Analytics Maturity Models and Roadmaps. Human Capital Management Institute

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3 Analytics Maturity Models and Roadmaps Human Capital Management Institute

4 Analytics Sophistication Curve Source: Gartner 2014 Human Capital Management Institute

5 Challenge of Measuring Human Capital Introduction Complexity of Workforce Data Employee/Full-Time-Equivalent (FTE) Jobs/Roles/Skills Time - Tenure Compensation ($ vs. Equity) Advanced Analytic Insights Workforce Planning Success Lack of Standards Frequency of Change Benefits Span of Control Compensation Transfers Training Promotions, Transfers, Hires, Terminations Turnover Succession Data New Hire Turnover Recruiting Jobs/Roles/Skills Time - Tenure Lack of Analytic Skills Employee Data Measuring the Intangible Human Capital Management Institute

6 Fitz-enz Levels of Analytics Level 3 Prescriptive - Prescriptive Actionable If-Then Analytics - Workforce Planning + Financial modeling(hcf$) V A L U E Level 2 Predictive Level 1 Descriptive - Workforce planning, scenario modeling - Multivariate statistical modeling - Statistical regression analysis - Forecast Leading(predictive) Indicators - Trend reports - Metric scorecards - Ad-hoc reporting - Transaction and count reports BI Solutions Human Capital Management Institute

7 #1 Asking the Right Questions What If you could answer the following? 1. What is our workforce productivity? 2. What is our total cost of workforce? 3. What is the ROI of our training investment in the workforce? 4. Is quality of hire (i.e. Top Talent ) better than cost per hire? 5. Is it better to build, buy or rent talent? 6. Are leaders effectively managing human capital? What is a good leader worth? Human Capital Management Institute

8 Analytics Sophistication Curve Source: Gartner 2014 Human Capital Management Institute

9 Why Big Data in Human Resources (BDiHR) is Important to Finance Budgeting Personnel costs, compensation and benefits represents the single largest expenditure category for operating and maintenance. Rate setting Outside of allocated space, personnel cost allocation is the predominant driver in rate setting. Forecasting Personnel costs are the most likely cost to deviate from budget expectations.

10 What BDiHR is Finance looking for? For Finance BDiHR equals more timely, reliable and effective information for modeling and decision making, a quantitative focus. Detail time records (especially in operations): Cost allocation/rate setting, reimbursement and grant match Staffing, additional staff or overtime Trends: Vacancies/turnover Inflation

11 ACI-NA Financial Benchmarking Survey Survey Overview Prepared annually Voluntary (prepare or no share) FAA 127 is base for survey Approximately 773 data points Includes 40 HR data points Airports Responding (102) ACI-NA 2016 Financial Benchmarking Survey FY 2015

12 Public Safety Labor as a Percent of Total Compensation ACI-NA 2016 Financial Benchmarking Survey FY 2015

13 Police & Firefighting Labor as a Percent of Total Public Safety Labor ACI-NA 2016 Financial Benchmarking Survey FY 2015

14 Data Analytics & Organizational Change

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16 Established: October 22, 2015

17 2016 & 2017 Goals Successful Integration Maintain Business Momentum

18 Reporting to Analytics to Insight: The People Analytics Maturity Curve Build Process and Governance Pilot Automate and Globalize High What is likely to happen and how can we be better prepared? 4 Predictive solutions Predictive Analytics Workforce Planning Measurement Maturity Why did it happen and how/where can we improve? 3 Linkage models & advanced survey analytics Workforce Surveys What happened and how do we compare on a defined set of metrics? 2 Executive Dashboards Low What happened? 1 Ad hoc metrics and reports Descriptive benchmarking & dashboards Metrics/ Benchmarking Low Utilization of Workforce Data High PwC

19 Our Data Story Workforce Management Talent Management Engagement A Great Place to Work for Strong Performers

20 Human Capital Dashboard 6, , , , , , Headcount 5,264 4,023 2,857 3, % New Hire Turnover 40.00% 34.23% 30.00% 20.00% 10.00% 40.26% 42.98% 9.08% 0.00% ,500 3,000 2,500 2,000 1,500 1, % Generation Band 19.3% 23.12% 1.88%

21 Human Capital Dashboard Projected Retirement Projected Retirement by state 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Ethnicity 31.34% 29.14% 13.69% 10.79% 10.63% 1.72% 1.10% 0.93% 0.58% 0.08% Under 1 Year 1-2 Years Gender Female Male

22 Talent Management

23 ENGAGEMENT

24 Employee Strategic Goal Develop leaders and a workforce aligned to the needs of our Strategic Plan and an inclusive environment that reflects the diversity of our community.

25 Improve Leverage Low Impact on Engagement High Low Low Priority Driver Score Review Level Of Commitment High

26 Profile XT Team Development Low Mod-Low Mod-High High Learning Index Verbal Composite Numerical Composite Energy Level Assertiveness Sociability Manageability Attitude Legend Team Leader Direct Report A Direct Report B Direct Report C Decisiveness Accommodating Independence Objective Judgement

27 Personnel Considerations Productivity and Efficiency Workforce Planning Justify all positions prior to (re)filling/new additions: Costs/risks associated with elimination Savings/revenues to fund the position Alternatives to permanent staffing model Realign/restructure responsibilities Executive team review and prioritization Benefits Employee Benefits Task Force Plan options Plan design Alternative models Sustain below market average expense growth rate Incent employees to manage wellness through cost share model Retention Labor Market- San Diego unemployment at 4.2%, lowest in a decade and well below national 4.8% ACI-NA Salary Survey reports 3.4% increase in median base wage of airport industry employees World at Work reports 3.5% increase in base wages in 2016 for Western U.S. employers Airport Authority voluntary turnover doubles since 2012

28 Total Personnel Expenses FY 2010 FY 2019 $60 $ % Expense ($ millions) $40 $20 $35.4 $ % $37.2 $ % 2.3% $39.1 $ % 0.2% $ % $ % $ % 6.9% 20% 10% 0% Year-over-Year Increase / Decrease (%) -10% $0 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017* FY 2018* FY 2019* -20% Expenses % Increase/(Decrease) * Budgeted FY 2017, FY 2018 & FY 2019

29 Personnel Costs as % Operating Expense / Revenue FY 2010 FY % 50% 40% 40% % of Operating Expense 30% 20% 30.2% 32.5% 26.5% 26.6% 31.2% 24.3% 30.0% 21.5% 28.6% 20.0% 28.0% 18.6% 27.4% 27.4% 27.5% 18.0% 18.9% 18.9% 28.2% 18.6% 30% 20% % of Operating Revenue 10% 10% 0% FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017* FY 2018* FY 2019* 0% % of Operating Expenses % of Operating Revenue * Budgeted FY 2017, FY 2018 & FY 2019

30 About Human Capital Management Institute Vision: Human Capital data as key to business decisions as financial data is today We Bring Financial Discipline, Standards and Rigor to the HR Function Background: Full service analytics/planning Created Human Capital Financial Statements Over 50 years of experience What We Do: Quantify, predict, optimize the workforce Link HR data to business impact $$$ Software tools, training and consulting Workforce Planning Predictive Analytics Training Human Capital Reporting Workforce Productivity Have You Found Your Analytics Pot of Gold? 30

31 Examples: Talent Analytics ROI 15% Productivity Gain, Reduced Loss Rate (Fortune 50 Transportation Company) 5% Reduction in Cost of Workforce (TCOW) (Fortune 30 Technology Company) Sales Training Predictive ROI (Large Retail Co.) Predictive Hiring Metrics for Sales Stars ($1.0 Billion Privately Held Bank) Employee Engagement Revenue Impact ($1.0 Billion Public Airline) 40% Voluntary Turnover Reduction (Public Financial Services Co.) ROI of Internal vs. External Hires (Public Bank) $1.1 Billion Annual $650 Million Annual $250 Million Annual $264 Million Annual $96 Million Annual $12 Million Annual $6 Million Annual Human Capital Management Institute

32 What to Include in a Business Case 1. Compelling Questions (or problem statement) Key questions linking to business imperative (i.e. growth) 2. Objective Facts and Data (ideally 2-3 year trend) Current state assessment, quantitative analysis, key metrics 3. Powerful Visuals Charts Charts with insights, that tell a story and, drive action 4. ROI Cost Benefit i.e. Business Impact The Cost savings range is $1.0 to $3.0 million 5. Qualitative Story Telling (opportunity or future vision) Two of our Top 3 salespeople came from other industries 6. Risk Analysis What if we do nothing Engagement drops, turnover rate climbs growth slows Human Capital Management Institute

33 Business Case Example: Defining Career Paths Employees are Assets to be Developed Accounting Job Family Career Salary Progression CAGR = 10.0% $130,000 $100,000 $90,000 Insights: Ten-year cost savings is the area between the cost of External Hires compared to the career path of an Internal Staff Accountant. Dir., Accounting CAGR = 6.6% $94,000 Dir., Accounting Mgr., Accounting Base Salary $80,000 $70,000 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.) Mgr., Accounting $79,100 $67,000 Sr. Accountant Sr. Accountant $60,000 $59,800 Accountant Average Annual Annual Rate Rate Accountant $50,000 $40,000 50th %ile $46,400 $49, CAGR: Compound Annual Growth Rate Staff Accountant Years of Experience Internal Market Rates Salary Ranges (50%-75%ile) External Market Rate Note: Make sure to select the period which will provide the most accurate forecast. In some cases, a run rate based on the current or last year is optimal, but in others an average of several years or a custom time period is best to use. Human Capital Management Institute Staff Accountant

34 Human Capital Capitute Management Institute CASE STUDIES

35 JetBlue and Net Promoter Score (NPS) Case Studies How likely are you to recommend JetBlue as a good place to work? The Net Promoter Score is a numerical representation of Crewmember responses Calculate the percentage of detractors and promoters Subtract detractors from promoters Calculate score

36 JetBlue: Identifying Workforce KPIs Leveraging Workforce Metrics to Drive Business Results Case Studies Issue: Does high Employee Engagement increase Profitability? Process: Link workforce metrics to key business drivers Employee Engagement, Customer Satisfaction, Revenue and Profit Build metrics and scorecards to measure results CASM Cost per Available Seat Mile: JetBlue = $.0899 (industry lowest) Competitors = $.0976 Outcome: Identified Net Promoters Created Net Promoter Score, or NPS to measure highly engaged employees Flights with higher average NPS correlate to increased customer satisfaction and revenue JetBlue Performance Metrics Load Factor BELF Load Factor: JetBlue = 79.7% Competitors = 73.1% Break even Load Factor: JetBlue = $.0888 (industry lowest) Employee Net Promoters = Customer Net Promoters = Loyalty = Revenue Passenger RPM Revenue per Seat Mile: JetBlue = $.1128 Competitors = $.1281 JetBlue tops J.D. Power s annual customer service survey 10 years in a row 1.1 million following JetBlue Airlines on Twitter TCOW Total Cost of Workforce: JetBlue = 23.6% of revenue Competitors = 34% of revenue Human Capital Management Institute

37 Linking It Together: JetBlue NPS and Engagement Case Studies If NPS goes up 5% what does the business get? = If crew-leader drives NPS, does it then drive the rest? Net Promoter Score Engmnt Discret Effort Adverse Events Customer NPS Revenue Overall Management Pilots Inflight CMs Technicians Customer Support CMs Airports CMs 5.0% 6.0%???? 5.0% 5.0% 10.0% -5.0% 5.0% 1.0% 5.0% 8.0% 2.0% 0.0% 3.0% 0.5% Support Center CMs Systems Operations CMs NOTE: CMs = Crew Members aka Employees Human Capital Management Institute

38 Employee-Customer-Profit Chain Case Studies Hypotheses 1. Total Cost of Workforce Customer Facing Staff 2. Cost per Hire 3. Cost of Turnover Employee Net Promoters Quantify and Predict Customer Satisfaction 4. Employee (NPS) Link to Customer Satisfaction 5. Customer Satisfaction Impact on Profits Loyalty, Revenue, and Profits Actionable Intelligence Increasing the number of Net Promoters by 10% = $26 Million - $96 Million Workforce ROI Calculator Workforce ROI Dashboard Human Capital Management Institute

39 Case Study: National Health Institute Financial Impact + Statistical Significance Case Studies The impact of training on turnover rate and managed promotion rate is statistically significant based on the p-value. It shows that the probability of the observed effect happened by chance is less than 0.1%. 7% 6% 5% 4% 3% 2% 1% 0% Turnover Rate 6.3% 18% 6.0% 5.7% 16% 4.7% 5.0% 4.7% 14% 12% 3.8% 3.1% 3.2% 10% 2.8% 8% 2.3% 6% 1.5% 4% 2% 0% Alumni Non-Alumni Managed Promotion Rate 15.5% 13.8% 10.3% 9.5% 10.0% 10.6% 5.8% 5.6% 3.5% 5.2% 5.0% 4.1% Alumni Supervisors Non-Alumni Supervisors Method Variable Chi Square Turnover Rate.037**.093*.085*.008***.066*.093* T-Test Managed Promotion Rate.0015***.025**.0035***.0095***.009*** <.001*** Human Capital Management Institute

40 Case Study: Health Institute Projected ROI of Internal Hires Projected ROI of doubling the number of positions filled with internal hires over the next five years is approximately $5.7 Million, between $.7 and $1.3 Million per year. Between 2009 and 2014, roughly 10% of positions were filled with internal hires, costing $3,700 less per position than their external hire counterparts. Case Studies Salary Cost Savings (Millions) $1.4 $1.2 $1.0 $0.8 $0.6 $0.4 $0.7 $0.9 Five-Year Forecast $1.1 $1.2 $1.3 $0.2 $0.0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 - Excludes hiring cost savings. Includes external and internal hires in Grades 5 and above. Grade 0 had no internal hires between 2009 and Projected growth for internal hires over the next five years forecasts an increase from 10% to 20% of hiring activity. - Includes existing savings from internal hiring activity. In 2014, salary cost savings realized was approximately $530,00. - Analysis compares positions within the same grade levels. Criteria for classifying internal hires is both a position change and grade increase. - Departments with Alumni supervisors have twice the managed promotion rates as departments without Alumni supervisors. Human Capital Management Institute

41 Case Study: Health Institute Training Program ROI Case Studies Based on historical 15% growth in training participation, projected ROI is between $3.2 and $4.2 Million annually. $5 $4 $3 $3.2 $3.4 $3.6 $2.6 $2.7 $2.8 $3.9 $3.0 $4.2 $3.1 $2 $1 $1.1 $1.3 $1.4 $1.5 $1.7 $0 -$1 -$0.51 -$0.54 -$0.56 -$0.59 -$ Academy Training Costs Hard Cost Savings Soft Cost Savings Academy ROI - Projected cost based on estimated Title 42 and Title 5 replacement costs. Assumes a 75% replacement rate. Excludes retirements and IC Transfers. - Title 5 costs not inclusive compensation review costs not applicable, advertising costs and HR package costs incomplete. - Projected turnover costs assume a 3% annual increase in overall workforce costs, and a compound annual growth rate (CAGR) in alumni of 15.9%. - Managed turnover savings includes turnover savings for departments with alumni supervisors, but excludes turnover savings already captured for Alumni. NCI Workforce Cost Savings: - Includes replacement hire salary cost differential, replacement hire recruiting time (hours), vacation payout and severance costs (estimated) and benefits continuation (estimated), less open position salary savings. NIH Recruiting Cost Savings: - Includes transaction processing and general recruiting costs (estimated). Human Capital Management Institute

42 The HR Analytics & Planning Journey Roadblocks and Pitfalls on the Path Data Gaps, Inconsistent Data Executive Support Standards/Governance Job Framework/Mapping Resources and Analytic Skills Data Integration System/Tool Limitations ROI and Success Stories Avoid Analytics Journey Pitfalls World Class Analytics Data Driven Decisions! Data Errors Lost HR Credibility Analytics journey steps Start Pitfalls along the way Journey path and goal Human Capital Management Institute

43 Your Journey to Oz Human Capital Management Institute

44 Appendix: Workforce Productivity

45 PRODUCTIVITY GAINS AMONG PUBLICLY TRADED VIRGIN PULSE CLIENTS COMPANIES THAT ENROLLED 30% OR MORE EMPLOYEES SAW SIGNIFICANTLY HIGHER PRODUCTIVITY GAINS Average Client Productivity Gain Before Launch 0% 0.2% 0.1% Launch Year Average Client Productivity Gain After Launch 6.9% 4.5% 2.0% Annual Impact per FTE* $8,300 $5,800 $3,500 Market 1 Average Productivity Gain = 0.6%/year, $880/FTE. Year -2 Year -1 Launch Year 1 Year 2 Enrollment Above 30% Enrollment Below 30% Average n=14 companies n=15 companies n=29 companies *Analysis compares productivity change rate 2 years before and 2 years after launch. Results adjusted to normalize out industry-average results for each company during their respective launch timing. Limited to 29 companies with data 2 years before and 2 years after launch. 1. Market average for , n = 1,908 companies in EU/NA. Source: Human Capital Management Institute

46 Case Study: HCF$ at Bio-Tech Advanced Productivity Benchmarks By advanced productivity metrics, Bio-Tech ranked 3 rd in Human Capital ROI Ratio and Return on Human Capital Investment ( ) Workforce productivity was improving, however some competitors were gaining ground Workforce Productivity 2012 Workforce Productivity 2013 Human Capital ROI % 50% 100% 150% Return on HC Investment Competitors BioTech 8.0% 4.0% 0.0% -4.0% -8.0% -12.0% -16.0% -20.0% Human Capital Management Institute Human Capital ROI CAGR 4.0% 3.5% 2.1% -5.7% -5.7% -18.3% Human Capital ROI 20.0% 0.0% -20.0% -40.0% -60.0% % 50% 100% 150% Return on HC Investment Competitors BioTech Return on HC Investment CAGR 11.4% 6.7% 6.1% -12.4% -15.7% Human Capital ROI Ratio= ((Revenue - (Total Expenses - Total Cost of Workforce)) / Total Cost of Workforce) Return on Human Capital Investment= (Total Operating Profit / Total Cost of Workforce) %

47 Introduction to Productivity Human Capital Management Institute 47

48 Example: Forecast Total Cost of Workforce Status quo Millions $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $- TCOW Calculated vs Strategic Plan $627M BELOW Calculated Data $X,XXX,XXX below calculated data TCOW % Change 25% 22.0% 20% 15% 10% [VALUE] 5% 0% Calculated Strategic Plan Calculated Strategic Plan Variables Status Quo Controlled Growth Workforce Headcount 12% Average Employee Salary 8% Bonus & Incentive Pay (Average) 5% Total HR Costs 11% Human Capital Management Institute 48

49 Example: Forecast Total Cost of Workforce Controlled Growth TCOW Calculated vs Strategic Plan GAP closed Strategic Plan Bottoms up fit TCOW % Change =Labor Cost growing at Plan 10% Rate Millions $1,400 $1,200 $1,000 $800 $600 $400 12% 10% 8% 6% 4% [VALUE] 10.0% $200 2% $ % Calculated Strategic Plan Strategic Plan Calculated Variables Status Quo Controlled Growth Workforce Headcount 12% 5% Average Employee Salary 8% 4% Bonus & Incentive Pay (Average) 5% 2% Total HR Costs 11% 5% Changes Human Capital Management Institute 49