Money Makes the Case for Workforce Analytics

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By Laime Vaitkus

Taking on workforce analytics requires an investment of time and money, but it can be well worth it, as data-driven decisions can have a positive effect on the business bottom line, according to consultants.

The business case for using workforce analytics is for financial and competitive advantage, according to Jean Martin, talent solutions architect at CEB Global, a best practice insights and technology firm. “There has been a radical increase in the pace of change and the nature of work,” and companies need a better understanding of the diverse workforce that now exists, she told Bloomberg BNA Feb. 3.

The business world has become too complex and competitive to leave the decisions to managers because “people can’t necessarily make decisions with reliable accuracy every time,” she said. “If you are not placing the right bets, you will be left behind by the competition,” she said.

Selling the Need for Analytics.

There are financial benefits from using workforce analytics. For example, stock prices of organizations with high-impact talent analytics outperformed their peers by 30 percent, according to “High Impact Talent Analytics” from Bersin by Deloitte; improved gross profit margins by 6 percent, according to “The Analytics Era” from CEB Corporate Leadership Council; and had a 79 percent higher return on equity, according to “HR Systems Survey” from Sierra-Cedar.

HR professionals can make the case for analytics by using numbers and charts, but case studies can be particularly compelling, as they present realistic examples of how organizations can benefit from workforce intelligences, said Lexy Martin, principal of Research and Customer Value at Visier.

Companies that use analytics successfully do not simply collect data but know how to wield it to their advantage, according to Lexy Martin, who spoke at a recent WorldatWork-sponsored webinar on the topic. “It isn’t just the adoption of workforce analytic solutions that create the returns; it’s what you do with analytics,” she said. The insights are useless if they are not acted upon, and “you need to follow up on those actions to determine if they make a difference,” she said.

The most effective practice is to integrate several different data sources into the analytics, such as HR talent management, financial, operational data and more, Lexy Martin said.

The companies that get the best returns on their workforce analytics investment are those whose leaders use the data to drive business decisions and outcomes, according to Jean Martin. “Companies that manage to do that successfully have the advantage over other organizations,” she said. CEB research found that these best-practice companies achieve $13 million in savings for every billion dollars of revenue, she added.

A survey from CEB noted that companies reported a higher return from using analytics tracked data more frequently and sharing it with line managers. “This is the actionable step from the data,” Jean Martin said.

Best-practice companies gather the data and use it to inform HR strategies and then share it with managers, Jean Martin said. For example, data analysts and HR may work to gather and interpret the data and bring the conclusions to business leaders. In turn, they might use the data to develop a set of questions and recommendation for line managers, she said.

High Cost but Higher Returns Possible.

The investment in workforce analytics can be substantial; the average cost for a data warehouse is $2.3 million, according to research from IDC, an IT market research firm, Lexy Martin said. There is also the cost of additional technology, such as licenses, IT administrators and maintenance fees, which can bring the average cost up to $3.5 million, she said.

However, organizations can reap positive financial and business results through the use of workforce analytics; taking the insights and making interventions really can make an impact, Martin said. It starts with adopting the technology and using it to make HR itself more effective, and then analytic teams can go after business metrics that can really affect the bottom line, Lexy Martin said.

Typically, there are two basic types of results for companies that use workforce analytics: The first result is from saving headcount and becoming more efficient, she said. For example, internet companies Micron and Yahoo reported they saved $500,000 each through increased efficiency with fewer staff.

Reaping the Benefits of Analytics.

More advanced uses of workforce analytics are geared toward results that would interest C-level executives—that is, data that directly affect financial results, Lexy Martin said.

For example, Electronic Arts, a video game company, used data to analyze what made certain work teams more successful than others, she said. The company analyzed workforce and business data to determine the best predictors of success for each game that went to market, she said.

Electronic Arts reviewed the attributes of teams and the team members that created each game and compared it with product data, game quality, financial results and customer satisfaction, Lexy Martin said. This allowed Electronic Arts to improve firm performance and create more profitable games, she said.

Companies considering using workforce analytics need to determine what issues are most critical to the business, Lexy Martin said. They should also determine their goals and objectives and which metrics can best determine the desired impact, she said.

To contact the reporter on this story: Laime Vaitkus in Wilton, CT at LVaitkus@bna.com

To contact the editor responsible for this story: Tony Harris at tharris@bna.com

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