November 16, 2010

Human Capital Management Institute

Presents:

Measuring Workforce Productivity using

Total Cost of Workforce

Agenda

• Welcome

• Overview

– About HCMI the Workforce Intelligence Consortium

– The Challenge of Measuring Human Capital

• What is Workforce Intelligence?

• Quantifying Total Cost of Workforce

• Q&A

• What’s Next?

2© Human Capital Management Institute 2010

About Human Capital Management Institute

HCMI Background:

Specialized in HR analysis & measurement

Deep expertise in Workforce Analytics & Planning

Board made up of CFOs and HR heads

Over 40 years of experience

What We Do:

Measure the immeasurable in human capital

Transform workforce data into business intelligence

Provide Tools and Training so HR can Partner with Finance

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Workforce Assessment w Strategic Consulting w Training

Best Practices w Workforce Analytics and Planning w Benchmarking

The Human Capital Management Institute (HCMI) was founded on the belief that organizations can and must, find better ways of measuring their investments in human capital. Our vision of the future is one in which human capital measurement and information is as integral to business decision making as financial information is today.

We Bring Financial Discipline, Standards and Rigor to the HR Function

© Human Capital Management Institute 2010

Workforce Intelligence Consortium

Workforce IntelligenceConsortium

Universities/ Educators

Thought Leaders

Benchmarking Organizations

Member Companies

HCMI

A partner-driven organization dedicated to quantifying and solving workforce planning and analytics issues

Dr. Jac Fitz-EnzSponsors

What Do We Do?

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Awareness Action Competence Effectiveness Excellence

QuantifyIntegrate

Predict

The Workforce Intelligence Consortium

accelerates your workforce planning and

analytics competency

Bu

sin

ess

Im

pa

ct

Align HR and business strategy

Create a Center of

Excellence

Utilize benchmark standards

Conduct root cause analysis

Leverage advanced metrics and ROI

analysis

The Challenge of Measuring Human Capital

WorkforceAnalytics

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Past Present

WorkforcePlanning

DecisionMaking

Historical Workforce

Future Workforce

Current Workforce

Future

Trend Analysis Future ScenariosWorkforce Knowledge

Predictive Analytics

Key performance

Indicators

Workforce Optimization

© Human Capital Management Institute 2010

Workforce Analytics vs. Workforce Planning

The Challenge of Measuring Human Capital

Human Capital Management Institute 7

Va

lue

1978 1985 1995 2007 2010

Workforce IntelligenceConsortium

Predicting

Analyzing

Benchmarking

Measuring

Time

As we move to more advanced analytics over time, we see

greater value

Source: Dr. Jac Fitz-enz

The Challenge of Measuring Human Capital

Compensation

Transfers

New Hire Turnover

Succession Data

Turnover

Training

Recruiting

Em

ploy

ee D

ata

Benefits

Span

of Control

Workforce

Planning

SuccessAdvanced

Analytic

Insights

Complexity of Workforce Data

Employee/Full-Time-Equivalent (FTE)

Jobs/Roles/Skills

Time - Tenure

Compensation ($ vs. Equity)

Frequency of Change

Promotions, Transfers, Hires, Terminations

Jobs/Roles/Skills

Time - Tenure

Measuring the Intangible

Lack of Standards

Lack of Analytic Skills

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• Revenue

• Expenses

• Assets

• Liabilities

What is Workforce Intelligence?

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Operations &

Business

Financials

• Hiring

• Paying

• Developing

• Engaging

• Retaining

• Diversity

Human Capital

Customer

How do we get from Human Capital to Financialsand deliver actionable data?

• Unit Cost

• Cycle Time

• Quantity

• Quality

• No. attracted

• Conversion rate

• Spend amount

• Margin

• Satisfaction

• Return rate

© Human Capital Management Institute 2010

• What is Total Cost of Workforce (TCOW)?Total of all workforce direct related costs including:– Employee compensation (salaries/wages, incentives, overtime, + equity & other pay)

– Contingent temporary/contract labor (costs)

– Employee benefits and perks (costs)

– HR function (costs, e.g., recruiting, training & support)

– Retiree or inactive workforce costs (costs)

• Why is it important? – Workforce is the largest cost (average 70% of operating expenses)

– What gets poorly measured, gets poorly managed

– In growth: budgets, requisitions and position control leave many holes

– In decline: shows how much to cut

– Need for a metric to manage the workforce complexity

Total Cost of Workforce (TCOW)

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The Bottom Line – Controlling Workforce Costs

• Existing cost control tools don’t work (Budget?)

– Status quo drives binge (hiring) / purge (layoff) cycles

– Off-shoring/Outsourcing reduces costs but not competition

• How does TCOW Control Costs?

– Set targets to budget, forecast, benchmark or improvement goals

– Link to new hire requisitions, hiring freezes, bonus-incentive payouts

– Benchmark business unit and organizational performance

• TCOW as a % of Revenue or as a % of Total Expenses

• 1% TCOW savings at a Fortune 500™ Co. = $30 million

About Total Cost of Workforce (TCOW)

Human Capital Management Institute

• “Total Cost of Workforce detail is great but I need to drill down to see what is driving costs”

Low - Below Total Wkfce Cost Target

Warning - Limit of Total Wkfce Cost Target

High - Above Total Wkfce Cost Target

Each category shows performance,

tenure and job role detail

Total employees managed and

average cost of workforce

displayed for

each manager.

Total Cost of Workforce: Application

Human Capital Management Institute

The Impact of Workforce Analytics and PlanningHewlett Packard Case Study

About HP:

$120 Billion USD Annual Revenue, 13% Revenue Growth, 300,000+ global employees

Ranked number 9 on Fortune 500 list of America’s biggest revenue producers

Acquisitions:

2008, EDS corp., $22.1 Billion USD revenue, 130,000 employees

2009, 3Com corp., $1.3 Billion USD revenue, 4,600 employees

2010, Palm corp., $1.0 Billion USD revenue, 1,000 employees

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HP Case Study: Inventing the Future Workforce Growth, Reduction and Business Integration:13% growth while saving $500 - $700 Million USD annually

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• 1-page workforce snapshot report• Workforce planning optimization• Workforce mix (regular, contract, expat)• Location, job and function insights

Productivity

Industry standard definitions Benchmarks Productivity metrics + goals

HR Strategy Quadrants HR Optimization Model Output

• Pay for performance • Link turnover to employee feedback• Shared culture and values

Engagement

Rewards & recognition Employee communication Employee assessments

• Predictive analysis• Cost savings vs. growth analysis• Reduce/re-train outdated skills

Cost

Total cost of workforce Job architecture Productivity vs. cost trade-off

• Current vs. future talent needs

• Rapid hiring of new talent/key skills

• Integrate critical skills and roles

Quality

Talent management Learning & development Staffing requirements

Inte

gra

ted

Bu

sine

ss + T

ale

nt S

trate

gy

Human Capital Management Institute

The Impact of Workforce Analytics and PlanningHewlett Packard Case Study

2000 to 2005: Struggling to Move and Change

“A” Division retrenches Development Engineers

“B” Division is hiring Development Engineers

2006 to Current: Become an Agile Workforce

Adopting Total Cost of Workforce into hiring, budgeting, and workforce planning, HP has been able to:

Be surgical in workforce decision making

Increase mobility and hire only when needed

Simultaneously retrain or layoff obsolete skills while hiring needed new skills

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Where Are You?

Where is your organization on the Workforce Planning and Analytics journey?

© Human Capital Management Institute 2010 16

Assess

• Skills• Capabilities• Systems• Data• Organization

Organize for Success

Assess Current State

Prepare Data and

Measures

Quantify and Predict

Optimize

Organize

• Build a Roadmap• ID Goals• ID and build

skills/resources• Define

governance• Plan service

delivery and measurement

Prepare

• Data• Integrations• ID Key Metrics

Execute

• Quantify value, ROI, and costs

• Predict and forecast

• Model workforce

Take Action

• Value opportunities

• Cost savings• Policy or process

changes• Continuous

improvement opportunities

How Do We Do It?

5 Steps to Workforce Intelligence

How Do We Accelerate the Journey?

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Member-specific

solutions

Industry Expertise

Training and

Education

Tools and Software

Peer Networking

The Workforce Intelligence Consortium can quickly move you from measuring to QIP

• Assessment• “Bring your

issue”• Member-specific

Roadmap

• Experts• Educational

Institutions• Benchmarking

organizations• Proven measures

and standards

• Foundational WFP and analytics

• Advanced education

• ROI Calculator• Workforce

Image Maps• Data integration

blueprint• Next generation

Workforce Intelligence software

• Member forums and communities

• White Papers and knowledge library

Consortium Additional Offerings

The goal of the Workforce Intelligence Consortium is to provide solutions to your specific workforce issues. In some cases, we may work with you to provide additional resources or solutions to achieve this goal.

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• Center of Excellence guidebook and training

• Span of Control optimizer• Workforce Reorganization

Analysis• Dashboard and Scorecard

Process Development• Advanced Human Capital

Analytics Certification

• Additional Training Advanced WF Analytics Advanced WF Planning KPI and Scorecard Design Talent Management Data Transformation and Standards

Program Timeline

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Q1 – Q3 2011Current tools , web prototypes,

web data integration, and data load tools released

Q4 2010Consortium

onboarding and education

Q4 2011Web based

application suite (est release 12/11)

Workforce Intelligence Consortium program timeline:

Regular expert, education, and community sessions will be held throughout the year. Next generation tools will be released as defined by the program schedule.

© Human Capital Management Institute 2010

Question and Answer

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Next Steps

The Workforce Intelligence Consortium educational series continues:

Calculating Human Capital ROI

November 30

1pm CT/11am PT

Register at www.workforceic.com

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Next Steps:

Human Capital Management Institute 23

Visit www.hcminst.com or www.workforceic.com for more information about tools, services, and the consortium

To schedule a demo of 1st Generation Solutions or to join the Consortium, contact Cheryl Farley, Program Director at

cheryl.farley@hcminst.com

Presenter information: Jeff Higgins, CEO HCMI at jeff.higgins@hcminst.com

Workforce Intelligence Consortium Group

@HCMI

Thank you

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