Questions Human Capital Analytics Can Answer

7/27/2019 Questions Human Capital Analytics Can Answer

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January 30, 2014

© Human Capital Management Institute

Presents:

Questions Human Capital

Analytics Can Answer

HUMAN C APITAL

M ANAGEMENT INSTITUTE



About Human Capital Management Institute

HCMI Background:

Specialized in HR analysis &measurement

Deep expertise in Workforce Analytics &Planning

Board made up of CFOs and HR heads

What We Do:

Measure the immeasurable in humancapital

Transform workforce data into businessintelligence

Provide technology, consulting andtraining so HR can partner with Finance

2

SOLVE Workforce Intelligence Software Strategic Consulting Training

Best Practices Workforce Analytics and Planning Benchmarking

The Human Capital Management Institute (HCMI) was founded on the belief that organizations can andmust, find better ways of measuring their investments in human capital. Our vision of the future is one inwhich human capital measurement and information is as integral to business decision making asfinancial information is today.

We Bring Financial Discipline, Standards and Rigor to the HR Function




HCMI Products and Services

Human Capital Financial Statements• Human Capital Impact Statement • Human Capital Asset Statement • Human Capital Flow Statement

Workforce Quantifier™ ROI Calculator• ROI of Workforce Decisions• Cost of Turnover, Workforce Cost , Cost per Hire• Business Case for HR Interventions

Data Integration Blueprint • Modular Talent Management Components• Detailed Data Dictionary + Metric Formulas• Key Analysis Segments and Dimensions

Human Capital Metrics Handbook • Over 600 Metrics and Detailed Definitions• More than 100 KPI and Best in Class Metrics• Unique Metrics that Monetize Human Capital

Workforce Planning• Link Workforce and Financial Metrics• Advanced Retirement Calculator• Forecast Skills, Costs, Talent and Productivity

CorrelationCoefficient(0-1)

FactorsLeadingtoIncreasedTurnover

Job Title orPosition

Dissatisfaction With Compensation

High vs.Low TurnoverManager

Commute Distance

Driver#3

Driver#2

Driver#1

.50

.33

.27

.02

LowTurnover Impact

HighTurnoverImpact

SomeTurnover Impact

.11

WorkLocation

Numberof Jobsin Last3 Years .70

H i r ed Through Em pl oyee R efer ral .19

Job Framework Mapping• Integrated Taxonomy 15,000+ jobs• Map Critical Job Roles

Workforce Capability Assessment• Data and Systems Capability + Risk Analysis• Human Capital Measurement Standards

Span of Control Optimizer™ Tool

• Benchmark and Optimize Spans• Optimize Management Layers

Career Path Quantifier• ROI of Career Path• Build, Buy or Lease Talent Analysis

Analytic Engagement Projects• High Performer Profiles• Engagement ROI and Sales Impact

• Turnover and Retention Driver Analysis

Initial Reports&

Analysis

Data Gathering

First Good

Metrics

HR Data Warehouse

Drill-down,standardreports

Scenario Analysis

ExternalBenchmarking

Contextfordecisions

Data

Driven Decision

Making!

Turnover,Headcount,Hiring

HRISsystem data

C

OEFormation

Data Errors

HR AnalyticsMandate

HR StandardsEstablishedLostHR

Credibility

HR data/systems Assessed

HR Data Cleansedhistoricaldatascrubbed

Bus.UnitsReject

Analysis

Data Errors

Historicaldatastillbad

1st AnalyticsStudy

Advanced

AnalyticStudies

HR AnalysisValidated

Integrated HR

Databases

COELaunches

TrainingCourses

Bus. UnitsDemand

more

Analyticsjourneysteps

Setbacksalong the way

Journeypath and goal

HR Roadmap Design• Step by Step Actionable Deliverables and Insights• Map for, Systems, Data, Tools, Skills, Metrics + more

Training and Advisory Support • Expert, Guided, Standard and Customized• Ongoing Advisory Support Services• Beginning and Advanced Training

SOLVE Workforce Intelligence Software• Integrated Dashboard, Advanced Tools, Metrics,

Data Blueprint and Predictive Modeling• Automated Completion of HCFS

Statistical Sales Predictor• Predict Revenue by Economic/Workforce Factor• Link to Economic Drivers to Workforce Metrics

© Human Capital Management Institute 3



Presenter Information


Grant Cooperstein, VP Analytics

Grant Cooperstein has over 10 years of experience conducting advanced workforce analyticsand planning projects. In his current role, Grant provides guidance to organizations acrossthe globe, enabling rapid advancement in human capital management practices. Responsiblefor leading consulting engagements, deep content training and product development, he helpsclients drive value and quantify the impact of workforce decisions.

Previously, Grant worked as a human capital consultant for the Infohrm Group, a globalanalytics and planning company. There he led clients from Fortune™ 500 companies andgovernment agencies on their human capital journeys, delivering millions of dollars in cost savings and value creation.

In addition to his consulting background, Mr. Cooperstein has extensive experience as a

Human Resources practitioner. Grant held a position of Workforce Analytics Manager at IndyMac Bank, a premier Financial Services company in North America. In addition toworkforce analytics and planning, he has deep knowledge across multiple HR functions, witha particular focus in Compensation, Performance Management and Recruiting Analytics.



Background: Measuring Human Capital




Meeting the Need: What Does it Take?

Workforce Measures that “Link” to Business Results “ A single point of data is not enough to make a story”

“ We need context to show value and explain the linkage”

Historical data is important, predictive data is critical “ What will our workforce look like in 5 years ?”

“ Where are we going and do we need to change course ?”

Data is not enough, analytics must show stories and insights “ What are our critical workforce issues ?”

“ What are our critical workforce metrics ?”




The Challenge of Measuring Human Capital

Compensation

Transfers

New HireTurnover

SuccessionData

Turnover

Training

Recruiting

E m p l o y e e D a t

a

Benefits

Span

of Control

Workforce

Planning

SuccessAdvanced

Analytic

Insights

Complexity of Workforce Data

Employee/Full-Time-Equivalent (FTE) Jobs/Roles/Skills

Time - Tenure

Compensation ($ vs. Equity)

Frequency of Change

Promotions, Transfers, Hires,Terminations

Jobs/Roles/Skills

Time - Tenure

Measuring the Intangible

Lack of Standards

Lack of Analytic Skills




Workforce Planning vs. Workforce Analytics


Workforce Analytics

Workforce Planning

Present

Future

Past

Predictive Analytics

Trend Analysis

Workforce

Knowledge

Key

Performance

Indicators

Workforce Optimization

Future Scenarios

Workforce Planning

Planning and Analytics

Workforce Analytics

Workforce Planning and Analytics Linkage Strong Workforce Analytics insights enable

future Workforce Planning success.

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The Metrics Journey

Base Data - No Metrics

Calculated Metrics (e.g., Turnover Rate)

Simple Metrics ( e.g., Headcount, Terminations )

Combined Source Metrics (e.g., Time to Profitability)

Insightful Metrics (e.g., Revenue per FTE)

Advanced Metrics combined calculated metrics (e.g., Career Path Ratio)

Index Metrics (e.g., New Hire Success Rate)

Complex Index Metrics (e.g., Quality of Hire)

How do you stack up?




Metrics and the Talent Management Life CycleQuantifying Workforce and HR Impact

What are your organization’s

key metrics at each talentmanagement life cycle stage?

How are workforceproductivity, value and

impact calculated?

10

Recruiting &Hiring

Training

(L & D)

Performance&

Engagement

MobilityCareer Path

Turnover &

RetentionLeadership &Management




Answering Key Human Capital Questions

with Workforce Analytics




Answering the Right Questions

What if HR could answer the following:

1. Is it better to build, buy or rent talent? What is the right workforce cost?

2. Are leaders effectively managing human capital? Do leaders correlate to employeeengagement, retention and performance?

3. What is our workforce productivity? Is it improving? How do we rank?

4. What is the ROI on our training investment?

What workforce and business issues do you face?




Question 1: Total Cost of Workforce


Question:

Is it better to build, buy or rent talent? What is the right workforce cost?

Metric:

TCOW Includes:

Total Cost of Workforce =Total Compensation Costs +

Benefits Costs + Other Workforce Costs

• Employee compensation (salaries/wages, incentives, overtime, equity and other pay)

• Contingent temporary/contract labor (costs)

• Employee benefits and perks (costs)

• HR function cost (e.g., recruiting, training and support)

• Retiree or inactive workforce costs (costs)

Additional Metrics for Consideration:

Internal vs. External Compensation Cost Differential, Internal vs. External Recruiting Cost Differential



The Bottom Line – Managing Workforce Costs

• Existing cost control tools don’t work (Budget ?)

– Status quo drives binge (hiring) / purge (layoff) cycles – Off-shoring/Outsourcing reduces costs but not competition

• How does TCOW control costs?

– Set targets to budget, forecast, benchmark or improvement goals

– Link to new hire requisitions, hiring freezes, bonus-incentive payouts

–

Benchmark business unit and organizational performance• TCOW as a % of Revenue or as a % of Total Expenses

• 1% TCOW savings at a Fortune 500™ Co. = $30 million

Example 1: Total Cost of Workforce

Example: Business Case for Total Cost of Workforce

An organization with 100,000 employees at the end of 2011 and 100,000 employees at theend of 2012 would appear to have effectively controlled workforce cost by managing totalworkforce headcount.

However, due to increases in benefits, wages, and changes in the workforce such asbonuses, promotions, and mix of jobs hired, organizations with flat headcount growth caneasily (and often do) experience 10% or greater increases in Total Cost of Workforce.




Case Study 1: Defining Career PathsEmployees are Assets to be Developed

Staff Accountant

Mgr., Accounting

Dir., Accounting

Accountant

Sr. Accountant

CAGR: Compound Annual Growth Rate

Accounting Job Family Career Salary Progression

$46,400

$49,600

$59,800

$67,000

$79,100

$94,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

0 1 2 3 4 5 6 7 8 9 10 10+

Years of Experience

BaseSalary

Staff Accountant

Accountant

Sr. Accountant

Mgr., Accounting

Dir., Accounting

Ave Annual Rate

Market Rates

(50%-75%ile)

CAGR = 10.0%

$130,000

CAGR = 6.6%

Entry level Staff Accountant

hired at 50%ile needs annual

salary growth of 10.0% to stay

with market(Assumes mkt growth of 3% annually

w progression to . Director in 10

years.)

50th %ile

Insights:

Ten-year cost savings is thearea between the cost of

External Hires compared tothe career path of anInternal Staff Accountant.

Note: Make sure to select the period which will provide the most accurate forecast. In some cases, a run rate based onthe current or last year is optimal, but in ot hers an average of several years or a custom time period is best to use.

Key Metrics:- Total Cost of Workforce- External Hire Compensation Differential- Replacement Hire Compensation Differential




Question 2: Leadership Effectiveness


Question:

Are leaders effectively managing human capital? Do leaders correlate toemployee engagement, retention and performance?

Metric:

•A holistic measure encompassing a manager’s total talent managementpractical results and impacts

• Designed to hold senior management accountable for talent management

• Ideally, index metric components should be calculated on an individualmanager basis

Talent ManagementIndex

=

Combination of select key metrics,

weighed by importance and impact tothe organization

Background:



Example 2: Leadership Effectiveness

• Career Path Ratio

20%

• New Hire HighPerformer Rate

Mobility

• High PerformerTurnover Rate

• % of High Performers

PerformanceManagement

Turnover andRetention

• Overall EmployeeEngagement Rate

EmployeeEngagement

Index

20% 20% 20% 20%

Recruiting andHiring

Talent Management IndexThe Talent Management Index is a holistic measure encompassing a manager’s totaltalent management practical results and impacts. Such a metric can be used as anincentive compensation modifier. It is designed to hold senior management accountable for Talent Management. Ideally, all index metric components should becalculated on an individual manager basis.

Talent Management Index




Case Study 2: Quantifying Manager Effectiveness

Can you quantify which of your managers are more effective at managing talent?

Manager A Manager B• Exceeds business goals

• Hires exp’d employees

• No training

• High turnover

• Low mobility

• Mixed performance

• Low Engagement

• Exceeds business goals

• Hires junior employees

• Trains team personally

• Low turnover

• More transfers/promotions

• High employee performance

• High engagement

Insights:

Manager Quality is a key component of employee turnover

Cohort analysis is segmenting by high- and low-turnovermanagers

Result: Spotting managers with turnover disproportionate toworkforce size

Management

Group

Percent of

Managers

Percent of

Turnover

30%

34%

22%

14%

10%

81%

8%

2%

Low Turnover

High Turnover

New Manager*

1 Employee** 1%

Key Metrics:

Talent Management Index

Manager Stability Rate

Average Supervisor Changes

Percent of High Performers

High-Performer TurnoverRate




Question 3: Workforce Productivity

HC ROI Ratio =(Revenue – (Total Expenses - Total Cost of

Workforce)) / Total Cost of Workforce


Question:

What is our workforce productivity? Is it improving? How do we rank?

Metric:

Description:

Net operating profit impact of each dollar invested in human capital.

Background:Organizations tracking Human Capital ROI Ratio can effectively measure the linkage of overalltrends in market value over time (for publicly traded or other organizations for which a relativemarket value is obtainable). Ideally, this metric should be used for long-term strategicpredictions rather than short-term measurement as market value can fluctuate dramatically dueto uncontrollable events as well as industry and market changes.



Example 3: Workforce Productivity

Traditional

Productivity

Metrics

Leading

Productivity

Metrics

Summary Human Capital Impact Statement

Human Capital ROI Ratio Prior Year Current Year % Chg

Relative Value Add

(Productivity) by

Job Group




Case Study 3: Productivity by Job Category

Questions Answered:

• Which Jobs Have the Highest ROI?

• Which Jobs Create the Most ValueRelative to Cost?

• Which Jobs Have the BestOpportunity for TrainingInvestment?

Human Capital ROI Ratio by Job Family

H u m a n C a p i t a l V a l u e A d d “ R O I ”

Management &

Sr. Leadership

Professional

Staff

Sales Staff

Specialists

Laborers &

Helpers

Operations

Staff

Service

Staff

Adminstrative

Support Staff

Contingent Staff

.00

.50

1.00

1.50

.00

.50

Average Total Compensation Cost

Human Capital ROI Ratio by Job FamilyHuman Capital ROI Ratio by Job CategoryFinancial Services Company


Insights:

‐ Focus investment in jobs that give youthe most “bang for your buck”

‐ Analyze rates of change period overperiod for Productivity, TCOW,Revenue, Profit and Total Costs.

Key Metrics:

Human Capital ROI Ratio

Return on Human Capital Investment



Question 4: ROI of Training


Question:

What is the ROI on our training investment?

Metric:

•Not all training is created equal!

• Focus on critical roles and workforce groups such as sales, operations,customer service, and management

• Measure impact of performance, engagement, productivity and retention

Training PerformanceDifferential

=

Total Productivity, Output or

Performance After Training / TotalProductivity, Output or PerformanceBefore Training

Background:



Case Study 4: ROI of TrainingRetail Sales

• At all levels of tenure, Sales positions completing some or all companycourses have higher production than those that have not.

• Positions with >3 years of tenure completing all company courses produceover $250,000 USD more revenue annually than those with similar tenure

and no training.

• Courses completed does not correlate with tenure; many tenured sales peoplehave not completed company courses.

•

Sales Reps that complete some/all modules are more likely to be from certainlocations. Training results in the most $ benefit at these locations versusothers.

Key Findings:




< 3 Months 3 - 6 Months 6 - 12 Months 12 - 24 Months 24 - 36 Months 36+ Months

E m p l o y e e S

a l e s P r o d u c t i o n

Employee Tenure

Annual Difference Between All and No Courses No Courses Some Courses All Courses

High

Case Study: Training and Sales Performance

Average

Low

Insights:

‐ At all levels of tenure, training by the sales managersignificantly increases employee sales production.

‐ On average, employees completing training courses have

$250,000 higher sales annually.

70% of EEs

10% of EEs

20% of EEs

R2 = .63

Key Metric:

Average Training Performance Differential

Training Effectiveness Index




Next Steps




Metrics Linking Financial Results to Human Capital

Productivity/Value Creation Impact

Low Medium High

High• Open Position Lost Revenue or

Production per Day3

• Market Capitalization value perFTE2

• Management Span of Control

•

High-Performer Productivity Differential• Avg Training Performance Differential

per Employee

• Employee Engagement Revenue Linkage

• Quality of Hire Index

• Profit per FTE2

• TCOW1 per FTE2

• Human Capital ROI Ratio

• Internal vs. External HireCompensation Differential4

• Avg Replacement HireCompensation Cost Differential

• TCOW1 % of Revenue

• TCOW1 % of Expenses

• Revenue per FTE2

• Average Cost of Turnover

• Training Investment per FTE2

• Return on Human Capital Investment

• Employee Engagement Index

• Talent Management Index

• Training Effectiveness Index

• High Performer Turnover Rate

Low

• Job Tenure

• Time to Fill

• Cost per Hire

• Career Path Ratio • Managerial Bench Strength

• Experience & Education Index

• Avg Internal vs. External Cost per HireDifferential

(1.) TCOW = Total Cost of Workforce

(2.) FTE = Full Time Equivalent Workforce

Link toFinancialResults

(3.) Listed in Human Capital Financial Statements as Average Lost Revenue or Production per Day per Position

(4.) Listed in Human Capital Metrics handbook as Internal vs. External Hire Compensation Difference




Workforce Analytics Business Case ROI Examples

• 15% Productivity Gain: Output Up, Costs Down• ($55.0 Billion Package Delivery Co.)

• 5% Reduction in Cost of Workforce (TCOW)(Fortune™ 30 Technology Company)

• Profile to Hire Sales Stars with SuperiorPredictive Metrics ($1.0 Billion Bank)

• ROI of Sales Training ($2.0 Billion Retail Co.)

• Employee Engagement Service LevelRevenue Impact ($1.0 Billion Public Airline)

• 40% Voluntary Turnover Reduction• (Midsized Public Financial Services Co.)

• ROI of Internal vs. External Hires(Public Bank)

$1.1 Billion Annual

$650 Million Annual

$264 Million Annual$1.1 million per Salesperson

$250 Million Annual$250k per Salesperson

$96 Million Annual$5 per flight premium

$12 Million Annual

$6 Million Annual

© Human Capital Management Inst i tu te 27




SOLVE Workforce Intelligence Software



What you get with SOLVE

CEO/COO CFO

CHRO

HR Function Leads

CIO

• Workforce Productivity

• ROI of the Workforce

• Human Capital Financial Statements

• Tools to Control Workforce Cost

• Automatic HR Data Warehouse

• Data Integration Blueprint

• Integrated Talent Mgmt Scorecard

• HR Power Tools (i.e. ROI Calculator)

• HR Talent Management Dashboards

• Workforce and HR KPI Metrics




SOLVE Methodology Overview

WorkforcePlanning

Workforce ROICalculator

Human CapitalFinancial

Statements

Career PathQuantifier

ScenarioManager

Advanced IndexMetrics

LocationOptimization

(In Development)

WorkforceOverview

Recruitingand Hiring

Performanceand

Engagement

Productivity Turnover Management

MobilityHuman Capital

FinancialStatements

WorkforceROI and

Career Path

Dashboards

(Basic User Suite)Talent Management Dashboards

Advanced Toolset

(Power User Suite)Data Integration

Blueprint

Workforce Standards

Primary Systems

Secondary Systems

External Databases

SOLVE Wizard

1 2 3Foundation

(Data Integration)

Outputs4

Question-Driven Analytics and

Planning

ActionableWorkforce

Insights

PredictiveFinancial and

WorkforceModeling

WorkforceLinkage to

Business Results

QuantifyWorkforce

Productivity andROI

Filter Analysis and Reporting, Compare

Scenarios by Workforce Group, Position, Region,

Location, Location, Business Unit and More.

Build Scenarios, Detailed Analysis and

Modeling for Workforce Groups,

Positions, Regions, Countries,

Locations, Business Units and More .

EE-Level Data and Dimensions,

Configured for Organization

Specific Drivers and Analysis.




Question and Answer




Contact Information:

Human Capital Management Institutewww.hcminst.com

Presenters:

Grant Cooperstein, VP [email protected]

Jody Gilmyers, Consultant [email protected]

For more information about the following products and services, please visit the links below:

SOLVE Workforce Productivit y Reports Human Capital Financial Statements

Training Human Capital Metrics Handbook Thought Leadership

Workforce Intelligence

Consortium Group@HCMI


http://www.hcminst.com/


mailto:[email protected]


http://www.hcminst.com/products-services/solve-hr-management-software/



http://www.hcminst.com/products-services/human-capital-financial-statements/

http://www.hcminst.com/training/

http://www.hcminst.com/products-services/human-capital-metrics-handbook/

http://www.hcminst.com/thought-leadership/human-capital-management-white-papers/orgplus-total-cost-of-workforce/

http://www.hcminst.com/thought-leadership/human-capital-management-white-papers/orgplus-total-cost-of-workforce/

http://www.hcminst.com/products-services/human-capital-metrics-handbook/

http://www.hcminst.com/training/

http://www.hcminst.com/products-services/human-capital-financial-statements/


http://www.hcminst.com/products-services/solve-hr-management-software/





Questions Human Capital Analytics Can Answer

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