Driving Workforce Decisions With Compensation Workforce Analytics

8/10/2019 Driving Workforce Decisions With Compensation Workforce Analytics

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Driving Workforce Decisions

with Compensation Workforce

Analytics

Moun Peterson, PhDDirector of Workforce Analytics & Research

Human Capital Management Institute


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About Human Capital Management Institute

HCMI Background:

Specialized in HR analysis &measurement

Deep expertise in workforce analytics &workforce planning

Board made up of CFOs and HRexecutives

What We Do:

Measure the immeasurable in humancapital

Transform workforce data into businessintelligence

Provide technology, consulting, andtraining so HR can partner with Finance

SOLVEWorkforce 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 onein which human capital measurement and information is as integral to business decision making asfinancial information is today.

We are a Full-Service Workforce Analytics and Planning Company

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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

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

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

LowTurnoverImpact

HighTurnoverImpact

SomeTurnoverImpact

.11

WorkLocation

Numberof Jobsin Last3 Years .70

H i r ed Thr ough Empl oyee R efer r al .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 LeaseTalent Analysis

Analytic Engagement Projects High-Performer Profiles Engagement ROI and Sales Impact Turnover and Retention Driver Analysis

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

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

SOLVEWorkforce Intelligence Software Integrated Dashboard, Advanced Tools, Metrics,

Data Blueprint and Predictive Modeling Automated Completion of HCFS

Productivity & Benchmark Reports Productivity Metrics External Benchmark Comparisons Answers to Key Productivity Questions


Initial Reports&Analysis

Data Gathering

First Good

Metrics

HR Data Warehouse

Drill-down,standardreportsScenario Analysis

ExternalBenchmarking

Contextfordecisions

Data

Driven Decision

Making!

Turnover,Headcount,Hiring

HRISsystem data

COEFormation

Data Errors

HR Analyt

icsMandate

HR StandardsEstablishedLostHR

Credibility

HR data/systems

Assessed

HR Data Cleansedhistoricaldatascrubbed

Bus.UnitsReject

Analysis

Data Errors

Historicaldatastillbad

1st

AnalyticsStudy

AdvancedAnalytic

Studies

HR Analysis

Validated

Integrated HRDatabases

COELaunches

TrainingCourses

Bus. Units

Demandmore

Analyticsjourneysteps

Setbacksalong the way

Journeypath and goal


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Agenda


1. What is Workforce Analytics?

2. The Essentials of a Workforce Analytics Initiative

3. Key Compensation Metrics

4. Case Study


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Value Creation in Todays Marketplace

Intangible Capital ValueMarket value driven by factors

not on a balance sheetIntellectual or Human Capital*

Tangible Asset/ValueMeasures well established for

modern Finance as a DecisionSupport Science

Well Measured

Not well Measured

Hard to

Measure

Source: Ocean Tomo Research, Inc., 2011

Human Capital = employee knowledge, training, productivity, experience, culture, leadership, development,performance, creativity, etc.

Easy to

Measure

Are we managing the right things or just managing what we know how to manage?

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Challenge of Measuring Human Capital

Compensation

Transfers

New HireTurnover

SuccessionData

Turnover

Training

Recruiting

EmployeeDat

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



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Strategic Approach to Workforce Analytics


Data Tools

Metrics &

Standards

Resources

Knowledge Capability

DataIntegration

RepeatableProcess

WorkforceStrategy


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Building a House for Data-Driven Decisions

Excludes systems considerations

Linked

Business and Workforce Strategy(HR Value Creation & Workforce Optimization Model)

Workforce Planning Human Capital Analytics

One Foundationfor Analytics

& Planning

Predictive Workforce

Management

Tools

Classification ToolsStandards

Demand

&Supply

Policies&

WorkforcePracti

ces

Critical

Roles

&

Skills

Predictive

Modeling

Metrics

to Recruit,

Train &

Retain

Cost

Modeling

Root

Cause

Analysis

TalentManagement

&Practices

Clean Data

+ Standards =

Reports & Measures

Analytics &

Workforce Planning

Capabilities

Analytic Framework Foundation to Roof

Workforce Planning

and Analytics

2 PATHS,

1 HOUSE

Foundation

Awareness

Excellence

Measures + Metrics Benchmarks

Measuring & Reporting

Reports

Data Quality

Manager dataTemp & contractor dataTurnover data

Geographic data

Performance mgmt data

Employee career

path / succession data

Compensation dataRecruiting data

Strategic Plan data by unit Job/Position dataEmployee basic data

Data-

Driven

Decisions



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TheAACEE Evolution ModelWhere is your company?

Awareness Action Competence Effectiveness Excellence

Workforce Analytics Journey

AnalyticCompet

encies

Measures that Align HRand Business Strategy

Analytic Center ofExcellence

Metrics & BenchmarkStandards

Conduct RootCause Analysis

WorkforceAnalytics that

Quantify Impact

Advanced Metrics+ ROI Analysis



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Characteristics of the Analytics Journey

MetricsFramework

andScorecards

KPIs andAutomatedReporting

Standards +Integrated

Data Analysis

Hot SpotIdentificationand Trending

Performanceand

RetentionModelling

Key Driver ofBusinessStrategy

Capability Milestones

+ + + + =

Example Roadmap Steps Toward Excellence

Awareness Action Competence Excellence

Start goal

Stage In Evolutionary Model

Review and Optimize Along the Way

2 3 3+ 4 51

Select Measuresthat Align HR andBusiness Strategy

WorkforceAnalytics thatQuantify Impact

AdvancedMetrics use +ROI Analysis

Conduct RootCause

Analysis

Metrics andBenchmarkStandards

LaunchAnalyticCenter of

Excellence

Effectiveness



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Building Human Capital Value

PredictiveData

Model

Validate

and Analyze

Clean and

Integrate Data

Establish Data Quality

and Identify Gaps

Establish a foundation forWorkforce and Data Standards

Value

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Initial Reports &

Analysis

First Good

Metrics

HR Data Warehouse

Drill-down, standard reportsScenario Analysis

External

Benchmarking

Context for decisions

Data-

Driven Decision

Making!

Turnover,Headcount, Hiring

HRIS system data

COE Formation

Data Errors

HR Analytics

Mandate

HR Standards

EstablishedLost HRCredibility

HR Data/Systems

Assessed

HR Data Cleansedhistorical data scrubbed

Bus. Units

Reject

Analysis

Data Errors

Historical data

still bad

1stAnalytics Study

AdvancedAnalytic

Studies

HR Analysis

Validated

Integrated HR

Databases

COE Launches

Training

Courses

Bus. Units

Demand

More

Example Human Capital Analytics Journey

Analytics journey steps

Setbacks along the way

Journey path and goal

Data Gathering



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Getting Started: Questions to Consider

Manager SupportEssential to give the project visibility among the executives.

Expertise & KnowledgeNeeded to understand and guide the process. If it does not exist within the company thentraining is needed and/or external sources of expertise (e.g., consultant, vendor, etc.).

TechnologyDoes the technology needed already exist within the company? What are the company

policies about application tools that can be used? Does new technology need to bepurchased?

ResourcesIs there a budget? Is there headcount?

Information & DataWhat data are needed? What is the source of data to be used? Will there be multiple data

sources used?

CommunicationsWho is the targeted audience? How will it be communicated?

StandardsA mutual understanding of what the data points and metrics mean.



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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?

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METRIC NAME METRIC NAME

1 Pay-for-Performance Differential Incentives 14 Average Total Comp Cost FTE Employees

2 Pay-for-Performance Differential Salary 15 Average High-Performer Comp FTE, Employees

3 Average Non-Employee Cost FTE, Annual 16 Average Total Comp % of Market Comp

4 Average Non-Employee Hourly Cost FTE 17 Average Total Comp Cost Employees

5 Total Direct Comp Cost - % of Expenses 18 High-Performer Total Comp Differential

6 Total Direct Comp Cost - % of Revenue 19 Internal vs. External Hire Total Comp Difference

7 % Average Salary Increase Annual 20 Total Comp Cost % of Expenses Employees

8 Average Salary FTE, Annual 21 Total Comp vs. Market - %

9 High-Performers Salary Differential 22 Total Cost of Workforce

10 Total Salary Cost - % of Revenue 23 Total Cost of Employees % of Revenue Employees

11 Total Cost of Employees % of Expenses Employees 24 Total Cost of Workforce % of Expenses Workforce

12 Total Comp % of Revenue Employees 25 Total Cost of Workforce % of Revenue Workforce

13 Total Comp % of Revenue Workforces 26 Total Workforce Comp % of Expenses Workforce

Compensation Key Metrics



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For the Finance andHR relationship towork, HR data mustbe translated intomonetary terms $

Quantifying Cost is agood starting point,such as Total Cost ofWorkforce

Partner with Finance to Quantify Costs and

Opportunities

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Q:What is Total Cost of Workforce (TCOW)?

A:Total of all workforce-related costs:

Employee compensation(wages, incentives, overtime, equity, &

other pay)

Contingent temporary/contract laborcosts

Employee benefits& perks costs

HR functioncosts(e.g., recruiting, training, & support)

Retireeor inactive workforce costs

Q:Why is it important?

A:Workforce costs avg. 70% of operating

expenses What is poorly measured is poorly managed

In growth: budgets, requisitions & position control leave too many

holes

In decline: shows how much to cut

Need a metric to manage workforce complexity

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A powerful metric which can answer anumber of key business operating questions:

What is the annual cost of the workforce if itremains unchanged?

What is the cost increase if the company grows15% annually?

How much does the workforce need to decrease tosave 10% of operating costs?

Currently, few companies have answers tothese questions

Total Cost of Workforce



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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

The ten-year cost savings is the areabetween the cost of External Hirescompared to the career path of an InternalStaff 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 others an average of several years or a custom time period is best to use.


$88,945


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Pitfalls

1. Workforce analytics doesnt

always have a linear path2. Getting stuck in a reporting

cycle

3. Citing lack of resources



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Contact Information and Upcoming Events

Moun Peterson, Director of Workforce Analytics & Research

[email protected] /

Workforce Intelligence

Consortium Group 20

Pasadena, CA: www.hcminst.com/training (HC200K)

Workforce Analytics Training Feb 3-4, 2015

Workforce Planning Training Feb 5-6, 2015

Announcing Solve Dashboards

Sign up for a demo: www.solveworkforce.hcminst.com

Free Productivity Insights Report

Available for a limited time: www.hcminst.com/freereport

http://bit.ly/hcmidisc
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A Guide to the World of Workforce Metrics

A comprehensive guide of

over 600 human capitalmetrics

100 best-in-class andcritical metrics to quantify

and manage the workforce

Definitions anddescriptions showing mostcommon and best use

Detailed formulas andexplanations

For more information visit:

http://www.hcminst.com/metrics

Driving Workforce Decisions With Compensation Workforce Analytics

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