There is a lot we can learn from the financial services industry. Constantly changing regulatory and remuneration policies, as well as post-recession restoration pressures, are making it difficult to attract and retain key people in the financial services industry (FSI). In fact, 72% of banking and capital markets CEOs and 70% of insurance CEOs see the limited availability of key skills as a threat to growth. There is a clear connection here between what happens in the workforce and the success of the organization.
Exceptional companies know that the best people decisions drive the best business outcomes:
- More diverse workforces outperform others.
- Companies with stronger HR programs, outperform on financial metrics.
- Organizations with stronger HR analytics programs have a higher return on equity.
- Companies ranked the best to work for, outperform the stock market.
In my last post, I discussed how innovative new ideas that drive success come at the intersection of the workforce and the business. Case in point: Banks with lower employee turnover retain more customers. Insurance firms with the right agents bring in more clients. At the crossroads of the workforce and the business is where HR can have its greatest impact. It is here where in-depth knowledge of people dynamics is invaluable in making talent decisions that directly affect the top and bottom line.
The problem is that HR has traditionally relied heavily on intuition or hallway conversations to inform these important decisions. While finance and a data-driven mindset go hand-in-hand, the HR department is still building confidence in using analytics and a scientific approach to workforce management. A 2015 report by Deloitte indicates that in order to tackle HR’s challenges, “CHROs may… consider revising their HR technology strategy and upgrading the skills of their HR teams to reinforce their analytical skills and integration with the business.”
New cloud-based Applied Big Data technology makes it easier — and quicker — to equip HR with the fact-based insights that are vital to making better workforce decisions. With this kind of tech, HR can see how talent has historically affected the organization and make plans for the future that create optimal business outcomes. To be clear, this is not just about being more data-driven or focusing on the usual metrics, but understanding how HR can better connect what it does to the business. HR should not only align with the business but drive it forward.
The right solution allows HR to make a bigger impact by answering questions such as:
- Does hiring experienced and expensive agents with a large existing book of clients, or hiring young and hungry agents, lead to greater revenue and margin?
- Do branches with higher average performance ratings or training hours for their employees have better customer retention?
- Is the size a new insurance policy correlated with the number of training hours employees received?
- Have increasing retirement rates for investment advisors led to a decrease in assets under management?
With these kinds of insights, HR can conquer the FSI’s biggest talent issues. Below are a few more examples of areas that can be vastly improved with the use of data-driven HR:
Boost Returns on Recruiting
Attracting talent is difficult in any industry, but when hiring top quality talent is necessary to customer satisfaction and retention, the effectiveness of the recruiting funnel becomes a major focus. When it comes to recruitment, most talent acquisition teams focus on time-to-fill quotas and cost-of-hire numbers, but these metrics only tell you how fast you hired someone and how much it cost you to get them. But these numbers tell you nothing about the quality of a hire.
This is where data-driven HR becomes essential. Without the ability to quickly dig deep into all parts of your funnel, it’s impossible to go back and tell which lead sources are most effective, which new-hire attributes correlate to the best performance and retention, and how talent develops and flows through your organization. A scientific approach will ensure that you are only hiring high performing talent that will drive the success of your financial organization.
Navigate Growth and Change
The financial sector has faced a lot of upheaval in the past decade. In fact, only 31% of banking and capital market CEOs feel very confident about their company’s growth prospects in 2016. Intelligent, fact-based planning is essential to mitigating this problem. By effectively avoiding talent shortfalls through better workforce planning, which takes both an organization’s internal workforce dynamics and business drivers into account, HR can proactively address talent issues that are on the horizon.
Data-driven workforce planning enables you to create accurate workforce models using aggregated data from all your HR systems. Build various plans and scenarios that optimize the impact of mergers, acquisitions, and divestitures on your people, so you can see what all the options are before actioning on the right one. In addition, cloud-based solutions make accounting for planned growth and natural attrition much easier, as well as more collaborative.
Workforce planning provides an approach to turning threats into an advantage by bringing data to evaluate scenarios you can map back to business outcomes. By investing in the datafication of HR, you can turn today’s tight labor markets into an opportunity for your organization.
Reduce Exposure to Talent Pipeline Risks
Despite the importance of succession planning to financial organizations, decisions about which positions are the most critical and who should be in the running for these types of positions are often left up to gut feel. This can turn into a narrative about who leaders perceive to be the most promising — and all of us are prone to bias.
PWC’s 2016 Global CEO survey found that insurance CEOs want to ‘focus on [their] pipeline of leaders for tomorrow’ in order to remain relevant and competitive. A risk-mitigating process like succession planning works best if it involves data and fact. Not only will data-driven succession planning keep you laser-focused as you search for the talent needles in the haystack, it will help your organization have more fact-based discussions with stakeholders. Staying on top of succession pipelines and workforce diversity reduces the likelihood of gaps in leadership.
Also by integrating succession into your workforce plans you gain the ability to see when and where replacements will be required. More importantly, you get to align the changes and opportunities within future plans, with the development and growth needs of your most important talent – your succession candidates.
For example, your organization may be planning to open a new location or introduce a new business line. Often it is hit or miss as to whether this type of opportunity registers with those running the succession process. With an integrated HR analytics and planning solution it is simple to see which candidates will benefit from being moved into this startup experience, and simultaneously, you have insight into all the subsequent people moves required to ensure business continuity and your succession pipeline continues to grow.
Build Confidence Without Breaking the Bank
With the growth of the financial sector is in question, HR has the opportunity to mitigate business risks by becoming more strategic with their workforce decision-making and management.
The key to success is to not just show board members and executives the data — it must be delivered to whoever makes decisions on people, and explained in the language of the business. Show how attracting, keeping and engaging top talent directly affects revenue, profit and customer satisfaction. With the support of the business, investments in becoming more data-driven, as well as upgrading your technology and systems, can be made to vastly improve the impact HR — and the workforce — has on business performance and success.
About the author: Dave Weisbeck
Dave enjoys problems that require both logical and creative solutions, and thus exercise both his left- and right-brain. He started out his career in the 90s writing code as a computer programmer, and then moved on to product management, marketing and general management roles. Dave has a strong background in analytics, having played a key role in the analytics businesses at SAP, Business Objects, and Crystal Decisions. At Visier, he looks after product and market strategy. A proficient do-it-yourselfer (he made his own PVR for fun), Dave’s hobbies include the logical and creative challenges of cooking, home brewing, and photography.
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