Using Analytics To Make Smart HR Decisions

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Rusty Lindquist VP Strategic HR Insights BambooHR Mykkah Herner Head of Professional Services PayScale

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—Ion Hewitt Of the 6 emerging capabilities of todays HR leaders, the first is “data- and analytics-based decision making.

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Evolution of HR Business Value H L Strategic Micro Small Mid Large Operational

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People Analytics Companies that build capabilities in people analytics outperform their peers in quality of hire, retention, and leadership capabilities, and are generally higher ranked in their employment brand. -Bersin, by Deloitte Human Capital Trends, 2015

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Competency Gap Three in four surveyed companies (75 percent) believe that using people analytics is “important,” but just 8 percent believe their organization is “strong” in this area. -Bersin, by Deloitte Human Capital Trends, 2015

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Competency Gap Too few organizations are actively implementing people analytics capabilities to address complex business and talent needs. Among all the challenges we studied this year, people analytics presented the second-biggest overall capability gap for organizations. -Bersin, by Deloitte Human Capital Trends, 2015

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of HR professionals score themselves low in their ability to analyze. 80% -Bersin

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It’s time to blow up HR and build something new Rethinking HR Why we love to hate HR What will it take to fix HR It’s time to split HR HR faces a crisis of credibility in the boardroom HR is our “favorite corporate punching bag” Value Perception Crisis

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It’s more than just Competency Outdated Technologies (like spreadsheets) Need for data consolidation (like HRIS) Need to look externally Waiting too long to start measuring Don’t know what to measure and how

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How do we fix it?

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Increase exposure to the data you do use

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Identify the data you need

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Data is not the point

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Suck Threshold Features Suck Threshold Not all growth is good growth Expected Result Actual Result Perception of Value Not doing enough Doing too much

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Suck Threshold What Matters Most Not doing enough Doing too much What To Say No To Sweet Spot Features Not all growth is good growth Perception of Value Suck Threshold

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Signal to noise ratio

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Align With Strategy

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Focus on Outcomes

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Examples: Comp Analytics

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What are comp analytics and why do they matter? Measure performance of your comp program. Identify pay issues that create unnecessary cost. Identify pay issues that create risk of litigation. Condense large amounts of information into small understandable nuggets. Substantiate your hunches. Get your CFO on your side.

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Range Midpoint Minimum Maximum $20,000 $32,000 $26,000 Range Midpoint: Range Minimum: Range Maximum: Lower limit of a pay range/band. The proficiency point aligns to market. The upper limit of a pay range/band. Basic Comp Measures Pay Ranges

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Range Width [=(max-min)/min] How much flexibility do we give our managers in setting pay? Midpoint Differential [=(midpoint grade2-midpoint grade1)/midpoint grade1)] Do we have a more or less hierarchical org structure? Positions with multiple levels? Understanding Range Math

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Range Penetration [=(EE Pay-min)/(max-min)] How well are employees moving through their ranges – do the ones at the top deserve it? Green-Circled Employees [Below bottom of range] We may be untruthful and/or paying un”fair”ly. Red-Circled Employees [Above top of range] These are employees we decide to pay more, even though the data doesn’t support it. Using Ranges

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Compa-Ratio [=EE Pay/Mid] Are we on track with our pay philosophy? Market Ratio [=EE Pay/Market] How are we doing vs our competitors? Midpoint to Market Delta [=(Mid-Market)/Market] Are our ranges current to market? Measuring Plan Performance

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Communicating With Execs About Compensation

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How are we doing? What’s the real concern Comp is something nebulous that I can’t control or understand I’m afraid we’re far far away from the market What’s the response Educate and update execs regularly on the comp info they need to know Proof Market-Ratio – report for the org and by dept* Compa-Ratio – report for the org and by dept. Provide individual info to managers, as appropriate

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29 Cost to bring Green Outliers to range minimum: $115,041 or 2.02% Amount paid to Red outliers above range maximum: $115,041 or 2.02% Sample Compa Ratio Report How are we doing?

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Are we keeping up with the market? What’s the real concern? We’re losing a lot of people to our competitors. Someone annoying has been coming into my office every week for the past quarter asking for an increase. Are we overpaying? What’s the response? Share real-time data on your organization’s position relative to the market. Proof Market-Ratio – report for the org and by dept.* Compa-Ratio – report for the org and by dept. Provide individual info to managers, as appropriate.

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Sample Market Ratio Report Are we keeping up with the market?

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What about our critical positions? What’s the real concern? We have 12 names in a drawer and we’re willing to pay those people anything – don’t tie my hands. We’ve had 3 of our best 8 people leave a critical job in the past few months. What’s going on? What’s the response? Share current market trends on critical jobs so you can be more responsive to market shifts in an uncertain time. Proof Market Reports – Hot jobs analysis.

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What about our critical positions? Hot Jobs Analysis

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How are our top performers doing? What’s the real concern? We just lost a really critical, high-performing, employee to our competitor. What’s the response? Share info about where your top performers fall in range. Proof Flight Risk Report. Underpaid over-achievers.

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How are our top performers doing? Flight Risk Report How are our top performers doing? Flight Risk Report

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What’s the real concern? Where are we open to law suits? We have a report due on our compliance with EEO. What’s the response? Share info on disparate pay/potential risk areas. Provide assurance that there are no risk issues. Proof Disparate pay report, divided by EEO classes. What are our potential risks?

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Are there any potential risks? Disparate Pay and Reports by EEO Gender-based Report What are our potential risks? Disparate Pay and Reports by EEO Disparate Pay

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What’s the real concern? We’ve had a lot of folks who have been here a while leave! Is that ok? We’ve had some critical positions turnover, is that ok? What’s the response? Get to the reasons behind the turnover. Not all turnover is bad. Share the physical costs of turnover. Proof Turnover calculation. Any Turnover Issues?

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Any turnover issues? Calculating the Cost of Turnover Additional Resource: http://www.isquare.com/turnover.cfm Any Turnover Issues? Calculating the cost of turnover Monetary Costs due to leaving Recruitment Training Low Productivity Costs New Hire Lost sales / opportunity costs Morale Bad turnover vs good turnover Typical Projections Line Staff = 150% of annual salary Managerial staff = 200-250% of annual salary

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Examples of Recruitment Measures 40 Examples of Recruitment Measures Average Time to Hire X days How often do employees negotiate their offer? X% of offers negotiated Number of non-accepted offers due to compensation Win Rate vs. Competitors # of head-to-head wins vs. competitors The idea is that recruitment should improve in relation to the comp program’s success

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Flight Risk - # flight risk EE 90 Day Turnover Rate = Good Turnover vs. Bad Turnover The idea is that retention should improve in relation to the comp program’s success Examples of Retention Measures 41 Examples of Retention Measures

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the rate at which people leave a place, company, etc., and are replaced by others

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Examples of Budgetary Impact Measures 43 Compensation as a % of Revenue or Total Compensation as a % of Revenue The idea is that comp $ don’t have to increase to spend comp better Gut check on over/under payment vs. Actual (Range & Market) relative to performance The intent is to show that gut checks aren’t always accurate – value in doing comp studies Examples of Budgetary Measures

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Examples of Engagement Measures Engagement Survey Scores Absenteeism – Average # of unplanned absences by employee Exit Interview Responses re: compensation 44 Examples of Engagement Measures

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eNPS (Employee Net Promoter Score) “On a scale of 1 to 10, how likely are you to recommend this company as a place to work?” 10 9 8 7 6 5 4 3 2 1 0 Promoters Passives Detractors eNPS = Promoters (%) – Detractors (%)

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General Guidelines Start small (the journey of a thousand miles) Pick something meaningful and get started Align your efforts with your business strategy Build (or hire) competency in your team Partner with IT Focus on ROI Leverage technology

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Companies that excel in talent and HR analytics can be positioned to out-compete and outperform their peers in the coming years. —Bersin

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Who are our key partners? Who are our key suppliers? Which key resources are we acquiring from partners? Which key activities do partners perform? What key activities do our value propositions require? Our distribution channels? Customer relationships? Revenue Streams? What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment? Which customer needs are we satisfying? What type of relationship does each of our Customer Segments expect us to establish /maintain with them? Which ones have we established? How are they integrated with the rest of our business model? For whom are we creating value? Who are our most important customers? Through which Channels do our Customer Segments want to be reached? How are we reaching them now? How are our Channels integrated, and which ones work best, or are most cost-efficient? How are we integrating them with customer routines? What Key Resources do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue Streams? What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive? For what value are our customers really willing to pay? For what do they currently pay? How are they currently paying? (How would they prefer to pay?) How do we report on this “revenue” to the rest of the organization?

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Follow BambooHR and PayScale on social media: bamboohr.com/blog | payscale.com/compensation-today Thank you!

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Questions? BambooHR Receive a free job posting on our ATS and full HRIS for one week. We will contact everyone within the next few days to set this up. Download our free eBook: Communicating Compensation: Your guide to tackling tough conversations about pay PayScale