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Analyze This

May 29, 2003
Related Topics: Human Resources Management Systems (HRMS/HRIS), Strategic Planning, Featured Article
Geof Pejsa can see the future of human resources through the 18-inchflat-panel monitor placed on his desktop. Seated in his office at a largefederal facility in the suburbs of Washington, D.C., the chief of the pay,processing, and systems branch for the U.S. Census Bureau is closely studying amap of the United States. He positions his hand on his computer mouse and movesthe cursor to Texas. Instantly, a bubble pops up on his monitor showing minimum,maximum, and average salaries for the 272 bureau employees working in the LoneStar State.

    "This is data that used to take days or weeks to assemble," says theaffable 40-year-old public servant. Another click of the mouse and he’sdrilling down into the data by county and then by job position. Seconds later,he’s able to slice through the data to view individual workers. "We’reable to determine how pay scales vary in different states and uncover patternsthat influence them, such as education, training, gender, and race. This is likelining up a Rubik’s Cube."

    The high-tech operation could never be mistaken for grandpa’s federalgovernment. The Census Bureau--along with a growing number of companies such asInterwoven, Royal Caribbean Cruises, Merck, and Northrop Grumman InformationTechnology--is turning to sophisticated workforce analytics applications tomine data and gain insight into business processes and labor conditions. Theseapplications can spot hidden patterns and problems and help an organization makemore effective business decisions surrounding programs, policies, and pay. Yet,while workforce analytics uses data-mining and reporting tools that weren’tavailable just a few years ago, the system isn’t problem free.

    Unless anorganization taps into the right data and ensures that it is accurate--and thenputs the data into action--workforce analytics can become a trip down therabbit hole. Ron Hanscome, senior program director at META Group in Plymouth,Minnesota, is one who can see the distinct advantages. "It turns theintangible into tangible," he says. META reports that about 60 percent ofGlobal 2000 companies will use some form of workforce analytics by the end of2003, mostly to improve decision-making on compensation, recruiting, retention,and performance issues. David Ulrich, a business professor at the University ofMichigan, says that the technology is bringing healthy change. "Organizationsare beginning to recognize that the softer side of the business can be measuredand that it’s a key factor in achieving success," he says. Betty Silver,human capital strategist at SAS Institute Inc. in Cary, North Carolina, adds,"Workforce analytics allows organizations to examine a multitude ofinterrelated factors. It can drill into places that previously couldn’t bereached."

    Although workforce analytics is rooted in humanresources, the ability to deliver detailed informationabout workforce issues and trends--ranging from where to locate a factory forthe best labor pool to how a VP of sales should build incentives--has real applications throughout the organization. Done properly,workforce analytics can help an enterprise sail beyond the flat earth ofspreadsheets and simple reporting and discover a brave new world.

Counting on analytics
    Step inside Federal Office Building Number 3 in the Washington, D.C., suburbof Suitland, Maryland, and you will find yourself wandering through amind-numbing labyrinth of corridors and hallways. Hundreds of offices,stretching almost as far as the eye can see, provide an apt metaphor for thelevel of complexity that confronts a person trying to navigate today’s datainfrastructure. Without a map and an address for finding a particular person oroffice, all the brainpower ensconced in this massive building is out of reachand virtually useless.

"By putting data into the hands ofmanagers, we’re allowing decision-making to take place on the front lines ofthe organization rather than in the executive offices."

    Seated at a simulated wood grain desk in room 3254, Pejsa is explaining thehow and why of workforce analytics. In sharp contrast to the world of technologyhe lives and breathes, he surrounds himself with an array of personal items.There are Beavis and Butthead figurines, framed cloth patches from various spacemissions, and a Sopranos poster. At this moment, he is reflecting on how thebehemoth agency is migrating into the digital age. Having spent his entireworking life at the organization--he joined the Census Bureau in 1985 aftergraduating from Virginia Tech with a degree in business management--hecertainly has a sense of perspective. "By putting data into the hands ofmanagers, we’re allowing decision-making to take place on the front lines ofthe organization rather than in the executive offices."

    At the Census Bureau, workforce analytics has unleashed a new level ofknowledge. From their desktop PCs, line managers have access to information thatwould have been unimaginable only a few years ago. It’s possible to examinedata on employee education and training patterns; salary breakdowns by geographyor employee segments; the effectiveness of diversity programs; terminationhistories; who uses employee benefits; alternative work schedules; andretirement and early retirement planning.

    When Pejsa decides to create a report, he selects the desired elements fromdrop-down boxes and slots them into the appropriate rows and columns. Once areport appears on his monitor, he can apply filters--such as employees atheadquarters within a specific pay grade--and instantly view a more detailed,customized report. Using SAS Institute’s Human Capital Management application(formerly HR Vision), Pejsa and others can view charts, graphs, and raw data andbegin to map out a business strategy for people and resources more effectively.

    One advantage of using analytics is the organization’s ability to betterunderstand the demand for temporary positions and how much they cost. Becausemany job assignments are cyclical in nature--and the Census Bureau sometimespromotes current employees for weeks or months at a time--planning for changesand budgeting can become a complex task. By using the application, "managersare able to take changes into account and structure the workforce dynamically,"Pejsa says.

    Recently, the Census Bureau also turned to the application to betterunderstand employee work schedules before negotiating with its labor union. Bymodeling various scenarios--such as four 10-hour days and the traditional 5x8week--Pejsa can view how changes in staffing levels will affect pay andperformance. "We were able to run the report and discuss the issueimmediately," he says.

    In the past, such reporting capabilities required the MIS department to spenddays, even weeks, digesting data on a mainframe. And in many instances, the datasets were so complex that it was simply impossible to generate a report. Just asroom numbers help locate the right office within the vast expanse of CensusBureau headquarters, workforce analytics attempts to bring order to a chaoticdata universe.

Putting data to work
    One thing that makes workforce analytics so powerful is that organizationscan tap into data from operations, finance, marketing, human resources, andmore. In addition, it’s often possible to use 10, 20, even 30 years of datathat has grown cobwebs sitting in long-neglected databases. By overlaying andcombining data--like a giant Rubik’s Cube--it’s possible to understand howa particular incentive or compensation plan actually plays out or whatconstitutes an optimal level of turnover. "An organization can make somescientific adjustments based on past successes and failures," Ulrich says.

    Simply put, workforce analytics puts line managers on the front lines ofdecision-making. A VP of operations can tweak compensation, rewards, andresponsibilitiesto keep top performers engaged. If he or she adds a bonus, it’s possible tomeasure the corresponding results before and after. A finance executive canslice and dice data about labor trends and costs to create a favorable paystructure at a new factory. At the same time, a director of human resources canidentify which benefits employees use, which are frivolous, and how to maximizecorporate resources.

    META Group estimates that the initial cost of workforce analytics starts inthe low six figures and averages about $250,000 per 10,000 employees, plusongoing annual licensing and maintenance fees. In some cases, that can translateinto an ROI ranging from a few months to a year or more. And a well-designedsystem can integrate with a human resources scorecard and incorporate industrymetrics to provide a more complete picture of cause-and-effect relationships.That could mean taking industry averages for the cost of a particular benefitand overlaying them with internal costs, or examining how incentives atbest-practice companies affect productivity and comparing it to internalpractices.

    At the Census Bureau, the genesis of workforce analytics is rooted in suchknowledge. One day, while Pejsa was sitting with his boss discussing humanresources systems, the two realized how inefficient a homegrown application wasfor managing the 10,000 employees spread across 12 regional offices. "Thesystem was inflexible, and we had questions about the data quality," he says.What’s more, the system had a tendency to crash and couldn’t accommodate allof the data residing in various databases and datamarts. So, they began to lookat the various analytics and reporting tools on the market.

    Eventually, the Census Bureau chose a workforce analytics application fromSAS. The selling points, Pejsa says, were the simplicity of the Web interface,built-in templates, and the flexibility to add and create reports as needed.Moreover, Human Capital Management allowed the Census Bureau to plug in adiverse array of formats, including Microsoft Access and Excel.

    After a six-month implementation, the Census Bureau went live with the systemin the spring of 2002. In September, it moved to a Web-based version of HumanCapital Management, and put the application on the desktops of 25 analystswithin human resources (Pejsa hopes to expand the use of the system to 200 to300 managers within the next year or so). Finally, the government agency wasready to put its human resources data to work in a big way. "We had access todata and information that would significantly change the way we make decisions,"Pejsa says.

"We have gained a level of sophistication that didn’t existonly a few years ago."

Analyze that
    Not only has workforce analytics reduced the risk of delays, errors, andinconsistencies, but it also has saved the Census Bureau tens of thousands ofdollars in staff time. The MIS department no longer spends hours generatingreports. Managers can steer clear of reams of paper or mind-numbingspreadsheets. "We have gained a level of sophistication that didn’t existonly a few years ago," Pejsa boasts.

    That may be so. But like any other emerging technology, workforce analyticscan present a hornet’s nest of challenges, frustrations, and problems. "Workforceanalytics is only as good as the underlying data and how it’s used," METAGroup’s Hanscome cautions. One of the biggest problems is identifying businessobjectives and mapping data so that it can flow seamlessly across departments,divisions, and business units. Adds Marcia Barkley, president of MBarkleyConsulting, a Sacramento, California, firm: "Building the infrastructure forworkforce analytics can prove intimidating. Many organizations have purchasedapplications and wound up with them sitting on the shelf or sitting idle."

    There’s also the task of changing a culture that once allowed only the topexecutives to view data but now pushes decision-making further down into theorganization. "If line managers and others don’t understand the value of aworkforce analytics application and how to collaborate and share data, then thesystem isn’t going to produce anything close to the desired results,"Barkley explains.

    At the Census Bureau, the learning curve has been steeper than expected,Pejsa admits. When the agency first turned to workforce analytics a couple ofyears ago, it had plans to use an assortment of features and tools that havesince been placed on the back burner. What’s more, it wanted to introduce theapplication to dozens of senior-level managers, but most were woefullyunprepared for the hands-on approach. "Our goals were too ambitious," hesays.

    Another giant headache was revamping the agency’s organizational structureto fit the application. Over the years, the Census Bureau had assumed adecidedly horizontal structure, and the SAS software required a distinctlyhierarchical model to function effectively. Pejsa spent more than a monthworking with his boss and staff analysts to map all the desired tools,capabilities, and permission rights to the appropriate users.

    Finally, the process of connecting all the various systems proved more than abit troublesome. At first, other applications and systems produced hiccups whenthe Census Bureau attempted to switch on the workforce analytics tools. And insome cases, servers crashed and nerves frayed when the agency attempted to plugin back-end applications and stream data across the organization.

    The Census Bureau’s encounter with workforce analytics has been moresuccessful than most. Only about 10 percent oforganizations are now using it in any significant way, and another 10 to 15percent are dabbling in it, says META Group’s Hanscome. Part of the problem,he says, is that some vendors’ applications aren’t ready for prime time.They simply cannot cull and organize data in ways that provide maximum insight.Another factor is that tight IT budgets and a heavy emphasis on other projects,including customer-relationship management and supply-chain management, havediverted funding and attention away from the somewhat nebulous world ofworkforce analytics.

    Yet, for the Census Bureau, which spent less than $100,000 to get the projectoff the ground, the payoff has been substantial. Despite occasional glitches andbreakdowns, the agency is evolving into a smarter, more flexible organizationthat’s finally able to measure the cost and value of its workforce. And as theagency has plowed through various problems and challenges, it has found a clearpath to success, Pejsa says. "We now have the tools to make strategicdecisions faster and better.

Workforce, June 2003, pp. 58-63 -- Subscribe Now!

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