The New HR Analytics

Overview

A crystal ball into the future value of your organization's human assets.
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. The New HR Analytics is another such quantum leap, revealing how to predict the value of future human capital investments.

Using Fitz-enz's proprietary analytic model, readers learn how to measure and evaluate past and current returns. By combining those results with focused business intelligence and applying the exclusive analytical tools in the book, they will be able 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 • Recognize risks and formulate responses that avoid surprises • Support decision making by predicting the actions that will yield the best returns

Brimming with real-world examples and input from thirty top HR practitioners and thought leaders, this groundbreaking book ushers in a new era in human resources and human capital management.

About the Author

JAC FITZ-ENZ (San Jose, CA) is widely acknowledged as the father of human capital strategic analysis and measurement. As founder of Saratoga Institute, he developed the first international HR benchmarks. He was named by HR World as one of the Top 5 HR Management Gurus and cited by HR Magazine as one of 50 people in the last 50 years who have significantly changed the field of HR. He has authored a dozen books, including the award-winning The ROI of Human Capital (978-0-8144-1332-6). His column, "Leading Edge," appears monthly in Talent Management magazine.

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Why Human Capital Measurement Matters

Why Human Capital Measurement Matters and How to Avoid Common Metric Mistakes

If you don't measure it, you don't know what is actually happening. If you don't understand it, you can't control it. If you can't control it, you can't improve it. For these reasons, plus the fact that people are one of the largest oganizational expenses, human capital measurement is critical to business success.

 "Your business decisions should be based on empirical data," says Jac Fitz-Enz, world-renowned expert on human capital strategic analysis and measurement. "Analytics are bias free and credible. The numbers require little translation; they speak for themselves." Yet, as he acknowledges, "Simply collecting a mass of data not only has no value, it can lead to frustration and poor decision making." In THE NEW HR ANALYTICS (AMACOM, 2010) Fitz-Enz offers tips on avoiding the seven most common metrics mistakes:

1. Confusing data with information. We bury ourselves in data, with the erroneous assumption that we know something. Uninterrupted data collection is a worthless, make-work, dust-gathering expense. The basic question is: What will you do with the data once you have it?

 2. Valuing inside versus outside data. No one in the organization cares about the HR function. People want to know  what value HR is generating for the company. Report on human capital, the employee activity, rather than on human resources, the department activity.

 3. Generating irrelevant data. Presenting metrics on topics of no importance is useless. Metrics must answer relevant business questions. Focus on collecting and reporting only important business data. Otherwise, you'll just pile up a data dump.

 4. Measuring activity versus impact. Reporting costs, time, cycles, and quantities without describing their effects is pointless. When considering such "intermediate metrics," ask yourself: What difference does it make? What is the result? If the answer is nothing, why report it?

 5. Relying on gross numbers. Averages mask effects. If you reduce a large number of outcomes to an average, you have no profile of the phenomenon. What are the mean, the median, the mode, and the percentiles? Are all data points bunched around the middle, or are they spread across a wide range? Average cost and average turnover are meaningless.

 6. Not telling the story. We can gather a mass of data and display it in colorful charts, graphs, and tables, but in the end, does it tell a story of what happened, why, when, where, how, and to whom? To have meaning and value, data must be turned into business intelligence.

7. Getting stuck in analysis stagnation. Data must have a purpose and application. How can you use it to spur action on the part of some employee group or to solve a problem?

 Adapted from THE NEW HR ANALYTICS: Predicting the Economic Value of Your Company's Human Capital Investments by Jac Fitz-enz (AMACOM, 2010).

 

 

 

 

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Want to Build an Effective Workforce for the Future?

 

Want to Build an Effective Workforce for the Future?

Start Now with Capability Planning

Why waste money on seeking the best candidates to fit into outdated job descriptions or match the staffing requirements in short-term, short-sighted business plans? Changes in technology, customers, market niches, competition, and other forces call for shifting the focus from finding capable people to developing new capabilities.

What new capabilities do you need to acquire or build to meet changing market trends? That's the core question for transforming yesterday's workforce planning into capability development for today and tomorrow. In his latest groundbreaking book, THE NEW HR ANALYTICS (AMACOM, 2010), acclaimed human capital management pioneer Jac Fitz-enz shows how capability planning leads to succession planning that leverages quality employee engagement and drives revenue growth. It all starts with skills segmentation. "While all people are important, all skill sets are not of equal importance," he notes. "Treating the workforce like a monolith is absurd and costly." Fitz-enz presents a plan for subdividing the workforce into the following capability categories:

• Mission Critical. A few capabilities are absolutely key to ongoing success. If you think about it, you know what these are. They can relate to technology, leadership, finance, sales, production, or anything else that represents a make-or-break situation. Do you currently have sufficient mission-critical capabilities in place? Do you have back-ups being developed? (According to Fit-enz's survey of 1,200 companies, 54% of companies have ready backfills for fewer than 30% of their positions.)

• Differentiating. Given your current or desired future market possibilities, which capabilities separate your organization from the competition? These can be unique technical, financial, service, or other skills and knowledge that only your organization has or needs to acquire. These often augment the mission-critical capabilities, but are not identical.

• Operational. Certain skills are necessary to keep the operation going. These are often characterized as administrative and maintenance, but also include technical skills. At times they are taken for granted or ignored. They need to be reviewed as insurance, as their absence would reduce efficiency, impair timely response to customer needs, and increase operating costs.

• Movable. As markets, customers, and products change, some skills become less important or even obsolete. Companies sometimes forget this and allow these to remain, causing operational expenses to build. In the worse situation, this can culminate in massive layoffs. People in these positions need to be retrained, reassigned, or let go, and the processes outsourced, if needed at all.

Adapted from THE NEW HR ANALYTICS: Predicting the Economic Value of Your Company's Human Capital Investments by Jac Fitz-enz (AMACOM, 2010).

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Review Quotes

"…highly recommend the seminal book…to anyone seeking a serious and workable predictive analysis system…destined to become a classic in the field of HR analytics." —Blog Business World

"This latest book from a reigning legend in the field of human capital offers a new model for measuring the success of investment in people." —T& D magazine

"…book is a leading-edge addition to the field...will serve as an excellent framework for organizations seeking to enhance the return on their investment in human capital." —Choice

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Cover Copy

ADVANCE PRAISE FOR THE NEW HR?ANALYTICS

"Dr. Jac Fitz-enz . . . has now defined and shaped predictive analytics that define more clearly how today's metrics can predict and lead to tomorrow's successes."— Dave Ulrich, Professor, Ross School of Business, University of Michigan, and Partner, The RBL Group

 

"In The New HR Analytics Jac Fitz-enz extends his decades of leadership in human capital measurement. It is a call to action that should inspire leaders to rethink their assumptions and improve their decisions."— John Boudreau, Professor, Management & Organization, and Research Director, Center for Effective Organizations, University of Southern California

 

". . . a comprehensive Human Capital Management framework and a very practical set of action-oriented recommendations that together enable you to leverage the one thing that makes your organization truly unique: your human talent."— James P. Ware, Executive Producer, Work Design Collaborative LLC

 

"Predictive analytics is what we've been waiting for because it's the next level of understanding in Dr. Jac's long and evolving journey to empower us with the core tools, terminology, and logic to make a difference."—Ed Kleinert, Administrator, HR Information Technology, Memorial Sloan-Kettering Cancer Center

 

"Dr. Jac Fitz-enz continues to provide the thought leadership businesses need now more than ever when it comes to human capital management."—Shyam Patel, COO, People Report

 

"The New HR Analytics is the breakthrough people management playbook. . . . The HCM:21® model introduces leading-edge predictive techniques that maximize return on human capital investments while energizing and engaging employees." —Ken Scarlett, President, Scarlett Surveys International

 

"Once again, Dr. Jac has led the way with critical research that enables organizations to create sustainable value through people."—Kent Barnett, CEO, KnowledgeAdvisors

 

"Jac Fitz-enz . . . is a powerful lighthouse who enlightens the long way from the old human resources department to the new human capital strategic partner. . . . an important milestone in human capital history."—Luis Mar?a Cravino, Cofounder and Codirector, AO Consulting S.A., Buenos Aires

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Jacket Copy

With his landmark book The ROI of Human Capital, Jac Fitz-enz delivered a powerful methodology for pinpointing the bottom-line contributions of employees. The book helped transform human resources, turning a field considered soft and vulnerable into a business-focused operation that delivered quantifiable results.

 

Now Fitz-enz uncovers the most exciting and promising development in HR today: actually predicting the monetary value of future human capital investments through analytics. This is a new and vastly improved way of mapping out organizational needs, particularly in the wake of layoffs and economic turmoil, as organizations recover and rebuild for the future.

 

The New HR Analytics supplies the principles, practices, and worksheets you need to thoroughly grasp and apply HCM:21®, the author's four-phase predictive management model. Original research conducted by 30 HR practitioners and global thought leaders details their experiences translating human capital analytics into action. The book:

 

• Makes a passionate case for why HR needs to embrace analytics to keep pace with how the shifting market and internal factors affect human capital management

• Promotes a new workplace planning model focused on generating human capability through employee engagement and paying for performance

• Explains how to turn HR service delivery into a value-generating process by analyzing staffing, development, and turnover through the lens of a cost-effective input-throughput-output model

• Provides an in-depth approach to performance measurement and reporting—one that links strategic, operational, and leading indicators to apply metrics and analytics in a more meaningful way

 

The book's numerous real-world examples show you exactly how the predictive management model has been put to work, including how:

• Ingram Book Group used analytics to combat an ongoing turnover and productivity problem

• Enterprise partnered with Monster to use market and demographic information for selecting a call-center site

• UnitedHealth Group drew on analytics and technology to solve its staffing and retention problems

 

Analytics, explains Fitz-enz, is not just a set of statistical tools. It is a mental framework, a quantum leap in human capital management. It is the logic framework that gathers, organizes, and interprets data—to deliver the knowledge your organization needs to grow and thrive.

 

Jac Fitz-enz is acknowledged world?wide as the father of human capital strategic analysis and measurement. As founder of Saratoga Institute, he developed the first international HR benchmarks. He was named by HR World as one of the Top 5 HR Management Gurus and cited by HR Magazine as one who has significantly changed the field. He has authored a dozen books, including the award-winning The ROI of Human Capital, and his column "Leading Edge? appears monthly in Talent Management. He can be reached at source@netgate.net.

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Excerpt

PREFACE

 

This book was twenty-five years in the writing. It started in 1984, with the

publication of my How to Measure Human Resources Management; it was

augmented with Human Value Management six years later; and then the

concept was updated ten years ago in The ROI of Human Capital. Those

books chronicle the development of metrics in human resources from its

inception in the 1970s to today. They have passed the test of time with

second and third editions, and two were honored with Book of the Year

Awards from the Society for Human Resource Management.

Now, The New HR Analytics is both the product of these endeavors

and the look into the future. Although this book talks to human resources

managers, it deals with the broader issue of human capital management

processes. Hence, it is as applicable to the work of line managers as to

that of the human resources department. Anyone who manages people

can find value in the model we present here and the case studies that are

offered in support of that model.

HR as an Expense

Having come into HR in 1969 from ten years in line jobs, I could not

understand why any company would create a function that was only an

expense. But then, too, at that time line management itself was not so

sophisticated. Management models of the day were a patchwork quilt of

fads that came and went, sometimes to reappear later. Others flashed

across the sky like a meteor and burned out when they hit the atmosphere

of managerial impatience. During that period, HR was simply a place

where you put people ''who couldn't do any harm,'' as a manager in my

company said at the time.

I quickly discovered the problem behind the perception. It had two

parts. One part was that HR people actually believed and accepted the

idea that they were an expense center and nothing more. To be sure, there

were a few who fought that perception, but they were overwhelmed by

the accounting-driven belief system of the time. The second part of the

problem was that HR didn't know, and never talked about, the value they

were generating because they couldn't—they had no language for it. All

their terms were qualitative, subjective, and equivocal. Anecdotes were

their only way of responding when management asked for evidence of

the value added by HR's services.

''How is employee morale?''

''It's good!''

''How good?''

''Very good.''

Could you run any other function with such performance indicators?

It is enough to make one despair.

The Introduction of Metrics

The solution was obvious. We in HR needed to learn to speak in quantitative,

objective terms, using numbers to express our activity and value

added. Business uses numbers to explain itself. Sales, operating expenses,

time cycles, and production volumes are principal indices that express

business activity. In the 1970s, productivity was the key issue. In the

1980s, the quality movement emphasized process quality as a competitive

advantage. Both relied on numbers to express degrees of change.

At the time, I asked the HR director of a major corporation if he

was involved in these initiatives. He answered that they were not human

resources management issues. Here were the major initiatives of the day,

and he could not see what they had to do with people. Is it any wonder

that people write about nuking the HR function?

During the 1970s, we in HR began to experiment with simple cost,

time, and quantity metrics to show that HR was at least managing

expense and generating something of value. In the beginning it was

largely a defensive maneuver. But by the 1980s, we were able to show

that we were indeed adding measureable value. In 1984, I wrote the first

book mentioned earlier. In 1985, at my consulting company, the Saratoga

Institute, we published the first national benchmarks, and this led to publi-

cation of Human Value Management, which was a marketing model

applied to the HR function. By 2000, we had advanced the methodology

to a point where we were talking about return on investment. Basically,

we shifted the paradigm from that of running the HR department to that

of managing human capital in the organization. At that point we were

still using primarily standard arithmetic functions. Later in the decade

we began to apply simple statistical tools, and this opened up the era of

human capital analytics—which brings us to today.

The Era of Analytics

We are on the threshold of the most exciting and promising phase of the

evolution of human resources and human capital management. We've

gone from the horse and buggy to the automobile to the airplane. Now

it's time to mount the rocket and head for the stratosphere.

Like arithmetic, statistics are bias free and are applicable over a vast

range of opportunities. They can be used in studies of single, localized

problems or for supporting organization-wide makeovers. The secret

sauce of statistics is just like the source code of computer programs—a

buried logic that can go step-by-step or leap ahead, using macros to speed

to the solution.

Today, we shift our attention to predictability. This book is about

predictive management. We think of it as ''managing today, tomorrow.''

Predictive management, or HCM:21, is the outcome of our eighteen-

month study called the Predictive Initiative. It is the first holistic, predictive

management model and operating system for the human resources

function. We launched it in the last quarter of 2008 and it has been suc-

cessfully applied in industry and government, in the United States and

overseas.

HCM:21 is a four-phase process that starts with scanning the marketplace

and ends with an integrated measurement system. In the middle, it

addresses workforce and succession planning in a new way and shows

how to optimize and synchronize the delivery of HR services. It is

detailed in the chapters that follow.

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Table of Contents

CONTENTS

 

PREFACE xi

CONTRIBUTORS xvii

 

PART ONE: INTRODUCTION TO PREDICTIVE ANALYTICS 1

CHAPTER ONE Disruptive Technology: The Power to Predict 3

CHAPTER TWO Toward Analytics and Prediction 8

Why Analytics Is Important 17

Measuring What Is Important, by Luis Maria Cravino

Strategic Human Capital Measures: Using Leading HCM to Implement Strategy, by Stephen Gates and Pascal Langevin

From Business Analytics to Rational Action, by Kirk Smith

 

PART TWO: THE HCM:21(r) MODEL 45

CHAPTER THREE Scan the Market, Manage the Risk 47

How to Improve HR Processes 56

The Intersection of People and Profits: The Employee Value Proposition, by Joni Thomas Doolin, Michael Harms, and Shyam Patel

More Than Compensation: Attracting, Motivating, and Retaining Employees, Now and in the Future, by Ryan M. Johnson

''Best in Brazil'': Human Capital and Business Management for Sustainability, by Rugenia Pomi

CHAPTER FOUR

The New Face of Workforce Planning 85

How to Put Capability Planning into Practice 94

Scenario Planning: Preparing for Uncertainty, by James P. Ware

Quality Employee Engagement Measurement: The CEO's Essential Hucametric to Manage the Future, by Kenneth Scarlett

Truly Paying for Performance, by Erik Berggren

The Slippery Staircase: Recognizing the Telltale Signs of Employee Disengagement and Turnover, by F. Leigh Branham

CHAPTER FIVE Collapsing the Silos 141

How They Are Applying It 153

Roberta Versus the Inventory Control System: A Case Study in Human Capital Return on Investment, by Kirk Hallowell

The Treasure Trove You Already Own, by Robert Coon

Waking the Sleeping Giant in Workforce Intelligence, by Lisa Disselkamp

CHAPTER SIX

Turning Data into Business Intelligence 182

How to Interpret the Data 192

Predictive Analytics for Human Capital Management, by Nico Peruzzi

Using Human Capital Data for Performance Management During Economic Uncertainty, by Kent Barnett and Jeffrey Berk

Using HR Metrics to Make a Difference, by Lee Elliott, Daniel Elliott, and Louis R. Forbringer

 

PART THREE: THE MODEL IN PRACTICE 215

CHAPTER SEVEN Impacting Productivity and the Bottom Line: Ingram Content Group, by Wayne M. Keegan 217

CHAPTER EIGHT Leveraging Human Capital Analytics for Site Selection: Monster and Enterprise Rent-A-Car, by Jesse Harriott, Jeffrey Quinn, and Marie Artim 224

CHAPTER NINE Predictive Management at Descon Engineering, by Umair Majid and Ahmed Tahir 240

CHAPTER TEN Working a Mission-Critical Problem in a Federal Agency, by Jac Fitz-enz 259

CHAPTER ELEVEN UnitedHealth Group Leverages Predictive Analytics for Enhanced Staffing and Retention, by Judy Sweeney 265

 

PART FOUR: LOOKING FORWARD 271

CHAPTER TWELVE Look What's Coming Tomorrow 273

Views of the Future: Human Capital Analytics 276

 

APPENDIX: THE HCM:21(r) MODEL: SUMMARY AND SAMPLES 301

INDEX 333

ABOUT THE AUTHOR 000

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