Contents Trends in People Analytics - PwC · PDF fileContents Trends in People Analytics With excerpts from the 2015 PwC Saratoga Benchmarks Growing impact of people analytics 2

Contents

http://www.pwc.com/hr-analytics

Trends in PeopleAnalyticsWith excerpts from the 2015 PwCSaratoga Benchmarks

Growing impact ofpeople analytics 2

What the benchmarkssay about the state ofthe workforce 3

People analytics trends:

#1: Building a peopleanalytics function 6

#2: Growingdissatisfaction withcurrent approachesto data governance 9

#3: Building targets andbenchmarks intoanalytic tools 10

#4: Taking predictions

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Conclusion:Insistent on insight 16

Appendix 17

About PwC PeopleAnalytics 20

Contacts &Acknowledgments 21

Trends in people analytics: With excerpts from the 2015 PwC Saratoga Benchmarks 2

Contents

Growing impact of people analytics

Talent is top of mind to senior executives, and that is more evident than evertoday. For the first time in eight years, results from PwC’s Annual CEO Surveyshow that 34% of US CEOs are “extremely concerned” about the availabilityof key skills.1 They are right to be concerned—talent drives the top line. Itdrives the achievement of business strategy. It creates innovation, controlscost, and drives change. And, according to PwC Saratoga US Human CapitalEffectiveness benchmarks, issues related to talent should be a high priorityfor CEOs.

Executives are increasingly pressuring HR to produce evidence-based insight oncritical talent to develop solutions: Do we have the right talent mix to achieveour business objectives? How engaged are our top performers in aligning tothe new business strategy? Can we do more to predict who are going to be theright leaders of the future and what experiences we should give them? Can weidentify potential talent flight risks in our most important roles?

People analytics is a new domain for most HR departments. A new function isbeing born as companies look to better drive the return on their investmentsin people. The old approaches of “gut feel,” and “doing what everybody elseis doing” are not sufficient anymore. We believe in making decisions based onevidence, not hunches.

This reports highlights our recently published PwC Saratoga benchmarks, andfrom those, several improvement opportunities leaders may examine relatedto their people. In last year’s summary, we provided several trends in peopleanalytics, which we still see as relevant solutions to today’s workforce issues.However, there are a number of new people analytics trends we outline inthis report.

1 PwC’s 18th Annual CEO Survey

With 34% of US CEOs“extremely concerned”

about the availability ofkey skills,1 the need forhard data on people isgreater than ever before.








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The recently released PwC Saratoga Human CapitalEffectiveness benchmarks represent 2014 calendaryear data from the US entities of 435 participatingorganizations covering a range of industries, companysizes, and revenue. All results shown reflect medianbenchmark values across participating organizations.

Return on workforce investment is declining

A critical measure of workforce productivity, Labor CostRevenue Percent, rose from 28.2% to 29.9%, indicatinga decline in return on workforce investment. Thoughproductivity has remained high in post-recession years, itis leveling off after several years of consistent increases;the decline in Labor Cost Revenue Percent2 was primarilydriven by a decrease in Revenue per Full-Time Equivalent(FTE) (from $404,058 to $370,552). Despite a dropin Labor Cost per FTE (from $102,294 to $98,988),companies earned less revenue on their investment.Organizations may be hesitant to continue to invest intalent the way they were as the economy bounced backseveral years prior; however, this lack of investment maycause productivity to decline over the long term.

What the benchmarks say aboutthe state of the workforce

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2 PwC defines Labor Costs as the sum of compensation cost and benefits cost








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High potential promotions slip

Similar to high performers, high potentials are also showingconcerning career trends. High Potential Promotion Rate4

decreased from 19.6% to 18.3%, while overall PromotionRate increased from 8.6% to 9.0%. This is the smallestdifferential between the two in several years, indicating thathigh potential promotion readiness may be an area of neededfocus for leadership development programs today.

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Turnover decreased in 2014—however, the proportionof high performers leaving remains concerning. Withoverall Voluntary Separation Rate dropping from 8.8%to 8.7%, and High Performer Separation Rate3 droppingfrom 6.0% to 5.9%, the gap between the two remains quitenarrow. High performers, despite being among the mostvaluable employees, are not being driven to stay with theirorganizations.

3 PwC defines high performers as employees with performance ratings inthe top 20% of the organization

4 PwC defines high potentials as individual contributors or managementlevel employees identified by the organization as having leadershippotential and are in line to move into a more senior role








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Investment in HR increases

As HR is increasingly being asked to solve strategic humancapital issues, the function is receiving increased fundingto deliver.

Building a people analyticsfunction#1

Growing dissatisfaction with currentapproaches to data governance#2

Building targets and benchmarksinto analytic tools#3

Taking predictions of flight risk tothe next level#4

Diversity stalls

Headcount of diverse leaders is also declining somewhatafter showing progress for several years. Ethnically DiverseExecutive Headcount Percent decreased from 11.6% to10.7%, and Female Executive Headcount Percent declinedfrom 26.7% to 25.7%. As diversity programs gain moreattention, a lack of progress tends to call into question theeffectiveness of efforts in this area.

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For leaders, these results raise the question, “How do weimprove?” The rise of people analytics and an abundanceof data provides the opportunity to analyze root causesfor critical human capital issues through programs suchas employee surveys, predictive modeling, and advancedworkforce data analysis.

Trends in people analytics

To execute on those programs more effectively, weare seeing the following trends commonly appear inthis area:








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People analytics Trend 1:Building a people analyticsfunction

Organizations are quickly recognizing that they need a dedicatedpeople analytics function in order to produce insights from thecomplex data that is gathered across the employee lifecycle.

Investment in people analytics is on the rise

In a recent pulse survey, a stunning 86% of PwC Saratoga participantsreported that creating or maturing their people analytics function isa strategic priority for the next one-to-three years. And nearly one-half (46%) of those organizations already have a dedicated peopleanalytics function.

Today, the median organization in our database has one individualfocused on people analytics per 3,567 employees. Not oneparticipant expected to see a decline in the resources dedicated topeople analytics over the next three years. In fact, every one of ourparticipants said they expect the number of resources to increase or atleast remain consistent with today’s levels.

Data integration and insight are primary objectives

Many organizations recognize that the reason they need a standingfunction is the level of effort involved in successfully driving theproduction, distribution, and adoption of analysis, reports,and insight.

When asked about the biggest barriers to successfully producingworkforce reports and analytics, the top response was the presence of“multiple unintegrated sources” of people and organizational data,all of which needs to be synthesized to support meaningful analysis.More than one-half (69%) of participants cited this challenge as a top

barrier to a successful program. Another major concernwas the extent of “manual processes” required toproduce reports and analytics, with more than one-half(56%) citing this issue.

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Contents But building a sustainable people analytics capabilityrequires more than a technology tool, whether anorganization wants to achieve foundational success—or become more advanced, or even leading edge. Wefind that developing people analytics is a journey formost organizations; the stages are depicted in thegraphic below.

Only a full strategy and adoption plan will enablesustainable impact and long-term success. Without theright functional roadmap, data processes, programs,operating model, training, and change management inplace, organizations will fail to realize the full return ontheir technology investment.

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People Analytics Journey at a Glance

The solution: Too much for technology tools alone

Many analytic technology solutions are emerging in the marketto address these concerns, and the interest from participatingorganizations has been significant. Organizations across industriesare investing in or creating the business case for building or buyinga technology solution to join siloed data sources and automateprocesses. Based on PwC’s 2014 HR Technology Survey,5 56% oforganizations have a formal HR Technology roadmap/strategy, and25% plan to move their HR analytic technology to the cloud overthe next one-to-three years.

5 PwC’s 2014 HR Technology Survey: Moving HR to the Cloud? Navigatekey barriers to boost success








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Managing change to createsustainable people analytics

Creating a people analytics function from scratchis not an overnight task—it takes time to developprograms, implement technology, and hire the rightpeople. Even so, the speed to a full capability might stilloutpace stakeholders’ ability to consume so much newinformation. While there’s often a pent-up demand forreports and analytics, there will still be an effort requiredto facilitate the adjustment to a new operating model, andincorporate new data into old ways of working.

A few principles of change management to keep in mindwhile working through the establishment of peopleanalytics:

• Clearly define and articulate a “case for change”– To create full buy-in from the whole suite ofexecutives, a critical first step is to define whatdecisions are being made with limited or inaccuratedata and identify how an enhanced capability will

address these challenges. Laying out the full strategy, as wellas the benefits that will be recognized by the business and amethodology for tracking success, will further strengthenthat case.

• Establish active executive sponsors – While the CEO andother C-suite leaders may crave workforce data, there may beoperational leaders stuck in old ways of thinking, where data fromHR failed to make an impact. Close attention should be paid toobserving if leaders are resisting or not utilizing people analytics indecision making, and if so, understanding why. Strong advocatesfor change should demonstrate how they use data to drivebusiness decisions in order to help pave the way for others.

• Engage the entire organization to embrace analytics – Buildcompelling communications from leadership that clarifies howanalytics will be embedded into work process and decisionmaking, what the leader and staff roles and expectations are, andhow non-compliance will be addressed.

• Identify and address key changes required to embed peopleanalytics – In building the new operating model, there will benew roles within and outside the function. This will need to beaccompanied by new models of interaction, new skills, and newbehaviors. Consider what tools stakeholders will need in order tofully take advantage of people analytics.

• Define and roll out 21st century learning – Employ newlearning techniques available and think about how gamificationor online simulations can be leveraged to help build capability andengage individuals in the usage of data.



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People analytics Trend 2:Growing dissatisfaction with currentapproaches to data governance

Consistency counts

A critical—but sometimes underappreciated—componentof building a sustainable people analytics capability isthe creation of a data governance approach to addressprocesses for standardization and to develop enterprise-wide agreement on definitions, formulas, hierarchies,maintenance, and the like.

Yet the impact of poor data governance becomes visible forthose companies without it:

• The technology company that can’t define who is anengineer and needs to determine, for example, whetherto include individuals who started as engineers butmoved to more administrative roles as they progressedin their careers, engingeering managers, and individualswho have an engineering degree but now work in acorporate function.

• The professional services firm with no definedmanager hierarchy, and needs to identify to whoman individual reports, be it their project manager,their matrix manager, the person responsible for theircost center, or the person who gives them theirperformance rating.

• The hospital that can’t calculate labor costs, andneeds to determine whether to include unscheduledovertime, per diems/PRNs, or traveling nurses.

• The organization that doesn’t know who came overin the recent acquisition, and needs to address overlapsand inconsistencies in data, since both still operate fromtheir own legacy systems.

• The global organization that operates in siloes bybusiness unit, and needs to find a way to create aregional aggregate view of the organization.

No—or very little—satisfaction withgovernance

These issues are frequent sticking points for manyorganizations, serving as significant obstacles that canimpede real progress in analytics when left unresolved.Only 6% of 2015 PwC Saratoga benchmarkingparticipants reported being “very satisfied” with thequality of their people data. Nearly one-third (29%)cited poor data quality as a top barrier to successfullyproducing workforce reports or analytics, and 25% citeda lack of agreement on data definitions.

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People analytics Trend 3:Building targets and bench-marks into analytic tools

Creating context

Organizations are increasingly investing in analyticstechnologies to integrate and visualize their people data.Once those reports are built, they typically generate a simplequestion from leaders: “How do we compare?”

Obtaining metric results and having them available at yourfingertips is just the first step. It’s important to providecontext for your data. Benchmarks added to reports anddashboards help set context to enable you to evaluate howa measure stacks up against other organizations in a givensector or region, or next to those similar in headcount orrevenue. They can also help the organization establishtargets, which can be used to color code reports, makingthem more easily digestible for leaders looking to determinewhether they are “red” or “green” in certain areas.

Building the best targets

Establishing these targets isn’t always a simple process,even when benchmarks have been established. Leadingorganizations are considering their targets with great care.It’s important to look at several areas:

• Variability within the organization: How are ourtop business units or managers performing on thesemeasures? What’s attainable within our environment?

• Historical trends: How have our results changed overtime? Since last year? Last month? In what direction arewe headed?

• Business and people strategies: Is this measurea focus area for us? Is it important to our employeevalue proposition?

• Differences in benchmarks: Is an industrybenchmark the best means of comparison for a givenmeasure? Or is it more sensible to use a regionalnorm, or a benchmark for organizations similarin size? Should we display the median or the topquartile?








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8.5%

Defining “goodness”

The rationale for using peer comparisons to help define what is “good” comes to life justlooking at variability in a metric, such as the voluntary separation rate across variousindustries. We see a range in median voluntary separation rates by sector, with ProfessionalServices (12.9%) and Banking (12.0%) industries being the highest, according to our 2015PwC Saratoga benchmarks. The Utilities industry is among the lowest at 6.0%. Differencesacross organizations in different sectors, regions, size bands, etc. make finding the rightbenchmark critical for attainable target-setting.

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Utilizing people analytics incompensation practices

Compensation, particularly with respect to incentives,remains a hot button HR issue for organizations today.Most organizations have tackled the wave of shareholder,regulatory, and media scrutiny, but remain focusedon compensation strategy to appropriately rewardand recognize employees in ways that maximize theiremployee value proposition. As people analytics come tothe forefront of HR, insights from data are playing moreheavily into those strategic compensation decisions.

Identifying the “right” compensation programs and mix forthe organization

The structure of management pay has shifted, withpayouts hinging much more heavily on pre-set, explicit,data-based performance standards. Leaders are oftenusing analytics to answer questions like:

• Which corporate, business unit, and individualmetrics are most aligned with organization success?Are there absolute cutoffs, or is relative performanceconsidered? How should these be incorporated intoincentive programs?

• What is the appropriate payout curve and how sharply shouldpayouts vary based on performance?

Ensuring that participants understand the value of compensationprograms, and creating a clear line-of-sight to influence behaviors

Despite decreasing labor costs, spend on employee rewards remainshigh across many industries. In order to maximize their investment,organizations must weigh the economic costs with the valueproposition offered to employees, and find the right balance fortheir workforce. People analytics functions are utilizing advancedanalyses of employee survey data as well as predictive models tounderstand what provides the most “bang for the buck.” Leading edgeorganizations are also conducting conjoint analysis, or “tradeoff”surveys, to understand which incentives are most appealing toemployees, versus which are likely be discounted and thus ineffective.

But not lose sight of attraction and retention fundamentals

Companies have struggled to make do with limited merit budgets formany years now. At the same time, they face a remarkably pitchedtalent battle across many pivotal roles, whether those are hard-to-findskillsets, high-volume jobs, or roles that produce a disproportionatehigh level of value compared to others. Analyzing people data canhelp to identify these pivotal roles and high performers in order toensure their rewards packages are working concertedly to attract andrecognize these individuals for long-term success.



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People analytics Trend 4:Taking predictions of flight riskto the next level

Shoring up skill sets

Getting to “predictive” is the objective of many HRdepartments as they begin their people analytics journeys.Yet companies that have built such models recognize that it’snot the end of the journey, but in fact just the beginning. Thequestion becomes, “What do we do with these results?”

We often see a significant skill gap in business partners’ability to effectively interpret and use data. In fact, amongPwC Saratoga participants, about three-quarters use businesspartners in their HR operating model.6 Yet only 31% of thisgroup said that most of their business partners have theright level of analytical skill to interpret and use outputs ofpredictive models to address business problems. And only6% of our survey participants said that all (100%) of theirbusiness partners had the right level of analytical skill.

6 PwC defines business partners as Director and above HR employees whowork primarily with senior business leaders designing and executingbusiness strategies

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Closing the gaps to cross the analytics divide

To take full advantage of the insight made possible bypeople analytics, we see leading organizations taking anumber of next steps beyond model creation.

• Interrogate the results to gain a full understanding:If high performers within one demographic group are ahigh flight risk, ask “Why?” Follow-up analysis throughmeans such as focus groups may be necessary to fleshout insights further.

• Establish a program to address the root causes: Forexample, if manager effectiveness is found to be linkedto flight risks, that needs to be addressed throughsystematic training and coaching enterprise-wide.

• Decide whether individualized outreach isappropriate: Predictive results are often individualemployee level data that should be treated withsensitivity. You should have a plan for how and when amanager or HR representative broaches the issue with anindividual employee—or, in fact, if this should happenat all.

• Communicate to stakeholders: The data can becomplex and needs to be explained in a consumable andaction-oriented manner. This communication should beformulated in conjunction with a change managementplan to help others understand how these findings will beintegrated into day-to-day talent processes.

• Integrate the results into existing technologies:Flight risk scores can be built into existingdashboards and reports in order to track variousstatistics (like actual turnover) by those flags.Understanding the metric results for high andlow risk employees can help to inform retentionstrategies across the organization.

• Refresh the data on an ongoing basis: The volumeof data sometimes requires the establishment of adata warehouse, so that periodic snapshots of alldatapoints of interest are adequately captured in away that makes the data aggregation and analysisa straightforward process. Many analytic tools canfurther ease the process by linking the predictivemodel directly to the employee source data, andautomatically re-scoring individuals.








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People analytics trends ofthe future

With the advancement of technology tools and analytictechniques in the market, the future of people analyticsis bright. There are a variety of trends on the horizon,waiting for organizations to capitalize on their value in thehuman capital arena. A few examples include:

• Wearable technologies. From smartwatches to fitnessdevices, wearable technologies (or “wearables”)are gaining momentum across the globe. As moreindividuals embrace these gadgets, what if HR coulduse data from these to boost productivity or monitoremployee health? Based on PwC’s 6th Annual DigitalIQ Survey, 54% of top performing companies willbe investing more in sensors in the coming year—with the ubiquity of this technology, companies cantake advantage in the workforce by embedding intoemployee badges or other devices. Ideas from leadingedge companies include tracking employee locationson a factory floor to gain productivity data in real-time,or gathering fitness application data to track employeewellness metrics. A major barrier will be increasingthe comfort level of individuals with sharing this data

with employers, as only 21% of consumers reported being willingto share more personal data with companies,7 a figure that couldlikely be even lower among employees.

• Gamification. As companies use game simulations to engage usersacross the realms of retail, sporting, classrooms, and others, the nextfrontier will inevitably become the workplace. Some organizationsalready tout the benefits of gamification in candidate assessments—this could be taken a step further with efforts on workforce planningor even employee surveys. Imagine the task of scenario planningwith HR and site managers, brainstorming different possibilitiesof turnover spikes, declines in hiring, retirement waves—but fedthrough a simulation in game format. Also imagine the multitude ofemployee surveys that are sent out on an ongoing basis—but nowconducted in a way that recognizes individuals with virtual rewardsto encourage participation. The space for gamification techniques inthe people analytics area is plentiful.

• Social network analysis. With an increased focus on adaptabilityand a connected employee experience, many organizations arecreating more permeable boundaries and flattening organizationalstructures with the aim of creating a more efficient and flexibleworkplace. As a result, work is increasingly occurring throughinformal networks of relationships rather than through formalreporting structures or prescribed work processes. Socialnetwork analysis—a strategy for understanding complex websof relationships and connections—allows you to uncover thesehidden networks. Understanding the reach of individuals andtheir connections to others across the organization not onlyshows the interconnectedness of the company, but can also shedlight on the impact of employee engagement, for example. Anengaged employee who is central to the network can boost moraleand productivity, but similarly, a disengaged employee can bedestructive to the work environment. Social network analysis canreveal exactly where positive work—and potential damage—mightbe done through these key individuals.


7 PwC’s 2015 CEO pulse on personal data


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Conclusion: Insistent on insight

As executives set the talent strategy for the future, people analyticsare poised to inform those decisions in a major way—if HR is up to thechallenge. Building out a people analytics function requires strategicthought to the long-term roadmap for data, technology, programs,and operating model—as well as the change management requiredfor full adoption.

Keeping up with the trends in people analytics is critical fororganizations to become more advanced, whether that’s building orrefining a data governance approach, building comparison data intoanalytic tools, or taking action from predictive data. These are justa few of the leading edge practices out there—with more emergingeach day, people analytics will advance rapidly over the coming years.








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Appendix: Additional data charts


Results from PwC Saratoga’s 2015 Human Capital Effectiveness benchmarks represent US 2014calendar year data from 435 participating organizations covering a range of industries, companysizes, and revenue:

Represented industries: Represented company size:

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Contents Full results of people analytics market trends, based on PwC Saratoga member responses:

Does your organization have a dedicatedpeople analytics function?

Which other HR functions [also] produce reporting/analytics?

If yes, how many FTEs report to thefunction?

Is creating/maturing your peopleanalytics function a strategic priorityfor the next 1-3 years?

How do you expect the number ofresources in your analytics functionto change over the next 3 years?

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18Trends in people analytics: With excerpts from the 2015 PwC Saratoga Benchmarks








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Contents What are the top 3 barriers to successfully producing people reports/analytics at your organization?

How satisfied are you with thequality of the people data within yourorganization?

Does your organization have businesspartners?

What percentage of your businesspartners have the right level ofanalytical skill?

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19Trends in people analytics: With excerpts from the 2015 PwC Saratoga Benchmarks








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Appendix 17




Contents

About PwC People Analytics

Don’t just collect data. Generate insight.

There’s a quiet revolution taking place in human resources and talentdevelopment departments around the world. Faced with a growing need formeaningful insights into the workforce, companies are beginning to recognize theenormous, untapped potential in what they already know, and what they couldknow, about their own workforce. It’s called “people analytics,” and it’s changingthe way companies think about everything from attracting and developing talentto employee engagement and retaining talent.

PwC is a global leader in people analytics because we go beyond simple datareporting and surveying. We are a full-service people analytics provider, with athorough understanding of the specific workforce issues faced by companies inyour industry. We offer a broad range of services, from Saratoga benchmarkingto advanced analytics to comprehensive workforce surveying. PwC can also workwith you to build a people analytics capability that allows you to do more withyour data including Big-Data for HR. We help you to take the guesswork out ofyour most important workforce decisions, supporting your efforts to improveoperational and financial results.

PwC, your full-service people analytics provider.

At PwC, we are passionate about our mission: to help our clients use theirworkforce data to get better insights, and to use these insights to drive bettertalent, financial, and operational results.

About PwC US

PwC US helps organizations and individuals create the value they’re looking for.We’re a member of the PwC network of firms, which has firms in 157 countrieswith more than 195,000 people. We’re committed to delivering quality inassurance, tax, and advisory services. Find out more and tell us what matters toyou by visiting us at www.pwc.com/US.









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Contents

Contacts Acknowledgements

To have a conversation about your company’speople analytics, please contact:

Nik Shah(703) 918 [email protected]

Rishi Agarwal(408) 817 [email protected]

Scott Pollak(408) 817 [email protected]

Ranjan Dutta(703) 918 [email protected]

Kristina Dunphy(415) 498 [email protected]

Ð´»¿» »» ©©©ò°©½ò½±³ñ¬®«½¬«®» º±® º«®¬¸»® ¼»¬¿·´ò Ì¸· ¼±½«³»²¬ · º±® ¹»²»®¿´ ·²º±®³¿¬·±² °«®°±» ±²´§ô ¿²¼ ¸±«´¼ ²±¬ ¾» «»¼ ¿ ¿ «¾¬·¬«¬» º±® ½±²«´¬¿¬·±² ©·¬¸ °®±º»·±²¿´ ¿¼ª·±®òÓÉóïëóîîíð

Thank you to those that contributed ideasand efforts to this publication, including:

Bhushan SethiPwC People & Change

Anthony BrucePwC UK People Analytics

Annie GoodyearPwC Human Resource Services

Rick EricsonPwC Human Resource Services

To learn more about PwC People Analytics,how we can help you on your people analyticsjourney, or to become a member of PwC Saratogabenchmarking, please visit our website atwww.pwc.com/hr-analytics.








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Appendix 17



Documents

Contents Trends in People Analytics - PwC · PDF fileContents Trends in People Analytics With excerpts from the 2015 PwC Saratoga Benchmarks Growing impact of people analytics 2