ILRHR555: HR Analytics for Business Decisions

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1 ILRHR555: HR Analytics for Business Decisions Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 1

2 This course includes Two self-check quizzes Two discussions Five tools to download and use on the job One scored project in multiple parts Completing all of the coursework should take about five to seven hours. What you'll learn Explain how and why an organization uses metrics and analytics Assess measurement requirements tied to the organization's needs Describe the difference between the strategic and tactical mindsets of people resources Assess the maturity of a measurement system Describe next steps to improve a measurement system Course Description HR leaders can drive business performance by defining, designing, developing, and delivering initiatives that lead to competitive advantage through the effective use of people. To succeed, however, they need a solid understanding of the organization's business drivers and strategic initiatives. This understanding is the foundation of effective HR leadership. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 2

3 This course focuses on new approaches in "people analytics" for HR professionals, including designing and using an HR metrics model. You explore differences between tactical and strategic business methods, looking at best practices to mature a measurement system. You examine frameworks for categorizing and evaluating metrics, and learn to build an analytical model appropriate to your organizational goals and priorities. With these skills, you can use strategic analytics both to measure HR's impact and to communicate that impact to other leaders in the organization. John Hausknecht Associate Professor, School of Industrial and Labor Relations, Cornell University John Hausknecht is an associate professor of human resource studies at Cornell University. He earned his Ph.D. in 2003 from Penn State University with a major in industrial/organizational psychology and minor in management. He received the 2004 S. Rains Wallace Award for the best dissertation in the field of industrial/organizational psychology. Professor Hausknecht's research primarily falls within the domain of staffing and has appeared in the Academy of Management Journal, Journal of Applied Psychology, and Personnel Psychology. Start Your Course Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 3

4 Module Introduction: Align HR Analytics with Organizational Needs A key skill for HR leaders is the ability to align HR analytics to support larger organizational needs. The traditional, tactical measures used by HR practitioners are changing, so HR leaders must be able to show how people contribute to strategic goals. In this module, you cover the first part of strategic HR analytics: assessing and defining measurement needs. How do you measure the performance of your HR function? If you're like many HR professionals, you measure and communicate performance using a set of metrics that is significantly different from that used by your colleagues in other areas of the organization. So although you may be meeting your challenges and goals, colleagues outside of HR may find it difficult to see how your accomplishments are important or relevant to them. Aligning the "people metrics" with the organization's strategies clarifies the value HR can provide at a strategic level. In this module, you look at how and why organizations use metrics, and consider a shift that is occurring in the types of measures now being adopted. Consider the relationship or lack of relationship between key business metrics and common HR metrics. Once you have identified the measures needed, define them with enough information so that they can be used consistently across the organization. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 4

5 Watch: Define HR Analytics Analytics are changing the way HR professionals quantify the value that people-our biggest asset -have on an organization's ability to compete. In practice, this includes a variety of metrics that cover key HR areas such as performance management, talent management, compensation, diversity, and learning and development. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 5

6 Watch: Recognize Changes in HR Measurement If you've worked in HR for a while, you may wonder if how you measure different dimensions of the HR function has really evolved. Like other functions, HR is experiencing significant changes due to technological advances and the increased availability of data. These changes have implications for how HR functions -processes are being simplified, some skills are no longer needed and new skills are now required, the turnaround time for acquiring data to make decisions is shorter, and more complex analysis is both possible and expected. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 6

7 Watch: Apply the LAMP Model Cascio and Boudreau provide a framework to conceptualize HR measurement: the LAMP model. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 7

9 Tool: Assess Measurement Needs Download the Tool Measurement Planning Worksheet The first step in establishing a measurement system, is to assess the needs of the organization. It is most productive to assess measurement needs with stakeholders who are familiar with the organization's problem or opportunity. To form a stakeholder team, consider who has the key skills, influence, resources, or other vested-interest in the measurement system. The Measurement Planning Worksheet can be helpful when determining measurement needs. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 9

10 Tool: Map Measurement Needs with Stakeholders Download the Tool Measurement Mapping Guide An organization needs to establish measures in two situations: if they need a measurement system to address broad organizational needs, or if there is a specific problem or opportunity that requires custom data and analysis. Broad Measurement Example Custom Measurement Example Both situations essentially present a question that needs to be answered using data. When assessing a measurement, it is helpful to use a measurement mapping guide, available in the link at the top of the page. For either type, writing a quantified problem or opportunity statement helps to prioritize use of resources and evaluate if interventions have been successful. A problem statement might include: Current level of performance Desired level of performance Cost or value of closing the gap For example: Repeat repairs are at 8%, compared to the best regional rate of 3%. Closing this gap through additional training would save $250,000 annually and improve customer loyalty. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 10

11 Activity: People Metrics Poll Each organization uses different metrics based on their specific needs. Take a moment now to share the key "people" metrics your organization uses. Complete the review responses from your fellow students. People Metrics Poll. When you are done, click "see previous responses" to Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 11

12 Watch: Use Standard Metrics Now you have a better idea of the broad range of HR and "people" metrics that organizations are using. For more metrics and definitions, check out the glossary on the SHRM website. It is not a surprise that students in the course defined "headcount" differently. It's also very common for employees in the same organization to define company metrics differently. To effectively analyze and act upon the data, you need to ensure that people in your organization share the same standard definitions. Consider the key points in a process where employees interact with the data: data collection and analysis. The "data users" may be employees from HR or outside of HR. As you saw from measurement mapping, data are integrated across an enterprise. If HR's headcount data are unreliable, for example, then a related metric downstream will also be impaired. Using standard metrics helps the entire system. Take some time now to explore the different kinds of metrics an organization uses, both inside and outside of the company. Identify examples that make sense for your measurement map. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 12

13 Watch: Select the Metric Class With so many different metrics, how do you know which ones to use? Let's look now at different types of metrics and how they vary. For example, if you have 200 or more metrics available, how do you categorize them in a way that makes sense? What categorization strategies make it easier to choose and implement metrics effectively? Here are some approaches that you may find useful. See below for more examples of common HR metrics. Compensation Metrics Organization and Employee Development Metrics Staffing Metrics Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 13

14 Watch: Get Specific About HR Metrics When we say "define metrics," we mean more than the dictionary definition, more than just the words describing the metric. To operationalize the metric, you need enough information about it that qualified employees could collect, record, and report the data so that you could answer the required questions. Another good test of a "good definition" is this: if colleagues from another company gave you their definition of a metric -for example, "turnover" -could you confidently compare your turnover rates to theirs? Or do differences exist that would prevent a valid comparison? Watch the video to learn more about the attributes you need to define for each metric. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 14

15 Watch: Use Data and Metrics Before collecting any data, consider how stakeholders will later use it. Think into the future, when the data is available - what form should the output data be in to make decision-making easy? Think of graphs, pictures, or tables you could use. Before someone collects the data and brings it back for analysis, it's good to verify how you want it to look. You might even review a rough sketch with the stakeholders to confirm that they are getting what they need. Checking early helps ensure that the resulting data are useful in answering the target questions. View the video to learn several common uses of data. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 15

16 Watch: Measurement Map Example Let's pull it all together now and see how these first steps look, from mapping the needs through defining the metrics. Listen to the video and review the Measurement Mapping Guide provided, this time paying attention to page 2 where the metrics are added. These should help you prepare for the next exercise. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 16

17 Watch: Ask the Expert: Joshua Pascoe on Human Resource Metrics Joshua Pascoe is HR Director of Data and Analytics for the Honeywell corporation. Pascoe previously held positions for Honeywell as Human Resources Director, HR Director over Global Manufacturing Facilities, and HR Director with HR Shared Services. Honeywell is a Fortune 100 company that invents and manufactures technologies to address tough challenges linked to global macrotrends such as safety, security, and energy. It is headquartered in Morristown, New Jersey, and employs 132,000 people worldwide. Question Please describe the most common HR metrics tracked by your organization? (E.g., turnover, compensation, diversity, other.)

18 Module Introduction: Work with Data Once you have identified and defined the metrics, it's time to start working with the data. In this module you will learn skills HR leaders require to work with data, including collecting and analyzing it. This module covers data collection. You look at characteristics of high-quality data and investigate where you might find it -either inside or outside the organization. This module covers analyzing data. Entire courses are devoted to this subject; in this course we stay fairly high-level, learning some common analysis techniques and some mistakes to avoid when interpreting data. The data collected are ultimately used to make a decision -to spend money, invest, make a change, etc. To make good decisions, you must accurately interpret the data. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 17

19 Watch: Distinguish Good-Quality Data To have confidence in your analysis and the decisions that will be based on it, good-quality data are critical. Good data have five characteristics that ensure a measurement system is effective. These characteristics also help you as a leader as you review analyses from colleagues and decide whether the data do, or do not, justify actions you are considering. View examples of good- and bad-quality data. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 18

20 Watch: Determine Data Sources The next step is to determine where to get the data you need. Before you run off to invest in a new system, assign new responsibilities to a colleague, or setup a spreadsheet to tally data--consider first that it may not be necessary to establish a new sources for data. What existing data sources are available that could be leveraged? Talk with stakeholders invested in the measurement to see what they are aware of. Assess the data quality the source provides and if it would adequately meet your requirements. Are the processes, systems and people capable or at least good enough to start? View the video to learn more about data sources and how to overcome barriers to obtaining good quality data. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 19

21 Activity: Interpreting Data Poll Test your analytic skills by interpreting the following data. To complete this activity: Review the graph located below titled Absenteeism Rate. Take the following Poll: Interpreting Data. Click submit to post your responses. Click the link to see previous responses. Review the interpretations by other students. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 20

22 Tool: The Purpose of Analysis Download the Tool Six Common Mistakes to Avoid When Interpreting Data Did everyone interpret the data the same way? Ideally, there is little variation in the interpretation of analysis. We find, however, that all too often people make some assumptions rather than let the data speak for itself. Refer to the Six Common Mistakes to Avoid When Interpreting Data, available in the link above. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 21

23 Watch: Revisit the Five Uses of Data Let's revisit the five uses of data provided earlier in the course. This time you will see the supporting graphs and hear the interpretation. Consider how you might apply these examples to an organization. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 22

24 Watch: Faulty Analysis Traps -Three Examples People make some common mistakes when interpreting data. View the videos to learn more. Example 1: Correlation vs. Cause Example 2: Interpreting Change Example 3: Explaining Differences Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 23

26 Watch: Ask the Expert: Joshua Pascoe on Integrating Data into HR Practices Joshua Pascoe is HR Director of Data and Analytics for the Honeywell corporation. Pascoe previously held positions for Honeywell as Human Resources Director, HR Director over Global Manufacturing Facilities, and HR Director with HR Shared Services. Honeywell is a Fortune 100 company that invents and manufactures technologies to address tough challenges linked to global macrotrends such as safety, security, and energy. It is headquartered in Morristown, New Jersey, and employs 132,000 people worldwide. Question What obstacles have you had to overcome in your journey toward becoming more data driven in HR?

27 Module Introduction: Strategic Analytics This module will take a strategic view of HR analytics. You will take the work done in collection and analysis and think about how you might report and communicate those findings across the organization so that change follows. You will also look at how to position HR analytics in a more strategic way in the organization. This module covers reporting findings, including some best practices, tips, and methods for communicating the results of analytics work. It is important to collect the data, analyze it, and report it, but you also need to get the attention of those who can drive change. Call these skills the "table stakes" of the job. One step you can take to capture and keep the attention of your senior leadership team is to think about people analytics strategically. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 25

28 Watch: Identify Methods of Reporting There are several options for communicating findings. Completing an Analytics Communication Plan can be useful as you determine the methods most effective for the audience and situation. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 26

30 Watch: Presenting Analytics You can use several models to structure content for a presentation: telling, selling, etc. But if you put yourself in the position of the listening audience, there's really one best approach. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 28

31 Watch: Evidence-Based Management You've seen how seemingly single metrics actually relate to other metrics in a chain. Thinking broadly across a system is important as you develop a data-driven mindset for an organization. Evidence-based management is one approach that helps you look at work as a system. In doing this, you may consider more than just one perspective. In the video we describe four components of an evidence-based approach. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 29

32 Watch: Think Strategically: Shift from Liability to Asset You can make tangible changes to be more strategic. Consider this example: if you were to secretly listen to a conversation of your executive leadership team, would you be more likely to hear comments such as, "HR will have to cut their budget more," or would you hear comments such as, "Who in the organization has the skill set to do...?" These comments indicate the mindset of leaders and suggest how they value people resources. This is where you can step up to help HR make a shift as a strategic partner. As a champion of the effective use of people resources, one of your responsibilities is to help shift the conversations from those that regard people as liabilities to those that value people as assets. Tactical metrics such as productivity, cost, and cycle time have a place in any business, but strategic use of people resources gives a different feel to the metrics used. What type of metrics does your organization use? People are a liability if... you hear questions such as... and use metrics such as... How effective is the department? How much does the function cost? How much has the department cut costs? What is the target for productivity savings? How much is healthcare cost increasing? How many diverse candidates are there? healthcare cost per FTE ratio of HR to employees cost of HR per employee training cost per employee cost per hire productivity (for example, contacts per employee, cycle time, volume, defects, etc.) People are an asset if... you hear questions such as... and use metrics such as... Do we have succession plans? Where are our best new hires coming from? Why are high performers leaving the organization? How are we rewarding our "best" employees? Are we retaining the top performers? time to fill key roles attrition rates revenue factor human capital ROI training ROI Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 30

33 Watch: Create a Vision for Strategic HR Measurement Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 31

34 Watch: Apply the DELTA Model There are a few models that may be helpful as you begin to think more strategically. View this video for one such example and to hear how one current, high performing organization, has applied this model to their work. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 32

35 Tool: Assess Measurement System Maturity Download the Tool Measurement Maturity Checklist Another useful model is one leveraged from the software development field: the capability maturity model. We can apply the same concept to any process, or in this case to a measurement system, as a way to identify where to focus improvements to the system. The Measurement Maturity Checklist can help you assess your measurement system. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 33

36 Watch: Predictions for Future Trends in People Analytics Take a few minutes to consider what the future may hold for the practice of collecting and using HR analytics. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 34

37 Watch: Ask the Expert: Joshua Pascoe on Predictive Analytics Joshua Pascoe is HR Director of Data and Analytics for the Honeywell corporation. Pascoe previously held positions for Honeywell as Human Resources Director, HR Director over Global Manufacturing Facilities, and HR Director with HR Shared Services. Honeywell is a Fortune 100 company that invents and manufactures technologies to address tough challenges linked to global macrotrends such as safety, security, and energy. It is headquartered in Morristown, New Jersey, and employs 132,000 people worldwide. Question Companies are trying to supplement (backward-looking) metrics with (future-oriented) predictive analytics. Can you provide an example of a situation where you benefited from taking this longer-term view?

38 Watch: Course Wrap-Up The following additional resources may be helpful as you work with data and analysis: Information Dashboard Design, Stephen Few, 2008, ISBN-10: , O'Reilly Media Inc. Balanced Scorecards & Operational Dashboards with Microsoft Excel, Ron Person, 2013, ISBN-10: , John Wiley & Sons Inc. The Visual Display of Quantitative Information, Edward R. Tufte, 2001, ISBN-10: , Graphics Press. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 35

Stay Connected John Hausknecht Associate Professor Cornell University, ILR School Center for Advanced Human Resource Studies (CAHRS) Email: jph42@cornell.

39 Stay Connected John Hausknecht Associate Professor Cornell University, ILR School Center for Advanced Human Resource Studies (CAHRS) Web: Continue the conversation with us: The HR Blog at ecornell. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 36