Predicting Corporate Success Through 'People' Data

By Pamela Babcock Nov 12, 2009
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NEW YORK—Study and use of human capital metrics has for the past several years been maturing from a reactive to a proactive field that’s on the way to becoming a valued predictive tool. A key step to measuring potential corporate success is asking the right questions to link HR or “people” data to customer and financial data, according to experts attending a recent human capital metrics conference.

“You’ve really got to manage tomorrow today because that’s where the game is,” Jac Fitz-enz told attendees Nov. 5, 2009, at The Conference Board-hosted event. Think analytics and you probably think statistics. But that’s not the starting point for analytics, according to Fitz-enz.

“The starting point for analytics is logic—a logical system of questions that need to be asked about what’s going on in your organizations,” he said. “If you don’t ask the right questions, you don’t get the right answers. And all scientists know that the solution to any problem is found in the question.”

Fitz-enz, CEO of the San Jose, Calif.-based consultancy Human Capital Source and considered the father of human capital strategic analysis and measurement, recommends doing a comprehensive scan of an organization’s human, structural and relational capital.

“You need to connect this stuff because it doesn’t operate in isolation,” Fitz-enz said. “These things work together whether you know it or not. And our goal is to develop algorithms in time based on real data in the organization that show the connection between these things so you can start to manage holistically.”

Conference Survey: Few Get It

A survey of conference attendees focused on attendee organizations’ HR analytics teams that track business outcomes that are critical to other business functions. It found that the level and depth of these statistical analyses are wide-ranging.

According to the audience poll, approximately a quarter said they don’t track key business outcomes, while half said they track a few; only 15 percent said they track “a lot.” Meanwhile, only 8 percent said there is a standardized set of company outcomes all functions must track.

Responses from another survey question might reveal the reason for infrequent tracking of key business outcomes. When asked if their HR department is staffed with individuals capable of producing predictive analytics, nearly a third of the estimated 125 respondents said no, while 61 percent said they have a few people on staff who can; only 8 percent reported that they are well-staffed and can deliver predictive analytics to the CEO regularly.

“I’m not a big vendor person, but this is a place where you kind of need the help.”

-- Cedric Coco, Lowe’s Cos.

Cedric Coco, vice president of learning and organizational effectiveness for Lowe’s Cos. Inc. in Mooresville, N.C., said a key to his company’s human capital analytics and business intelligence program is having the right people focused on people research.

“You can’t just take an instructional designer or an HR generalist and say, ‘Okay, you own people data,’ ” because when it comes to algorithmic research, “there are people who specialize in doing this,” Coco said. He recommended looking to people in fields such as finance and market research who have the technical skills and can focus on algorithm analysis, trend-setting, trend development and predictive analytics.

“Go find a couple of them and put them in your organization,” Coco said. He added that because the space “is changing so much,” HR professionals might want to consider leveraging some outside resources. “I’m not a big vendor person,” Coco said, “but this is a place where you kind of need the help.”

Tackling Business Problems

Car rental giant Enterprise Holdings recently went the vendor route. It hired Monster Intelligence to slice and dice data in an effort to tackle the business problem of deciding where to place a new facility.

The St. Louis-based company approached Monster Worldwide in the summer of 2007 to decide where to locate a center that could handle up to 10,000 calls daily originating from the western region of the U.S. for its Alamo Rent-A-Car, Enterprise Rent-A-Car and National Car Rental brands.

“It was not a decision they took lightly,” noted Jesse Harriott, chief knowledge officer and senior vice president for Monster, based in Maynard, Mass.

Enterprise had considered dozens of domestic and international locations and thought that the massive job board’s real-time labor market information could help determine the best location. Monster Intelligence analyzes and tracks employment trends, recruiter and job seeker behavior, human capital topics, and job performance reporting.

Visitors to Monster.com conduct more than 170 million job searches monthly in the U.S. and upload more than 31,000 resumes daily, Harriott said, adding, “There’s a tremendous volume of intelligence that we can mine from.”

Steps Taken

Monster worked with a cross-functional team led by Enterprise’s head of human resources and took a multi-pronged approach to the site selection. Harriott said some of the logic and analytics can be applied or modified to fit any site selection and can address the following:

Identify business needs first “or the rest of the process will not go smoothly,” Harriott said. Enterprise and Monster looked at projected occupational growth and typical candidate profiles for occupations needed at a call center as well as sector-specific information that might impact hiring, such as increased outsourcing, technological advances and the generational makeup of the workforce.

Develop a short list of locations by analyzing quantitative and qualitative factors because “you can’t boil the ocean when you do this kind of activity and analyze all 300 major markets in the U.S.,” Harriott said. Monster looked at current company facility and office locations, locations with a competitive advantage, ease and/or cost of site location, economic development incentives, and proximity to universities, public transportation, commercial real estate and airports. Qualitative factors included the unemployment rate, payroll change, rate of economic growth, and concentration and typical annual salary of desired occupations in each market.

Evaluate and compare the talent pool after winnowing the selection to three to six locations by looking at supply and demand for jobs you want to fill. For supply, calculate the talent density by comparing a national and local job search index of how many resumes are posted online for positions available. For demand, evaluate posting trends, calculate the talent demand index for each occupation and look at supply/demand for each of the markets, Harriott advised.

Analyze the economic situation in each market by looking at unemployment and payroll trends, major regional industries and employers, economic growth or decline, workforce demographics, economic incentives, and cost of facilities/office space.

Identify the competition. Use job-posting trends to identify competitors’ presence and recruitment in each location, identify industries that hire the most for the occupation your company will recruit, and identify and profile top companies in each location.

The Outcome

Enterprise and Monster narrowed the sites to four and eventually chose one for a number of reasons, including a downtown location with access to public transportation, a strong labor supply relative to demand, and proximity to a university that could provide educated and skilled employees with flexible schedules looking for part-time work, according to Jeff Quinn, senior director of Monster Intelligence. The center began taking calls in April 2008.

Quinn declined to identify the location but said, “In general, [Enterprise has] been extremely happy with how they’ve been able to handle that workforce and to handle the ebbs and flows within their business.”

Harriott added that for companies that cannot afford to hire a consultant, “There are a lot of public sources for this type of information,” such as third-party job resume databases and Internet searches that can give you a sense of “where some of the strong markets are.” Government web sites, such as those of the Bureau of Labor Statistics and the U.S. Census Bureau, also have a wealth of public information about the size of, and turnover within, the labor force by direct marketing area, Harriott added.

Pamela Babcock is a freelance writer based in the New York City area.

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