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Data Keys

As workforce analytics become more sophisticated, they may help companies forge a tighter link between HR and the bottom line.

Friday, June 16, 2006
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Douglas Krey, senior vice president of human resources at Capital One, wanted to move the McLean, Va.-based financial-services company's HR staff out of the business of regularly answering calls from managers who needed answers to workforce-related questions. Instead, he wanted the managers to have that information at their fingertips, constantly updated, while HR staffers focused on more strategic tasks.

Krey also wanted to provide the HR staffers with better access to information that would help them perform those tasks.

To do all this, Krey and his team decided they needed a data dashboard -- an application that continuously pulls information from the company's various HR systems and displays it to individual users via a graphical interface. Working with DoubleStar, a West Chester, Pa.-based software and consulting firm, Krey and his staff developed and deployed a dashboard three years ago based on DoubleStar's Workforce Information Factory product (relaunched last year as Workforce Insight).

"We wanted to give our user community direct access to the data they needed with an intuitive, easy-to-use tool," says Krey.

Today, managers can use the dashboard to find information on areas such as employee headcount, the status of new hires and the amount of training their employees are taking. HR staffers -- who have access to a deeper array of data sources -- can use the dashboard to identify attrition rates, measure the effectiveness of employee training programs and obtain more refined recruiting data.

"The dashboard gives managers access to data that lets them manage their own HR-related processes and it gives the HR staff data so they can influence those processes and be more proactive in their own areas," says Krey.

The information gleaned from the dashboards is merged with employee feedback to form the basis of the company's annual "People Imperatives" -- companywide initiatives designed to improve Capital One's overall performance. A recent People Imperative focused on expanding and improving the company's training programs, says Krey. The dashboard helped Capital One pinpoint progress in that area, with data showing per-employee training going from 14 hours per year to 22 hours and increased satisfaction levels with the quality of the training, he adds.

"I think Capital One is off to a great start -- they're one of the best companies in terms of taking data from various silos and making it accessible so it can be used by all different levels of the organization," says Larry Hutchlson, CEO of DoubleStar. 

The company is a clear example of an organization that uses workforce analytics to forge a tighter link between its HR processes and its business, he says.

However, Capital One and companies like it appear to be the exception, not the rule. The term "workforce analytics" has been tossed around the HR landscape for more than five years, yet even today the percentage of companies that are actually using analytical tools to probe more deeply into HR data and compile reports that uncover workforce trends remains relatively small. A survey conducted earlier this year of 3,000 members of the International Association of Human Resource Information Management (IHRIM) conducted in conjunction with Knowledge Infusion found that 72 percent of the respondents said they have no analytic tools to measure the impact of HR on business results.

"Attack of the Quants"

Successful analytics tools, say experts, are ones that are capable of pulling data together from multiple platforms and presenting the information in easily accessible formats.

"Overall, there's a lot of value being delivered in today's analytics packages -- the problem is the plumbing underneath those packages," says Paul Hamerman of the Forrester Group in Cambridge, Mass. "In many organizations, HR data resides in a number of different systems and it's not always easy to assemble that data and present it to end users."

Another problem is that too many companies continue to rely on analytics solutions that simply aren't capable of delivering the type of information HR needs today, says Ron Hanscome, vice president of human capital marketing at Oracle Corp. in Redwod Shores, Calif.

Hanscome, who prior to joining Oracle served as an analyst at the META Group, points to a 2003 study conducted by that research firm which found that the overwhelming majority of companies surveyed were using custom-built or in-house solutions to compile workforce analytics, he says. "As we dug under the covers, we found that those custom solutions were aging, they were less integrated into the core infrastructure, had higher total costs of ownership and held greater risks for the organization because of these pools of sensitive data floating around in unsecured applications," he says.

Efforts have been made in the past to show a direct link between HR activities and the bottom line, but in many cases they lost steam, says Hanscome.

"It's been too much of an 'optional' activity for organizations -- there've been too many other pressing items on HR's agenda," he says. "However, HR is being pushed in that direction by the C-suite. We also see a number of top HR roles being filled by non-HR people from the finance and legal departments who expect a more rigorous approach to measurement. Jason Averbook [founder and CEO of HR consulting firm Knowledge Infusion] has referred to it as the 'Attack of the Quants.' "

This approach, says Hanscome, will be a welcome departure from the standard practice at many HR organizations: taking information from multiple sources, massaging it, dumping it into Excel spreadsheets and "generating a pretty set of graphs for executives to see on a monthly basis."

Instead, progressive HR departments are moving to automated delivery of HR information on a real-time basis, via dashboards, that's tailored to specific stakeholders, he says.

"Dashboards add a degree of personalization, and at the high end we're seeing tools that can send out alerts when a particular metric pertaining to, say, retention crosses a critical threshold," says Hanscome.

Analytics and Financials

Another barrier to the wider adoption of workforce analytics at many companies is the fact that HR often insists on "owning" the information, says DoubleStar's Hutchlson.

"We see it over and over again: We build a platform and they want to control the flow of information to make sure that what's getting out to constituents is scrubbed and censored," he says. "If the information was more widely and readily distributed, you'd see a much greater adoption rate."

This reluctance to share is impeding the potential for human capital information to be elevated to the same stature as financial information, says Hutchlson.

"The data that comes out of HR analytics should be co-residing with financial data," he says. "The real win is the ability to take this information and ultimately model against it, to do 'what-if' analyses, rather than just record things in the rearview mirror."

One of DoubleStar's clients, a large home-improvement retail chain, created a data warehouse of its people-related information and began connecting it with other parts of the business, says Hutchlson. By linking its HR data with financial data, the company discovered that its sales of high-margin items such as lawn tractors and gas-powered grills were suffering during the spring because many of its most experienced store associates were being shifted to the stores' garden centers to cope with the high demand in those areas.

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As a result, the company decided to hire temporary workers to staff the garden centers in order to free up the experienced associates for assisting customers in the high-margin areas.

Gathering Steam

Some vendors have released tools designed to link HR analytics to the bottom line in the same way that customer-relationship management software is designed to forge tighter bonds between companies and their most profitable customers.

"Organizations used to think about customers in terms of 'How many do we have?' " says Eric Yau, vice president of performance analytics at Ottawa, Canada-based software firm Cognos. "Then they moved on to 'Who are our most profitable, valuable customers?' They wanted to understand their customers in much better detail."

Cognos, one of the pioneers in business-intelligence technology, is applying a similar methodology to HR with Cognos 8 Workforce Performance, a new analytics package it released recently.

"We built the product because we've been focused on business intelligence for quite a while," says Yau. "Companies now see that their employee population is their most costly asset by far, and that retaining this asset will grow only more crucial within the next few years."

The new tool is designed to provide clients with a richer, more nuanced view of their workforce using data from their HR information systems -- including age, job function or any other attribute stored within their access systems -- so they can conduct more comprehensive workforce-planning activities, he says.

"Companies will be able to do some analysis to determine where their biggest areas of attrition will be 10 years down the road, for example," says Yau. "You'll be able to conduct these analyses proactively so you can understand which functions, job roles and geographic areas you'll need to pay the most attention to."

Apophecy Inc., a joint venture between Denver-based Spectrum Human Resource Systems and United Kingdom-based Strata Systems, has just released the Apophecy HR Analyzer, a tool designed to help HR departments conduct better workforce planning.

The HR Analyzer gathers data from HR, financial and operations systems, pre-calculates it and makes it available to managers via dashboards in order to help companies uncover metrics such as profit per employee, the true cost of employee absences and reasons for turnover.

Finally, San Francisco-based Taleo has included new workforce analytics capabilities in Taleo 7, the latest version of its talent-management enterprise software. Taleo Reporting and Analytics, which is offered as an on-demand solution, features Analytics Dashboards, which are designed to provide managers with immediate access to workforce trends and developments.

Amanda Hahn, director of talent acquisition for Aramark, a Philadelphia-based provider of food and uniform support services, says the company was looking for a simpler way to gather and analyze its workforce data.

"Executives don't want to look at lines and lines of data; they need a quick snapshot," she says. "Before, we could take operational reports and put them into tools such as Excel, make them into pretty pictures, but all we were doing was just creating static reports. What we liked about the Taleo product is the ability it gives us to see and manipulate data across our different businesses and slice it up into different sections, such as looking at diversity and career bands."

Aramark was looking for a consistent process for gathering and analyzing data across the entire organization, says Hahn.

The demand for more sophisticated workforce analytics applications will continue to grow, says Hanscome. 

"In the end, people are trying to convince others of the need to invest in HR programs and technology and are trying to get to more fact-based decision- making," says Hanscome. "The pressure to do this is only going to increase as the move to figuring out how to account for intangible assets gathers steam."

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