2013 Harvard Business School Publishing. Created for Harvard Business Review by BullsEye Resources, www.bullseyeresources.com.

USE WORKPLACE ANALYTICS TO REVITALIZE YOUR

ORGANIZATION
featuring Carl C. Hoffmann, Ph.D.
DECEMBER 9, 2013

Calculating Success
Sponsored by
WEBINARS
2013 Harvard Business School Publishing. Created for Harvard Business Review by BullsEye Resources, www.bullseyeresources.com.
www.hbr.org
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OVERVIEW
Most companies have reams of human capital data, but few use it effectively. A carefully
planned workforce analytics initiative can help leaders make smarter strategic decisions about
human capital and drive superior performance. Focusing on labor costs is a frst step, but that
alone is not enough.
It is important that organizations break down silos between Finance, Marketing, Operations,
and Human Resources. A holistic approach to workforce analytics that focuses on organi-
zational design, the human capital supply chain, management, and innovation is the key to
success.
CONTEXT
Carl Hoffmann discussed how a structured approach to workplace analytics can improve
company performance and proftability.
KEY LEARNINGS
Too many organizations take a simplistic approach to workforce analytics.
The ratio of total labor costs to total revenue is a helpful foundation for workforce analytics. It
focuses on key metrics and is dynamic; the ratio can be changed by increasing revenue and/or
decreasing total labor costs. Optimizing this ratio, however, requires shared responsibility and
creative thinking. Human Resources, Finance, Operations, Marketing, and Sales must partner
to address market dynamics. Teams must focus on key analytical challenges associated with
human capital management that affect both labor costs and revenue.
Despite the benefts associated with workforce analytics, many organizations take an overly
simplistic view. Dr. Hoffmann described common symptoms of this approach:
Revenue is seen as fxed, while labor costs are viewed as variable. This reduces
workforce analytics to an accounting exercise focused solely on controlling labor costs.
Human Resources creates programs that are disconnected from the organiza-
tions need for change. Human Resources often deals with an accounting approach to
workforce analytics by controlling labor cost components. HR teams address productivity
through programs that are isolated from the true need for change.
Emphasis focuses on individual performance, rather than organizational
success. All workers must be committed to providing excellent customer service and meet-
ing standards of quality. While this is important, it is not enough. Attention must also be
given to organizational performance.
CONTRIBUTORS
Carl C. Hoffmann, Ph.D.
Human Capital Management and
Performance LLC; Co-Author,
Calculating Success
Lisa Burrell (Moderator)
Senior Editor, Harvard Business
Review
DECEMBER 9, 2013
Calculating Success
USE WORKPLACE ANALYTICS TO REVITALIZE YOUR ORGANIZATION
2013 Harvard Business School Publishing. Created for Harvard Business Review by BullsEye Resources, www.bullseyeresources.com.
www.hbr.org
3
DECEMBER 9, 2013
Calculating Success | USE WORKPLACE ANALYTICS TO REVITALIZE YOUR ORGANIZATION
Focusing heavily on labor costs can create a domino effect with negative consequences. A case
study about a low-margin retail store illustrates the vicious cycle. By paying low hourly wages,
the store experiences high turnover, poorly trained and disengaged workers, and high absen-
teeism. In response to the chaos, managers fll in for absent workers, hire and train replace-
ments, and deal with mistakes. Because managers are distracted by reactive frefghting, stores
are dirty, customer service suffers, and merchandising is ignored. Lower sales and lost revenue
lead to even lower hourly wages.
Effective workforce analytics addresses workforce management in a holistic and
dynamic way.
When used effectively, workforce analytics helps organizations break out of chaos by taking a
holistic and dynamic approach to workforce management. By identifying the root of problems
and taking action, businesses can grow revenue and become more proftable. The key compo-
nents of workforce analytics programs include:
1. Creating a new business model to provide better service and increase sales.
2. Using activity-based costing to collect data on how workers spend time and determine the
costs.
3. Analyzing the data and determining what activities can be eliminated, automated, and
reorganized.
4. Modeling the new organization.
5. Establishing an HR team that can build a talent supply chain and monitor performance.
6. Developing a highly capable management team that can lead self-managed work groups
and leverage technology.
7. Measuring success based on revenue and profts.
Workforce analytics should optimize the ratio of labor costs to revenue.
The new approach to workforce analytics is designed to optimize the ratio of labor costs to
revenue by focusing on four areas:
1. Organizational design. Based on the companys business model, leaders decide what
work must be done and what processes, structures, roles, capabilities, and performance
measures will effciently accomplish it. Useful analytical tools include activity-based sur-
veys, organizational design driven by scenarios and workload projections, compensation
surveys and modeling, and hiring processes.
When it comes to organizational analytics, disconnects often exist due to functional silos.
Human Resources lacks insight into the business strategy and operational model, while
Finance, Marketing, and Operations lack insight into workforce defnitions and standards.
Workforce analytics is
distinctive from other
forms of analytics. It
takes a holistic and
dynamic approach
and shows how
better workforce
management can
contribute to the
business.
CARL HOFFMANN
2013 Harvard Business School Publishing. Created for Harvard Business Review by BullsEye Resources, www.bullseyeresources.com.
www.hbr.org
4
DECEMBER 9, 2013
Calculating Success | USE WORKPLACE ANALYTICS TO REVITALIZE YOUR ORGANIZATION
This can lead to unintended workforce consequences. For example, senior operational
leaders at an energy company launched a balanced scorecard to measure performance for
oil feld foremen. The foremen werent skilled at optimization and they ultimately rejected
the new tool. This could have been avoided through HR involvement and analysis.
2. Human capital supply chain. Organizations must evaluate whether their human capital
supply chain is flling roles with people capable of doing the work at the quantity, quality,
time, and cost required by the business model. Useful analytical tools include stochastic
modeling of worker fow, visibility into the external labor market, scenario planning, and
process monitoring, as well as daily schedule optimization for service industries and portfo-
lio optimization for longer-term projects.
During corporate planning, organizations should create a human capital demand and
supply forecast. Inventory building and maintenance can be accomplished through hiring,
transfers, outsourcing, contractors, or layoffs.
3. Management. Once the workforce is in place, businesses must analyze whether employ-
ees are fully engaged and motivated to meet or exceed performance standards. Useful
analytical tools include correlating key corporate performance indicators and human capital
management performance indicators.
When managers coach and motivate employees, it leads to greater engagement and proft-
ability. However, when the managers tool set falls short, it results in disaffection and
losses. Analyzing KPIs related to corporate performance and human capital management
can provide the frst warning sign or positive feedback about employee engagement. For
instance, the corporate performance indicators at a communication company were terrible.
However, the human capital KPIs for the call centers seemed satisfactory. Further analy-
sis found that call center managers were rewarded for the percentage of their group that
met certain metrics. As many as 80 percent of managers fred employees who didnt meet
metrics. This drove the human capital KPIs up at the expense of customer satisfaction and
revenue.
4. Innovation. Since change is unavoidable, organizations must understand how to detect
the need for innovation and disseminate new programs throughout the business. Useful
analytical tools include prototyping and experimental design.
A structured approach to workforce analytics is essential.
As organizations embark on workforce analytics initiatives, Dr. Hoffmann recommends the
following six-step process:
1. Frame the central problem.
2. Apply a conceptual model to guide the analysis.
3. Capture the relevant data.
2013 Harvard Business School Publishing. Created for Harvard Business Review by BullsEye Resources, www.bullseyeresources.com.
www.hbr.org
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DECEMBER 9, 2013
Calculating Success | USE WORKPLACE ANALYTICS TO REVITALIZE YOUR ORGANIZATION
4. Apply analytical methods.
5. Present statistical fndings to stakeholders.
6. Defne action steps to implement the solution.
This approach will determine which actions will be most effective for different organizational
contexts.
Workforce analytics uses different fundamental principles from Big Data.
Although Big Data is a popular trend in business today, workforce analytics relies on a different
set of underlying concepts.
The datasets supporting workforce analytics are relatively small. Big Data takes
advantage of billions of data records. In contrast, HR information is more limited. Even
companies with more than 100,000 employees dont have the data reservoirs recom-
mended for Big Data initiatives.
Small targeted datasets are valuable for workforce analytics. Workforce analytics
creates small targeted datasets that contain meaningful measures. Big Data sees no need for
data subsets.
Workforce data must be trusted and reliable. Big Data embraces messy data and
eschews exactitude. With workforce analytics, managers must have confdence that data
accurately represents the people they are managing.
Workforce analytics is concerned with both data correlations and causation.
Big Data settles for correlations and gives up on causation. While that may be effective for
taking advantage of trends, it doesnt help control them. When managers act, they need
confdence that their actions will cause the desired effect.
Workforce analytics
will only be successful
when managers feel
condent that the
data point to actions
that will cause
the desired eect.
Managing people
requires knowing
why and how to take
action.
CARL HOFFMANN
2013 Harvard Business School Publishing. Created for Harvard Business Review by BullsEye Resources, www.bullseyeresources.com.
www.hbr.org
6
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responsibility for any information provided or any decisions made based upon the information provided in this document.
DECEMBER 9, 2013
Calculating Success | USE WORKPLACE ANALYTICS TO REVITALIZE YOUR ORGANIZATION
BIOGRAPHIES
Carl C. Hoffmann, Ph.D.
Human Capital Management and Per-
formance LLC; Co-author, Calculating
Success
Carl C. Hoffmann has been helping
companies around the world meet the
challenges of formulating and implement-
ing effective human resource strategies
for more than 30 years. From 1978 until
1999, Hoffmann was CEO of a successful
private consulting frm that focused on
helping companies collect and analyze
data to support strategic workforce deci-
sions. When his company was purchased
by PricewaterhouseCoopers, Hoffmann
joined PwC as a partner. At PwC he devel-
oped and led the Integrated Analytics
practice for the Americas, as well as the
global Workforce Analytics practice. In
2002, when IBM acquired the PwC Man-
agement Consulting Group, Hoffmann
became a partner and vice president of
IBMs Global Business Services group. In
all of these roles, he designed and ran a
number of large workforce transforma-
tion projects for multinational companies.
Since retiring from IBM in 2007, Hoff-
mann has established a private consulting
frm, Human Capital Management and
Performance LLC (HCMP), which contin-
ues to work with corporate executives to
make fact-based decisions that integrate
workforce activities with line operations
to achieve strategic goals.

Hoffmann has given presentations on
public policy before U.S. House and
Senate committees, and on business
process redesign and technology imple-
mentation for the International Quality
& Productivity Center, the International
Association for Human Resource Infor-
mation Management, and the Society for
Human Resource Management. He is
also the author of numerous publications,
reports, and white papers dealing with
human resource analysis and research
methodology. He holds a PhD in demog-
raphy with a concentration in biostatistics
from the University of North Carolina at
Chapel Hill.
Lisa Burrell (Moderator)
Senior Editor, Harvard Business Review
Lisa Burrell is a senior editor at Harvard
Business Review. She acquires and devel-
ops articles for the magazine, primarily
in the areas of leadership, talent manage-
ment, self-management, and organiza-
tional behavior. She also contributes to
other platforms at Harvard Business Pub-
lishing, including interactive assessments,
new products, and the blog network on
hbr.org. Previously, as a senior editor at
HBR Press, she oversaw and developed
branded lines of books, such as HBRs 10
Must Reads, which are curated collections
of the top HBR articles on core manage-
ment topics, and the HBR Guides, which
help managers develop essential skills for
growth and advancement in their organi-
zations and careers.
Before joining HBR in 2004, Lisa served
as managing editor at Perspectives on
Politics, a fagship journal of the Ameri-
can Political Science Associationand
before that, as an associate editor at The
American Prospect, a magazine about
politics, public policy, and culture.