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Chapter 3

Talent analytic :
the financial impact of HRM activities

Didik P
Elizabeth A
Shinta Chandra
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Agenda
Outline 1 Outline 2

 Human Resources Management  Financial effect of employee

In Action attitude
 Linking worker beliefs to  attitude, customer behavior, and
increase productivity and profits
profitability
 Costing employee absenteeism
 Big Data : Promise and Perils  Analytic and measure for
employee absenteeism
 The LAMP model : foundation
of workforce measurement
 Process : interpreting the cost of
absenteeism
 Logic
 Analytic
 Measure
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Agenda (cont’d.)
Outline 3 Outline 4
 Costing employee turnover  Financial effect of collaboration
 Analytic : the component of and sharing knowledge
turnover cost  Logic and analytic
 The total cost of turnover  Measures
 Is employee turnover good or bad  Process
for an organization
 Conclusion
 Financial effect of work-life
program
 The logic of work-life program
 Analytic and measure : connecting
work-life program and outcomes
 Cautions in making the business
case for work-life program
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Outline 1:

 Human Resources Management In Action

 Linking worker beliefs to increase productivity and profitability

 Big Data : Promise and Perils

 The LAMP model : foundation of workforce measurement

 Logic
 Analytic
 Measure
 Process
HRM in Action: Linking worker beliefs to
increase productivity and profitability

 Management is interested in employees’ attitudes, job

statisfactions, commitment, and engagement

 What is the financial impact of the behavioral outcomes

associated with job attitudes and costs?
 Employee attitudes cause higher profits, productivity, employee
retention, and consumer loyalty  company profit

 Beliefs: Recognition for good work

 Talent : potential and realized capacities of individuals and

group and how they are organized,
 Big Data : Promise and Perils

 Big data  collection and analysis of the digital history created when people
shop or surf the Internet, but it also includes the tests and measures of attitudes,
behaviors and competencies.

 Three Key features big data :

 Volume : the sheer amount of data that businesses can access has accelerated
because most information is now in digital format and comes from many
different sources.

 Velocity : refers to the speed of data creation. Real time, or nearly real-time,
information makes it possible for an organization.

 Variety : of data includes sources of data both internal and external to HR an

enterprise.
The LAMP model : foundation of
workforce measurement
Lighting the “LAMP” for strategic change & organizational effectiveness
THE LAMP MODEL :
Logic, Analytics, Measures, Process
 Logic : The “ Story “ That Connects Numbers and Outcomes

 Without a compelling logic, its just not clear where to look for
insight into what the numbers (HR measurement data) mean.
Conversely, with well – grounded logic , it is easier to help leaders
outside of HR to undertand and use the measurement systems to
enhance the talent-related decisions they make

 Analytics : Drawing Appropriate Consclusions from Data

 Analytics tranforms HR logic and measures into rigorous,

relevant insights. Whereas statistics and research design are
analytical strategies for drawing correct conclusions from data,
measures comprise the numbers that populate the statistical formula.
THE LAMP MODEL :
Logic, Analytics, Measures, Process

 Measures : Getting the Numbers Right

 The logic guiding the measurement of turnover is

straightforward. It begins with the assumption that employee
turnover is not equally important every where

 Process : Creating Actionable Insights

 Process is the final element of the LAMP framework. It is

the process of using data to influence key decision makers.
Talent Analytics

Talent Analytic answer two simple questions

1. What do we need to know about our organization and

workforce to run the company more effectively?

2. How do we turn that knowledge into action?

The objective is to connect investments in program that contribute to
employee engagement with outcomes that senior executives value,
such as higher customer satisfaction, higher profitability and
increased shareholder value.
The Logic diagram : Employees Experience

Job Challenge and Learning, Autonomy, Supervisor Task Support, climate and
trust, Work-Life Fit. And economic Security

High Engagement, High Job Satisfaction, Intentions to stay

Highly Engaged Employees at the Work-Unit Level

Cooperate with Devote extra effort to Effectively Adapt to

Each other innovation Change

Highly Engaged Employees at the Work-Unit Level

Improve staffing Lower turnover Increase performance

and service
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Outline 2:

 Financial effect of employee attitude

 Employee attitude, customer behavior, and profits at Sysco Corporation
 Logic : linking management practice to financial outcomes
 Analytic : connecting the model to management behavior
 Measure :
 Analytic combined with process : the Sysco web portal
 Monetary payoffs
 Integration the value-profit chain into organizational systems

 Costing employee absenteeism

 Analytic and measure for employee absenteeinsm
 Process : interpreting the cost of absenteeism
FINANCIAL EFFECTS OF EMPLOYEE
ATTITUDES
• Attitude --> internal states that focus on particular aspects of
or objects in the environment
• 3 Element of Attitude:
• 1. Cognition. The knowledge an individual has about the
focal obect of attitude
• 2. Emotion and individual feels toward the focal object
• 3. Action tendency. Readiness to respond in predetermined
manner to the focal object
 FINANCIAL EFFECTS OF
EMPLOYEE ATTITUDES

• Employee Attitudes, Customer Behavior, and Profits at Sysco Corporation

 Financial Effects of Employee Attitudes

Logic : linking management practice to financial outcomes.

Effective management practices drive employee satisfaction (and engagement). A
satisfied and angaged workforce, in turn, enables a company to pursue excellence
ininovation and execution

Analytic : connecting the model to management behavior

The set of practices that describe how the company seeks to engange the hearts and
minds of employees with its employer brand-has been termed the 5 STAR
management model:
1. Ensuring that leaders offer direction and support
2. Strengthening frontline supervisors
3. Rewarding performance
4. Addresising employees quality of life
5. Icluding employees by egaging them and leveraging diversity
Financial Effects of Employee Attitudes
Measure : Sysco developed a work climate/employee-engagement survey built
around each of the 5 STAR principles.

Analytic : combined with process : the Sysco web portal

 Satisfied employees deliver better results
High Low

Associate satisfaction 4.00-5.00 3.90-3.99 3.75-3.89 3.55-3.74 <3.55

Customer loyalty score 4.55 4.40 4.25 4.15 4.05

Retention,marketing associates 88% 85% 81% 75% 76%

Retention,drives 87% 81% 81% 75% 76%

Monetary payoffs. Table 3-1 des not include cost saving associated with
improvements in the retention of marketing associates and drives,but those cost
savings are significant.
 Costing employee absenteeism
Absenteeism :
 any failure of an employee to report for or to remain at work
as scheduled,regardless of reason.
Why are employees absent?
 Personal illness (34%)
 Family-related issues (22%)
 Personal needs(18%)
 Entitlement mentality (13%)
 Stress (13%)
 Costing employee absenteeism
Analytics and Measures for Employee Absenteeism
Figure 3.5 Total estimated cost of employee absenteeism (Source:
Cascio,W and Boudreau J(2011) Investing in People: Financial impact of Human
Resources Initiatives.) :
1. Compute total employee hours lost to absenteeism for the period
2. Compute weighted average wage or salary/hour/absent employee
3. Compute cost of employee benerfits/hour/employee
 Costing employee absenteeism
Analytics and Measures for Employee Absenteeism
Figure 3.5 Total estimated cost of employee absenteeism (Source:
Cascio,W and Boudreau J(2011) Investing in People: Financial impact of Human
Resources Initiatives.)
4a. Yes 4b. No

Are absent
workers paid?

Compensation
Compensation lost/hour/absent employee
lost/hour/absent employee = benefit only
=wage/salary + benefit

5. Compute total compensation lost to absent employess (1x4a or 4b, as applicable)

6. Estimate total supervisory hours lost to emplotee absenteeism
Costing employee absenteeism
Analytics and Measures for Employee Absenteeism
7. Compare average hourly supervisory salary+benefits
8. Estimate total supervisory salaries lost to managing absenteeism problems
(6x7)
9. Estimate all other costs incidental to absenteeism
10. Estimate total cost of absenteeism (∑5,8,9)
11. Estimate total cost of absenteeism/employee (10 ÷ total
no.employee)
Costing employee absenteeism
Process : Interpreting the Cost of Absenteeism
Are we average,above average,below average?
 Cost will vary depending on the type of firm,the industry,and
the level of employee that is absent (unskilled vers skilled or
professional worker). Amerika misses 2.3% of schedule work time
or average 5.4 unschedule absences per years.
UK misses 40% more time,average 7.6 days per years.

Are these dollar real?

 Use the value of what employees earn(salaries,benefits, and
overhead costs) as a proxy for the value of their time
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Outline 3:
 Costing employee turnover
 Analytic : the component of turnover cost
 The total cost of turnover
 Is employee turnover good or bad for an organization

 Financial effect of work-life program

 The logic of work-life program
 Analytic and measure : connecting work-life program and outcomes
 Cautions in making the business case for work-life program
Costing employee turnover
Turnover :

 employee who leaves an organization permanently

Cause instant and significant risk due to :

 Employee takes the client with them away
 Employee posses unique knowledge that cannot be re-created easily
 High performer employee who are difficult to replace

Turnover Ratio :
Number of turnover incident per period Performance and Replaceability turnover
X 100% V X 100%
Average workforce size Performance and Replaceability Average
S

Functional turnover vs dysfunctional turnover

Costing employee turnover
Component of turnover cost :
 Separation cost
 Exit interview, administrative, separation pay, Increase unemployment
tax, etc
 Replacement cost
 Opening job vacancy, administrative, interview, medical examination,
transfer fee, etc
 Training cost
 Information literature, orientation, formal training program, on the job
training, etc

Reducing productivity during the learning period

Costing employee turnover
Productivity loss over each third of learning period for job classification

Productivity loss during each

Week in third of the learning period (%)
Classification learning
period 1 2 3

Management and partners 24 75 40 15

Professional and technician 16 70 40 15
Office and clerical worker 10 60 40 15
Broker trainees* 104 85 75 50

* The learning period for the average broker trainees is two years, although the cost to the firm is generally incurred only
in the first year. It is not until the end of the second year that the average broker trainees is fully productive
Costing employee turnover
Is employee turnover good or bad for an organization
McDonald’s Study* :

* Tyler, R. (2009, Aug. 13). Worker over 60 are surprise key to McDonald’s sales. Telegraph. Retrieved from http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer
/6017391/worker-over-60-are-surprise--key-to-McDonald’s-sales.html
Costing employee turnover
McDonald’s Study* :
The fast food chain invited Lancaster University Management School to
examine the performance of 400 of its restaurants and the researchers found
that customer satisfaction levels were on average 20% higher in those
outlets that employed kitchen staff and managers aged over 60.

 He put the improvement down to the older workers' additional experience,

work ethic and skills in dealing with customers face-to-face.

 The presence of older employees improves customer satisfaction, and in a

service led business such as McDonald’s, this drives the bottom line.
Mature employees are a key part of the performance recipe. This is good
news for the workforce given the changing demographics of the society.

* Tyler, R. (2009, Aug. 13). Worker over 60 are surprise key to McDonald’s sales. Telegraph. Retrieved from http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer
/6017391/worker-over-60-are-surprise--key-to-McDonald’s-sales.html
Financial effect of work-life program
Work – life Program :
 Working condition that helps an employee to manage work and
non-work demands
Including :
Child and dependent (onsite or near site child care)
Flexible working condition (flextime, teleworking)
Leave option (maternity and paternity leave, sabbaticals, retirement scheme)
Information services and HR Policies (professional and personal
counselling)
Company Culture (respect and diversity)
Financial effect of work-life program
The Logic of Work – life Program :
Work-life program investment
(Benefits, Condition, flexibility, information, resource)

Communication, training culture, supervisor support

Employee achieve greater work and life balance

Reduce stress, burnout, and conflict

Improve satisfaction, commitment, and engagement

Better work and

Better recruiting Less absence Lower turnover
Career behavior

Reduce Reduce turnover Increase performance

Improve staffing
absenteeism cost cost and service
Financial effect of work-life program

• Corporate voice for working families. (2011, feb). Business impacts of flexibility : an imperative for expansion. Retrieve from
https://www.wfd.com/PDFS/BusinessImpactsofFlexibility_March2011.pdf
• Human Resources\BusinessImpactsofFlexibility_March2011.pdf
Financial effect of work-life program
IBM Case Study :
IBM global work-life survey demonstrate that flexibility is an important
aspect of employee’s decisions to stay with the company. Responses from
almost 42,000 IBM employee in 79 countries revealed that work-life program
of which flexibility is a significant component is the second leading reason for
potentially leaving IBM, behind compensation and benefits.
In the corporate finance organization, 94 percent of all managers reported
positive impacts of flexible work options on the company’s “ability to retain
talented professionals.”
In 2015, global full time IMB employee is around 377,757

• Corporate voice for working families. (2011, feb). Business impacts of flexibility : an imperative for expansion. Retrieve from
https://www.wfd.com/PDFS/BusinessImpactsofFlexibility_March2011.pdf
Financial effect of work-life program
Consideration in making work-life program business
case* :
Data, researches, and anecdotal evidence
Train the manager first
Evaluation

• Families and work institute. 2012). Workflex : The essential guide to effective and flexible workplaces. Alexandria, VA : Society for human resource management
• C:\Users\awahyudin\OneDrive - Kemin Industries\MM Unair\Materi Kuliah\Human Resources
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Outline 4:

 Financial
effect of collaboration and sharing
knowledge
 Logic and analytic
 Measures
 Process

 Conclusion
 Linking worker beliefs to increase productivity and profitability
 Financial effect of collaboration
and sharing knowledge

 Global competition and rapid changing financial

environment driving to innovate.
 The return of investment from innovation and
knowledge sharing is the most difficult acts to
conduct.
 A case of the measurement team from HR, finance,
senior operations leader and IT technicians developed
a quantifiable business case to support the substantial
investment which is top-rated customer service.
 Financial effect of collaboration
and sharing knowledge

 Following, the measurement team steps:

 Logic and analytic :
 Identifywhich workers and job would benefit from
knowledge sharing and organizational information.
The finding are pilot, flight attendants and pre-flight
preparation need a collaboration information access
and social networking tools which lead to accuracy
data. Those demand technology
 Financial effect of collaboration
and sharing knowledge

 Measure
 There is an improvement in productivity and accuracy
after using networked mobile device technology, and
lead to efficiency because the lack of using airport
offices, sharing message, information and advice
between flight attendants and more time to focus to
passengers.
 The finance department identified two areas cost
saving: fewer flight attendants and elimination office
space
 Financial effect of collaboration
and sharing knowledge

 Process
 The measurement teams project the finding to ROI
 Investment in program and collaboration and social-
networking
 Critical but difficult to measure HR issued was
resolved
 The collaboration and sharing of knowledge are
quantified using a logical, data-based approach
Conclusion : Linking worker beliefs to increase
productivity and profitability
 Four key behaviours that trigger
productivity:
Select for Talent
•

 Managers have to identify talents that are needed fo a

particular position and find people who fit in it. To do that,
manager must take into account the broad range of factors-
situational, contextual, strategic and environmental
Conclusion : Linking worker beliefs to increase
productivity and profitability
 Four key behaviours that trigger
productivity:
Define the right outcomes
•

 Managers have to establish very clear objectives so the

employees know exactly the goal. Managers make sure that
employees have the resources i.e. Equipment, budget, etc.
Best managers don’t define the steps for their employees
Conclusion : Linking worker beliefs to increase
productivity and profitability
 Four key behaviours that trigger
productivity:
Focus on strengths
•

 Managers have to focus on workers’ strength will serve

the company best rather than their weakness and attempting
to fix them.
Conclusion : Linking worker beliefs to increase
productivity and profitability

 Four key behaviours that trigger

productivity:
• Find the right fit
 Managers always encourage their employees and them
in order to find the kind of work that bring out their best
talents
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Thank you for your

attention

Didik
Elizabeth
Shinta Chandra