New advances in analysis of even the most mundane data can help HR predict staff behaviour on a group or individual basis... and even exert a subtle influence, says Debbie Lovewell
Case Study: The Royal Bank of Scotland
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While it can be thrilling to live life on a knife-edge as any extreme sports enthusiast will testify, never knowing what's round the corner is rarely the most profitable idea. Very few of us, however, claim to have Mystic Meg-style powers, yet this doesn't mean that employers can't gain some insight into the future actions of their workforce. Information that is readily available can be used to identify potential staff turnover, for example, by pinpointing the characteristics of employees that are most likely to leave.
Paul Osgood, head of the communications practice at Hewitt Associates, explains that the first step towards predicting possible actions and trends is building up a comprehensive set of data about staff. The growth of technology and increasingly comprehensive HR systems means many firms will have already begun to do so anyway.
"There are two things [employers] can collect. The first one is obviously to collect employee data through employee surveys, some sort of measure of either employee satisfaction, engagement or commitment, which is probably considered to be softish data. Some organisations are more sophisticated in the way they collect that data. I think it's fair to say that the better they are at collecting that data and the more regularly they collect [it], the better it can be," says Osgood.
Rather than simply surveying employees to gauge satisfaction levels or gather ideas around what staff expect from a reward package, this information can provide a whole new level of insight into employee behaviour and characteristics. But very few organisations have yet to recognise this. Osgood explains that it is often overlooked in favour of more complex sets of data. "If you look at it, there's a lot of transactional data that organisations handle which can, in isolation, give the compensation and benefits manager great insight into who's doing what. But what organisations haven't necessarily done is see the potential to say 'lets think about this in relation to some of the softer data that we collect as well'. For example, can you make a link between those people that participate in share purchase plans, the overall business performance of the organisation and that person's tenure in the organisation? Can you actually tie people in by persuading them to participate in share plans because they get tied up in the organisation?"
The process is not necessarily as complex as employers may initially imagine. Mark Edelsten, European partner at Mercer Human Resource Consulting, says most firms will be able to work it out with existing in-house expertise and systems. "You can do a lot of it with Excel."
Specialist systems are required, however, to carry out more complex processes and analysis. While employers that outsource their HR administration may find that their provider can track employee data for them. Osgood offers the example: "If you look at salary rises, you can actually watch whether a move and someone's satisfaction in moving to a new employer correlates with their ability to sustain salary increases."
Once employers have worked out the characteristics of those that are likely to leave, they can then set about designing a retention strategy. In many cases, this will involve tailoring a benefits package to suit the profile of the workforce. And the same forecasting process can also be used to shed some light on the types of perks they are likely to value.
Mike Ashton, a principal at Deloitte, explains that tailoring benefits to suit staff can influence how they perceive their employer. "It demonstrates that if you understand your population and establish that work-life balance [for example] is critical to them, then you can put in place an employee benefit to influence their decision over that.
"It's around employee commitment, where someone is going to go the extra mile and someone is not going to go that extra mile if they're not happy with the culture, benefits and reward package. And if they're not going the extra mile, that will almost certainly impact on the bottom line."
However, he adds that it can be difficult to put an exact figure on what an organisation stands to gain. "It's always very hard to demonstrate a direct link in saying 'if I do this, it will have a 3.5% impact on my bottom line'. You can say invariably that committed staff will deliver a more successful business."
Osgood agrees that the strategy is likely to pay off: "[Employers] need to understand which [benefits] are likely to increase the performance of individuals or their likelihood of staying. It forces organisations to think much more carefully about targeting and segmenting their employee groups into something that has a much more powerful effect on the individual."
Knowing the likely length of service among certain employee groups may also help firms decide which benefits to offer. Share schemes, which typically run for several years at a time, are a classic example of a perk where gauging potential staff take-up upfront is a definite advantage. Fiona Downes, head of employee share ownership at IfsProShare, explains: "If you're going to get the majority of staff leaving in two years' [time], then you wouldn't run a scheme that offers options for five years."
She adds that knowing when staff are likely to have large expenditures on their hands can also help determine the best time of year to launch a scheme. Identifying if there are certain times of year when a large number of the workforce takes a holiday, for example, is just one possibility.
Firms are also looking into the future when deciding whether to grant executive share options. Charl Cronje, a partner at actuarial firm Lane Clark & Peacock, explains this has been prompted by new accounting standards, which mean such grants now have to be charged to a company's profit and loss account. "Before they grant options, they tend to come to [an actuarial firm] and ask it to estimate in advance if they make a grant of options what the accounting charge will be. We look at that under various scenarios [for example] how many people leave and what happens to the share price."
But while the process undoubtedly has advantages for employers, capturing the information they desire about staff may not be without its problems. Alex Tullett, head of benefits communication at Jardine Lloyd Thompson, says bosses should carefully consider what details they may request that some employees may consider to be an infringement into their personal lives. "The process of deciding what information to gather is a very important one as you don't want to alienate certain parts of your workforce. Asking these kinds of questions is fraught with political issues, good and bad. It is definitely good to build up a picture, but I'd be worried if [employers] started to build up too detailed a picture."
Most organisations will hold personal details such as an employee's age, gender and home address as a matter of course. And staff that belong to a company pension scheme may also have to provide their marital status in order to gain spouse's benefits. Firms that wish to provide family cover on perks, however, could potentially run into a grey area.
Tullett believes not all employees will be willing to disclose details on the number and age of their children, particularly if they have families with more than one partner. "What happens if that person's manager finds out and is very moralistic?"
Compiling even the smallest amount of data can also be a challenge. "Most organisations don't have the skills to collect the data let alone analyse it. The difficulty with introducing any of this stuff is that organisations don't have their data sufficiently well organised," explains Edelsten.
Firms typically hold around a year's worth of information on staff, whereas at least three years' worth is required for this type of analysis. In many cases, the data will also need to be cleaned before it can be used.
The need to iron out such issues may be why the process is still in its relative infancy and just a handful of organisations in the US and UK have so far implemented such a strategy. As it becomes more widespread, however, Osgood anticipates it will also benefit HR and benefits staff on a more personal level: "We are at the point where we are looking forward. I think it will project to a position where compensation and benefits [managers] are going to become much more integrated with other parts of the HR business because they now see the benefit of adding the data together. In that respect, I think we're going to see the skills of the compensation and benefits manager growing and developing beyond the current skill set. They have a more important role in helping the organisation understand what drives an individual and maybe influencing what drives an individual as well."
So while the future will always throw up some surprises, you may already be sitting on the data that could help to guard against too many nasty shocks. Who knows, we may someday see the end of relying on the benefit of hindsight to tell you that hiring lazy Steve in Accounts wasn't necessarily the best decision.
Mind control:
Rather than simply enabling employers to tailor benefits to suit their workforce, human capital foresight also means that firms could subconsciously influence employees in order to build up a desired culture and values. Mike Ashton, a principal at Deloitte, explains that this can only happen once employers have a firm understanding of their staff and business critical events, and have established a successful communications strategy. "You'll develop certain values in your employees that will lead them to behave and make decisions in a certain way. Then you can start to influence people. But until you understand your workforce and understand what those critical events are and how people behave when those critical events occur, you're not going to be able to influence them."
A relatively young workforce, or one that has a large number of staff with families, for example, may appreciate flexible working policies, which can influence the way that they perceive their employer. However, employers need to bear in mind that they cannot be seen to recommend certain insurance benefits, subconsciously or otherwise.
But employers should ensure that they align the process with the organisation's business needs. "You wouldn't want to be totally driven by the workforce if it didn't suit your business needs. You want to get the right skills into your business and, across the spread of a large business, you are going to have a fair number of preferences about what people want the culture to be. You've got to look at both the needs of the people and the needs of the business. They have got to be aligned. You can't have one necessarily driving the other," explains Ashton.
Case Study: The Royal Bank of Scotland
The Royal Bank of Scotland's human capital toolkit allows HR to go back to the future again and again to predict staff behaviour.
While the majority of employee research confirms past business performance, when RBS took over NatWest in 2000 it wanted to find out what was around the corner too. The bank has pooled data from over 26 countries worldwide and carries out surveys on its 115,000 employees across the globe. The system collects information on employee turnover, reward preferences and productivity. And once the data is measured, it can be managed.
Greig Aitken, manager of HR research and measurement, says: "If you want to know what the take-up rate is for female staff, in Madrid, on our flexible benefits system, then we can do that. We can segment by location, by ethnicity, by gender and analyse that to make sure that we have got the right flexible reward stuff in place."
The organisation has a human capital board, which includes directors and HR directors from a number of RBS' businesses. "They prioritise work based on business impact, so we have partnerships with institutions like the Harvard Business School and they are helping," he adds.
The system can also predict take-up of perks and is especially useful when communicating flexible benefits to staff. After all, what's the point of bombarding an 18-year-old with no kids with information on childcare vouchers? "We have been doing segmentation analysis which allows HR to target communication to the right people. There are certain people who would be keen on [taking] wine for their flexible reward, for instance. Rather than this approach of sending a 70 page document out to everyone, we send out the right communications for every person," explains Aitken.
