Accepting the imperative of a data-driven enterprise is half the battle. Proper execution is equally key.
By John Schwarz
According to industry research, companies using workforce analytics outperform those that do not. It is that simple.
In a 2010 report, Analytics: The New Path to Value, researchers from MIT revealed that top-performing companies are three times more likely to be advanced users of workforce analytics than lower-performing companies. As well, these top-producing companies are two times more likely to cite workforce analytics as their competitive differentiator.
This is a definitive statement about the power of workforce analytics as a core driver of an organization’s success.
Similarly, the Aberdeen Group’s recent 2011 study, The 2011 HR Executive’s Agenda, clearly shows that organizations integrating workforce analytics with business performance analytics are nearly three times more likely to achieve best-in-class performance status over those that do not. (See “Best Defined,” below.) Aberdeen’s research also indicates that organizations using workforce analytics experienced a 14 percent year-over-year improvement in revenue per employee, compared to just 5 percent for those companies that did not.
Clearly, for organizations that want to achieve best-in-class status and maximize their performance and profitability, workforce analytics have become a “must have.” In such a competitive landscape, workforce analytics are no longer a “nice to have.”
In the Aberdeen Group’s study, companies that earned the designation of best-in-class performers relied significantly on the use of workforce analytics and achieved the following:
• 87 percent of their employees rated themselves as “highly engaged”;
• 78 percent of key positions have ready and willing successors
• 12 percent saw year-over-year improvement in hiring
With workforce analytics, HR professionals can play a more pivotal role in their organizations to help direct senior management and hiring managers in connecting the dots between their company’s overall performance and their investment in their workforce. Workforce analytics empower HR professionals to shift from being an operational function to becoming more of a strategic role within their organization. Workforce analytics uncovers deep insights into workforce data by drilling down into the data and highlighting both patterns of success to be repeated and patterns of failure that could lead to risk and impact. Equipped with powerful workforce metrics, HR leaders can clearly identify and communicate to the “powers that be” precisely where their company’s investment in human capital is paying off and, more importantly, where it is falling short and why.
Companies must align their people strategy with their business strategy in order to be successful and profitable. Without deep insight into their workforce data, how can business leaders make informed and effective business decisions for their organization as they relate to human capital and talent management?
Indeed, the October 2010 Harvard Business Review (HBR) article, “Competing on Talent Analytics,” makes it clear that high-performance companies use workforce analytics to align their business strategies with their human capital strategies. “These companies have taken the guesswork out of employee management by leveraging analytics to improve their methods of attracting and retaining talent, connecting their employee data to business performance, differentiating themselves from competitors, and more,” the article states. HR is a critical partner in these strategic efforts, providing the analytics these organizations need to enhance the overall value delivered by their workforce, and to earn a solid financial return on their human capital investment.
Of course, accessing and measuring workforce analytics are only parts of an HR professional’s equation when looking to implement workforce analytics. To be truly successful, HR leaders must generate the appropriate organizational support among critical stakeholders, from the top down. In fact, a company’s workforce analytics initiative should be looked upon as a corporate initiative (not just an HR initiative) and include critical input and buy-in from various departments. Sales, finance, operations, and IT, as well as front-line managers, all can provide HR with critical feedback regarding their unique workforce requirements and how decisions about the workforce affect the business strategy.
Business leaders need people to do the work, and they need HR to supply real-time accurate data to help them make smarter decisions about their workforce. HR leaders must communicate with senior-level executives and frontline managers to determine the
company’s future strategies and focus their efforts to fill these roles with the right talent to achieve those objectives. HR leaders must educate senior executives and line-managers as to the true value of workforce analytics to help them succeed as an organization. If it fails to get company-wide support, a workforce analytics initiative will fail, and HR will continue to fall short of being more strategic players in their own organization.
With buy-in, by contrast, the rewards are enormous. PwC’s 10 Minutes on Transforming HR summed up the value proposition nicely: “With the help of [analytics] tools, companies can shift time and attention away from HR administration to the more value-added aspects of HR, such as talent strategy. For example, in the financial services arena, savvy smaller players have been recruiting top loan producers from big banks, greatly increasing loan volumes.”
The obvious questions are, “What metrics should I be tracking?” and “Which KPI’s will provide me and my organization with the greatest value?”
When getting started with workforce analytics, HR professionals must be clear on what the top driving initiatives are from a corporate perspective—what are the overall business objectives? HR must identify and measure those workforce metrics that are most impactful to your organization. As your organization matures and evolves, metrics too will evolve, adapt and change but you need to identify a baseline of metrics as they relate to your initial workforce strategies and requirements.
The HBR article shows that high-performance companies track a wide range of metrics from basic human capital facts (headcount, cost-per-hire, etc.) to more sophisticated performance data (how workers are impacting actual business results). Global food-service giant, Sysco, for example, began its workforce analysis with three gross measures for each operating unit: work climate/employee satisfaction, productivity, and retention. The article’s authors note that Sysco “has drilled deeper to understand, measure, and manage seven other dimensions of the work environment, including frontline supervisor effectiveness, diversity, and quality of life.”
Whether your organization is just starting out with workforce analytics or using some form of workforce analytics but looking to expand the maturity of your metrics, three fundamental HR areas must be considered: turnover, recruiting, and employee performance. And that should happen before moving onto more advanced workforce metrics.
1. Turnover. Identify who is leaving the organization voluntarily and
why. Is it related to onboarding, training or management issues? Do particular functions or locations account for a significant portion of your overall turnover rate? Use your findings to address performance or training gaps and improve your investment in human capital.
2. Recruiting. Identify the top talent common characteristic traits
for each position in your organization—especially those that drive business performance—and map them to your internal and external recruiting strategies. Use the data to determine the types of skills and abilities that you need to actively recruit for both immediate and long-term success.
3. Performance. Identify who are the under-performers and why.
Understand when and where productivity fluctuates and why. Align compensation and incentive programs with performance.
Use this information to improve performance by deploying better management, training, incentives, etc.
Focusing initially on these fundamental workforce areas will not only help you to position HR as a true strategic partner but also to deliver a variety of bottom-line advantages to your colleagues, such as providing unprecedented insights into productivity and performance levels of their direct reports, highlighting functions and roles that may require special attention, and enabling greater profitability through better workforce cost control for their departments.
Tools and Technologies
It wasn’t all that long ago that employers were forced to make human capital decisions without solutions designed exclusively for accessing, measuring, and reporting workforce analytics. Many leading organizations today still do not use a formal workforce analytics solution to help manage their HR metrics. According to a 2012 Visier Inc.-sponsored survey of more than 150 U.S.-based employers, a growing number of organizations are in fact using some type of solution to manage their workforce data. Some 78 percent of the survey’s participants state that they employ some type of method to manage their workforce analytics. However, 32 percent are dissatisfied with how they are using workforce analytics, and 36 percent plan to increase their workforce analytics investment in the next 6 to 12 months.
These findings indicate that a majority of employers believe in the power and importance of managing and reporting workforce analytics, but a significant percentage of respondents is still figuring out how best to access and measure the data more effectively. One problem that often stands in their way—especially when organizations use multiple, disparate HR systems to track HR data—is that they cannot get a comprehensive, 360-degree view of their true workforce data. That inhibits delivery of the true ROI of human capital management.
More companies today are waking up to the reality that people are the most expensive asset in their organization. Executive leaders and HR professionals are seeking alternative ways to help their organizations answer and address critical workforce questions and be more active in their HR approach. Data doesn’t lie. By implementing a complete, end-to-end workforce analytics solution, organizations can get an accurate birds-eye view of their workforce and use the data to guide them in fact-based human capital decisions and strategies. In considering a workforce analytics solution, four key recommendations stand out:
1. Make sure the solution easily integrates HR data across all HR systems. Streamline reporting efforts for your HR professionals to extract, analyze, understand and report on large amounts of complex data from disparate HR systems. Eliminate the need to “piece together” workforce data housed in multiple, expensive and complex HR systems and provide a true and accurate representation of workforce insights to stakeholders and decision-makers—saving your organization both valuable time and money.
2. Look for solutions that help predict trends and outcomes. Organizations that use basic reporting methods such as Excel spreadsheets are at a huge disadvantage with the opportunity to use automated solutions that identify patterns of behavior and characters to help determine failure or success. It is essential that employers create recruiting and development plans that ensure they have the “right” talent required to achieve business goals. This means they need solutions that offer predictive and modeling capabilities. Using advanced clustering techniques empowers you to uncover hidden patterns of behavior or common characteristics, help predict future plans and outcomes and make better, more informed decisions—based on past and present data.
3. Ensure that the solution offers an intuitive user experience. Workforce analytics must actually be put to use to be of real value. The broader the adoption of the workforce analytics solution, the broader the adoption of fact-based decisions to improve your workforce. User-adoption in an organization is the key to success or failure of workforce analytics initiative. Therefore, it is imperative that the solution be user-friendly and intuitive. This not only ensures higher adoption rates, but it also reduces implementation and training costs, with a solution that is simple to use.
4. Ensure that solutions should enable analytics to be reported easily and
compellingly. As a true strategic partner in your organization, HR must share data in a way that persuades decision-makers to act (e.g., to recruit specific types of talent, to reduce headcount tactically, to develop certain individuals within the organization). The most powerful analytics solution should present information with clarity and visual appeal. Using PowerPoint to re-create visual representations and reporting of your HR data can often be time-consuming. Solutions that can easily and seamlessly export data and create visual representations in one easy step are advantageous, especially if you are reporting monthly or quarterly with extensive data and must refresh data on an on-going basis. Sharing findings in a collaborative, easy way with stakeholders can reduce costs, shorten decision times and achieve greater alignment.
As a growing body of industry research continues to highlight, workforce analytics tools—and the array of insights they provide—are essential to companies seeking to outperform their competitors and maximize their profitability. By integrating workforce analytics with business analytics, you will not only improve your human capital ROI but you will also increase the value that your workforce delivers to your organization’s performance. HR leaders have always understood that people are the most critical and important element to a company’s success. With workforce analytics, those leaders finally have the tools necessary to turn that knowledge to action.
John Schwarz is founder and CEO, Visier, Inc. For more from this whitepaper, please click here.