Knowledge Services: Use HR analytics to positively impact your ops profit

Historically, the HR world has been relying on a lot of qualitative data for taking many decisions which have an effect on the organization at multiple levels. The sparse usage of quantitative data could have many reasons of which non-availability of data, lack of one-view of the employee (data), non-availability of an integrated data system to enable various data types to talk to each other or simply the inability or unwillingness of the HR professional to use hard data to take decisions related to human beings are some of the oft repeated reasons.

In the current economic downturn many of the business enabling functions (including HR) have seen drastic cut in head counts to save the head counts in some other part of the organization which in the decision makers eyes is a revenue generating business unit. Most of the time the HR is called upon to address many crunch situations by the ops manager. However, when the going is great and everything appears to be smooth, managers tend to forget the HR.

When it comes to the question of ‘Where does the HR fit at the business high tables already occupied by the Finance experts, the marketing wizards and the sales stars?’ most of the time the average HR professional tries hard to quantify the business impact it has on the day to day running of the business or the effect it has on the business bottom line with little success.

HR analytics could help the HR leader to equip herself with high business impact data points which could be important for all the CXO level executives in the organization. One case in point is attrition modeling. By modeling the attrition behavior of employees and successfully implementing the same in the organization, the HR leaders could help the organizations bring down the attrition rates and have a very positive impact on the operating profit of the organization. To support this view we can discuss an examples.

Example - A company in the BPO industry

Average no of months spent in the training room before certified as a process associate : 2 months

Average no of months before joining operations: 1 month

Attrition rate : 35%

Total wage bill for the BPO company: USD 120 Million

Other expenses: USD 40 Million

Revenue: USD 210 Million

Operating Profit = Revenue - All expenses= USD 50 million

Bench/Attrition cost=((training duration + bench duration)/12)*% attrition*wage bill= USD 10.5 Million

Lets assume that by using various interventions enabled by the attrition model the organization brings down the attrition by 5%

Bench/Attrition cost after interventions=((training duration + bench duration)/12)*% attrition*wage bill= USD 9 Million

There is a saving of USD 1.5 million which would take the operating profit up by 3%. Here we are not including the cost of recruitment/induction/on boarding etc.

Any CEO/CFO would certainly like to see the 3% increase in operating profit - recession or no recession