics; pre-built analytical

models

Revenue, cost, and risk metrics,

delivered directly to people

managers

Strategy-driven workforce

forecasting to identify and mitigate

human capital risks

Extensive partner network, to

deliver added capabilities

© 2015 SAP SE or an SAP affiliate company. All rights reserved.

Thank you

Contact information:

Mick Collins

Vice-President, Workforce Analytics & Planning

Email: [email protected]

Twitter: @mickcollins

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