Workforce Intelligence: The Path to Growth

By Jac Fitz-enz, Ph.D.

Benchmarking is passè. Japanese industrialists developed it in the1950s, and in 1990 Robert Camp's book popularized it in America. By 2000, HR had embraced the practice. But today, benchmarking has ceased being a leading-edge tool and is now an everyday exercise yielding no competitive advantage.

Growth Imperative
Growing market share is the greatest challenge for today's CEO, with mergers and acquisitions (M&As) promising "instant" growth. But the failure rate of M&As is estimated to be as high as 75 percent. Hewlett Packard bought Compaq in 2002 and watched its stock lose 50 percent of its value. Similarly, Pfizer acquired Warner Lambert and Pharmacia, yet its stock dropped 44 percent in four years.

An Alternative: Organic Growth
While often overlooked or dismissed as too demanding, organic growth, or growth from within, is a powerful, future-oriented strategy. Yet the C-suite is tempted to grab headlines through acquisition instead of grinding out new internal programs. Organic growth is a never-ending process that requires patience, which is something in short supply among many executives.

Past efforts are often a disconnected series of projects without long-term, consistent results. Such efforts die of their own weight or are superceded by the latest management fad.

Organic growth requires more than good judgment and persistence. It also demands the best information available. Commercial enterprises are not closed systems. They operate within a world market of labor demographics, economic cycles, government regulations and competitor initiatives. With so many decision-making variables, false starts and broken projects litter the organic path of organizations.

Understanding the Field
Growth starts at the macro level with the vision of the CEO. The chief executive's vision is turned into strategic initiatives, leading to marketing programs and branding communications. Emphasis gradually shifts to the micro level where we build systems and processes, invest in technology and train associates.

So why do many improvement projects fail to achieve their objectives? Because we may know all the pieces, but we do not know the connections. We lack alignment.

Lateral Alignment
Alignment has always been considered linear. We link goals to objectives to individual performance targets, one at a time, each cascading from above. But people are not linear. If goals, objectives and targets remain isolated from each other laterally, agility and adaptability are compromised. In today's agile global markets, maintaining competitive advantage requires tools that help us widen our vision and synchronize our actions.

Figure 1 illustrates the essentials for analyzing alignment. HR services are provided to functional units. Outcomes are measured in terms such as productivity, quality or service. To increase success, we must analyze all three dimensions simultaneously. An intelligence system that assembles and dissects all key variables, and sorts out the drivers, offers the power to predict outcomes no matter what the mix of influences. It will also work on the micro level, where growth actually happens.

The Moment of Truth
Once the organization is prepared for growth, we must still face the moment of truth: We find ourselves on the front line ready to meet the prospect or customer. All initiatives are at the mercy of the associate. Virtually every variable mentioned above, from vision to training, can affect the moment of truth when associate and customer meet.

The success rate is a direct reflection of the simultaneous alignment of all macro and micro variables. No amount of executive cheerleading will make the sale if something is missing in the system. When asked, every executive will have an opinion about what the key driver is. Unfortunately, there is seldom any data behind that opinion. This is why we must introduce intelligence into the process.

Workforce Intelligence
Intelligence is not linear. It is wide in scope, deep in experience and thorough in deliberation. It is virtually impossible for an individual executive, let alone a group, to provide the scope and breadth of intelligence today's marketplace demands. Each executive looks at an issue based on his or her profession and expertise, such as engineering, finance, marketing or HR. They tend to focus on one area and ignore others that may be interrelated or interdependent.

Figure 2 illustrates factors that can affect the moment of truth and plans for growth. Misalignment of these factors means the moment of truth is in danger. If an associate is confused about the vision or strategic initiatives, how can he or she know how to treat the customer? If branding communications say one thing to customers and another to associates, how should the associate sell or provide service?

In a recent branding study, we discovered that branding was consistent in only about 80 percent of the companies surveyed. Other research shows that immediate supervisors have enormous influence on associate performance, and that supervisors with short tenure seldom do as good a support job as those with longer tenure. Conversely a supervisor who has been in the same position for a very long time can negatively affect associate performance.

The Good News
Within the past five years, decision science and workforce analytics have advanced to a point that can be conveyed as workforce intelligence. Powerful analytic tools existed previously, but they were beyond the budgets of most HR departments. But today, more than one vendor offers different levels of sophisticated assessment and analytic services. A few are truly state-of-the-art. What has been missing until now is a three-dimensional approach for applying analytics. SAS Institute leads in holistic analysis. Their workforce analytic program can easily and quickly handle three-dimensional analyses.

Workforce intelligence removes HR's traditional silos, which have been a barrier to growth. For example, staffing programs frequently operate independently of activity within the sales department. In one large electronics firm, hiring programs were counter-cyclical to sales bookings, costing the company an estimated $35,000,000 in two years. In another example, development programs were not connected to retention efforts, so a major bank spent a quarter of a billion dollars a year on development, yet turnover remained at high levels. Worse yet are the cases of hiring and layoffs occurring simultaneously.

This counterproductive behavior can be prevented with three-dimensional analysis. The analytic process outlined in Figure 1 is the starting point, from which the following processes are activated:

• Measurement. Quantify individual and group data within the cube.
• Connection. Find correlations and causal relationships and build the model.
• Monetization. Describe problems and opportunities in dollars.
• Benchmarking. Checking results against industry standards.
• Prediction. State expected outcomes in revenue or expense terms.
• Monitoring. Install a monitoring system as an early warning device.

From three-dimensional analysis, specific problems with identifiable consequences emerge. If a company is hiring people based on an old job model, the remedy is to redefine the job and introduce pre-hire assessment.

But all problems are not internal. In another case turnover was low, but market share was threatened by new competitors. The three-dimensional approach identified strengths within the company that could be expanded to fend off the upstarts.

Since all organizational variables can be entered into the analytic soup, solutions need not be confined to human capital. Structural and relational capital factors also emerge. We have discovered poorly engineered processes and branding that confuses both customers and associates. In some cases, analytics can help an organization avoid investing in expensive technology solutions, because the process of measurement and analysis identifies another source for the problem.

Benefits
Monetary benefits include savings in hiring and training as well as increases in productivity and service. Once the model uncovers current opportunities, ongoing monitoring continually probes factors that can change and cause future problems. It is an early warning system that short circuits incoming deviations before they can become disruptive and costly.

The workforce intelligence method ensures that confusion and waste will be minimized, the level of confidence in decision-making will rise, associates will be more sharply focused and ultimately customers will be more satisfied and retained. When all these benefits are added together, the total spells consistent growth in revenue, earnings and market share.

Dr. Jac Fitz-enz is the father of human capital benchmarking and workforce analysis. As the founder and chairman of Saratoga Institute, Fitz-enz led the development of the world's most comprehensive human capital benchmark database.