Data helps drive decisions around workforce challenges.
By Tony Ashton
If you ask business leaders what their top asset is, the most common refrain is “our people.” No matter how true, it has become a cliché. Moving beyond platitude to reality is the biggest challenge most companies face to actually leverage their most important asset. The growing economy is putting talent management in the spotlight, and it’s no surprise that employers are now placing more emphasis on making sure their top asset is highly engaged and productive. In the search to increase productivity, forward-thinking companies around the globe are discovering that workforce analytics can transform workforce data into valuable information. Driving companies to utilize their data for better decisions are five major trends: an aging workforce, rising turnover rates, increased competition, heightened risk, and millennials taking over the office.
1. Aging workforce. As more baby boomers are reaching retirement age, companies are beginning to lose highly-skilled workers. Additionally, low-skill jobs are increasingly being outsourced. According to a new report by McKinsey, the United States is moving full force into a knowledge economy, where high-skilled and information workers will be valued more than ever before. As a result, corporate leaders are increasingly looking at existing employees to determine what attributes are needed in the next generation of leaders, who fits this profile and what needs to be done to make them successful. Progressive companies are using this as an opportunity to reshape their workforce and rethink how they do business instead of traditional approaches to simply filling job vacancies when they arise. Analytics help businesses gain visibility and insight into their talent to ensure they are prepared with a qualified, flexible workforce ready to deliver the business needs of today and an ever-changing future.
2. Rising turnover rates. Most people spend a third of their adult lives at work according to the American Psychological Association. Making sure employees view this time as meaningful is one of the biggest factors to reducing turnover, which has been fairly stable for the years following the global financial crisis. But its starting to move up again, particularly voluntary turnover. SuccessFactors Global Workforce Benchmarking Database cites that hiring has also been increasing slightly, representing greater churn both within and across companies. Unfortunately, management skills have been eroding over time.
This is partly due to the decreased levels of investment companies have been making over recent years in the pursuit of efficiency, cost cutting, and scalability of operations.
Managers are under greater pressure to produce business results and, in turn, don’t spend enough time on the people dimension of their job. Engagement is a complex issue that involves alignment to company direction, individual feelings of contributing value and being valued, as well as the more material elements of good pay and benefits. The link between employee engagement, customer satisfaction and business performance are well known, but often it isn’t until hard data is used to show how this applies to a company that executives begin to take the matter seriously.
Companies that recognize the importance of engagement are using workforce data to go further and understand the different employee segments within their organization and how engagement varies based on role, location, manager, experience, and many other factors. Workforce analytics provides companies with a way of developing targeted strategies to engage and retain their top talent in a cost effective, targeted, and more impactful way. Analytics also aids in the ability of a company to attract and retain talent, and identify the hiring or training plans needed to avoid massive skills shortages, and avoid the increased cost and risk inherent in hiring rather than retaining people in critical roles.
3. Increased competition. Today, specialized skills are in high demand, recruiting and training are expensive, and retention is a critical lever for companies to be the first to market with new ideas, products, or services. Expertise often comes from on-the-job training, a significant investment in both corporate time and money. Combining workforce and business data helps companies measure the impact of their investment in people and the bottom line return. For example, tracking sales figures and linking that to recruitment, training, and retention data can help guide management decisions. It provides clarity on the amount of time it take new hires to be productive, and the value of onboarding and training. Cross analyzing by other factors like workforce tenure show the increased value possible by retaining top talent due to their disproportionate impact on business outcomes.
4. Heightened risk. Rising turnover rates and the predicted increase of mergers and acquisitions in 2013 further amplifies the risk to business. Linking finance, compliance, and people data can prepare enterprises for the unexpected. Managing turnover among critical roles and top performers helps companies mitigate business risk, and reduce it in other ways. What happens if you suddenly lose a key employee? Do you have a succession plan in place? In the event of a sudden merger, would you have the right managerial skills in place to effectively manage teams through the transition? Understanding skills gaps and key roles makes it easier to align workforce with business goals and manage risk.
5. Growing millennial employees. Millennials are taking over the workplace. In some areas, like tech startups, they already dominate and frequently manage older colleagues. Employers need to realize the extent to which millennials have been affected by entering the workforce during the worst economic collapse since the Great Depression. Rather than focusing on one career or skill set, many millennials keep options open, work on multiple things at a time, and experiment with their early careers.
The most successful strategies employers can use include the provision of contemporary tools and technology. Additionally, companies should offer millennials plenty of opportunities to learn, develop, and grow through both formal training and novel on-the-job experiences. Traditional companies are still trying to grasp the ways in which millennials use collaboration technologies and new ways of working. Linking employee data to areas like finance, CRM, and social networking/collaboration content can help companies determine the impact of new ways of working while learning which employees are most productive. Analyzing variability in performance can help employees understand the effectiveness of training programs and the root causes of productivity or business performance differences across the company. Knowing this helps with the development of tailored strategies to account for diversity, but also helps identify successful strategies that can be applied more broadly across the company.
For too long, managers have had to make decisions on gut instinct and a lack of solid information. With the growing impact of these five trends, companies are increasingly turning to analytics to help navigate the best way forward. HR has been at the back of the train when it comes to IT investment and resources. However, Gartner research shows analytics is top of the list and with the true recognition of “people as our most important asset,” more companies are starting to take the plunge. However, before investing in analytics, companies should know that not all big data tools are equal. When it comes to strategic analytics, the biggest problem is understanding what the right metrics are for your organization. A fancy graph means nothing if the only person in the business who can read it is the expert data scientist. Complexity is one of the biggest barriers to companies adopting analytics. HR and business managers need information they can easily understand, not just another dashboard. Once business users can easily access and understand analytics and are confident about the quality of their data, they can move forward with making more effective decisions about their workforce. In order to prepare for the future of business, companies need an intuitive, data-driven approach to human capital that allows them to leverage their core strength and greatest competitive advantage – their people.
Tony Ashton is senior director of product management for workforce planning and analytics at SuccessFactors, an SAP company