Calculating Return On Investment from HR Analytics
Presented by:
Scott Mondore, Ph.D.
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Work Group Speakers
Scott Mondore, PhDManaging Partner
Hannah Spell, PhDDirector of Research and Analytics
Shane Douthitt, PhDManaging Partner
Matt Betts, PhDConsultant
SMD OVERVIEW: Driving Business Results Through Surveys & Assessments
OU
R T
EC
HN
OLO
GY Analytics Based:
Links People to Critical Business Outcomes through:
• Employee Surveys
• 360 Feedback
• On-boarding & Exit Surveys
• Selection Assessment
• Competency Modeling
OU
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RO
CESS 4 Steps:
• Prioritization of Key Business Drivers
• Selection of Improvement Areas
• Customized Action Items
• Business-Focused Action Plans
YO
UR
BO
TTO
M-L
INE Common Outcomes:
• Operations Metrics
• Financial Metrics
• Customer Satisfaction
• Patient Satisfaction
• Turnover / Retention
• Whatever is most critical to your bottom-line
Participating Organizations
Presentations & Presenter
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Scott Mondore, Ph.D.Managing [email protected]
http://smdhr.com/leadershipteam.html
Learning Objectives
Define the goals of analytics
Real Bottom Line Indicators
Calculating Return on Investment
THE GOALS OF ANALYTICS
CASE STUDIES
AFTER THE ROI….
A Critical Definition
• ROI does NOT stand for: Reporting Out Information
• ROI is not based on how many data visualizations and reports you create—or how cool they look
• The same analytics that create the initial models can be used to show the actual ROI
• At some point, a CEO is going to ask: “We’ve spent all this money on the HR Analytics team/tools…..what’s the ROI?”
The Biggest ROI Obstacle
• As with most HR interventions (leadership development, employee surveys, 360s)….it isn’t the calculation or the math or getting the data
• It’s just taking the time to do the ROI study
Goal and Definition of HR Analytics
• Ultimate Goal – Leverage people insights to inform changes to organizational policies/procedures to better align with BUSINESS OUTCOMES
• Simply Defined –The analysis and application of a company’s people data– Often involves multiple sources of data (some of which come from non-
traditional HR sources)
– Includes both primary as well as secondary data collection strategies
• Implications – Can impact broad spectrum of HR (and organizational) activities
• Turnover analysis
• ROI and Cost calculation
• Reporting• Data
Management• Compensation• Training
• Competency models
• Predictive talent profiles
• Succession Planning
• Performance Assessment
• Training effectiveness
• Survey development and analysis
• Targeted assessments
• New Hire, Onboarding, Exit Surveys
• Climate Assessment
• Change Readiness Assessment
HR ANALYTICS
Talent Management
HR Operations
Employee Experience
Recruiting & Selection
• Target Candidates
• Selection Assessment Development and Analysis
• Role Play, Work Sample, Behavioral Interview, Knowledge Assessment Development and Weighting
• Hiring Algorithms
Why Analytics?
• HR Analytics connect employee data to business outcomes
• HR Analytics prioritize where and how much to invest
• HR Analytics calculate impact/ROI from people investments
Analytics Business ResultsPeople Investments
The Opportunity – HR Analytics
• Discover the attitudes, competencies, skills, experiences, etc. that drive business results
• Make people investments based on drivers of results
• Take the lead in making HR processes business-focused
• Build a business case based on ROI
• Become viewed as a strategic partner that drives business results
Prioritization
• The key take away from any analytic project should be prioritization for follow-up
• Analysis paralysis is common – make sure you are doing analytics with a purpose
• Don’t get bogged down in information overload
• There will always be more analysis you can do, more ways to cut your data…determine what is needed and useful
Analysis Goals
Connect the dots between people and business results – don’t just assume
Uncover actionable insights
Determine a priority for follow-up
Generate strategic plans – direct resources to the priorities
THE GOALS OF ANALYTICS
CASE STUDIES
AFTER THE ROI….
• Pharmaceutical company with 23% market share facing new competitors and recent stagnant growth
• Sales training is a significant investment, but not sure of ROI
• Need to conduct skills assessment and ROI study to create company-wide training strategy
• Included customer assessments (e.g., physicians) in the assessment process
CASE STUDY: Small Pharmaceutical Company
CASE STUDY: Small Pharmaceutical CompanySelling Skills Assessment Sample Items
Competency Sample Item
Account Management Responds with appropriate urgency to requests that require follow up
Advanced-Level Selling Skills Engages in discussions with healthcare providers that are relevant and interactive
Evidence-Based Selling Skills Easily discusses concerns about bias in XYZ’s clinical studies
Product & Disease State Expertise
Articulates all potential effects that XYZ can have on patients depending on therapy paradigm and patient profile
Managed Care Expertise Effectively finds solutions to managed care challenges and restrictions
Relationship Building Comfortably builds rapport with healthcare provider’s office staff
Consultative Selling Skills Asks pertinent and insightful questions during interactions to identify customer needs
CASE STUDY: Small Pharmaceutical CompanyOverview of the Full Model
Evidence-Based Selling Skills
Consultative Selling Skills
Managed Care Expertise
Product & Disease-State Expertise
XYZ Script Writing
Market Share0.10*
0.29*
0.54*
0.16*
0.19*
0.60*
*Higher path values indicate a stronger impact based on a 0.0 to 1.0 scale.
1
2
3
4
Circled numbers indicate the development priority based on the magnitude of the relationship with script writing & market share.
Findings & Implications:
• Evidence-Based Selling Skills are a significant, causal driver of Script Writing and Market Share.
• Evidence-Based Selling Skills, in turn, are driven by Product & Disease State Expertise, Managed Care Expertise, and Consultative Selling Skills.
• Prioritizing initiatives that target the key drivers listed above will lead to improvements in sales performance among XYZ Sales Representatives.
CASE STUDY: Small Pharmaceutical CompanyCritical Item-Level Drivers
Priority* Competency Item
Evidence-Based Selling Skills
Easily discusses concerns about bias in XYZ’s clinical studies
Accurately answers questions about clinical study methodology
Product & Disease State Expertise
Possesses broad knowledge of the therapeutic market
Articulates all potential effects that XYZ can have on patients depending on therapy paradigm and patient profile
Managed Care Expertise
Understands the specifics of managed care plans
Effectively finds solutions to managed care challenges and restrictions
Consultative Selling Skills
Understands physicians’ unique approaches to treating the disease state and provides solutions based on needs
Asks pertinent and insightful questions during interactions to identify customer needs
1
2
3
4
*Priorities determined based on the magnitude of the relationship with script writing & market share.
CASE STUDY: Small Pharmaceutical CompanyCompetency-Level Change in Performance
Competency2017
Average**2016
Average**Difference
(2017 – 2016)Significant Change
Account Management 6.65 6.64 +0.01 No
Advanced-Level Selling Skills 6.55 6.59 -0.04 No
Consultative Selling Skills* 6.59 6.47 +0.12 Yes
Product & Disease State Knowledge* 6.65 6.51 +0.14 Yes
Evidence Based Selling Skills* 6.56 6.34 +0.22 Yes
Managed Care Expertise* 6.64 6.42 +0.22 Yes
Relationship Building 6.70 6.64 +0.06 No
Sales Representative Overall 6.61 6.53 +0.08 No
Rating Scale: 1 = Strongly Disagree; 2 = Disagree; 3 = Somewhat Disagree; 4 = Neither Agree nor Disagree; 5 = Somewhat Agree; 6 = Agree; 7 = Strongly Agree
* Denotes 2016 key drivers of Script Writing and Market Share Performance.** Averages calculated for XYZ Sales Representatives who participated in the assessment in 2016 and 2017 (N=84); therefore, 2017 averages reported here differ slightly from 2011 averages presented previously. All averages exclude self ratings.
CASE STUDY: Small Pharmaceutical CompanyLongitudinal Impact on Sales Performance
Evidence-Based Selling Skills
Consultative Selling Skills
Managed Care Expertise
Product & Disease-State Expertise
XYZ Script Writing
Market Share0.10*
0.29*
0.54*
0.16*
0.19*
0.60*
Change in Mean from
2016 to 2017 of +.14
Change in Mean from
2016 to 2017 of +.22
Change in Mean from
2016 to 2017 of +.12
Change in Mean from
2016 to 2017 of +.22
299 Scripts 371 Scripts
2016 2017
Sales Outcome Estimated Impact*Actual Sales
Improvement (2016 to 2017)
Total Sales Impact
XYZ Script Writing3.2% of Script Writing
Improvement+24% +.77%
Market Share3.8% of Market Share
Improvement+1.0% +.04%
23% 24%
2016 2017
*Impact based on 0.2 change in Evidence-Based Selling Skills Mean; Results based on the average Script Writing and Market Share performance of XYZ Sales Representatives who participated in the Sales Assessment and remained in the same sales territory between 2016 and 2017 (N=54).
By focusing on improving Sales Reps’ Evidence-Based Selling Skills, the training team played a key role in
improving bottom line sales (i.e., Script Writing and Market Share) performance .
Increasing Script Writing by .77% equates to approximately
$15,400,000in additional revenue.
Keys to ROI Calculations
• Instead of running a concurrent model, we are running a model that shows change in key drivers (Time 1 to Time 2) against change in business outcome (Time 1 to Time 2)
• The beta weights show the IMPACT (and amount of variance accounted for) of key driver change on the business outcome
• Use SEM for the analysis when possible
Large Retail Organization
• $93 million annual shrink problem
• Succeeded in reducing shrink by $14 million dollars in 1 year
• Create a business-focused HR Strategy:
– Empirically link employee data to meaningful business outcomes
– Identify ‘invisible levers’ in employee attitudes, skills and behaviors that will drive outcomes
– Leverage existing data to create the strategic framework
– Prioritize employee-focused interventions to drive business outcomes
– Provide customized solutions to drive business outcomes
Data Utilized in the Study
• Shrink data at store level—as an example (used multiple business outcomes in the full study)
• Employee opinion survey results
• Performance Mgmt/Competency ratings
• LMS training data
• HRIS data – dishonesty terminations
• Store turnover data
• Customer satisfaction results
Key HR Processes
Business Outcomes
Performance Management
Selection
Employee Survey
360 Feedback
Succession Planning
Competency Builder
Career Development
HRIS Data
Training
Business Outcomes
People• TurnoverService• Customer satisfactionQuality• ShrinkFinance• Cost reduction
Dimensions of the Employee Survey
Engagement
Regard for Employees
Manager Effectiveness
Career Development
Recognition & Perf. Mgmt.
Resources Available
Job-Person Match
Policies Hours Worked
Customer FocusWork Environment
Benefits
Scales range from 2-5 items. Alphas range from .79-.91.
Salaried Employee Competencies
Employee Development Leadership
Strategic Decision Making
Cross-Organizational Collaboration &
Teamwork
Execute With ExcellenceAchieve Extraordinary
Results
Individual Ratings for the Store Manager and Assistant Mangers were used.
Drivers of Shrink
ShrinkLegend
Employee Survey
Training Participation
Terminations
Competency Ratings
Numbers indicate the intervention priority based
on the magnitude of the relationship with shrink.
Job-Person Match
Manager Effectiveness
Dishonesty Terminations
Ethics Course Participation
Achieve Results
Shrink Course Participation
3
3
2
1
2
2
Further Prioritizing the Levers
• While all of the ‘levers’ identified in the model significantly impact shrink, the ‘levers’ can be prioritized even further based on the magnitude of their relationship with shrink
• Further Prioritization:
1. Achieving Extraordinary Results
2. Ethics Course
3. Shrink Course
4. Dishonesty Terminations
5. Job-Person Match
Intervention Framework
People TechnologyProcess
Planned Interventions & Cost
• Build optional shrink training courses for specific roles
• $300kTraining
• Deploy a store-level incentive program for meeting quarterly shrink goals
• $5 million
Recognition & Reward
• Nothing plannedSelection
• Insert shrink focused messaging in a larger “customer experience” initiative
• $250k
OD & Leadership Development
Recommended Actions to Reduce ShrinkTRAINING:
• Code of Ethics Course– Has a direct, significant impact on shrink– Opportunity to re-train or conduct refresher courses with managers
and employees– Senior leaders regularly re-communicate the key messages from the
Code of Ethics
• Sales and Shrink Course– Has a direct, significant impact on shrink– Currently not mandatory– Opportunity to make the course mandatory and re-train managers
and employees
Revised Interventions & Cost
• Enhance and update ethics and shrink course – make both mandatory
• $50kTraining
• Nothing plannedRecognition &
Reward
• Improve selection process for front-line employees –background checks & integrity testing
• $2 millionSelection
• Develop shrink management routines
• Develop shrink partnering program
• $50k
OD & Leadership Development
Actions Taken and Actions Cut
• Initial budget was $5.55 million
• Revised budget was $2.1 million– Cut incentive plan
– Cut major training build
– Cut “shrink focused” customer experience programs
• Data analysis – Did not identify pay/benefits as a major driver of shrink
– Showed the existing training courses were having an impact
– Did not identify “customer focus” as a major driver of shrink
– Showed that “dishonesty terminations” were a significant driver of shrink
• Created an HR Strategy with a known impact on shrink
Calculating Impact & ROI
Intervention Beta Potential Shrink Impact Level of Investment
Manager Competency .14 $13.0 million Under-investing
Ethics Course .10 $9.3 million Under-investing
Shrink Course .09 $8.4 million Under-investing
Dishonesty Terminations -.08 $7.4 million Under-investing
Engagement .04 $3.7 million Appropriate
Reward & Recognition ns ns Over-investing
Customer Satisfaction ns ns Over-investing
• $93 million in annualized shrink
• Example – average Manager Competency score of 3.92
• Moving 0.30 could result in additional savings of $975,000Approximate cost of $200,000 (build, employee time)
• We also took a 25% conservative impact factor
• Expected ROI: 487%
Doing the ROI Math
• Predictive Model Competency Beta: 0.14
• Shrink Problem: $93 million
• Time 1-Time 2 Model: Actual Impact Beta 0.12
• $30M improvement X .12 Impact Beta=
– $3,600,000
Complex Methods – Simple Insights
Make sure the methods are stringent and appropriate to accurately answer the question
Keep the methodology behind the scenes
Only share the key take-aways
THE GOALS OF ANALYTICS
CASE STUDIES
AFTER THE ROI….
After Your ROI Calculation
• COMMUNICATE!– Share the ROI with key stakeholders and all leaders– Keep the story simple (but bring the complex math with you)– Include the story as part of the OD interventions/change management
• Keep Analyzing the Time 2 Data– Over time, you will find new key drivers because change happens– You will need to create a new strategy for Year 3 based on latest analysis
• It’s a Hot Seat– More ROI will be expected the next time around, but respect for the HR
Analytics will be gained
The CEO’s Question
• Remember the CEO’s question: “We’ve spent all this money on the HR Analytics team/tools…..what’s the ROI?”
• Answer:
– “To date, we have spent $XYZ dollars on team, technology, tools and we have returned $ABC dollars in terms of……”:
• X% improvement in direct sales by our sales reps
• Y% reduction in turnover
• Z% improvement in actual Shrink dollars
Revisiting Practical Tips• We have to change our mindset and approach:
– Move from reporting HR-focused metrics to identifying the drivers of business results– Then show if focusing on drivers actually had the desired impact (ROI)
• Focus on Predictive Analytics that are linked to business outcomes– More reports do not equal (ROI)
• The analytics are complicated – but the story that emerges has to be simple– Boil the story down to critical drivers and priorities– Improve x (people measure) & y (people measure) and z (business outcome) will improve– Then prove it with analytics (ROI)
• Start with one project and try it out before jumping all the way in. Ask yourself:– Can I articulate why this really matters to the business? (ROI)– Can I articulate the business value of moving this number? (ROI)– Why would senior and front-line leaders care about this metric? (ROI)
Recommendations
• Have a measurement strategy – it can’t be to just measure more often
• Harvest the intelligence from the data you already have, before investing in more data
• Think about what you will do with the data to drive results
• Define the business problem first and then identify potential data sources that will likely provide intelligence
• Show the impact of the measurement process (ROI) and leaders will champion HR measurement…not question it
Questions and Comments
• Please use the chat function to submit a question
• Recorded meeting and PPT deck will be posted to the HR Analytics Work Group website
• On HR Analytics Work Group LinkedIn page you can ask the group and speakers additional questions after the meeting
WHAT NEXT?
SMD OVERVIEW: Driving Business Results Surveys & Assessments
OU
R T
EC
HN
OLO
GY Analytics Based:
Links People to Critical Business Outcomes through:
• Employee Surveys
• 360 Feedback
• On-boarding & Exit Surveys
• Selection Assessment
• Competency Modeling
OU
R P
RO
CESS 4 Steps:
• Prioritization of Key Business Drivers
• Selection of Improvement Areas
• Customized Action Items
• Business-Focused Action Plans
YO
UR
BO
TTO
M-L
INE Common Outcomes:
• Operations Metrics
• Financial Metrics
• Customer Satisfaction
• Patient Satisfaction
• Turnover / Retention
• Whatever is most critical to your bottom-line
What SMD Provides for Organizations
What good is a prediction without a
guarantee?
Integrated Solutions:
Turnover Reduction
Employee Lifecycle Surveys
Labor Relations Assessments
Consulting:
Analytics On-Call
HR Analytics Check up
Competency Builder
Assessment and Hiring
Surveys:
Employee
360 Feedback
New Hire and Onboarding
Exit
Pulse
Physician
2017 Analytics Work Group Completed- Now What?
• Stay informed on SMD research– White Papers: http://smdhr.com/whitepapers/– Webinars: http://smdhr.com/webinars/
• Complimentary Analytics Consultation– One of SMD’s Analytics Consultants (PhD) will take a look at your
organization’s current process to collecting and/or analyzing employee data and provide feedback on improving collection and diagnosis
– More information, contact Heidi Kamm [email protected]
• Post-Analytics Work Group Survey– We’d enjoy your feedback on the Retention Work Group, please take
survey here
Let’s get in touch:
Scott MondoreManaging Partner
smdhr.com