Advance Praise for The New HR Analytics ‘‘Dr. Jac Fitz-enz and his associates have done it again! As the architect of the human capital movement, he has now defined and shaped predictive analytics that define more clearly how today’s metrics can predict and lead to tomorrow’s successes. The book both synthesizes and extends the measurement movement with outstanding essays where ideas are turned into action. HCM:21 will be the standard for how to go about scanning, planning, producing, and predicting organization processes in a predictive and rigorous way. Those of us who care about the HR profession are grateful that people like Fitz-enz continue to apply their knowledge to problems we care about.’’ —Dave Ulrich, Professor, Ross School of Business, University of Michigan, and Partner, The RBL Group ‘‘Dr. Jac Fitz-enz is always out on the leading edge of HR thought leaders. He’s done it again with The New HR Analytics. Anybody who aspires to advance an HR or total rewards career in the next decade should read this book!’’ —Anne Ruddy, CCP, CPCU, President, WorldatWork ‘‘The concept of managing people as an asset has been around for decades, but until now no one has been able to translate that compelling idea into real-world practice. Both HR professionals and line managers struggle all the time with ‘people manage- ment’ issues. Balancing the realities of getting today’s work done with the very real need to anticipate future needs has eluded managers since the beginning of time. ‘‘This book changes all that. Dr. Jac Fitz-enz and an impressive group of prac- titioners and thought leaders have pulled together both a comprehensive Human Capital Management framework and a very practical set of action-oriented recom- mendations that together enable you to leverage the one thing that makes your orga- nization truly unique: your human talent. HCM:21 is by far the most effective approach to strategic human resource management and human capital planning I’ve seen anywhere.’’ —James P. Ware, Executive Producer, Work Design Collaborative LLC ‘‘In a world where business intelligence as applied to human capital is on the verge of becoming as oxymoronic as ‘military intelligence,’ Dr. Jac Fitz-enz continues to provide the thought leadership businesses need now more than ever when it comes to human capital management. Too many businesses today confuse correlation with causation, and Dr. Jac’s four-phase human capital management system is a true antidote and the injection of innovation that businesses need to apply. As Dr. Jac succinctly puts it, there is nothing more powerful for a business than ‘managing tomorrow, today’ by properly applying analytics to its human capital.’’ —Shyam Patel, COO, People Report ‘‘Once again, Dr. Jac has led the way with critical research that enables organizations to create sustainable value through people.’’ —Kent Barnett, CEO, KnowledgeAdvisors ‘‘Once again, Jac Fitz-enz, aka Dr. Jac, has brought enlightenment to the enlightened. He’s evolved his body of work and the enormity of understanding of translating data, to information, to knowledge, to success. ‘‘Jac’s latest endeavor has placed the question squarely before all decision mak- ers, ‘How do we know what we know before we know it?’ ‘‘It’s part analytics, it’s part experience, it’s part intuition, it’s part good luck, and it’s all commitment. Commitment to demonstrating to decision makers throughout the organization that a thoughtful process, not usually linear in nature, always dynamic at the core, and entirely logical, can empower all of us to answer the ques- tions, with insight and meaning, in a language that can be understood. Jac’s life’s passion has been to translate the simple but imminently elegant tools into a language not only that we can understand, but also that we can execute from. ‘‘Predictive analytics is what we’ve been waiting for because it’s the next level of understanding in Dr. Jac’s long and evolving journey to empower us with the core tools, terminology, and logic to make a difference. The journey lives on!’’ —Ed Kleinert, Administrator, HR Information Technology, Memorial Sloan- Kettering Cancer Center ‘‘In The New HR Analytics, Jac Fitz-enz extends his decades of leadership in human capital measurement. It is a call to action that should inspire leaders to rethink their assumptions and improve their decisions.’’ —John Boudreau, Professor, Management & Organization, and Research Director, Center for Effective Organizations, University of Southern California ‘‘The New HR Analytics is the breakthrough people management playbook that will transform how CEOs manage their human capital and their human resource func- tion going forward. The HCM:21 model introduces leading-edge predictive tech- niques that maximize return on human capital investments while energizing and engaging employees. Organizations that ignore The New HR Analytics and Dr. Jac’s HCM:21 system for predictive HR management are doomed to fail in the resurging economy. Hucametrics has reached the tipping point.’’ —Ken Scarlett, President, Scarlett Surveys International ‘‘Everybody knows that Jac Fitz-enz is acknowledged as the father of human capital strategic analysis and human performance benchmarking. For me he is also much more. He is a powerful lighthouse who lights the long way from the old human resources department to the new human capital strategic partner. A book by Dr. Jac is always an important milestone in human capital history.’’ —Luis Marı´a Cravino, Cofounder and Codirector, AO Consulting S.A., Buenos Aires ‘‘Dr. Jac is the pinnacle of vision and leadership in human capital analytics. This book paves the way for the next wave in the field.’’ —Kirk Smith, Founder, W. Kirk Smith & Associates ‘‘Dr. Jac’s landmark book contains leading-edge human capital thinking and tools that will enable organizations to maximize operational impact by optimizing their investment in human capital.’’ —John Matone, Vice President, AlignMark HRTHE NEW ANALYTICS Predicting the Economic Value of Your Company’s Human Capital Investments Jac Fitz-enz American Management Association New York • Atlanta • Brussels • Chicago • Mexico City • San Francisco Shanghai • Tokyo • Toronto • Washington, D.C. Bulk discounts available. For details visit: www.amacombooks.org/go/specialsales Or contact special sales: Phone: 800-250-5308 E-mail: [email protected] View all the AMACOM titles at: www.amacombooks.org This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Library of Congress Cataloging-in-Publication Data Fitz-enz, Jac. The new HR analytics : predicting the economic value of your company’s human capital investments / Jac Fitz-enz. p. cm. Includes index. ISBN-13: 978-0-8144-1643-3 (hbk.) ISBN-10: 0-8144-1643-8 (hbk.) 1. Personnel management. 2. Human capital—Management. 3. Human capital—Cost effectiveness. I. Title. HF5549.F557 2010 658.3—dc22 2009053581 ᭧ 2010 Jac Fitz-enz All rights reserved. Printed in the United States of America. This publication may not be reproduced, stored in a retrieval system, or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of AMACOM, a division of American Management Association, 1601 Broadway, New York, NY 10019. About AMA American Management Association (www.amanet.org) is a world leader in talent development, advancing the skills of individuals to drive business success. Our mission is to support the goals of individuals and organizations through a complete range of products and services, including classroom and virtual seminars, webcasts, webinars, podcasts, conferences, corporate and government solutions, business books, and research. AMA’s approach to improving performance combines experiential learning—learning through doing—with opportunities for ongoing professional growth at every step of one’s career journey. Printing number 10987654321 To the two Lauras, my wife and my mother-in-law, who take such very good care of me. This page intentionally left blank Contents PREFACE xi HR as an Expense—The Introduction of Metrics—The Era of Analytics—The Organization of This Book—Acknowledgments CONTRIBUTORS xvii PART ONE: INTRODUCTION TO PREDICTIVE ANALYTICS 1 CHAPTER ONE Disruptive Technology: The Power to Predict 3 What Is Analytics?—Introducing HCM:21᭨—The Value of Insight—The Plan CHAPTER TWO Toward Analytics and Prediction 8 The Language of Metrics and Analytics—Ascending the Value Ladder—The Power of Analytics—The Model for Predictive Management Why Analytics Is Important 17 Measuring What Is Important, by Luis Maria Cravino Strategic Human Capital Measures: Using Leading HCM to Implement Strategy, by Stephen Gates and Pascal Langevin From Business Analytics to Rational Action, by Kirk Smith vii viii CONTENTS PART TWO: ᭨ THE HCM:21 MODEL 45 CHAPTER THREE Scan the Market, Manage the Risk 47 The Big Picture—The Value of Statistical Analysis—The Importance of Risk Assessment—The Data Speak for Predictive Management—Ready, Aim, Begin How to Improve HR Processes 56 The Intersection of People and Profits: The Employee Value Proposition, by Joni Thomas Doolin, Michael Harms, and Shyam Patel More Than Compensation: Attracting, Motivating, and Retaining Employees, Now and in the Future, by Ryan M. Johnson ‘‘Best in Brazil’’: Human Capital and Business Management for Sustainability, by Rugenia Pomi CHAPTER FOUR The New Face of Workforce Planning 85 Human Resources Versus Human Capital Planning—Jumping Ahead of the Competition How to Put Capability Planning into Practice 94 Scenario Planning: Preparing for Uncertainty, by James P. Ware Quality Employee Engagement Measurement: The CEO’s Essential Hucametric to Manage the Future, by Kenneth Scarlett Truly Paying for Performance, by Erik Berggren The Slippery Staircase: Recognizing the Telltale Signs of Employee Disengagement and Turnover, by F.