Success – from the inside out
Optimizing human capital is every business leader’s imperative
Business leaders know that an organization’s employees represent a significant component of its total value. The work force is the organization’s wellspring of innovation and renewal. Simply put, success or failure hinges on the workforce’s effectiveness in supporting the organization’s mission, vision and goals. Businesses can gain a competitive edge by focusing on and optimizing use of their human capital, integrating the human capital strategy within the larger business strategy.
According to a recent McKinsey Global Survey on how companies approach innovation, “Some 70 percent of corporate leaders say innovation is among their top three priorities for driving growth.”1 In this survey, top managers agree that identifying the right people and aligning them for innovation is their single greatest struggle and that the most important drivers of innovation are the organization’s culture and people. Innovation, agility and competitive advantage all are conditional to an effective work force.
The missing link: workforce analytics
Business leaders are using business intelligence and advanced analytics in an unprecedented way to improve performance. Some use customer, cost and profitability analytics to measure customer lifetime value and profitability by product, channel and customer segment. Many use supply chain analytics to optimize their supply chain. Surprisingly few, however, are using workforce analytics to drive an effective human capital strategy that proactively addresses changing business needs.
Most businesses today do not track who is critical, who will likely leave, or why they will leave, so there’s no opportunity to develop effective strategies to retain critical workers. In a recent Accenture survey, 40 percent of respondents said they had no formal measures to gauge the impact of their human resources (HR) and training efforts. Another 39 percent said they had measures in place, but only for some initiatives. Barely half of the respondents thought business-oriented metrics, such as profitability and revenues, were suitable measures of HR and training effectiveness.2
Workforce analytics is the missing link in today’s business strategy. Most companies ramp up goals without looking to see who may be retiring or at a critical stage in life that may take them away from the organization. Building a strategy without workforce analytics actually creates greater risk. Turn the focus within the organization to ensure that the necessary talent is in place – and will be in place in the future – to support business goals. Bring balance to the strategy by including workforce analytics along with customer analytics and realize the opportunity that is found within the organization.
Understanding today’s work force
In today’s flattening commercial environment, businesses are global, operate 24/7 and collaborate across the globe in an unprecedented way. Outsourcing has become commonplace, expanding beyond mere tactical functions to include entire business units.
Intellectual property and innovation drive competitive advantage, making employee retention key. Yet, as baby boomers retire and twenty-something millennials enter the scene with new skill sets and different priorities than their older counterparts, it is imperative for organizations to know how to attract, grow and retain these workers, as well as sustain the already seasoned professionals that bring depth and value to the organization.
Enabling innovation through workforce analytics
Everyone across the organization can play a role:
- Business managers need to identify pending skill gaps and a pipeline for tomorrow’s leaders.
- Finance managers need to determine costs related to vacancies, overtime, outsourcing, recruitment and loss of critical skills, and then model strategies to address these issues.
- HR needs to spot trends and develop strategies to support changing workforce demands while partnering with business and finance managers to determine the best organizational structure/restructuring to address change.
Using workforce analytics, these business leaders can benefit from a holistic view of their human capital and sophisticated insight into risk and competitive issues with the ability to measure success for continuous improvement in support of organizational goals.
Managing the work force in a truly strategic and forward-looking way through workforce analytics has the potential to deliver enormous gains:
- Improve business performance, innovation, agility and competitive advantage.
- Reduce costs and risks while improving results.
- Enhance value, productivity and esprit de corps of the work force.
Five ways to optimize the organization through its work force
Organizations that take full advantage of this new reality will gain competitive advantage, but only if they understand their workforce strengths, vulnerabilities and opportunities. Using human capital forecasting and modeling can help you design and modify current business plans that align the work force with business goals. It can also help you see upcoming skills gaps and trends so you can plan accordingly. That way, you will gain a better understanding of what your workforce needs to look like to properly sustain and maintain the business.
Here are five critical ways you can optimize your work force:
1. Align work force with business goals:
- Forecast the amount and types of talent required to execute business strategy.
- Gain full information needed to make decisions for tomorrow.
- Manage the work force to drive the organization to meet its goals.
- Identify specific talent gaps.
2. Address workforce demands at every stage of the talent life cycle:
- Acquisition: Match the right employee with the right skills at the right time at the right cost.
- Growth: Develop skills for today’s star performers and tomorrow’s leaders.
- Retention: Proactively respond to changing workforce demographics and trends.
3. Identify and mitigate risks:
- Analyze the past and look forward to spot trends in key factors related to voluntary termination, absences and other sources of risk.
- Determine the impacts of organizational change on employee performance.
- Predict where vacancies and leadership needs are likely to occur.
- Understand workforce supply-and-demand patterns, and create strategies with additional labor sources to meet that demand.
4. Plan for business change, such as mergers, acquisitions and downsizing:
- Model what-if scenarios of potential effects across divisions and geographies.
- Make strategic decisions to reduce the risk of losing good workers and keeping redundant or underperforming ones.
5. Synchronize financial and operational workforce strategies:
- Expand background for each employee to look beyond salaries and general workforce costs for a more granular understanding: absences, overtimes, training costs, headcount, salaries and other compensation.
- Develop a defensible position on how costs drive value for the organization.
Innovation through human capital
Invest in analyzing the work force just as you would the customer base because keeping your employees is as critical as keeping your customers for your organization to grow. While traditionally, managing human capital was considered an HR function, integrating human capital analytics into the business strategy provides valuable information that parallels the work force with the long- and short-term goals of the company. Learn what is needed to create a culture that attracts and retains talented individuals and anticipate changes in the work force. It’s a new way of looking at the key element in the business: the work force itself.
As the Global Product Marketing Manager for Human Capital and Strategy Management at SAS, Becca Goren drives the planning and marketing for these areas. In this role, she leads research studies, authors white papers and articles, and speaks frequently on this and similar topics.