CEB Corporate Leadership Council. The Analytics Era: Transforming HR s Impact on the Business

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1 CEB Corporate Leadership Council The Analytics Era: Transforming HR s Impact on the Business

2 The volume of data available to HR has increased exponentially across the past 30 years. AN EXPLOSION OF TALENT DATA Administrative and Compliance Data Talent Management Data Social Technology and Behavioral Data Volume of Data Employee Demographics Payroll Data Compliance Tracking Hire Dates Performance Evaluations Employee Engagement Survey Results Talent Assessment Results Employee Demographics Payroll Data Compliance Tracking Hire Dates Real Time Behavioral Data (e.g., habits) Passive Candidate Employment and Personal Preferences Past Experiences, Skills, Languages Professional and Social Networks Performance Evaluations Employee Engagement Survey Results Talent Assessment Results Employee Demographics Payroll Data Compliance Tracking Hire Dates

3 CEOs are asking for more analytics support from HR and HR plans to significantly increase investments in collecting, managing, and analyzing data assets. PRESSURE ON HR TO CAPITALIZE ON DATA ASSETS CEOs Want More Talent Data from HR Percentage of CEOs Who Believe Information is Important and Comprehensive Information is Important Receives Sufficient Information HR Plans to Increase Investments in HR Data and Analytics in the Next Two Years Percentage of Senior HR Leaders Costs of Employee Turnover 95% Agree Return on Investment in Human Capital Assessments of Internal Advancement Labor Costs n = 08. Source: CEB, CEB Corporate Leadership Council, Analytics Survey 203. Employees Views and Needs Staff Productivity 0% 50% 00% Percentage of CEOs n =,258. Source: PWC 5th Annual Global CEO Survey,

4 Most organizations are not yet realizing value from their analytics investments. FOR MOST, DATA IS NOT LEADING TO INSIGHTS OR IMPACT Few business leaders have the data and analytics support they need from HR. HR Analytics Has Led Me to Change a Business Decision in the Past Year Percentage of Senior Business Leaders Few HR Leaders Believe They Are Getting Significant Returns on Analytics Investments Percentage of Senior HR Leaders 5% Agree 8% Agree n =,590. Source: CEB, Business Barometer, 203. n = 08. Source: CEB, CEB Corporate Leadership Council Analytics Survey, 203. Lots of Data, Minimal Insight There s a lot of data out there, but not a lot of information. VP, HR Mining Company 4

5 Many organizations believe that technology and methodological sophistication are critical for HR s success. TECHNOLOGY AND ANALYTIC SOPHISTICATION HERALDED AS PATH TO SUCCESS Sample Talent Analytics Maturity Models Sample HR Technology Vendors Source: Services/consulting/human-capital/hr-transformation/hrtimes/5b9665f VgnVCM300000c56f00aRCRD.htm. 5

6 Beyond basic levels of analytic sophistication, additional investments focused only on improving technology and methodology sophistication yield minimal additional benefits. SOPHISTICATION ALONE IS INSUFFICIENT Improvement in Talent Outcomes By Analytic Sophistication High While a basic level of analytic sophistication is necessary for impact further investments in sophistication alone yield low additional benefits. Talent Outcomes Organizational Average Analytic Sophistication is an organization s effectiveness at using advanced methodology for talent analytics. Talent Outcomes Include: Employee performance Quality of hire Employee engagement Employee retention Leadership bench strength Low Low n = 08. Analytic Sophistication Foundational Data Management Requirements to Achieve Impact Maintaining consistent data governance and standards Protecting data from risks to security and confidentiality Maintaining accessible systems to store data High Source: CEB, CEB Corporate Leadership Council Analytics Survey,

7 CEB Corporate Leadership Council surveyed more than 220 HR executives at more than 60 organizations and more than 9,000 business leaders across the globe. All Rights Reserved. CLC583943SYN A GLOBAL SURVEY Note: See Appendix for survey demographics. 7

8 Analytic impact is the extent to which talent analytics are used to improve decisions. ANALYTIC IMPACT LEADS TO TALENT AND BUSINESS OUTCOMES Analytic Impact Leading Analytic Organizations have 2% better talent outcomes than the average organization. Financial Returns on Analytic Impact For the typical organization, improving analytic impact from median to max can improve talent outcomes by 2 percentage points, leading to a 6% improvement in gross profit margin, which translates to a $8.9 Million in savings for every $ Billion in revenue. The extent to which talent analytics improves decisions and provides actionable support to key stakeholders. Decision Improvement Analytics Support From the HR Function Improves Talent Decisions Improvement of Decisions Made By: CEO Board of Directors Business Leaders Line Managers Actionable Support HR is Effective at Providing Actionable Data- Based Guidance on Key Talent Areas Key Talent Areas Include: Sourcing Performance Evaluation HIPO Selection Leadership Development Employee Engagement Succession Planning Compensation and Benefits Analytic Impact Improves Key Talent Outcomes 2 Difference in Analytic Impact between Leading Analytic Organizations and the Average Organization Average Improvement in Key Talent Outcomes by Leading Analytic Organizations = 2% Average Organization Leading Analytic Organizations Leading Analytic Organizations are those in the top quartile of Analytic Impact across the distribution of participating organizations. n = 08. Bench Strength Employee Performance Quality of Hire Employee Engagement Source: CEB, CEB Corporate Leadership Council, Analytics Survey 203. Financial information on participating organizations was collected through Compustat for organizations where it was available. The median organization has $9.2B in revenue and a 30.76% Gross Profit Margin. Increasing from median to maximum analytic impact improves collected talent outcomes by 2 percentage points, which in turn leads to a 6% increase in Gross Profit Margin. 2 Talent outcomes were identified by senior HR leaders and surveyed organizations and validated through other internal CEB surveys. 8

9 There are two paths to improving Analytic Impact; however, first improving business application leads to more impact more quickly. THE BUSINESS APPLICATION GAP Analytic Impact and Effectiveness at Business Application and Sophistication High Improving business application alone can improve Analytic Impact by as much as 4%. Improving sophistication alone can improve Analytic Impact by as much as 5%. High Application, Low Sophistication Average Analytic Impact:.4x 3% of organizations Leading Analytic Organizations Average Analytic Impact:.22x 7% of organizations Only 7% of organizations match high sophistication with business application of insights. Organizations that are high on sophistication but low on business application are losing up to 7% of potential Analytic Impact. Business Application Best Path to Impact Low Application, Low Sophistication Average Analytic Impact:.00x 60% of organizations Low Application, High Sophistication Average Analytic Impact:.05x 20% of organizations Business Application is the ability to take specific actions from talent analytics. Low Low Sophistication 2 High Source: CEB, CEB Corporate Leadership Council Analytics Survey, 203. Business Application is measured by effectiveness at identifying the right business problems, applying business judgment to data, and engaging leaders to take action. 2 Sophistication is measured by effectiveness at complex analyses, (e.g., predictive and prescriptive modeling). 9

10 HR faces three key challenges to improving Analytic Impact. THREE CHALLENGES TO IMPROVING IMPACT Criticality Where Should I Focus Talent Analytics? 2 Capability How Do I Upskill My HR Function? 3 Credibility How Can I Increase Credibility of HR Data? Few Business Leaders Believe HR Analytics Focuses on the Right Business Questions Percentage of Business Leaders Most HR Leaders Believe HR Staff Capabilities is a Barrier to Improving HR Analytics Percentage of Senior HR Leaders Few Business Leaders Trust Talent Data and Insights from HR Percentage of Business Leaders Who Trust Talent Data 7% Agree 8% Agree 80% Agree n = 9,528. n = 08. n = 9,528. Source: CEB, CEB Global Labor Market Survey, 203. Source: CEB, CEB Corporate Leadership Council Analytic Survey, 203 Source: CEB, CEB Global Labor Market Survey,

11 THE ANALYTICS ERA: TRANSFORMING HR S IMPACT ON THE BUSINESS CRITICALITY CAPABILITY CREDIBILITY Prioritize Critical Business Questions Prioritize the most scalable opportunities for business impact, rather than simply fulfilling on-demand data requests 2 Apply Business Judgment to Data Science Reset goals for talent analytics to focus staff on business judgment 3 Drive End-User Ownership of Talent Analytics Provide implications of decisions, don t prescribe solutions Analytics Prioritization Principles Re-Goaled Talent Analytics Implication-Based Decision Support Evaluate talent risks to business strategy to identify key metrics Revise HRBP competencies to emphasize application of business judgment to data Talent Analytics Map HRBP Analytics Competencies Build capability by establishing accountability and facilitating connection across the business Imperatives for CHROs to Improve Analytic Capability Pseudonym.

12 Organizations are overwhelmed by the enormous variety of possible metrics to track and report. NO SHORTAGE OF METRICS Wide Range of Metrics from Mild to Wild Mild # FTEs Cost/FTEs Total Compensation Per Employee Employee Commitment Index Benefits Expense as Percentage of Total Operating Expense Average Employee Compensation Benefits Expense as Percentage of Revenue Absentee Rate Compensation Expense Per FTE Benefits Cost Per Employee Internal Pay Equity Employment Brand Strength Employee Engagement Level Employee Retention Index Cost Per Hire Hire and Promotion Rate (Google) Forecast the future organizational structure based on current hiring and promotion practices. Revenue Per Employee Departure Probability (Sprint) Use employee behavior data to identify employees who are likely to leave. Employee Loyalty Statistic (jetblue Airways) Use a single question net promoter score to measure engagement. Employee Digital Footprint Size (Intel) Smiles Frequency (Harrahs Entertainment) Record the frequency with which customer-facing staff members smile to determine customer satisfaction. Wild Source: CEB, CEB Corporate Leadership Council Analytics Survey, 203; HR & Workforce Analytics Innovation Summit, IE.Summits, 203; Competing on Talent Analytics, HBR,

13 We asked our membership about more than two hundred metrics. These metrics covered a wide variety of talent areas including: Employee Engagement Learning and Development Performance Management Recruiting Succession Planing Workforce Planning CEB CORPORATE LEADERSHIP COUNCIL TESTED MORE THAN 200 METRICS The Long Tail of Metrics Percentage of Organizations Reporting Usage, By Metric Percentage of Organizations Reporting the Metric 00% 50% 0% Metrics CEB asked members which metrics they track across their organization and report to the Board of Directors or the CEO. Detailed data provided in the Appendix. Source: CEB, CEB Corporate Leadership Council Analytics Survey,

14 There is no ideal number of metrics or single set of metrics that leading organizations track. NO MAGIC METRICS Wide Range in the Number of Metrics Tracked and Reported by Leading Organizations Range of Metrics Tracked by Leading Analytic Organizations Range of Metrics Leading Analytic Organizations Report to CEO or Board Please visit our forthcoming Analytics Portal and Metrics Topic Center, at clc.executiveboard.com, to see metrics tracked, broken down by size of organization, industry and geography. How to Read This Chart Number of Metrics Reported n = 6. n = 6. Source: CEB, CEB Corporate Leadership Council Analytics Survey, Number of Metrics Reported Source: CEB, CEB Corporate Leadership Council Analytics Survey, 203. Significant Overlap in Top Ten Metrics Tracked by Leading Analytic and Bottom Quartile Organizations Top 0 Metrics, by Frequency Overlapping Metrics 2 3 Leading Analytic Organizations Bottom Quartile Organizations Performance Rating Distribution Performance Appraisal Participation Rate 2 3 Fewest metrics reported by a Leading Analytic Organization Median = The number separating the top half and bottom half of responses. Most metrics reported by a Leading Analytic Organization 2 Performance Appraisal Participation Rate 3 Total Number of Hires 4 Internal Hires/External Hires 5 Employee Engagement Level 6 Average Performance Appraisal Rating 7 Average Time to Fill 8 Average Merit Increase for Each Performance Rating 9 Compensation Gap to Market 2 Gender Staffing Breakdown 3 Performance Rating Distribution 4 Compensation Gap to Market 5 Employee Engagement Level 6 Internal Hires/External Hires 7 Transfers 8 Ethnic Background 9 Average Merit Increase for Each Performance Rating 0 Average Employee Compensation 0 Total Number of Hires n = 6. Source: CEB, CEB Corporate Leadership Council Analytics Survey,

15 Business and HR leaders agree that talent analytics rarely identifies the key questions the business needs answered, leading to misalignment of analytic activities and investments. MOST ANALYTICS EFFORTS ARE MISALIGNED WITH BUSINESS PRIORITIES Less Than 20% of Business Leaders Believe That Talent Analytics Are Focused on the Right Issues Percentage of Business Leaders,707% Few Senior HR Leaders Believe That Talent Analytics Are Effectively Aligned with the Right Business Issues Percentage of Senior HR Leaders,400% 7% Agree 4% Agree n = 9,528. Source: CEB, Global Labor Market Survey, ,293% n = 08. 8,600% Source: CEB, CEB Corporate Leadership Council Analytics Survey,

16 ANALYTICS PRIORITIZATION PRINCIPLES OVERVIEW Gap Inc. s newly created Workforce Analytics Team needed to establish enterprise-wide analytics priorities to better manage diverse demands from the business and the resources needed from the center to support those demands. SOLUTION HIGHLIGHTS Gap Inc s Workforce Analytics Team developed an analytics prioritization strategy based on three key principles to ensure investments align with critical business needs and provide substantial return on investment. The principles are applied through the following steps: Conduct Prioritization Exercise Based on Key Questions: The team conducts a needs assessment oriented around key human capital questions, not metrics, to help business stakeholders clearly articulate their needs without worrying about what data is needed to meet those needs. Identify the Most Scalable Opportunities for Impact: The team identifies the most scalable opportunities for impact from prioritized questions and draws clear boundaries around where the Workforce Analytics team will focus their resources. Initiatives without scalable impact for the enterprise are managed by HR operations team within each brand. Create a Roadmap for Action and Investment: The team determines the inputs needed to address prioritized questions and identifies gaps in data availability (i.e., do we have the data we need?) and data application (i.e., are we able to use the data once we have it?) to build a roadmap of next steps and investments. COMPANY SNAPSHOT Gap Inc. Industry: Retail Gap Inc. offers apparel, accessories, and personal care 202 Sales: US $5.2B products for men, women, children, and babies under the Employees: 32,000 Gap, Old Navy, Banana Republic, Piperlime, and Athleta brand names. It operates approximately 3,400 stores worldwide. Key Regions of Operation: North America, Europe, Asia 6

17 THE ANALYTICS ERA: TRANSFORMING HR S IMPACT ON THE BUSINESS CRITICALITY CAPABILITY CREDIBILITY Prioritize Critical Business Questions Prioritize the most scalable opportunities for business impact, rather than simply fulfilling on-demand data requests 2 Apply Business Judgment to Data Science Reset goals for talent analytics to focus staff on business judgment 3 Drive End-User Ownership of Talent Analytics Provide implications of decisions, don t prescribe solutions Analytics Prioritization Principles Re-Goaled Talent Analytics Implication-Based Decision Support Evaluate talent risks to business strategy to identify key metrics Revise HRBP competencies to emphasize application of business judgment to data Talent Analytics Map HRBP Analytics Competencies Build capability by establishing accountability and facilitating connection across the business Imperatives for CHROs to Improve Analytic Capability Pseudonym. 23

18 RE-GOALING HR ANALYTICS FOR ACTIONABILITY OVERVIEW Most organizations overweight data science and management as key focus areas for their HR analytics employees at the expense of driving business decisions and actions using HR data. SOLUTION HIGHLIGHTS Telefonica Europe has refocused the role of the HR analytics function toward inspiring, influencing, and shaping business decisions using three key steps: Hire for Business Judgment; Train for Advanced Quantitative Skills Telefonica focuses on hiring candidates who demonstrate strong business judgment skills critical to driving business decisions using real world simulation tasks for candidate assessment. Reinforce Actionability at Each Stage of the HR Analytics Project Cycle Telefonica ensures that HR analytics employees are provided opportunities for internal networking and best practice sharing to drive HR data actionability at every step of the HR analytics project cycle. Establish Mutual Accountability for HR Analytics Application Telefonica s HR analytics team lead engages with business stakeholders prior to the start of any project, clearly establishing business expectations around HR analytics support as well as communicating the desired business support for the HR analytics team. COMPANY SNAPSHOT Telefonica Europe Plc. Industry: Telecommunications Telefonica is one of the world leaders in the FY 202 Revenue: 29 B telecommunication sector, providing communication, FY 202 Employees: 57,000 information and entertainment solutions. It trades Headquarters: Slough, United Kingdom under the commercial brand Movistar in Spain and Key Regions: of Operations: Europe O2 in the UK, Ireland, Germany, Czech Republic and Slovakia. 27

19 THE ANALYTICS ERA: TRANSFORMING HR S IMPACT ON THE BUSINESS CRITICALITY CAPABILITY CREDIBILITY Prioritize Critical Business Questions Prioritize the most scalable opportunities for business impact, rather than simply fulfilling on-demand data requests 2 Apply Business Judgment to Data Science Reset goals for talent analytics to focus staff on business judgment 3 Drive End-User Ownership of Talent Analytics Provide implications of decisions, don t prescribe solutions Analytics Prioritization Principles Re-Goaled Talent Analytics Implication-Based Decision Support Evaluate talent risks to business strategy to identify key metrics Revise HRBP competencies to emphasize application of business judgment to data Talent Analytics Map HRBP Analytics Competencies Build capability by establishing accountability and facilitating connection across the business Imperatives for CHROs to Improve Analytic Capability Pseudonym. 32

20 HR and business leaders agree that HR data and insights lack credibility. BUSINESS LEADERS DON T TRUST DATA AND INSIGHTS FROM HR Few Senior HR Leaders Believe that Business Leaders Trust HR Data Percentage of Senior HR Leaders who Believe Business Leaders Trust HR Data Business Leaders Confirm Lack of Trust Percentage of Senior Business Leaders who Trust Data from HR 20% Agree 8% Agree n = 08. n = 9,528. Source: CEB, CEB Corporate Leadership Council Analytics Survey, 203. Source: CEB, CEB Global Labor Market Survey, 203. Leader Trust Improves Analytic Impact By As Much As 4% Difference in Analytic Impact Based on Leader Trust in Talent Data and Insights Despite the things we ve already been able to accomplish, we are still under pressure to prove ourselves to the business. People just don t associate HR with analytics that s not who we ve been in the past. HR Director Retail Organization Organizations where business leaders trust talent data and insights have 4% greater Analytic Impact than organizations where business leaders do not trust talent data and insights..00x Business Leaders Do Not Trust Talent Data and Insights = 4%.4x Business Leaders Trust Talent Data and Insights n = 08. Source: CEB, CEB Corporate Leadership Council Analytics Survey,

21 IMPLICATION-BASED DECISION SUPPORT OVERVIEW Seagate realized that their approach to delivering talent analytics was not leading to action by business managers. In particular, they observed that their analytics delivery strategy failed to synthesize data in a consumable format, clarify decision implications, or support the individuals responsible for taking action. SOLUTION HIGHLIGHTS Rather than attempting to provide direct answers to complex talent decisions that require business judgment, Seagate s HR team helps decision makers arrive at their own conclusions by providing effective decision aids and clear guardrails. Filtered Data Visualizations: HRBPs use the workforce analyses and visualizations provided by the analytics team to stimulate leader-led challenge diagnosis, rather than reporting exhaustive data to defend HR diagnosis. Leader-Driven Decision Scenarios: Seagate enables leaders to explore alternative solutions with clear guardrails to support decisions that require high levels of judgment and interpretation, instead of providing HR directives only. Proactive Decision Output: Based on the decisions the leader makes, Seagate provides appropriate action owners implementation guidance to execute the decision. COMPANY SNAPSHOT Seagate Technology Industry: Technology Seagate Technology PLC provides electronic data storage products. 202 Revenue: US$4.93 B The company s primary products are hard disk drives, and they are 202 Employees: 57,900 one of the world s largest manufacturers of hard disk drives. 35

22 THE ANALYTICS ERA: TRANSFORMING HR S IMPACT ON THE BUSINESS A. Talent Reporting Providing Talent Information Maximize the sophistication of talent insight through advanced technology and methodology Manage ondemand data requests from the line Acquire and build data science capability within the HR function Provide directives to the line based on talent insights CRITICALITY CAPABILITY CREDIBILITY Prioritize Critical Business Questions Prioritize the most scalable opportunities for business impact, rather than simply fulfilling on-demand data requests Analytics Prioritization Principles Evaluate talent risks to business strategy to identify key metrics Talent Analytics Map 2 Apply Business Judgment to Data Science Reset goals for talent analytics to focus staff on business judgment Re-Goaled Talent Analytics Revise HRBP competencies to emphasize application of business judgment to data HRBP Analytics Competencies Build capability by establishing accountability and facilitating connection across the business 3 Drive End-User Ownership of Talent Analytics Provide implications of decisions, don t prescribe solutions Implication-Based Decision Support B. Talent Analytics Improving Business Decisions Maximize business application of talent insight to organizational decisions and actions Prioritize metrics and activities based on key business questions Hold all HR staff accountable for applying business judgment to talent data Facilitate line ownership of data interpretation and solution identification Imperatives for CHROs to Improve Analytic Capability Pseudonym. 40

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