The New HR Analytics

Jac FITZ-ENZ

• Publisher: AMACOM
• Year: 2010
• ISBN:
  9780814416440
• Topic: Negocios y empresa
• Subtopic: Gestión de recursos humanos

Using Fitz-enz's proprietary analytic model, you will be equipped to measure and evaluate past and current returns and apply the information to make predictions about the future value of human capital investments.

In his landmark book, The ROI of Human Capital, Jac Fitz-enz presented a system of powerful metrics for quantifying the contributions of individual employees to a company's bottom line. Now, in The New HR Analytics, he reveals how human resources professionals can apply this expense-based knowledge to make the most strategic staffing decisions for their companies.

You'll learn how to:

• evaluate and prioritize the skills needed to sustain performance;
• build an agile workforce through flexible Capability Planning;
• determine how the organization can stimulate and reward behaviors that matter;
• apply a proven succession planning strategy that leverages employee engagement and drives top-line revenue growth;
• and recognize risks and formulate responses that avoid surprises.

Brimming with real-world examples and input from thirty top HR practitioners and thought leaders as well as exclusive analytical tools, The New HR Analytics ushers in a new era in human resources and human capital management.

PART 1

Introduction to Predictive Analytics

CHAPTER ONE

Disruptive Technology: The Power to Predict

What do Amazon, Sony, Swatch, the San Francisco 49ers, and McDonald’s all have in common? The answer is that they are examples of what Harvard professor Clay Christensen has described as “disruptive technologies.” That is, these companies were dramatically innovative ideas that transformed their industries. Amazon rewrote book selling, Sony revolutionized the music business, Swatch upset the watch industry forever, the 49ers brought an innovative strategy that changed professional football, and McDonald’s added a totally new dimension to food service

Despite recent labor-market transformations brought on by global competitiveness, the liquidity crisis, management scandals, and federal government intervention, very little has changed within the “people game.” There has been no seminal shift in the way we manage people during a time of fundamental renovations in organizational structures, cultures, and workforce compositions. One year we are worried about where we will find sufficient “talent” and the next we are worried about how we get rid of older workers to free up progression space for younger people. But beyond that, we still treat employees as expenses. Management’s attitude about human behavior oscillates between totally predictable to absolutely indecipherable. Meanwhile, the latest advances in analytic tools are ignored. HR managers claim to be too busy to change the way they operate, thereby leaving themselves continually behind the curve, adding to operating expenses and claiming that their value is immeasurable.

For this and similar transgressions, the human resources department is distinct from and largely disconnected from other corporate functions. Although computer technology has made the job internally more efficient, HR has not delivered strategic value because it does not have a strategic management model. It continues to buy packaged products and apply them as patches to an obsolescent form. This is tantamount to repainting a clunker and expecting its miles per gallon performance to improve. Products—that is, software, survey instruments, training packages, and so forth—are tools, not solutions. If the organization’s fundamentals are weak, new tools won’t change them. In fact, they might even solidify the weakness. Today and tomorrow, organizations desperately need a disruptive human capital management technology based on analytics.

What Is Analytics?

To answer the question of what analytics actually is, I go to the meeting of art and science. The arts teach us how to look at the world. The sciences teach us how to do something. When you say analytics, people immediately think of statistics. That is incorrect. Analytics is a mental framework, a logical progression first and a set of statistical tools second (see Figure 1.1).

Various dictionaries define analytics as the science of analysis, from the Greek analutika, including the principles of mathematical analysis. That is, it is the process of dismantling or separating into constituents to study. So, simply stated, analysis is about taking something apart to understand it better. In answering complex physical or behavioral science questions, statistical methods are often utilized. For solving organizational problems, we need a logical structure to parse out the many variables that can affect human performance. Once we have identified those variables, we can employ statistics as necessary.

Figure 1.1. The nature of analytics.

Introducing HCM:21^®

For the first time, there is an opportunity to make a quantum leap in human capital management, a leap from obsolescence to innovation, through the application of analytics. It is our plan for predictive management, or HCM:21 (human capital management for the twenty-first century). This breakthrough program was developed over a period of eighteen months as part of our Predictive Initiative, a consortium of major organizations and thought leaders who were committed to transforming people management into a strategic function.¹

HCM, or human capital management, is the framework of logic that is used to gather, organize, and interpret data, and subsequently also knowledge, for the purpose of assessing the probability of upcoming events. HCM takes the gambling out of decision making. It helps you overcome a reliance on past data and obsolete experience, and replace it with insights regarding the future and the tools for influencing it. This is called “Managing tomorrow, today.”

The Value of Insight

Insight into the future is the greatest asset anyone can have. Consider how wealthy you would be if you had bought petroleum futures in 2006, or had accumulated a large amount of cash in August 2008, a month before the liquidity crisis slammed the global markets.

If you had made those moves at the right time, would you have been lucky or wise? Luck comes in two forms: dumb luck and true luck. Dumb luck is when you meant to bet on the number 6 horse but bet on the number 5 by mistake and won by accident. True luck seems to be a function of preparation, and there is a story from the golfing world that makes the point.

One day, Gary Player—one of only four professional golfers to win all four major tournaments, the U.S. and British Opens, the PGA, and the Masters—was practicing sand shots. A man watched as Player knocked most of the shots from the bunker into the cup. He said to Player, “Son, that is the luckiest thing I’ve ever seen.” Player responded, “Sir, I find the more I practice, the luckier I get.”

Most organizations do not rely on dumb luck to save them from market fluctuations. They prepare by buying commodity futures to protect themselves from shortages or cost increases; they buy advertising space a year at a time to obtain volume discounts. But what do they do in the human capital arena to offset future surprises? In most cases, the answer is nothing. Ask most staffing managers what their most cost-effective staffing strategy will be in the coming year or their most fruitful applicant sources. Or, ask the training manager what the most effective method is for bringing the salespeople up to speed on the new product line. They could not give you an answer based on anything other than anecdotal, obsolete experience. The chief administrative officer of a major bank once told me that he spends over $250 million annually on training, and yet had no idea if it was effective. No wonder he had to take TARP money. The human resources function applies a helter-skelter approach to service delivery. It does not have a management model or operating system with predictive capability—that is, until now.

The Plan

The remainder of this book focuses on a predictive management model that is driven by human capital analytics. Specifically, the HCM:21 system consists of four phases:

1.Scanning. All the external market forces and internal organizational factors are listed in terms of how they might affect the organization’s human, structural, and relational capital. Additionally, the interdependencies and interactions across these three forms of capital are recognized and accounted for. This is the critical, often ignored, point.

2.Planning. Workforce planning is reconstituted as capability development. The industrial-era, gap-analysis, structure-focused model is replaced with an agile system focused on building sustainable human capability rather than filling positions; in fact, many of those older positions will be restructured or eliminated.

3.Producing. Human resources services are studied as processes with inputs, throughputs, and outputs. Statistical analysis is applied to uncover the most cost-effective combination of inputs and throughputs to drive desired outputs.

4.Predicting. A three-point measurement system is designed to include strategic, operational, and leading indicators. The causal and correlational aspects of the three points are used to tell a comprehensive story.

A number of cases and models from practitioners and thought leaders supplement each phase of the plan and show how basic metrics and predictive analytics are being applied across many different settings in the Americas, Europe, and Asia.

In summary, HCM:21 is a model and a methodology for managing human capital, talent, or simply people. It is distinct and disruptive in that “people management” has always been a loosely connected, out-ofsynch batch of processes for hiring, paying, training, and sustaining talent. This is why people claim to “hate” HR. As a result, the function is being dismantled through outsourcing and parceling out to finance and operations. The time clearly is now for HR professionals to face these realities and adopt a future-focused, integrated management model. The rest of this book shows you how to do this, beginning with Chapter Two, on the promise of analytics and predictive management.

Note

1.The Predictive Initiative sponsors and contributors are as follows: organizations—American Management Association, Accenture, Blue Shield-CA, Ceridian, Fidelity, Future of Work, KnowledgeAdvisors, Lehman Brothers, Monster, National Reconnaissance Organization, Oracle, Scarlett Surveys, SuccessFactors, and Target stores; individuals—Karen Beaman, Nick Bontis, Robert Coon, Sal Faletta, Douglas Hubbard, Paul Jamison, Denise Sinuk.

CHAPTER TWO

Toward Analytics and Prediction

“The world is full of people whose notion of a satisfactory future is, in fact, a return to the idealized past.”

—ROBERTSON DAVIES, A Voice from the Attic, 1960

I introduced human resources metrics in 1978, with a series of public workshops based on my experience running a human resources department for a bank and later a computer company. Since then metrics have experienced a long, slow, and somewhat unsteady evolution. With every economic downturn we seem to retreat to the old familiar, if ineffective but comfortable, ways. As the market reopens, so do our minds and we try once again to make progress. In my view, human capital metrics passed through several evolutionary steps and continues to evolve. These are shown in Figure 2.1.

The Language of Metrics and Analytics

If HR professionals truly want to be part of the business, metrics—and especially predicti...