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1 How the New Workplace Analytics Will Revitalize Your Organization 2012 Harvard Business School Publishing Corporation Adapted by permission of Harvard Business School Publishing Corporation ISBN: Key Concepts Workforce analytics statistical data regarding staffing and company structure can be used by company executives to learn how to effectively leverage their workforces to increase company productivity and profits. Workforce analytics is particularly effective in addressing an immediate, time-sensitive company issue. However, developing an ongoing practice of workforce analytics enables companies to become more agile in responding to change. The use of statistical evidence allows managers to make business decisions and strategies based on objective information; this facilitates taking action to address company issues instead of creating resistance. Information gained from the workforce analytics process enables managers to effectively motivate and retain their employees, thereby increasing company productivity and profits. June 26, 2014 Information gathered from outside sources, such as business partners and customers, can also be analyzed to pinpoint areas for company improvement. Workforce analytics can be used to establish reasons for staff turnover and to suggest action steps for hiring and retaining good employees. In order to implement an effective ongoing workforce analytics process, managers must consider whether they have adequate internal support, technology, and staff to effectively maintain the program. Workforce analytics provides an effective, factbased method for driving a company s vision and performance. Introduction In Calculating Success, Carl Hoffmann, Eric Lesser, and Tim Ringo combine their decades of experience

2 in data analytics to explore how companies can make the best use of the data they collected regarding workforce and company organization in order to tie these factors to company performance. Analytical measuring of finance, supply, and marketing has a long history. Data regarding the workforce and the structure of a business, however, often is not integrated into the analytical process. The authors explain how companies can use this information to increase their competitive edge by leveraging the full potential of their workforces. Applying Analytics to Your Workforce Data analysis is the middle step between a company s vision and the action that will bring that vision into being. Successful companies analyze not only the business opportunity, but also the staffing and company structure necessary to make the vision a reality. These workforce analytics allow executives to understand what they need to know regarding their workforces and how they can act in accordance with that knowledge in order to improve their companies. There are four areas in which companies can focus their efforts to use workforce analytics to improve the production and effectiveness of their employees: 1. Organizational strategy: What needs to be accomplished? Are the company s procedures, structures, and roles sufficient to accomplish goals effectively? This analysis shows executives what parts of their companies require investment and what results will be realized following improvements in these areas. 2. Are company roles being filled with staff capable of performing their jobs at the levels called for in the business plan? This analysis examines the best method to hire the people necessary to fulfill a company s mission. 3. Are employees motivated to perform at or above required levels? This analysis shows executives what tools their employees need in order to perform effectively. 4. How can companies pinpoint necessary changes and implement solutions? This analysis encourages productive innovations and decreases the likelihood of non-productive changes. Workforce analytics are most effective when used to analyze a current, imperative company issue. A sixstep analysis defines the process. The first four steps address what needs to be done, and the final two address how to act on this knowledge. These steps include: 1. Fully understanding the core problem. 2. Applying a conceptual model of problem causes and solutions. 3. Allowing the conceptual model to define what data is collected. 4. Analyzing data to determine the root of the company s issues and focusing on effective and practical solutions. 5. Presenting the conclusions drawn from the data to the relevant stakeholders. 6. Engaging in changes necessary to carry out the solution. The failure of executives to invest in their workforces is due to the following causes: Many company leaders fail to understand the potential advantage that their workforces represent. Executives believe that data gathering will be too time consuming. Further Information Information about this book and other business titles: hbr.org Click Here to Purchase the Book Related summaries in the BBS Library: Keeping Up with the Quants Your Guide to Understanding and Using Analytics By Thomas H. Davenport and Jinho Kim Connecting Organizational Silos Taking Knowledge Flow Management to the Next Level with Social Media By Frank Leistner

3 Companies lack information as to how they can use data to improve their competitiveness. The Six-Step Analytical Process Workforce analytics generally start on a small scale in response to an immediate company problem. Once analytics become standard operating procedure, the workforce in turn is able to adapt to necessary changes, supporting a business process that is readily adaptable to varied challenges. There are six steps to analyzing workforce evaluation issues. About the Authors Carl Hoffmann has been helping companies implement effective human resource strategies for more than 30 years. In 2002, Hoffmann became a partner and vice president of IBM s Global Business Services group. Since retiring in 2007, Hoffmann has established a private consulting firm, Human Capital Management and Performance LLC (HCMP). He is also the author of numerous publications, reports, and white papers. Eric Lesser is the Research Director and North American leader for the IBM Institute for Business Value. Previously, he led IBM s Global Business Services research and thought leadership in the area of human capital management. He has written numerous articles for publications such as the Sloan Management Review, the Academy of Management Executive, the International Human Resources Information Management Journal, and the Journal of Business Strategy. Tim Ringo has over 20 years of experience helping organizations develop engaged, highperforming workforces aligned to business objectives. He is currently a partner at Londonbased Maxxim Consulting. He is a sought after speaker, commentator, and writer on human capital topics, and the author of a number of white papers and articles. Step 1: Frame the problem. First, managers must be willing to look beyond the immediate issue and see where it fits into the larger context of the company. In the process, they will discover the root of the issue. No matter how brilliant a company s strategic vision, it must be evaluated against how well the market will embrace it, how its supply chain can obtain the needed resources, and how much the company can invest in that strategy. Step 2: Apply a conceptual model to guide the analysis. A conceptual model that fits the company s needs is essential to help analysts sift data and decide what is important, what is not, and how missing data may affect their analyses. Step 3: Capture relevant data. Effective analysis depends on a base of relevant data. In the case of workforce analytics, this means data that is directly related to staff productivity and company profits. Step 4: Apply analytical methods. Workforce analytics must be performed by personnel trained in valid statistical modeling techniques. Step 5: Present statistical findings to stakeholders. Results of statistical analyses must be presented to company management in language that is easily understood by non-statisticians. Statistical findings also must be clearly linked to business improvements. Step 6: Define action steps to implement solutions. An analysis of the workforce must move beyond linking statistics to increased profitability. It also must propose action steps that will achieve the desired results. Performing statistical analyses of employees can be seen as an inhuman approach to managing people. However, workforce analytics, when used appropriately, enables managers to base their decisions on a logical base of factual information. Translating Strategy into Profitable Action Basing business strategy and workforce decisions on statistical analysis enables companies to make decisions from a strong evidence base, and also enables executives to both explain their companies issues and create road maps to overcoming them. Manag-

4 ers must have a clear vision of what needs to be done and what structure must be in place to support their visions before they are able to hire and motivate the appropriate staff to accomplish their goals. This factbased approach enables action rather than resistance to change. The process of moving from strategy to action occurs in four areas: 1. Developing the business strategy. A good strategy should lay out company goals as well as the procedures that must be followed in order to achieve those goals. 2. Creating the operational model. This creates a roadmap for company departments to follow regarding processes, organization, work standards, and necessary technology. 3. Defining the workforce requirements. New processes necessitate the creation of new positions and responsibilities. 4. Determining workforce standards. Management must establish the credentials required to fill the new positions and determine how eligible employees will be supported and rewarded for carrying out the company s vision. Workforce analytics involves modeling the behavior of the organization and the workforce to understand what drives performance within particular needs and constraints. Balancing Talent Supply and Demand Evaluating supply and demand in terms of workforce involves analysis of planning and execution. In the planning phase, a company projects the anticipated demand for qualified workers, determines the projected supply of workers, and identifies and resolves gaps between demand and supply. During execution, a company builds its workforce, deploys workers where they are needed, analyzes workforce effectiveness, and adjusts accordingly. Four business goals influence how companies determine the size of their workforces: 1. Cost reduction. Companies seek to reduce costs by matching workforce size to labor forecasts. 2. Customer satisfaction and revenue enhancement. Companies improve in these areas by being aware of staffing levels and employee capabilities in order to meet customer demand. 3. Employee satisfaction. Effective scheduling of staff increases employee satisfaction and productivity. 4. Increased managerial control and responsiveness. Automated tools allow managers to base staffing decisions on factual analyses of many factors. Managers employ a conceptual model that projects demand for qualified workers, evaluates available workforce supply, and analyzes gaps between supply and demand. Analysis of workforce supply and demand requires data from several areas, including: Predicted demand for products. Upcoming potential conflicts, such as vacations or sickness. Task-related time and effort. Worker capabilities and costs. Worker task scheduling preferences. Worker performance. Analytical tools are necessary to evaluate supply and demand and to build an effective workforce. Additionally, companies can predict necessary staffing levels by evaluating the link between practices that accomplish company goals and the productivity of employees. The movement of employees into and through a company is predictable and can be used to analyze whether this flow of personnel will continue to meet company needs. Stakeholder engagement is also very important to the analytical process. In particular, companies need to seek input from frontline employees, managers, and collective bargaining units. Effective workforce management requires that a company:

5 1. Continually track the number of employees. 2. Match workers to appropriate jobs. 3. Evaluate the success of the workforce plan. Untangling the Drivers of Workforce Performance Managers can use the information derived from workforce analytics to motivate employees. Companies must establish what they require of employees, what structure is most effective to support company goals, and what constitutes appropriate performance standards and rewards. Managers also need to hire and utilize effective numbers of staff to accomplish company goals. There are eight areas that drive workforce performance: 1. Work design must be efficient and effective in order to meet company goals. 2. Performance measures must be objective and directly linked to actions under workers control. There must be rewards to reinforce desired behaviors. 3. Talent sourcing and selection processes must be prioritized in order to hire qualified and motivated employees. 4. Training and development activities must enable employees to succeed in their work. 5. Workforce planning and allocation must balance supply and demand and distribute staff where they are needed. 6. Workers individual needs must be met by the company. 7. Leadership must work to successfully motivate employees. 8. The culture of the workplace community must be an environment that supports fairness and positivity. If all of these objectives are met, the result is workers who are actively involved in their companies successes. However, for this to happen, companies must gain an in-depth understanding of performance standards for both individual workers and the company as a whole. Measuring the Value of Collaboration and Knowledge Capital While innovation and knowledge-sharing are essential to company success, these concepts can be difficult to quantify in terms of profitability. In a global economy with a shifting financial environment, sharing knowledge among employees has become critically important, particularly during times of company transition. Therefore, companies must seek ways to measure the worth of investing in these areas. An analysis of employees social networking can provide many insights as to how information is shared within a company (e.g., spotlighting employees who are seen as information sources even though they do not hold management roles). Additionally, companies can gather valuable data from sources such as customers, suppliers, and business partners. Furthermore, evaluation of both formal and informal learning processes can be accomplished via partnerships between the human resources and financial departments. Analysis of this data has shown that learning and knowledge-sharing are essential to a company s production and efficiency, and therefore to its profitability. Emerging technologies allow organizations to go beyond the metaphorical suggestion box to engage employees and others in the extended enterprise (i.e., suppliers, partners, customers) in an ongoing dialogue about the current and future challenges and opportunities. Solving the Turnover Mystery Analytics can be used to evaluate the various factors that affect workforce interactions, allowing executives to understand issues with workforce retention. For example, PHARMA, in the midst of a technological makeover, was losing IT staff to other companies. PHARMA paid lower salaries than its competitors, but offered large bonuses and stock options to offset the difference. Analytics showed that simply increasing IT salaries was not an effective response to the issue.

6 The analytics team found three issues affecting IT employee decisions to leave the company: 1. Annual performance rating. 2. Whether they had been promoted in the past year. 3. Their eligibility in the stock option program. Stochastic modeling was used to follow the movement of employees through the company. This analysis highlighted the fact that by hiring outside, experienced staff, the company bypassed internal employees and disrupted pay scales. Key action steps to resolve PHARMA s staffing issues included: Engaging the workforce and increasing employee retention. Balancing staff numbers and capabilities to adequately support department projects. Analyzing the hiring process and building a qualified workforce. Providing focused employee training. Throughout our journey in researching and writing this book, we have seen a common thread emerge: there is more measurable value inside an organization than meets the eye if it is sought out and quantified. Building a Sustainable Workforce Analytics Capability Companies tend to first use data analytics in response to a pressing issue that requires an immediate solution. Over time, many companies have realized the benefit of ongoing data analytics efforts, particularly the fact that analytics can help prevent small problems from becoming larger. Incorporating workforce analytics into a company s structure requires the following five features: 1. Timely, accurate data: Ongoing data analytics efforts require data from multiple sources. Issues in this process include missing information, mis-categorized data, and differing definitions of key data elements across company departments. 2. A customized analytics system: A broad system, accessible to multiple stakeholders, must be able to do the following: Obtain data from a variety of source systems. Execute a variety of different analyses. Present the information in a way that is meaningful and can be customized to different audiences. Deliver information in a form that can be embedded within the business processes. Secure and protect the information. 3. System maintenance: Company changes that can affect the data analytics system include: Changes in the source systems that feed the analytics Changes in the technology that delivers and integrates the information with the daily operations and processes of the company Changes instituted by the users who become increasingly familiar with basic tools and capabilities 4. Analytic staff: The analytics team must be able to do more than simply present data. The team must have considerable business experience in order to provide relevant insights based on the analysis of the company s workforce data. 5. Governance structures: Since workforce analytics involves multiple stakeholders, it is necessary to establish a governing body to balance various needs against company protocols. Key Questions in Building a Sustainable Analytics Capability Managers wanting to establish ongoing data analytics must consider the following six questions: 1. Do I have the commitment of top management to pursue analytics within my organization? 2. Have I established a governance process focused on the overall interests and needs of the company?

7 3. Have I earned support by building a compelling business case and road map that demonstrates the benefit of using analytics to drive performance? 4. Is my workforce data clean, consistent, and able to be integrated with data from other parts of the organization? 5. Do I have a technology platform that allows me to perform various types of workforce analyses in a timely and accurate manner? 6. Do I have the resources within my organization to build, maintain, and support an ongoing workforce analytic capability? g g g g Features of the Book Estimated Reading Time: 5 hours, 261 pages Calculating Success by Carl Hoffmann, Eric Lesser, and Tim Ringo explores the world of workforce analytics, or the study of data related to staffing and company structure. Many companies are aware of the value of data collected from sources such as finance, supply, and marketing; workforce data, however, has lagged behind. Through their six-step process, the authors examine a series of case studies showing how companies can effectively utilize workforce analytics to resolve critical issues. This book will be of particular interest to company executives and management. Since the chapters of the book build progressively, it is best read in its entirety. The book also contains detailed appendices and extensive notes and index sections. Contents Chapter One: Applying Analytics to Your Workforce: Realizing Returns on Your Most Valuable Asset Chapter Two: Translating Strategy into Profitable Action Chapter Three: Balancing Talent Supply and Demand Chapter Four: Untangling the Drivers of Workforce Performance Chapter Five: Measuring the Value of Collaboration and Knowledge Capital Chapter Six: Solving the Turnover Mystery: An Extended Look at the Workforce Analytics Process Chapter Seven: Building a Sustainable Workforce Analytics Capability Conclusion Appendix A: The Components of a Behavioral Survey to Understand the Drivers of Workforce Engagement Appendix B: Sources of Data Relevant to Turnover Analysis Notes Acknowledgments Index About the Authors g g g g Copyright of Business Book Summaries, Business Book Review, BusinessSummaries and BizSum is property of EBSCO Publishing Inc. and its content may not be copied or ed to multiple sites or posted to a listserv without the copyright holder s express written permission. However, users may print, download or summaries for individual use. Business Book Summaries is a service of EBSCO Publishing, Inc. For more information about BBS, to subscribe to BBS, or to provide us feedback, visit our Web site. EBSCO Publishing Inc. 10 Estes Street Ipswich, MA USA

8 Copyright of Calculating Success is the property of Great Neck Publishing and its content may not be copied or ed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or articles for individual use.