PwC Saratoga: measuring HR effectiveness

The approach

www.pwc.com

PwC

Our business:

The MEASUREMENT,

BENCHMARKING and

STRATEGIC APPLICATION

of human capital information

“Bringing objectivity and business alignment

to human capital activities”

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PwC

Effectiveness of the HR function is a key issue …what the world’s CEOs are saying?

3

37% believe the

global economy will improve over the coming

12 months, compared with 44% in 2014

72% are concerned

about the availability of key

skills

71% plan to implement a

cost reduction activity

46% use data

analytics to get insight

into how effectively skills are being

deployed within the

organisation

81% are seeking

broader range of skills

Source: PwC 18th Annual Global CEO Survey (2015)

50% plan to

increase headcount in 2015

Mongolian CEO’s:

62% plan to implement cost

reduction activity

51% will increase headcount

85% find difficulty in recruiting

and retention of high-potential middle managers 42% have plans in implementing use of data and data analytics

PwC

C-suite is increasing focus on human capital

HR is being challenged to answer more complex questions such as …

How do we compare with the competition and the ‘best’?

Is our business sustainable - are we future-proof?

Are we attracting and developing talent?

What is the impact of our talent strategy?

Do we have good leaders … are our people with us?

Is our HR function and HR shared services effective?

How do our HR policies impact business performance?

"We need to improve our analysis to help the business drive the top-line.”

“The key improvement that is needed is faster information, with more depth of analysis comparing us to the outside world.”

“Regular management reports are often late. There is a great deal of unnecessary detail, and even I can frequently find errors.”

“There is very little insight provided, and little value-add. If I ask for comment or pose questions, they are answered reactively, but pro-active commentary is lacking.”

… but they question HR’s ability to respond

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PwC

PwC Saratoga

• A tool to bring an objective evidence-base to managing people in organizations.

• More than 30 years of experience in Human Capital effectiveness measurement.

• More than 16,000 organisations from various industry sectors around the world. Saratoga works with 40% of the FTSE 100 and the Fortune 500.

• Constantly updated methodology.

The results of HR Benchmarking will provide you with the following information:

What is the human capital return on investment for each full-time employee (i.e. how much do you get back for every dollar you invest in your people)?

How much money does each full-time employee make for the company?

Are learning and development costs effective?

What is staff turnover and absenteeism costing your organisation annually?

Can you reduce recruitment costs?

How efficient is the compensation package structure in your organisation?

How effective is the structure of your HR department?

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PwC 6

Global database coverage 2014

The PwC Saratoga database comprises >2,600 organisation datasets globally comprised regionally as follows:

Growth is currently around 10% per annum

Europe, Middle East andAfrica 57.5%

Asia Pacific 15%

America 27.3%

0.0% 5.0% 10.0%15.0%20.0%25.0%30.0%35.0%

Transport and logistics – 2,6%

Public sector – 9,0%

Retail and leisure – 5,3%

Chemicals - 2,3%

Pharmaceuticals – 6,2%

Utilities – 4,1%

Engineering/manufacturing – 30%

Financial services – 18,6%

Professional services – 3,3%

Technology – 10,9%

Communication and media – 5,5%

Other – 2,2%

PwC

PwC Saratoga’s global coverage

Asia Pacific Australia

China Hong Kong

India Japan

South Korea New Zealand

Taiwan

Thailand Singapore

South America Argentina

Bolivia Chile

Colombia Ecuador

Peru Uruguay

North America Canada

US

CEE

Bulgaria Czech Rep.

Hungary Kazakhstan

Poland Romania

Russia Serbia

Slovakia Turkey

Middle East

Kuwait Qatar

Saudi Arabia UAE

EMEA

Belgium Greece South Africa Denmark Ireland Spain Finland Italy Sweden France Netherlands Switzerland Germany Portugal UK

Central America Costa Rica Guatemala El Salvador

Mexico Nicaragua Panama

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PwC 8

Saratoga provides the HR benchmarking in three aspects

INPUT OUTPUT

HR Measurement

Financial impact and productivity

•Revenue per FTE •Cost per FTE

•Profit per FTE •Remuneration/Revenue

•Remuneration/Total Costs •Average remuneration

•Human Capital ROI •……. •…….

HR Delivery Measurement

Bringing in the right people •Recruitment rate

•Cost per hire •Acceptance rate , etc.

Developing people •L&D investment per FTE •L&D hours per FTE, etc.

Rewarding people •Average compensation

•Average benefits •Benefits/Compensation, etc.

Losing people •Absence rate

•Termination rate •Involuntary term. rate, etc.

People Productivity and financial impact

Human Capital Impact

•Productivity •Financial impact

Human Capital

Engagement Compensation & benefits

Absence Turnover

L&D Talent & succession

Performance management

Organisation Structure HR function Resourcing

Employee relations Workforce structure

PwC

PwC Saratoga metric benchmarking input questionnaire

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PwC

Sample output: Scorecard analysis

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Turnover Your Metrics Sample Percentiles Sample Europe Percentiles Europe

2002 2003 2004 25th 50th 75th Rank 25th 50th 75th Rank

Resignation Rate (%) 6.4 6.6 7.3 4.9 5.8 7.1 78 3.9 8.1 14.1 44

Metric and Unit of

Measurement

Quartile data for your

bespoke sample

Quartile data for the full

European database

Your Metric results,

including trend periods

Your Percentile Rank position

versus the samples

Turnover Your Metrics Sample Percentiles Sample Europe Percentiles Europe

2002 2003 2004 25th 50th 75th Rank 25th 50th 75th Rank

Resignation Rate (%) 6.4 6.6 7.3 4.9 5.8 7.1 78 3.9 8.1 14.1 44

Metric and Unit of

Measurement

Quartile data for your

bespoke sample

Quartile data for the full

European database

Your Metric results,

including trend periods

Your Percentile Rank position

versus the samples

PwC

Sample output: Key metric profile

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KEY METRIC PROFILE:

Threshold value to PwC Saratoga

suggested target 'Best' quartile

Your result showing a performance gap

versus the 'Best' quartile threshold

Your result achieves the suggested target

quartile

2.4

4.72.4

1.9

PwC

Benefits of measurement

For the organisation

• Increases the focus of human capital on the business agenda

• Produce objective measures of human capital performance revealing genuine as opposed to perceived action areas

• Allows target-setting and performance monitoring

• Reveals better performers and good practice across business units

• Demonstrates your competitive market position and versus external ‘best’ practice

• Contributing to business-aligned management reporting

• Challenging existing practice - kicking complacency

• Hard feedback - raises questions and provokes debate

For HR

• Improving HR-business strategy alignment

• Helps define evidence-based human capital strategy and HR programmes

• Clarifying HR and human capital priorities

• Provides business-case evidence for changes in HR/HC policy and practices

• Helps HR understand its own structure and performance e.g. functional best practice, identifying cost savings, efficiency gains and service improvements

• Raises the profile of HR

• Aids communication with Board members and other senior business colleagues

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PwC

Examples of how clients used our benchmarks

• To develop a portfolio of people and HR measures that aligned with business and people strategy;

• Improve reporting standards and processes;

• Support business cases for technology investment, process improvement, headcount reduction and identify potential saving;

• Identify characteristics of ‘best practice’ HR processes in order to build ‘best in class’ HR function;

• Develop a baseline of current performance of the HR function prior to undergoing a transformation programme to improve the efficiency levels of HR service delivery;

• Compare the performance and cost of HR operations across different regions;

• Compare current performance with other best practice functions operating the same model (i.e. HR Shared Service), identify potential cost savings that could be achieved within the function, whilst maintaining a high standard of service.

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PwC

Plan for Mongolia

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Preparation stage:

• Registration of participants

Filling in questionnaires by the participants:

• Collection of data electronically

• Assistance from PwC experts

Data collection and analysis:

• Participants submit the data and we run the data validation

Report preparation:

• Access to the reports for participants is provided

April 2015 May 2015 June 2015 July 2015

• First time launch in Mongolia

• Work with HRS experts from PwC

• Launch the Saratoga survey with the PayWell Salary Survey

PwC

www.pwc.com

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