SPEARHEADING HR TRANSFORMATION WITH WORKFORCE INTELLIGENCE: LESSONS FROM THE HEALTHCARE INDUSTRY

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1 A HARVARD BUSINESS REVIEW ANALYTIC SERVICES REPORT SPEARHEADING HR TRANSFORMATION WITH WORKFORCE INTELLIGENCE: LESSONS FROM THE HEALTHCARE INDUSTRY Copyright 2016 Harvard Business School Publishing. sponsored by

2 SPONSOR PERSPECTIVE JOHN SCHWARZ Founder and CEO, Visier Never let a good crisis go to waste is an expression HR leaders at healthcare provider organizations understand well. They are painfully aware of the serious challenges their industry faces: unprecedented growth in demand for services, a short supply of skilled caregivers, and constant pressure to improve patient satisfaction and reduce readmission rates and costs. The way these challenges impact the workforce and how leaders need to respond is clear: More than ever, it is critical to hire, develop, and retain the right talent, monitor workforce costs to improve financial stability, and discover how workforce factors drive patient outcomes and satisfaction. To avoid drops in service quality and patient satisfaction scores, organizations need to estimate and track hiring rates more accurately so that recruiters can provision the right hiring capacity ahead of demand. Likewise, HR leaders need to identify the speed and direction of career development paths to ensure that employees progress into key roles. Understanding what workforce factors drive exits from critical roles is crucial, so that retention programs can be crafted to address the top reasons staff leave. Learning how employee engagement relates to patient outcomes is also essential. It is not enough to deploy a survey and review the data; to unlock its true value, engagement data must be combined with workforce information and patient satisfaction scores. Leaders can then see how engagement scores impact readmissions and patient satisfaction, discover which workforce factors affect engagement, and build evidence-based engagement programs and track their progress. But given the tight HR budgets typical within the healthcare industry, how is it possible to make strategic investments that support these urgent needs? And how can leaders in other industries respond to the unique workforce pressures they face? I believe the answer lies in cloud-based workforce intelligence. While traditional custom-developed workforce data projects come with high costs, long completion times, and high risk of failure, cloud-based workforce intelligence solutions can deliver accurate insights at a fraction of the cost and time, with no dependency on technical skill. With Visier Workforce Intelligence, organizations can answer hundreds of key questions about the workforce. For instance, healthcare providers can quickly answer questions such as: Does higher employee engagement lead to higher patient satisfaction? How are vacant positions or rates of sick leave affecting patient satisfaction scores? Do more experienced and better qualified teams have lower patient readmission rates? Which key members of staff are most likely to leave? How can we better plan for the retirement of experienced nursing staff? If your organization is just beginning its own workforce intelligence journey, I hope this paper will trigger valuable insights as you review the lessons that other organizations have learned along the way. ABOUT VISIER Visier Workforce Intelligence solutions are enabling a rapidly growing number of the world s best brands to maximize their business outcomes through their people. Visier s Workforce Analytics and Planning solutions enable HR to: Analyze key business questions, going from data to insights Align with goals and strategies, going from insights to plans Act on decisions and plans, going from plans to outcomes With Visier, organizations can ensure their workforce is aligned with business demand, at the optimal cost. Watch customer interviews and download case studies at

3 SPEARHEADING HR TRANSFORMATION WITH WORKFORCE INTELLIGENCE: LESSONS FROM THE HEALTHCARE INDUSTRY U.S. healthcare providers today are facing a perfect storm: growing demand for healthcare, a nursing shortage, and regulatory pressure to embrace a new revenue model. To keep pace with these new demands, a growing number of healthcare providers are deploying workforce intelligence typically cloud-based software and the staff and processes that enable the use of data analysis and strategic planning to make workforce decisions that are aligned with and support business results. In recent years as many as 18 million more people have obtained healthcare coverage, and the population is aging. Unemployment among nurses is under 5 percent. Meanwhile, the U.S. Patient Protection and Affordable Care Act (ACA) of 2010 is pushing healthcare providers toward a revenue model that replaces fees for services with payments based on evidence-based medical results. Healthcare providers have typically run HR on a shoestring compared with other industries. As recently as 2014 they spent an average $716 per employee on HR, compared with a 12-industry average of $2,015, according to PwC Saratoga. Nevertheless, data-informed workforce decision-making is becoming a priority. Healthcare has been way behind the curve in HR, but is now making progress, especially among larger hospital systems, says Shebani Patel, principal in PwC s People Analytics practice, who consults on people analytics with healthcare providers and other industries. Some providers now understand the importance of analytics and are making strides along the maturity curve. To learn more about these strides, Harvard Business Review Analytic Services interviewed five HR practitioners at U.S. healthcare providers that have started this journey. Their insights, combined with input from industry experts, illustrate what drives healthcare providers to pursue workforce intelligence and how they are advancing. Their experiences offer four lessons for any organization that wants to adopt workforce intelligence platforms to make workforce decisions better aligned with business outcomes: Seize on a compelling business need Cultivate executive support Demonstrate the value Start small but aim big SPEARHEADING HR TRANSFORMATION WITH WORKFORCE INTELLIGENCE 1

4 Business leaders and executives focus on business analytics and HR focuses on people analytics, but you need to do joint analysis on the two. Alec Levenson, Senior Research Scientist, Center for Effective Organizations, Marshall School of Business, University of Southern California While the need for understanding the workforce has been ever-present in HR, external forces, including implementation of the ACA, are accelerating the need for actionable workforce information and workforce planning, confirms Dan Lapporte, senior manager for talent and organizational performance and workforce information management at Kaiser Permanente, Oakland, CA. Kaiser, the nation s largest not-for-profit health plan, is implementing cloud-based workforce analytics and workforce planning software, the two pillars of workforce intelligence. SEIZE ON A COMPELLING BUSINESS NEED The ultimate quest of workforce intelligence is to determine how employee behavior, performance, and attitude contribute to or correlate with business outcomes. Organizations want to measure turnover, engagement, performance, and other employee metrics to understand how they impact revenue, profit, customer satisfaction, and other business metrics. Too often the quest falls short. HR might have plenty of employee metrics but cannot ascertain exactly what they mean for the business. Do engagement, retention, and performance impact sales, customer acquisition, quality, innovation or in the case of healthcare, patient outcomes? Most people don t know how to think about both the business process side and the people or talent side, says Alec Levenson, a senior research scientist at the Center for Effective Organizations in the Marshall School of Business, University of Southern California, and author of Strategic Analytics: Advancing Strategy Execution and Organizational Effectiveness (Berrett-Koehler Publishers, Inc., 2015). Business leaders and executives focus on business analytics and HR focuses on people analytics, but you need to do joint analysis on the two. Among Patel s clients, one of the biggest hurdles is how to get HR and business to collaborate. This is true not just in healthcare, she says. The business doesn t know the right questions to ask HR, and HR has a hard time leading the business to think about people analytics and how it can be incorporated into critical business processes and planning. Now, healthcare providers have an incentive. Healthcare reform has placed new pressures on hospitals since the ACA took effect in Patient readmissions, along with patient satisfaction as measured by a survey called the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), now directly impact Medicare and Medicaid payments. The HCAHPS survey, given to a random sample of patients anywhere from two days to six weeks after their discharge, focuses almost entirely on the quality of care received by patients. The lower a hospital scores, the lower the amount of reimbursement they will receive from the government. Hospitals can lose (or gain) millions of dollars in earnings as a result of their patient satisfaction scores. 2 HARVARD BUSINESS REVIEW ANALYTIC SERVICES

5 A Harvard Business Review Analytics survey conducted last year suggests that when compa nies don t see the link between workforce analytics and business outcomes, they aren t likely to adopt workforce intelligence. Meanwhile, a meta-study of recent research about nurses suggests that training, engagement, and other factors impact patient satisfaction and other medical results. 1 The meta-study cites research that found caregiver engagement scores correlate with HCAHPS patient scores. Therefore, the need to pay attention to patient satisfaction and other quality measures at the same time there s a nursing shortage, is a golden opportunity. Without the ACA, healthcare providers might not be as far along as they are in dealing with the shortage, some HR practitioners admit. Attracting and retaining talent was still our number one priority for adopting analytics software, says Stacey Horn-Spirito, former manager of HR systems, process design and analytics for the University of California Irvine Medical Center (UCIMC). But the ACA drove a culture change for us. There s a lot of research about how staff impacts patient satisfaction scores. We wanted to know why staff leave, what could we do better or differently. UCIMC, which employs about 4,800 nurses, caregivers, and other staff was close to completing the first phase of its rollout of cloud-based workforce analytics software when Harvard Business Review Analytic Services interviewed Horn-Spirito. A Harvard Business Review Analytics survey conducted last year 2 suggests that when companies don t see the link between workforce analytics and business outcomes, they aren t likely to adopt workforce intelligence. Among 362 respondents, including HR and business managers, just 16 percent said competitive pressures on the business would be a reason to adopt workforce analytics, and only 11 percent of respondents had invested in the technology. figure 1 In contrast, three of the five HR practitioners interviewed cited competitiveness concerns as a key reason their organization adopted their workforce intelligence solution. The competitive pressures on our business are huge, Horn-Spirito says. HR has an opportunity to provide valuable insight by providing workforce metrics and analytics aligned with other key metrics that are meaningful to the organization. We need to see where we have opportunities to optimize resources, how we can increase revenue, and, of course, how we can attract and retain talent. When a compelling business need arises, savvy HR practitioners seize the opportunity to adopt analytics. Horn-Spirito previously worked for companies in hospitality, financial services, and manufacturing that had already adopted workforce intelligence. While at the manufacturing company quality was the driver, in hospitality and financial services it was the obsession with customer satisfaction, she adds. SPEARHEADING HR TRANSFORMATION WITH WORKFORCE INTELLIGENCE 3

6 FIGURE 1 AN INWARD FOCUS Most CHROs concentrate on internal workforce issues rather than external challenges such as business competitiveness. Percentage that say the following are the most important challenges/needs that must be addressed by their CHRO and HR strategy. [Respondents chose up to three.] Strategies for attracting and retaining talent Developing leadership capabilities beyond the executive team Creating an agile workforce 57 Reducing costs and/or improving productivity Enhance ability to take advantage of new market opportunities Competitive business pressures Optimize operations geographically SOURCE HARVARD BUSINESS REVIEW ANALYTIC SERVICES, 2015 CULTIVATE EXECUTIVE SUPPORT Cultivating support among top executives is imperative. Having a top HR executive with a business background, analytics acumen, and a seat in the C-suite appears to be a prerequisite for getting senior leadership attention. The CHRO at Dignity Health, San Francisco, has all three, says Todd K. Horton, director of workforce intelligence for HR. Dignity Health is the nation s fifth-largest health system with more than 60,000 caregivers and staff about 60 percent of whom provide direct patient care in 21 states. The organization began to deploy cloud-based workforce analytics software in October 2015, and has an option on workforce planning software. 4 HARVARD BUSINESS REVIEW ANALYTIC SERVICES

7 Each of the HR practitioners interviewed has a supportive CHRO, who was trusted by C-suite colleagues, and who was able to make the case for workforce intelligence to other top executives. Our CHRO is extremely supportive, Horton says, but he put me through my paces because he wanted us to think it through. Because the ACA is imposing a new operational model, C-suites are more open to investing in workforce intelligence. That s how we came to link workforce analytics to this strategic initiative from the ACA executive leadership, Horton adds. Three years ago, the executive vice president of HR at Alliance HealthCare Services, Inc., elected to invest in cloud-based workforce analytics software. She was our executive champion, recalls Christopher Gruttadauria, vice president of HR, at the Newport Beach, California, which provides radiology, interventional healthcare and oncology services. Alliance partners with more than 1,000 hospitals in 44 states, and about 65 percent of its nearly 2,400 employees are involved in direct patient care. However, it helped, Gruttadauria says, that HR could show the executive team some quick results from a project on retention that showed how insights from their workforce analytics solution could result in a measurable reduction in regrettable turnover. I don t think they had expected this level of workforce analytics from HR until they actually started seeing it. Each of the HR practitioners interviewed has a supportive CHRO, who was trusted by C-suite colleagues, and who was able to make the case for workforce intelligence to other top executives. Three of the five practitioners have CHROs with business backgrounds; a fourth has a CHRO with an analytical background. It may not be a coincidence that, just as most organizations have not invested in workforce intelligence, neither do many have a business- or analytics-savvy CHRO. In its multi-industry survey last year, Harvard Business Review Analytic Services found that only 16 percent of respondents had hired a CHRO with a business or finance background, and fewer (9 percent) had brought on board a CHRO with an analytics background. A lot of credibility comes through the CHRO, PwC s Patel says. We have found that it is sometimes helpful when a CHRO comes to HR from other functional areas (e.g., finance). Because they understand operations and the business, they can connect with senior executives in a different way. DEMONSTRATE THE VALUE Winning executive support is not the sole job of the CHRO, however. Nor is it a onetime exercise. HR must continuously demonstrate value that inspires HR and business leaders to support workforce intelligence. Practitioners used a variety of tactics to make their case. SPEARHEADING HR TRANSFORMATION WITH WORKFORCE INTELLIGENCE 5

8 HR must continuously demonstrate value that inspires HR and business leaders to support workforce intelligence. At first, some tried to provide analytical insights with legacy tools. These efforts proved painful. The results were clumsy, even difficult, to obtain, and not cost-effective. But they gave practitioners an argument for modern workforce intelligence software as a worthwhile investment by comparison. Before implementing its workforce analytics software, Alliance HealthCare provided ad hoc insights using spreadsheets. UCIMC used spreadsheets as well as traditional business intelligence (BI) tools. Dignity Health delivered analytical insights using the company s BI data warehouse. Each slogged through these efforts for a year or longer before deciding they needed software specifically designed for analyzing and visualizing human capital metrics and correlations with business metrics. After attempting to use traditional BI, the executives loved the data but not the experience, Horn-Spirito says. I did the cost benefit analysis and it was not something we could sustain. I wrote a business case that aligned delivering the HR metrics effort with the ACA if you want more, there are solutions available but we re going to need an investment and we gained executive support to acquire a platform. START SMALL BUT AIM BIG It is prudent to start small, practitioners say. The last thing HR needs is to aim for grand results that take a long time to achieve and cost a lot. But grand goals, they agree, should be the long-term aim. Even after we implemented workforce analytics software, I learned not to tackle the world, to take baby steps, and to first introduce analytics in certain areas where it can help most, says John Freudenberg, senior manager of HR analytics and technology at City of Hope, a research and treatment center for cancer, diabetes, and other life-threatening diseases. Located in Duarte, California, City of Hope has about 4,500 employees and 2,000 contingent workers a majority involved in direct care to patients. The ability to make comprehensive plans for this workforce is a high priority, Freudenberg adds. For example, each of the practitioners interviewed has focused on improving hiring, training, and retaining nurses. But they all expect that they will be able to achieve one of their big goals: to understand how nurses impact patient satisfaction scores. When they started, all five practitioners used data at the same maturity level as two-thirds of the HR and business leaders Harvard Business Review Analytic Services surveyed previously: they either made workforce decisions based on regular operational reports or ran reports as needed, mainly to support critical decisions. figure 2 6 HARVARD BUSINESS REVIEW ANALYTIC SERVICES

9 FIGURE 2 ADVANCING ALONG THE MATURITY CURVE Companies that are farther along in their journey toward workforce intelligence are able to use data proactively to analyze the workforce, make predictions, and create comprehensive workforce plans. Percentage that indicated which statement below best describes the extent to which workforce-related data plays a role in that organization s decision-making style [Respondents selected a single answer.] Workforce decisions are informed by regular operational reports Data is used only for critical workforce decisions On-demand data is used to analyze the workforce proactively Predictive analytics is used to analyze the workforce and make predictions Analytics is used to create and monitor comprehensive workforce plans SOURCE HARVARD BUSINESS REVIEW ANALYTIC SERVICES, 2015 A year from now, they expect to have advanced. For example, Alliance HealthCare, which has been using workforce analytics for three years, is on the path to understanding the correlation between engagement and patient satisfaction. We initially adopted workforce analytics software because we believed there was an acute retention issue. We just couldn t fully demonstrate it, Gruttadauria says. Based on its findings about retention, HR designed and launched an improved onboarding program for clinical staff, which showed up to a 30 percentage point drop in new hire turnover in pilot groups within the first 12 months, he says. We re now looking to load engagement data, patient satisfaction data, and possibly revenue data into our system, Gruttadauria says. One of City of Hope s key goals is to understand what makes nurses most likely to leave and to be able to prevent resignations instead of reacting to them. The power in the tool is creating models here are characteristics of the nurses who left over the last three years, says Freudenberg. Then, you can watch for those characteristics and become preemptive. SPEARHEADING HR TRANSFORMATION WITH WORKFORCE INTELLIGENCE 7

10 Training and change management are important for moving up the maturity curve. At Dignity Health, Horton calls this building the mind-set and skill set for data-driven decision making. To support this, Horton is collaborating with his learning organization to create a professional development program for HR staff who want to become competent in analytics. At Alliance HealthCare, we re about to start to bring business users into the conversation, Gruttadauria explains. By putting more transparent data in their hands, we re going to hear questions from them that we might not even think about. There will be a much larger partnership between HR and the business. You have to start somewhere, suggests PwC s Patel. But whatever you choose to do first, it will help tremendously to establish a detailed analytics road map for 18 to 36 months. CONCLUSION: AVOID HR IRRELEVANCE The healthcare providers who are adopting workforce intelligence software and processes appear to be doing it right, Patel says. You don t need to start your analytics journey by acquiring technology, but eventually it will immensely help take efforts and initiatives to the next level. There will be large-scale success for HR analytics only when it is built into broader business processes, Patel cautions. If HR can say, From an analytics standpoint these are the talent implications, that is where the magic happens. Observes Alliance Healthcare s Gruttadauria: A lot of HR departments say they want to make their people their greatest competitive advantage. You do that by demonstrating real insights through real data. With the entire healthcare provider organization now focused on creating a data-informed revenue model, HR has to be involved, City of Hope s Freudenberg says. HR leaders who fail to participate in these efforts will become irrelevant, he warns. If HR doesn t keep pace, we re going to lose our seat in the C-suite, Freudenberg says. We re going to go back to the transactional days when HR was basically paper pushers and not supporting the organization the way we are now through data. END NOTES 1 Nursing Special Report: The Influence of Nurse Work Environment on Patient, Payment and Nurse Outcomes in Acute Care Settings, Press Ganey Associates, Inc., The Changing Role of the CHRO, Harvard Business Review Analytic Services, HARVARD BUSINESS REVIEW ANALYTIC SERVICES

11 METHODOLOGY Spearheading HR Transformation with Workforce Intelligence: Lessons from the Healthcare Industry is based on interviews with human resources executives and managers at five large U.S.-based healthcare providers. Four interviews were conducted on the phone using a questionnaire provided in advance. One interviewee gave written responses. Interview subjects were asked to compare their organizations to others by answering selected questions from two Harvard Business Review Analytic Services Pulse Polls on workforce intelligence conducted in 2015, and then to describe their efforts at adopting workforce intelligence in depth. The HR executives interviewed include: John Freudenberg, senior manager of HR analytics and technology at City of Hope Christopher Gruttadauria, vice president of HR, Alliance HealthCare Services Stacey Horn-Spirito, former manager of HR systems, process design, and analytics for the University of California Irvine Medical Center Todd K. Horton, director of workforce intelligence and systems for HR, Dignity Health Dan Lapporte, senior manager for talent and organizational performance, and workforce information management at Kaiser Permanente Harvard Business Review Analytic Services asked the following experts to comment on the findings from the interviews: Shebani Patel, principal in PwC s People Analytics practice Alec Levenson, a senior research scientist at the Center for Effective Organizations in the Marshall School of Business, University of Southern California

12 hbr.org/hbr-analytic-services