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Using Analytics to Directly Drive Actual Business Outcomes (Case Study) Presented by: Shane Douthitt, Ph.D.

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Page 1: Using Analytics to Directly Drive Actual Business Outcomes ... · Using Analytics to Directly Drive Actual Business Outcomes (Case Study) Presented by: Shane Douthitt, Ph.D. Submitting

Using Analytics to Directly Drive Actual Business Outcomes (Case Study)

Presented by:

Shane Douthitt, Ph.D.

Page 2: Using Analytics to Directly Drive Actual Business Outcomes ... · Using Analytics to Directly Drive Actual Business Outcomes (Case Study) Presented by: Shane Douthitt, Ph.D. Submitting

Submitting Questions

Questions may be submitted at any time during the presentation. To submit a question:

Click on the Question Mark icon (?) on the floating toolbar (as shown at the right).

This will open the Q&A window on your system only.

Type your question into the small dialog box and click the Send Button.

Q&A icon

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Work Group Speakers

Scott Mondore, PhDManaging Partner

Hannah Spell, PhDDirector of Research and Analytics

Shane Douthitt, PhDManaging Partner

Matt Betts, PhDConsultant

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SMD OVERVIEW: Driving Business Results Through Surveys & Assessments

OU

R T

EC

HN

OLO

GY Analytics Based:

Links People to Critical Business Outcomes through:

• Employee Surveys

• 360 Feedback

• On-boarding & Exit Surveys

• Selection Assessment

• Competency Modeling

OU

R P

RO

CESS 4 Steps:

• Prioritization of Key Business Drivers

• Selection of Improvement Areas

• Customized Action Items

• Business-Focused Action Plans

YO

UR

BO

TTO

M-L

INE Common Outcomes:

• Operations Metrics

• Financial Metrics

• Customer Satisfaction

• Patient Satisfaction

• Turnover / Retention

• Whatever is most critical to your bottom-line

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Participating Organizations

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Learning Objectives

How to focus on business outcomes that matter to your organizational leaders

Provide case study example of business impact

How to use the employee survey to focus on more than just Engagement

Show the impact of HR on the bottom line

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Presenter

Shane Douthitt, Ph.D.Managing [email protected]/leadershipteam.html

To stay up-to-date on all our research and presentations,

• Join our LinkedIn page: https://www.linkedin.com/company/strategic-management-decisions

• Follow us on Twitter: @SMDHR

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DRIVING OUTCOMES WITH ANALYTICS

CASE STUDY

THE ENGAGEMENT TRAP

ALIGNING HR AND THE BUSINESS

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Our Definition of Big Data for HR

• Conducting HR analytics with the available people data in your organization to identify key drivers of business outcomes

• For our purposes in HR – the application of the concept of Big Data really spotlights our need for stronger HR analytics with the data we already capture

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Why HR Analytics?

• HR Analytics connect employee data to business outcomes

• HR Analytics prioritize where and how much to invest

• HR Analytics calculate impact/ROI from people investments

People Investments Analytics Business Outcomes

Why wouldn’t organizations invest in HR Analytics???

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Examples Business OutcomesFinancial• Profitability (see this especially in consulting industry)• % to budget goal• Revenue• Cost of Delivery

Productivity• Production (e.g., widgets produced)• Time to Proficiency with new hires• Absenteeism

New Product Development (see this a lot in Pharma R&D)• New Products Developed• Pipeline Progression• Milestone Completion

Turnover• Turnover• First year turnover• Regretted Loss turnover

Customer Satisfaction• Customer/patient Satisfaction• Customer Loyalty

Safety/Compliance• Falls/Safety Incidents• Compliance scores/certifications

Quality• On time delivery• Quality (e.g., % defects)• Quality of Care (healthcare)• Automation/Transformation

Sales• New Business Revenue• Quota attainment• Market Share• Contract Profitability (service industry)

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DRIVING OUTCOMES WITH ANALYTICS

CASE STUDY

THE ENGAGEMENT TRAP

ALIGNING HR AND THE BUSINESS

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Our Proposal – Large Retail Organization

• $93 million annual shrink problem

• Succeeded in reducing shrink by $14 million dollars in 1 year

• Create a business-focused HR Strategy:

– Empirically link employee data to meaningful business outcomes

– Identify ‘invisible levers’ in employee attitudes, skills and behaviors that will drive outcomes

– Leverage existing data to create the strategic framework

– Prioritize employee-focused interventions to drive business outcomes

– Provide customized solutions to drive business outcomes

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Data Utilized in the Study

• Shrink data at store level—as an example (used multiple business outcomes in the full study)

• Employee opinion survey results

• Performance Mgmt/Competency ratings

• LMS training data

• HRIS data – dishonesty terminations

• Store turnover data

• Customer satisfaction results

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Key HR Processes

Business Outcomes

Performance Management

Selection

Employee Survey

360 Feedback

Succession Planning

Competency Builder

Career Development

HRIS Data

Training

Business Outcomes

People• TurnoverService• Customer satisfactionQuality• ShrinkFinance• Cost reduction

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Dimensions of the Employee Survey

Engagement

Regard for Employees

Manager Effectiveness

Career Development

Recognition & Perf. Mgmt.

Resources Available

Job-Person Match

Policies Hours Worked

Customer FocusWork Environment

Benefits

Scales range from 2-5 items. Alphas range from .79-.91.

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Salaried Employee Competencies

Employee Development Leadership

Strategic Decision Making

Cross-Organizational Collaboration &

Teamwork

Execute With ExcellenceAchieve Extraordinary

Results

Individual Ratings for the Store Manager and Assistant Mangers were used.

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Drivers of Shrink

Shrink

Legend

Employee Survey

Training Participation

Terminations

Competency Ratings

Numbers indicate the intervention priority based

on the magnitude of the relationship with shrink.

Job-Person Match

Manager Effectiveness

Dishonesty Terminations

Ethics Course Participation

Achieve Results

Shrink Course Participation

3

3

2

1

2

2

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Further Prioritizing the Levers

• While all of the ‘levers’ identified in the model significantly impact shrink, the ‘levers’ can be prioritized even further based on the magnitude of their relationship with shrink

• Further Prioritization:1. Achieving Extraordinary Results

2. Ethics Course

3. Shrink Course

4. Dishonesty Terminations

5. Job-Person Match

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Intervention Framework

People TechnologyProcess

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Planned Interventions & Cost

• Build optional shrink training courses for specific roles

• $300kTraining

• Deploy a store-level incentive program for meeting quarterly shrink goals

• $5 million

Recognition & Reward

• Nothing plannedSelection

• Insert shrink focused messaging in a larger “customer experience” initiative

• $250k

OD & Leadership Development

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Recommended Actions to Reduce Shrink

TRAINING:• Code of Ethics Course

– Has a direct, significant impact on shrink

– Opportunity to re-train or conduct refresher courses with managers and employees

– Senior leaders regularly re-communicate the key messages from the Code of Ethics

• Sales and Shrink Course

– Has a direct, significant impact on shrink

– Currently not mandatory

– Opportunity to make the course mandatory and re-train managers and employees

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Revised Interventions & Cost

• Enhance and update ethics and shrink course – make both mandatory

• $50kTraining

• Nothing plannedRecognition & Reward

• Improve selection process for front-line employees – background checks & integrity testing

• $2 millionSelection

• Develop shrink management routines

• Develop shrink partnering program

• $50k

OD & Leadership Development

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Actions Taken and Actions Cut

• Initial budget was $5.55 million• Revised budget was $2.1 million

– Cut incentive plan– Cut major training build– Cut “shrink focused” customer experience programs

• Data analysis – Did not identify pay/benefits as a major driver of shrink– Showed the existing training courses were having an impact– Did not identify “customer focus” as a major driver of shrink– Showed that “dishonesty terminations” were a significant driver of shrink

• Created an HR Strategy with a known impact on shrink

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Calculating Impact

Intervention Beta Potential Shrink Impact Level of Investment

Manager Competency .14 $13.0 million Under-investing

Ethics Course .10 $9.3 million Under-investing

Shrink Course .09 $8.4 million Under-investing

Dishonesty Terminations -.08 $7.4 million Under-investing

Engagement .04 $3.7 million Appropriate

Reward & Recognition ns ns Over-investing

Customer Satisfaction ns ns Over-investing

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DRIVING OUTCOMES WITH ANALYTICS

CASE STUDY

THE ENGAGEMENT TRAP

ALIGNING HR AND THE BUSINESS

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Replacing HR Assumptions with Data-Driven Facts: Is Employee Engagement the Answer?

• HR strategy MUST align with the business strategy in order to effectively provide value that supports the organizational goals

• Organizations need to determine:

– What does engagement mean in our organization?

– Does engagement drive our business outcomes (don’t assume!)

– How do we impact engagement? What drives engagement – IF and ONLY IF, it is a driver of business results

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Engagement as a Silver Bullet?

• In recent years, employee engagement has increasingly captured the interest of both organizational leaders and academic researchers due to the common assumption that engagement plays a key role in promoting organizational success and building an organization’s competitive advantage.

• However, academic research has demonstrated mixed results in connecting engagement to outcomes. – For instance, even though some support has been found for the relationship

between engagement, turnover, and performance, other research has not found a relationship between engagement and turnover or engagement and performance.

• Should employee engagement truly warrant such intense industry focus?

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The Problem with Only Focusing on Engagement

• No clear definition

• No magic target number exists (what’s a good number?)

• No definitive study connecting engagement to business outcomes

• Front-line managers don’t always understand it

• Why not just focus on actionable areas that drive business results, instead of engagement scores?

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SMD’s Comprehensive Study

• Goal: determine which employee attitudes and experiences, as measured on employee surveys, are connected to business metrics that matter to SMD clients.

• Goal: determine how often Engagement is connected to business performance

• A variety of industries were included: healthcare, non-profit, retail, manufacturing, and professional services.

• These organizations range in size from less than 100 employees to several hundred thousand employees.

• SMD examined data across 30 organizations and over a half a million employees.

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What We Did

• We compiled the results of structural equation models for each client and determined which survey categories were found to be key drivers of their business outcomes.

• For simplicity in presenting results, we combined various financial metrics under one group, Financial Performance, and combined Customer and Patient Satisfaction (HCAHPS) measures into one Customer Satisfaction group.

• We also assessed the linkages of survey categories to employee performance, voluntary turnover, and turnover risk (i.e., organizational commitment).

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Comprehensive Study Results

Green check marks represent key drivers identified in four or more organizations. Blue check marks represent key drivers in fewer than four organizations.

Engagement was not one of the strongest or most consistent drivers of business outcomes.

Job Fit, Management, and Senior Management outperformed Engagement and all other employee attitudes in driving outcomes.

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Engagement Results

• Engagement was a key driver of their business outcomes only 28% of the time.

• That means if these organizations had solely focused on improving engagement, they would have put forth time, effort, and resources to something that would not provide any bottom-line improvement 72% of the time.

Engagement is NOT a business outcome - it is not even a good proxy for business outcomes.

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What is the Value of Engagement?

• Employee Attitudes/Experiences do matter: SMD found significant relationships between various employee attitudes and business outcomes in 100% of the organizations in the study.

• The key take away is that engagement (i.e., the five-item scale that measures engagement), was not significantly related to business outcomes 72% of the time.

• Similar results could be found with other employee attitudes in this study – BUT no other employee attitude is garnering the unfounded blind focus that engagement is getting.

• Organizations that use engagement as a proxy for business results are making faulty assumptions and bad decisions nearly three-quarters of the time.

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Which Approach to Engagement?Accountability

Career DevelopmentCommunication

Mission/Vision/Values

EngagementJob Fit

TeamworkWork Life Balance

ManagementSenior Management

Business Outcomes (e.g., Customer

Satisfaction, Turnover, Occupancy %)

Use Analytics to find

direct connections between employee

experiences and driving

the business

Use Analytics to find drivers of Engagement

Engagement

Business Outcomes

(e.g., Customer Satisfaction,

Turnover, Occupancy %)

Assume there is a connection between Engagement and driving the business

Use Analytics to find direct connections between employee

experiences and driving the business

Business Outcomes

(e.g., Customer Satisfaction,

Turnover, Occupancy %)

Know where to focus managers on areas that are actionableand directly impact

the bottom line

Wrong Way

Right Way

Common Topics Measured on Employee Survey:

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Case Study

• Gain executive buy-in to employee survey by connecting to business metrics

• Business outcome data included sales dollars, percent to budget, turnover rates, and efficiency metrics

• Differences in where to focus when comparing drivers of engagement vs business outcomes

Mid-Size Retail/Manufacturing Company

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Case Study - Different Drivers of Engagement vs Outcomes

CategoryDriving

EngagementDriving Business

Performance Metrics

Change Management 3

Communication

Company Culture 1

Customer Focus 2

Ethics/Integrity

Problem Solving 3

Senior Leadership 2 1

Work Life Balance 4

Would have spent time and resources addressing areas that are unlikely to impact the bottom-line

Would have missed three of the four drivers of business outcomes

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DRIVING OUTCOMES WITH ANALYTICS

CASE STUDY

THE ENGAGEMENT TRAP

ALIGNING HR AND THE BUSINESS

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What is an HR Strategy?

• What should HR be doing to help support the business strategy of the organization?

• The HR or People strategy should:

– Impact the organization’s performance

–Contribute to the organization’s Competitive Advantage

–Have a medium to long-term focus

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Aligning HR Processes with the Business Strategy

Business Strategy

HR Strategy

HR Process & Program Design

• Understand the business strategy• What are the priorities?

• What are the key business metrics?

• What HR processes and programs will likely have the biggest impact on the business strategy?• What HR data can be linked to the key business metrics to identify

the key drivers?

• Given the business strategy over the next 3-5 years, what types of employees are needed?

• Experiences required

• Competencies needed

• What targeted actions can be taken to support the business strategy?

• What metrics will define success?

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Business Partner RoadMapTM

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HR Processes: Are They Aligned to KPI’s?

Business Outcomes

Performance Management

Selection

Employee Survey

360 Feedback

Succession Planning

Competency Builder

Career Development

Action Planning

Examples of Business Outcomes

People• Turnover• Safety Incidents

Service• Customer satisfaction• Wait times

Quality• Clinical outcomes• Product Defects

Finance• % to budget• Cost reduction

Growth• Sales growth• Margin growth

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Answers to Thoughtful Questions Can Provide Powerful InsightKey HR Processes Example Questions

Selection - Recruiting Which labor pools should I focus more time?

Selection - Hiring What are the critical elements that predict the best hires?

Selection - On-boarding What attributes of on-boarding reduce 6-month turnover?

Selection – Exit Interviews What actionable information do we learn from high performers who leave?

Employee Surveys Which aspects of the employee experience predict high levels of productivity/performance?

Performance Management What competencies have the largest impact on business outcomes?

360 Feedback What behaviors drive individual performance?

Training What courses drive actual business results? What is the impact?

Career Development What experiences are required to increase the time to proficiency in key roles?

Succession / Talent Planning What experiences, skills, behaviors drive leader performance?

Action Planning What Actions have the largest impact/ROI?

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Identify Business Priorities

• Conduct stakeholder interviews with key business leaders– What are the top 3 business priorities for this year?

– What is our longer-term business strategy?

– What are the top 3 most important business metrics for this year?

– What are the key people/HR impacts on achieving our business goals/priorities?

• Request strategy and business priority documents (e.g., presentations)

• Review the business scorecard to understand key metrics

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Tips for HR Business Partners

1. Help your clients solve business issues

2. Use analytics to identify root causes and opportunities

3. Rely on your experiences and expertise to solve those problems/opportunities

4. Think like a business leader – what’s the cost and expected ROI?

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Recommendations

• Have a measurement strategy – it can’t be to just measure more often

• Harvest the intelligence from the data you already have, before blindly investing in more data

• Think about what you will do with the data to drive results

• Define the business problem first and then identify potential data sources that will likely provide intelligence

• Show the impact of the measurement process (ROI) and leaders will champion HR measurement….not question it

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Questions and Comments

• Please use the chat function to submit a question

• Recorded meeting and PPT deck will be posted to the HR Analytics Work Group website

• On HR Analytics Work Group LinkedIn page you can ask the group and speakers additional questions after the meeting

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Let’s get in touch:

Shane Douthitt, Ph.D.Managing Partner & Co-founder

[email protected]

smdhr.com