Chapter 1
The Need for Measurement in a Changing Environment
Have you ever heard of a company requiring a business case for investing in marketing? Or having a sales force? For that matter, what about training? Although specific budgets require justification, you'd be hard pressed to find a business leader who doesn't believe in developing the company's human capital. We dream of a day that the same will be said of measuring investments in human capital. From our perspective, as well as that of a growing cohort of HR and business leaders, evaluating these investments and using that intelligence to improve them is simply common sense. This day is coming, but for now such measurement is still seen as a competitive advantageāor worse, something nice to have but just not worth the trouble.
As this is my third book, written after practicing human capital analytics for over 10 years, I've written extensively on the justifications for measurement. For those of you who haven't yet seen the light, I present the arguments here again.
Analytics Give Companies a Competitive Edge
Recent studies by Deloitte and Bain have proven that the more advanced an organization's analytics capabilities, the greater the margins by which they outperformed their competitors. We'll go into more detail on these studies in Chapter 2, but for now suffice it to say that HR analytics can directly impact a company's bottom line. The Bain study in particular looks more broadly at the impact of analytics applied to nearly every aspect of business performance, which brings us to the next point.
Everybody's Doing It
The old adage from your mother about everybody else jumping off a bridge simply doesn't apply here. The other departments in your organization leverage their data and advances in analytics to make more intelligent, strategic decisions. Every time you scan your customer loyalty card at the supermarket, you're exchanging valuable information about your shopping habits in exchange for that buy-one-get-one deal on Cheez-Its. Marketers analyze patterns in the immense amount of data they collect to figure out how to get you to spend a little more on your next trip. This is predictive analytics.
Think about supply chain management. An automotive manufacturer bleeds cash for every minute its assembly line has to shut down because it has run out of a car part. Using analytics, it manages inventory to assure this doesn't happen, while simultaneously avoiding an overstock on a costly component. This, too, is predictive analytics.
Buddy Benge, HR analytics leader at Monsanto, says, āImagine having a piece of traditional capital in a manufacturing facility and not realizing its full potential; this is what we do with our talent.ā1 I could list countless examples of analytics at work throughout your organization. The point is, all of these functions have figured out how to harness the power of analytics to help them work smarter. Why not apply that same methods and science to the organization's most valuable assetāits people?
Transcending Borders
You don't need us to tell you that the leading organizations in almost any industry are experts at competing in the global marketplace. This includes competing for talent. The rise of technology has enabled companies to go anywhere in the world to find top people in their fields, spurring the rise of virtual teams, a 24-hour workday, and flexible working arrangements. Managing people across borders, cultures, time zones, and environments has required new thinking about the very pillars of traditional team management. Predictive analytics allows you to look at how people are performing and calibrate investments to maximize that performance. Further, the calibrations can be tailored to the wide variety of types of people that make up a global organization, allowing you to turn a one-size-doesn't-fit-all investment into a targeted experience capable of moving the performance needle for many different types of people.
Slim Down, Do More
Since the 2008 recession, HR leaders are all too familiar with directives to do more with less. As the economy has slowly improved, many organizations have more resources available to develop their people, but the need to eliminate and avoid waste is still top of mind. Analytics shows you where your investments are working and where they aren't. It's critical intelligence for a budget of any size, in times of boom and bust.
Our colleague, A.D. Detrick, learning measurement consultant at Xerox, is one of many forward thinkers using employee data to work smarter:
By having granular data on both user demographics and user behavior, we can closely follow where institutional knowledge resides within an organization. We can identify clusters of skills and gaps in knowledge. We can foresee threats posed by generational shifts or technology changes and work to remedy them before they actually have an impact. And we can expand our reach instantly across the globe to enact that change.2
Everybody Wins
By applying analytics to investments in people development, HR leaders know that they are deploying programs that work. Employees appreciate programs that give them what they need and want on the job. Brad Pearce, VP analytics manager at Wells Fargo, says, āThe competition for talent is strong and will become even stronger in the coming years.ā3 When people are given the skills, tools, and knowledge they need to perform at their best, it's a win for everybody involved. Companies are rewarded because they are maximizing their investments in human capital. Employees are happy because they are successful on the job. And customers are satisfied because companies that run like a well-oiled machine can fulfill their needs and exceed their expectations. The company is growing because its satisfied customers drive an increase in revenue. Employee engagement increases because everybody likes to be a part of a successful enterprise. And so the cycle continues, ad infinitum.
Changing Workforce
Globalization isn't the only force driving change in the makeup of today's workforce. Our last book summarized three main generational cohorts in the workforce, and since the next generation has begun to infiltrate the entry level. A 2013 EY survey of cross-company professionals outside of the EY organization found that 20 percent of managers reported managing a mostly even mix of employees from three different generations (boomers, generation X, and millennials). About two-thirds said their organization has made efforts toward alleviating the challenges in managing a generational mix:
- Work style accommodations (37%)
- Team-building exercises (36%)
- Generational differences training (32%)
- Cross-generational networking (26%)
- Tailored communications (25%)4
These types of accommodations tend to require significant resources and efforts to be successful, and we ask the same question about any initiative of this type: How do you know it is working?
Our first book, Human Capital Analytics, gives you step-by-step guidance for planning, evaluating, and improving investments in people. In this chapter, we'll dive into the changing workforce, setting the foundation for this book's discussion of analytical tactics, big data, and the future of human capital analytics.
Who's Working Today?
While each generation is made up of individuals with unique belief systems and lifestyles, generations are useful in that they group people together based on their collective experiences during the phases of their lives. Interestingly, the US Census Bureau officially defines only one generationāthe baby boomers, who are said to have been born within a historically observable timeframe (post-World War II). The subsequent generations (generation X, millennials, and...
