Calculating Return On Investment from HR Analytics. Presented by: Scott Mondore, Ph.D.

Transcription

1 Calculating Return On Investment from HR Analytics Presented by: Scott Mondore, Ph.D.

2 Submitting Questions Questions may be submitted at any time during the presentation. To submit a question: Click on the Chat icon on the top toolbar (as shown at the right). This will open the chat window on your system only. Type your question into the small dialog box and click the Send Button.

3 Work Group Speakers Shane Douthitt, PhD Managing Partner Scott Mondore, PhD Managing Partner Hannah Spell, PhD Director of Research and Analytics Matt Betts, PhD Consultant

4 OUR TECHNOLOGY OUR PROCESS YOUR BOTTOM-LINE SMD OVERVIEW: Driving Business Results Through Surveys & Assessments Analytics Based: 4 Steps: Common Outcomes: Links People to Critical Business Outcomes through: Employee Surveys 360 Feedback On-boarding & Exit Surveys Selection Assessment Competency Modeling Prioritization of Key Business Drivers Selection of Improvement Areas Customized Action Items Business-Focused Action Plans Operations Metrics Financial Metrics Customer Satisfaction Patient Satisfaction Turnover / Retention Whatever is most critical to your bottomline

5 Participating Organizations

6 Presentations & Presenter To stay up-to-date on all our research and presentations: Join our LinkedIn page: Follow us on Scott Mondore, Ph.D. Managing Partner

7 Learning Objectives Define the goals of analytics Real Bottom Line Indicators Calculating Return on Investment

8 THE GOALS OF ANALYTICS CASE STUDIES AFTER THE ROI.

9 A Critical Definition ROI does NOT stand for: Reporting Out Information ROI is not based on how many data visualizations and reports you create or how cool they look The same analytics that create the initial models can be used to show the actual ROI At some point, a CEO is going to ask: We ve spent all this money on the HR Analytics team/tools..what s the ROI?

10 The Biggest ROI Obstacle As with most HR interventions (leadership development, employee surveys, 360s).it isn t the calculation or the math or getting the data It s just taking the time to do the ROI study

11 Goal and Definition of HR Analytics Ultimate Goal Leverage people insights to inform changes to organizational policies/procedures to better align with BUSINESS OUTCOMES Simply Defined The analysis and application of a company s people data Often involves multiple sources of data (some of which come from nontraditional HR sources) Includes both primary as well as secondary data collection strategies Implications Can impact broad spectrum of HR (and organizational) activities

12 HR ANALYTICS Turnover analysis ROI and Cost calculation Reporting Data Management Compensation Training HR Operations Competency models Predictive talent profiles Succession Planning Performance Assessment Training effectiveness Survey development and analysis Targeted assessments New Hire, Onboarding, Exit Surveys Climate Assessment Change Readiness Assessment Target Candidates Selection Assessment Development and Analysis Role Play, Work Sample, Behavioral Interview, Knowledge Assessment Development and Weighting Hiring Algorithms Talent Management Employee Experience Recruiting & Selection

13 Why Analytics? People Investments Analytics Business Results HR Analytics connect employee data to business outcomes HR Analytics prioritize where and how much to invest HR Analytics calculate impact/roi from people investments

14 The Opportunity HR Analytics Discover the attitudes, competencies, skills, experiences, etc. that drive business results Make people investments based on drivers of results Take the lead in making HR processes business-focused Build a business case based on ROI Become viewed as a strategic partner that drives business results

15 Prioritization The key take away from any analytic project should be prioritization for follow-up Analysis paralysis is common make sure you are doing analytics with a purpose Don t get bogged down in information overload There will always be more analysis you can do, more ways to cut your data determine what is needed and useful

16 Analysis Goals Connect the dots between people and business results don t just assume Uncover actionable insights Determine a priority for follow-up Generate strategic plans direct resources to the priorities

17 THE GOALS OF ANALYTICS CASE STUDIES AFTER THE ROI.

18 CASE STUDY: Small Pharmaceutical Company Pharmaceutical company with 23% market share facing new competitors and recent stagnant growth Sales training is a significant investment, but not sure of ROI Need to conduct skills assessment and ROI study to create company-wide training strategy Included customer assessments (e.g., physicians) in the assessment process

19 CASE STUDY: Small Pharmaceutical Company Selling Skills Assessment Sample Items Competency Account Management Advanced-Level Selling Skills Evidence-Based Selling Skills Product & Disease State Expertise Managed Care Expertise Sample Item Responds with appropriate urgency to requests that require follow up Engages in discussions with healthcare providers that are relevant and interactive Easily discusses concerns about bias in XYZ s clinical studies Articulates all potential effects that XYZ can have on patients depending on therapy paradigm and patient profile Effectively finds solutions to managed care challenges and restrictions Relationship Building Comfortably builds rapport with healthcare provider s office staff Consultative Selling Skills Asks pertinent and insightful questions during interactions to identify customer needs

20 CASE STUDY: Small Pharmaceutical Company Overview of the Full Model Product & Disease- State Expertise Managed Care Expertise Consultative Selling Skills 0.54* 0.29* 0.10* Circled numbers indicate the development priority based on the magnitude of the relationship with script writing & market share. Evidence-Based Selling Skills * 0.19* XYZ Script Writing 0.60* Market Share *Higher path values indicate a stronger impact based on a 0.0 to 1.0 scale. Findings & Implications: Evidence-Based Selling Skills are a significant, causal driver of Script Writing and Market Share. Evidence-Based Selling Skills, in turn, are driven by Product & Disease State Expertise, Managed Care Expertise, and Consultative Selling Skills. Prioritizing initiatives that target the key drivers listed above will lead to improvements in sales performance among XYZ Sales Representatives.

21 CASE STUDY: Small Pharmaceutical Company Critical Item-Level Drivers Priority* Competency Item Evidence-Based Selling Skills Product & Disease State Expertise Managed Care Expertise Consultative Selling Skills Easily discusses concerns about bias in XYZ s clinical studies Accurately answers questions about clinical study methodology Possesses broad knowledge of the therapeutic market Articulates all potential effects that XYZ can have on patients depending on therapy paradigm and patient profile Understands the specifics of managed care plans Effectively finds solutions to managed care challenges and restrictions Understands physicians unique approaches to treating the disease state and provides solutions based on needs Asks pertinent and insightful questions during interactions to identify customer needs *Priorities determined based on the magnitude of the relationship with script writing & market share.

22 CASE STUDY: Small Pharmaceutical Company Competency-Level Change in Performance Competency 2017 Average** 2016 Average** Difference ( ) Significant Change Account Management No Advanced-Level Selling Skills No Consultative Selling Skills* Yes Product & Disease State Knowledge* Yes Evidence Based Selling Skills* Yes Managed Care Expertise* Yes Relationship Building No Sales Representative Overall No Rating Scale: 1 = Strongly Disagree; 2 = Disagree; 3 = Somewhat Disagree; 4 = Neither Agree nor Disagree; 5 = Somewhat Agree; 6 = Agree; 7 = Strongly Agree * Denotes 2016 key drivers of Script Writing and Market Share Performance. ** Averages calculated for XYZ Sales Representatives who participated in the assessment in 2016 and 2017 (N=84); therefore, 2017 averages reported here differ slightly from 2011 averages presented previously. All averages exclude self ratings.

23 CASE STUDY: Small Pharmaceutical Company Longitudinal Impact on Sales Performance By focusing on improving Sales Reps Evidence-Based Selling Skills, the training team played a key role in improving bottom line sales (i.e., Script Writing and Market Share) performance. Sales Outcome XYZ Script Writing Market Share Estimated Impact* 3.2% of Script Writing Improvement 3.8% of Market Share Improvement Actual Sales Improvement (2016 to 2017) Total Sales Impact +24% +.77% +1.0% +.04% Increasing Script Writing by.77% equates to approximately $15,400,000 in additional revenue. Product & Disease-State Expertise Change in Mean from 2016 to 2017 of +.14 Managed Care Expertise Change in Mean from 2016 to 2017 of +.22 Consultative Selling Skills Change in Mean from 2016 to 2017 of * 0.29* 0.10* Evidence-Based Selling Skills Change in Mean from 2016 to 2017 of * 0.19* XYZ Script Writing 299 Scripts 371 Scripts * Market Share 23% 24% *Impact based on 0.2 change in Evidence-Based Selling Skills Mean; Results based on the average Script Writing and Market Share performance of XYZ Sales Representatives who participated in the Sales Assessment and remained in the same sales territory between 2016 and 2017 (N=54).

24 Keys to ROI Calculations Instead of running a concurrent model, we are running a model that shows change in key drivers (Time 1 to Time 2) against change in business outcome (Time 1 to Time 2) The beta weights show the IMPACT (and amount of variance accounted for) of key driver change on the business outcome Use SEM for the analysis when possible

25 Large Retail Organization $93 million annual shrink problem Succeeded in reducing shrink by $14 million dollars in 1 year Create a business-focused HR Strategy: Empirically link employee data to meaningful business outcomes Identify invisible levers in employee attitudes, skills and behaviors that will drive outcomes Leverage existing data to create the strategic framework Prioritize employee-focused interventions to drive business outcomes Provide customized solutions to drive business outcomes

26 Data Utilized in the Study Shrink data at store level as an example (used multiple business outcomes in the full study) Employee opinion survey results Performance Mgmt/Competency ratings LMS training data HRIS data dishonesty terminations Store turnover data Customer satisfaction results

27 Key HR Processes HRIS Data Training Performance Management Business Outcomes Selection Employee Survey Business Outcomes People Turnover Service Customer satisfaction Quality Shrink Finance Cost reduction Career Development 360 Feedback Competency Builder Succession Planning

28 Dimensions of the Employee Survey Engagement Resources Available Job-Person Match Regard for Employees Policies Hours Worked Manager Effectiveness Work Environment Customer Focus Career Development Benefits Recognition & Perf. Mgmt. Scales range from 2-5 items. Alphas range from

29 Salaried Employee Competencies Employee Development Leadership Strategic Decision Making Cross-Organizational Collaboration & Teamwork Execute With Excellence Achieve Extraordinary Results Individual Ratings for the Store Manager and Assistant Mangers were used.

30 Drivers of Shrink Numbers indicate the intervention priority based on the magnitude of the relationship with shrink. 3 3 Job-Person Match Manager Effectiveness Legend Employee Survey 2 2 Ethics Course Participation Shrink Course Participation Shrink Training Participation Terminations Competency Ratings 2 1 Dishonesty Terminations Achieve Results

31 Further Prioritizing the Levers While all of the levers identified in the model significantly impact shrink, the levers can be prioritized even further based on the magnitude of their relationship with shrink Further Prioritization: 1. Achieving Extraordinary Results 2. Ethics Course 3. Shrink Course 4. Dishonesty Terminations 5. Job-Person Match

32 Intervention Framework People Process Technology

33 Planned Interventions & Cost Training Recognition & Reward Build optional shrink training courses for specific roles $300k Deploy a store-level incentive program for meeting quarterly shrink goals $5 million Selection Nothing planned OD & Leadership Development Insert shrink focused messaging in a larger customer experience initiative $250k

34 Recommended Actions to Reduce Shrink TRAINING: Code of Ethics Course Has a direct, significant impact on shrink Opportunity to re-train or conduct refresher courses with managers and employees Senior leaders regularly re-communicate the key messages from the Code of Ethics Sales and Shrink Course Has a direct, significant impact on shrink Currently not mandatory Opportunity to make the course mandatory and re-train managers and employees

35 Revised Interventions & Cost Training Enhance and update ethics and shrink course make both mandatory $50k Recognition & Reward Nothing planned Selection Improve selection process for front-line employees background checks & integrity testing $2 million OD & Leadership Development Develop shrink management routines Develop shrink partnering program $50k

36 Actions Taken and Actions Cut Initial budget was $5.55 million Revised budget was $2.1 million Cut incentive plan Cut major training build Cut shrink focused customer experience programs Data analysis Did not identify pay/benefits as a major driver of shrink Showed the existing training courses were having an impact Did not identify customer focus as a major driver of shrink Showed that dishonesty terminations were a significant driver of shrink Created an HR Strategy with a known impact on shrink

37 Calculating Impact & ROI Intervention Beta Potential Shrink Impact Level of Investment Manager Competency.14 $13.0 million Under-investing Ethics Course.10 $9.3 million Under-investing Shrink Course.09 $8.4 million Under-investing Dishonesty Terminations -.08 $7.4 million Under-investing Engagement.04 $3.7 million Appropriate Reward & Recognition ns ns Over-investing Customer Satisfaction ns ns Over-investing $93 million in annualized shrink Example average Manager Competency score of 3.92 Moving 0.30 could result in additional savings of $975,000 Approximate cost of $200,000 (build, employee time) We also took a 25% conservative impact factor Expected ROI: 487%

38 Doing the ROI Math Predictive Model Competency Beta: 0.14 Shrink Problem: $93 million Time 1-Time 2 Model: Actual Impact Beta 0.12 $30M improvement X.12 Impact Beta= $3,600,000

39 Complex Methods Simple Insights Make sure the methods are stringent and appropriate to accurately answer the question Keep the methodology behind the scenes Only share the key take-aways

40 THE GOALS OF ANALYTICS CASE STUDIES AFTER THE ROI.

41 After Your ROI Calculation COMMUNICATE! Share the ROI with key stakeholders and all leaders Keep the story simple (but bring the complex math with you) Include the story as part of the OD interventions/change management Keep Analyzing the Time 2 Data Over time, you will find new key drivers because change happens You will need to create a new strategy for Year 3 based on latest analysis It s a Hot Seat More ROI will be expected the next time around, but respect for the HR Analytics will be gained

42 The CEO s Question Remember the CEO s question: We ve spent all this money on the HR Analytics team/tools..what s the ROI? Answer: To date, we have spent $XYZ dollars on team, technology, tools and we have returned $ABC dollars in terms of : X% improvement in direct sales by our sales reps Y% reduction in turnover Z% improvement in actual Shrink dollars

43 Revisiting Practical Tips We have to change our mindset and approach: Move from reporting HR-focused metrics to identifying the drivers of business results Then show if focusing on drivers actually had the desired impact (ROI) Focus on Predictive Analytics that are linked to business outcomes More reports do not equal (ROI) The analytics are complicated but the story that emerges has to be simple Boil the story down to critical drivers and priorities Improve x (people measure) & y (people measure) and z (business outcome) will improve Then prove it with analytics (ROI) Start with one project and try it out before jumping all the way in. Ask yourself: Can I articulate why this really matters to the business? (ROI) Can I articulate the business value of moving this number? (ROI) Why would senior and front-line leaders care about this metric? (ROI)

44 Recommendations Have a measurement strategy it can t be to just measure more often Harvest the intelligence from the data you already have, before investing in more data Think about what you will do with the data to drive results Define the business problem first and then identify potential data sources that will likely provide intelligence Show the impact of the measurement process (ROI) and leaders will champion HR measurement not question it

45 Questions and Comments Please use the chat function to submit a question Recorded meeting and PPT deck will be posted to the HR Analytics Work Group website On HR Analytics Work Group LinkedIn page you can ask the group and speakers additional questions after the meeting

46 WHAT NEXT?

47 OUR TECHNOLOGY OUR PROCESS YOUR BOTTOM-LINE SMD OVERVIEW: Driving Business Results Surveys & Assessments Analytics Based: 4 Steps: Common Outcomes: Links People to Critical Business Outcomes through: Employee Surveys 360 Feedback On-boarding & Exit Surveys Selection Assessment Competency Modeling Prioritization of Key Business Drivers Selection of Improvement Areas Customized Action Items Business-Focused Action Plans Operations Metrics Financial Metrics Customer Satisfaction Patient Satisfaction Turnover / Retention Whatever is most critical to your bottom-line

48 What SMD Provides for Organizations Integrated Solutions: Turnover Reduction Employee Lifecycle Surveys Labor Relations Assessments Consulting: Analytics On-Call HR Analytics Check up Competency Builder Assessment and Hiring Surveys: Employee 360 Feedback New Hire and Onboarding Exit Pulse Physician What good is a prediction without a guarantee?

49 2017 Analytics Work Group Completed- Now What? Stay informed on SMD research White Papers: Webinars: Complimentary Analytics Consultation One of SMD s Analytics Consultants (PhD) will take a look at your organization s current process to collecting and/or analyzing employee data and provide feedback on improving collection and diagnosis More information, contact Heidi Kamm hkamm@smdhr.com Post-Analytics Work Group Survey We d enjoy your feedback on the Retention Work Group, please take survey here

50 Let s get in touch: Scott Mondore Managing Partner smondore@smdhr.com smdhr.com