HRCI SPHR – Module 5. Exit Management

1. Module 4. Chapter 3: HR Analytics

And now we are going ahead with HR analytics. So what is HR? Analytics. It is a process of collecting and analyzing human resource data in order to improve an organization’s work performance. The process can also be referred to as talent analytics, people analytics or even workforce analytics. So in my experience of a decade, I have seen that the organizations are using HR data so effectively that any strategy that they design, they ask for HR data. Reason behind HR data has so much of numbers and so much of stories to analyze that they can think of that what they would do in five years ahead, how their organization is growing in terms of the number it’s cost, employees cost, and how it’s affecting their overall profits. What kind of a talent they have, and what kind of a new opportunities that they can tap in based on their current people performance.

And in future, what are the people capabilities. So these data analytics, when you analyze, you will be able to identify what are the risks you able to reveal what are the opportunities organization can avail today or in future. You can discover the trends based on the past trends, how things have been. You can able to predict the present and future and drill into the contributing factors. Okay, this thing happened in the past, what could the factors of it is we try out the new scale or skill set in our organization? What could the contributing factors that will work against us and for us? So workforce analytics helps organization to prioritize and to think on a decision.

That where they need to invest their valuable resources. They cannot invest their valuable resources for all the employees and for each and every department they have to say okay, this is the priorities for next three years and these are the employees who would be working on these priorities. So we have to invest more on them and rest of the business can run as usual. So based on this HR analytics data, organizations are able to make more informed decisions so that they can use the resources optimally. So these are the four types of HR analytics.

One is the efficiency analytics which talks about whether the things are being done right or not. So if I’m following certain process, am I doing those things right or not? With that process, will I be able to get the right outcome or not? Then it’s effectively analytics assessing whether the right things are done or not. So first about are we following the right process? And second about whether the steps involved in the process are useful or required or not.

Okay, then terms as the operational analytics. So whatever the course of whatever the task that we are working on, are they right or not? And whether they’re making an impact on a short term goal. So whether they will help us to complete this project effectively at the end of it or whether it will help us to achieve our yearly objective. When I talk about strategic analytics, this is when you’re linking the HR programs, the pickup picture with the organizational goals.

So whether we are able to get the end result or not, giving you an example, the organization is moving towards AI artificial intelligence, so our RHR program, so the talent acquisition team is working in the right direction to get the right talent on board or not. Our HR processes align in a way that yes, we get the right talent on board and make them effectively as soon as possible as they’re on board to achieve the organizational goals. These are long term impacts. Operational focus on the short term impact. Because AI doesn’t happen in three months, it takes at least a couple of years.

First you identify, okay, we will be going for AI. That only takes the decision making skills. Once you have decided, then you will see which are the areas in the organization where can AI comes in, what is the current process, how AI would be introduced in it, and how many resources would be affected with it, and if the resource will be freed from the current work where these resources will be used. And AI implementation would again take a couple of months.

Once the AI will be implemented, the resource who are doing the existing work, they need to be trained on the other work. So this is a couple of years task. So our HR processes aligned in a way to achieve the organization goals. These are the long term impact. So the HR analytics has to be driven to achieve these four areas, helping the organization to achieve the bigger picture. Let’s move on to the next slide. So what is the purpose of HR analytics? I have given you an overview about it in the last slide. In this slide we will be discussing in detail.

First is establish the baseline so it compare your current practices with the past practices to see whether there’s any improvement or not and if any further changes are being required or not. Conduct benchmarking to compare your current practices with best practices or practices outside the organization. There are many firms these days who are doing this for the organization. So they will review your current practices and industry best practices and then suggest you that what new practices can be introduced, what is the practice that your following is doing great for them as for your culture, so you should continue doing it. So this is conduct benchmarking.

If you do not have any data in front of you, you will not be able to conduct track trends that’s economic, demographic, diversity, succession planning. So how many people in their senior leadership team have the female or male? And the current leadership team is only with the white people, or only people with the host country, or only people with the home country, or there’s a good mix of everything succession planning so all the executive leaders, do they have their successor in the organization or not? How many employees in the employees are in the ready now state or in the two years ready now state?

So these can only happen if you have a data in front of you your compensation, how your compensation has been in comparison to the company’s cost expenses and how it has been grown over the period of time or how it has been compared to your competitors. Are you at the 50th percentile of the market data or are you a little higher or are you a little lower?

So you need to do some corrections your work recruitment and work for trends. So are you able to hire the people in the defined timeline or your recruitment in their tag? Lagging time is too high and you are not able to get the right people on board at the right time measure. So it helps the organization to measure the HR programs and their performance so that they can plan ahead. See that where are the improvement areas that they need to work upon and then plan for the course of action.

So this is purpose of HR analytics in the next slide in this slide I would be giving you few HR formulas which you can use in your organization to see whether your HR programs are running effectively or not and if not then what you can do about it. Talking about the recruitment, the first one is the percentage of the positions being actively recruited is for zeff vacancy rate.

So you see that how many are the vacant positions based on your total headcount so how many positions you have to be working upon? If the numbers are too high that means your organization turnover rate is very high or your organization is growing at immense rate. So you really need to increase your focus area in your recruitment, how many people you are externally hiring and how many people you are hiring internally. If you’re hiring more people through internally through promotions or IGP, that means that the people are ready at a ready now state which is a very good number. However, if you’re hiring majority people from the externally that means your internal talent development is not working that great and they have to start working on it.

This one is very important average time to fill when hiring from outside some of the all external days to fill and the number of external recruits if this number of days are very high. Let’s take an example company says that people at a junior level should be hired within a month, that is a 30 days and it says for senior manager, manager and senior manager the average target should be 60 days, that is two months and for the senior level it says 90 days so three months. Now you have a tad you have a timeline for every position.

Now how many people you are filling in within the current timeline tells us that how effectively your recruitment team is working. Next is cost of external hires, total external hiring cost divided by the external recruit.

So if your hiring cost is very high that means you’re spending so much on your recruitment which will affect the company’s expenses. So the bucket is getting high to get the people on board which is not a good practice. So you have to pitch in your internal you have to change your internal recruitment practices so that you can get right people on board with a little recruitment cost. Next is Attrition so how many people are leaving and will be divided by the headcount? Some people do the rolling headcount which is sum of Attrition in the last twelve months divided by average headcount of last twelve months. So this talks about rolling Attrition because here the Attrition formula talks about the current scenario current month.

However, rolling Attrition tells you about the performance of the Attrition in the last twelve months. There could be some peaks in few seat months and there could be a drop in certain months so it gives you an average picture how the Attrition has been for the organization in the last twelve months. Next commission is succession planning. Succession planning is number of the succession planning candidates divided by the executive level guide count.

So this gives a picture like in case your executive level person leaves immediately how many people are ready to take that person’s position just ready downstairs. Then comes the compensation cost which is a very important cost for the organization because that impacts everything your total expense of the cost they have profits the shareholders impact also being driven the compensation cost.

So labor cost per Ft, what is it per labor cost divided by the Ft total labor cost divided by total number of Ft labor cost revenue percentage total labor costs divided by the company’s total revenue so how much of the revenue percentage is being taken away by the labor’s cost? Cost of percentage as a percentage of total labor cost.

So what is the benefits cost divided by the labor cost. So whatever the benefits we are giving to the employees what is a portion of the total labor cost is being driven away by the benefits cost then is human capital return on investments. The rate of return for each dollar invested in employees is in benefits so total revenue of the organization deduct from with the operating expenses and employees compensation and benefits cost and divide it by compensation and benefits cost. So it talks about how much percentage of the revenue you are investing in the human capital return. Then comes the learning and development so it talks about how much cost you investing in your learning and development and what is the return you’re getting in it so cost per Ft, that is a total learning and development cost divided by the number of FTEs, cost of a percentage of revenue.

So whatever is the learning development cost divided by the company’s revenue and same as the payroll incidences, number of events you have recognized, learning and development event divided by the number of Ft and the total number of hours it gives you for each person. Let’s take an example, you have 100 employees. So for each employee, how many mandates you are investing in their learning and development. Next is participation. So you said that okay, I have recognized ten events in the past and how many employees have really attended.

So is your learning and development events running successfully or not? Or employees are not interested in your learning and developing events. So these are the different formulas that helps the organization. Give a little picture that whether your programs are running effectively or not, or whether some programs getting heavier on a cost disconnect cost site for the organization and they really need to work upon.

These are just a few examples that have given over here to give you an overview of analytics. However, if you see each and every HR program can be number driven to give a story to the senior management team and sell your point for the new program. Tell them how your current programs are running effectively with the data, with the market practices and tell them that they should invest more to get a better results on their human capital.

When you’re running your appraisals, show them a data that how many employees are being promoted in the last three years and now their promotion is due, their performance has been great, so they should be promoted. Or there has been a case that has been continuously promoted for last two years, subsequent promotions and the manager has again set promotion. So do you have a case study to justify that promotion or not? So these all things and data can only become when you drive the data in that way when you’re able to crunch the data that you have in front of you to tell a story to your senior management team. So there are many tools in the market that you can use for your data analytics. If your organization is not able to invest in those tools, then obviously you can get hands on an Excel to use the data and get a story out of it.

So there’s a tab due, there is a bi business intelligence tool which you can use to crunch the data. But always in case you are not able to invest, then you have excellent use the data, crunch it, see the past trends, try to get a story out of it and sell it to the management. Giving an example, in my last organization, there has been a department in which there was a lot of attrition and people were not hi team was not able to analyze or the management was not able to analyze why the attrition rate has been so high. When we did very drill down to our management exit interviews, also the data of the employees who were leaving, we were able to identify that people, when they reached to the level of mid senior level, they leave the organization first because their job is getting stagnant. There’s no new work that they are learning. Second date has been a bottleneck. So people moving from middle senior level to senior level, the standard duration was increasing a lot. It took them for six to seven years to move to the next level.

So they cannot see their career development, they cannot see their career enhancement, they cannot see there any new learning opportunities for them. So it was getting stagnant, the career was getting started at that level and that’s why there has been a lot of attention at that level. So what we did is we worked at that level and we see whether we can provide talent, mobility and whether we can provide career enhancement at those levels for the growth.

With this, when we introduced in a couple of months, not even a couple of months, it took us a complete year to see the reducing the attrition rate. So if you analyze your data effectively, obviously you would be able to go in a root cause analysis and you will be able to define or you will be able to design better HR programs. So HR undertakes are being used nowadays very effectively by the organizations and senior management. Look forward to numbers before making any informed decision. This is an end to the path four. Now we are approaching to part five. That is the exit management and the last module of this chapter. So let’s connect to the next one.

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