May 2015 Edition
Sponsored by
Welcome Message From Wayne Chen, President of the Caribbean Employers’ Confederation On the Occasion of the Publication of the first edition of “Caribbean Employment Compass”
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he Caribbean Employers’ Confederation (CEC) is pleased to be associated with the inaugural issue of the Caribbean Employment Compass. Furthermore, we recognize and commend the work of National Employers’ Organizations (NEO’s) to deliver value to our members, build credibility among our stakeholders, and ensure that employers are heard in critical forums. This is especially important as thriving enterprises are the drivers of economic growth and wealth creation, and robust NEO’s have to strongly advocate for policies that create an enabling business environment. Today, Caribbean countries are faced with significant challenges: Economic growth is slow; unemployment, especially among young people, is rising; labour markets are uncompetitive; educational systems are not meeting the needs of the job market; small economies are especially vulnerable to the negative impacts of climate change. These challenges have impacted the NEO’s and many of us have great difficulty in collecting membership dues and generating the revenues to fund our activities. When we meet these challenges as a region, our prospects of finding solutions are enhanced. Each of our countries has a unique capacity, experience, and perspective that can help the rest. Individually we are small, but a bit bigger when we hold hands across our small sea. Collectively, we can learn from each other as we work together towards a common goal. The CEC, the Caribbean Congress of Labour (CCL) and the ILO, have recently embarked on an EU-funded, three-year US$2 million project to enhance the capacity at the national and region levels for employers and workers to have a greater input into the social dialogue and policymaking. The CEC will be working with the NEO’s to ensure that we play our role and look forward to continuing on this journey together.
Wayne Chen President, Caribbean Employers’ Confederation
CEC Employment Compass
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CONTENTS, CREDITS & EDITOR’S LETTER
EMPLOYMENT eCommentary of the Caribbean Employers’ Confederation
Labour Management Advisor, Barbados Employers’ Confederation sheena@barbadosemployers.com
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Publisher Miller Publishing Co. Ltd. Editor Sheena Mayers, Barbados Employers’ Confederation Advertising Opportunities and Sponsorship Queries Nia Vlahakis - nia@businessbarbados.com Design and Layout Tao Howard
TABLE OF CONTENTS 1
Articles HR & The Bottom Line CEC
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CEC Employment Compass
May 2015 eCommentary
barbadosemployers.com
Welcome Message from Wayne Chen, President of the Caribbean Employers’ Confederation Editor’s Letter About CEC
Employee Engagement: A Caribbean Perspective NISE
eCommentary of the Caribbean Employers’ Confederation
Employment Compass is an initiative of the Caribbean Employers’ Confederation in collaboration with the Barbados Employers’ Confederation
Sheena Mayers, Editor
Talent Management & SMEs ACCA
EMPLOYMENT EM
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Special Features Making the Case for Evidence-Based HR KPMG
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A KPMG Report: Evidence-Based HR KPMG
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Message from our Sponsor KPMG
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Edgehill, St. Thomas, Barbados, W.I. T: (246) 421 6700 | F: (246) 421 6707 miller@caribsurf.com MyDestination.com/Barbados ©2015 Miller Publishing Co. Ltd. All rights reserved. No part of this publication may be reproduced in any form without the prior written permission of the publisher. While every care has been taken in the compilation of information contained in this guide, such information is subject to change without notice. The publishers accept no responsibility for such changes.
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n undisputable fact of business is that information cultivates knowledge and knowledge supports better decisions. Even though we are firmly in the midst of the information technology age, eCommentary of the Caribbean Employers’ Confederation there is always a space to nurture topic specific resources and tools for practitioners in every sphere: the Caribbean Employment Compass is such a tool. Building on the success of the Employment Compass which was published in Barbados May 2014, the Barbados Employers’ Confederation suggested that a regional publication could be beneficial to the entire Caribbean. Eagerly Caribbean Employers’ Confederation saw the vision for a Caribbean Employment Compass that empowers practitioners through the provision of information, highlight research and trends and introduce new concepts and plans in the dynamic disciplines of Industrial Relations, Human Resource Management. Today we are delighted to have the Caribbean Employment Compass. This digital eCommentary will be circulated via all CEC members and with 3 digital publications scheduled for 2015 each publication will be devoted to a defined topic and articles from across the Caribbean will be shared via this medium. HR and the Bottom Line is just the first! Thanks to our sponsor KPMG, as well as our contributors for supporting this venture and sharing their wealth of research. We are delighted to have you as a reader of the Caribbean Employment Compass and I hope that you not only enjoy this issue but also find it instructive and informative. With warmest thanks,
EDITOR’S ABOUT THE LETTER CEC
About Us
Caribbean Employers’ Confederation Employers’ Consultative Association #17 Samaroo Road, Aranguez Roundabout North, Aranguez, Trinidad T: (868) 675-9388 Ext: 244 | F: (868) 675-4866 cecadmin@caribbeanemployers.com | caribbeanemployers.org What is the CEC? The Caribbean Employers’ Confederation (CEC), is a regional grouping of employers’ organizations in the Caribbean Region founded in 1960. This organization is dedicated to the development and promotion of good industrial relations practices at the enterprise and macro levels and is committed towards achieving productivity and prosperity for member countries and the region as a whole. Antigua and Barbuda Employers’ Federation (ABEF) aempfed@candw.ag Bahamas Employers’ Confederation (BECon) becon@bahamasemployers.org bahamasemployers.org
Jamaica Employers’ Federation (JEF) info@jamaicaemployers.com jamaicaemployers.com St. Kitts & Nevis Chamber of Industry and Commerce (SKNCIC) sknchamber@sisterisles.kn stkittsnevischamber.org
Barbados Employers’ Confederation (BEC) becon@barbadosemployers.com barbadosemployers.com
St. Lucia Employers’ Federation (SLEF) slefslu@candw.lc
Belize Chamber of Commerce and Industry (BCCI) membership@belize.org
St. Vincent Employers’ Federation (SVEF) svef@vincysurf.com Suriname Trade and Industry Association (STIA)
Bermuda Employers’ Council (BEC) mlaw@bec.bm Dominica Employers’ Federation (DEF) def@cwdom.dm Grenada Employers’ Federation (GEF) gef@sspiceisle.com
vsbstia@sr.net vsbstia.org The Employers’ Consultative Association of Trinidad & Tobago (ECA) ecatt@tstt.net.tt ecatt.org
One thing we can be sure of is that employers need to maximise the return they get from their staff. Here are some key questions to consider on HR’s strategic role in the organisation: • What organizational capabilities must our organization have to gain and/ or maintain a competitive advantage? • Is the company staffed to allow for achievement of organisational goals? • What are the skills and competencies required for goal attainment? • Is talent managed effectively? • What abilities do HR personnel need so that they can understand and respond to short-term and long-term market demands? • How do we organize HR activities to deliver maximum value? • How do we create an HR strategy that sets an agenda for how HR will help our company succeed? • Does the Industrial Relational climate hinder or advance the organisation’s success? • Is performance management aligned with organisational strategy? • Are HR Metrics tracked and benchmarked?
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Courtesy KPMG
HR & The Bottom Line Caribbean Employers’ Confederation
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usinesses need talented individuals, who are motivated, knowledgeable and high performing employees in order to thrive. In this regard, Human Resources play a significant role in job designing, recruiting, and job training as well as creating productivity and career development for business and workforce growth. The future of business is shaping up to be a renewed battle for talent, and human resources should help employees to grow professionally as this is essential for business success. As business becomes more competitive, Human Resource Personnel should implement new strategies to motivate staff members. This in return, will allow employees to produce innovative ideas which may lead to new product development and markets to emerge, whilst increasing performance deliverables and executing the demands of their respective departments to generate value for the organisation. Essentially, work today is not attributable to a single staff member; it takes a team to achieve success whilst utilizing all the available resources, and readily execute on new revenue opportunities. As a result of this, productivity will increase tremendously in all sectors including services and sales, which will allow future inventions to be created. Establishments should implement career development policies to promote top performers, as their talent would in turn yield bigger returns. Paving this path of success, allows committed workers to be proud of the company they are employed with, which Human Resource Personnel should embrace and encourage the competitive instinct needed to deliver bottom line value. â–
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>> Work today is not attributable to a single staff member; it takes a team to achieve success whilst utilizing all the available resources, and readily execute on new revenue opportunities
HR & THE BOTTOM LINE
UNDERSTANDING, DRIVING & MEASURING PRODUCTIVITY International Organisation of Employers
The International Organisation of Employers is the largest network of the private sector in the world. With more than 150 business and employer organisation members around the world, it is the global voice of business in labour and social policy debate at the international level.
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hat is productivity? a measure of the effectiveness and efficiency of an organisation or economy in generating output with the resources available.
Improving productivity is not about working longer or harder but about working smarter and finding more efficient and effective ways to produce more goods and services with the same amount of effort. It is also about producing higher value-added products and services.
Why does productivity matter? it is critical for long-term competitiveness and growth. For countries experiencing an ageing population, employers urgently need to enhance productivity since it is not possible to rely on increasing manpower to sustain business growth. For countries with large workforces, enhancing productivity is nonetheless needed to ensure that companies move up the value chain and stay competitive to maintain profi tability, especially since competition based on low labour cost is not sustainable in an open global economy. Indeed, the only viable way to increase profi ts sustainably is to increase the economic pie or value added through higher productivity. This can be done with closer involvement of employees, higher investment in capital and optimal use of capital.
Why understanding productivity measurement is fundamental
productivity measurement is essentially the identification and estimation of appropriate output and input. Measurement is crucial for productivity management; it helps to determine progress and provides information on how effectively and efficiently an organisation manages its resources. Without productivity measurement, it is difficult for businesses to make an informed decision regarding its sustainable growth. Some reports such as the ILO Global Wage Report cite a widening gap between productivity and wages. Such sources infer that the wage-productivity gap shows that workers are not being rewarded fairly for their contributions to economic outputs. Understanding productivity and its measurement is hence crucial for employers to assess how best to integrate productivity into wage policies, to assist them in motivating employees and cultivating a workplace with healthy labour-management relations. Some of the most common productivity measures are multi-factor productivity, capital productivity and labour productivity. There are diverse ways to measure each of these, and the outcomes vary depending on the measures deployed. It is hence important for businesses to understand how productivity can be measured so that the measures meet their needs and operations and accurately reflect what they are doing.
Common drivers of productivity productivity is enhanced in an environment with supportive policies, a culture of innovation, and where healthy competition is fostered
Five important drivers of productivity: #1: Innovation / Technological Change A 1% increase in domestic business R&D is estimated to increase multi-factor productivity growth by 0.13 percentage points. In particular, the performance of productivity growth during the last two decades was largely attributed to the acceleration in information and communications technology. #2: Institutions and policies Institutions and policies are likely to have an impact on labour productivity either by influencing investment in physical capital and human capital, or by directly aff ecting efficiency and technological change. For example, anticompetitive product market regulation appears to hinder multi-factor productivity growth. #3: Investment in physical capital About half of aggregate output growth in the last four decades of the 20th century has been attributed to physical capital accumulation. #4: Management practices Research has shown that management practices impact productivity signifi cantly – a single point improvement in management practices is associated with the same increase in output as a 25% increase in labour force or 65% increase in invested capital. #5: Human capital development Studies estimate that a 10% increase in the stock of human capital due to job-related training leads to an increase in multi-factor productivity of between 0.5% and 1.5%. Human capital development can also be achieved through on-the-job learning to acquire soft competencies such as communication skills. â–
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Talent Management & SMEs Brenda Lee Tang, FCCA - Head of ACCA Caribbean
Brenda Lee Tang is a Fellow of the Association of Chartered Certified Accountants. As Head of ACCA Caribbean, Ms. Lee Tang leads ACCA’s business and key relationships in the Caribbean and is responsible for advancing ACCA’s strategy in the region.
Developing talent is a vital issue for all leaders, irrespective of organisational size. This must be addressed if functions are to fulfil their potential and provide the support needed for the business to thrive in this increasingly complex and challenging world.
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mall and medium sized enterprises or SMEs as they are more commonly known - make a considerable and significant contribution to both the global and national economy. ACCA estimates that they account for two thirds of employment (67 per cent) and more than half of all output in the private sector globally. Among the OECD countries, they are believed to account for 30 per cent of exports and 10 per cent of foreign direct investment and they are seen as the main source of new job creation. SMEs can make a positive contribution to economic development as drivers of growth and ‘civil society builders’. The SME sector’s ability to adapt to rapid changes in the business environment, such as the increasing momentum of globalisation, its resilience and flexibility, and its potential for innovation make the sector a reliable source of new jobs - even though individual businesses may not be. These characteristics need to be fostered for the benefit of economic development across the world. But what about SME owner-managers fostering themselves and their employees? Talent management – the fostering of staff and employees – is an often overlooked aspect of a SME’s own development. Talent management is often thought of as something only big business does, that it is for corporate organisations with large human resources departments who have the money, time and other resources to recruit, develop and retain their talented employees in a way that small business would not be able to do. Research from ACCA showed that talent development programmes in large firms were hit in the global downturn, with recruitment put on hold and investment in training reduced. What was also surprising was that talent management in large companies was much more informal, because spending had to be reined in. But the reality for the SME sector is that they often “do” talent management without the formal processes, systems and budgets that are so often used by their larger counterparts, who can rely on human resources departments to source and running training and development events. But since both staff and management in
>> Talent management isn’t just about ensuring the business has access to the right skills in the short term. A growing issue for SME ownermanagers is business succession. Many SME owners do not consider what will happen when their organisation grows, and also when the time comes for them to step down or sell their business. SMEs are time-poor, their ability to access formal training depends very much on the manner in which this is delivered. However, talent management isn’t just about ensuring the business has access to the right skills in the short term. A growing issue for SME owner-managers is business succession. Many SME owners do not consider what will happen when their organisation grows, and also when the time comes for them to step down or sell their business. And preparing a successor or mentoring promising staff doesn’t always come naturally to entrepreneurs. It is for this reason that owner managers need to constantly improve how they recruit, retain and train their employees, no matter how small or large their business is. Investing in their people is key to success, even if a SME is a micro business with one or two employees. Nurturing and fostering talent does not have to be expensive, and it can pay dividends in terms of motivation of staff and their commitment to the small business; training might be in customer service, in pitching for new business, in business planning or in dealing with new technologies or in how to access finance. Most of this development could happen organically and innovatively as the SME sector is already known for being innovative in their approach – not only innovative in their business offering, but also innovative in their approaches to doing business. SMEs can be an excellent breeding ground for developing new talent, but the challenge for the SME owner once they have developed their talent is to know what to do when their talent flies the nest. The owner-manager might find seeing their expertly trained employee move on, perhaps to start up their own SME; but they should rest assured their support and their development has in some way helped to develop an individual and by knock-on effect the economy too. Talent management can be both a strategic and an altruistic act. ■
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HR & THE BOTTOM LINE
Employee Engagement: A Caribbean Perspective The National Initiative for Service Excellence (NISE) Inc. is an organisation created by the Social Partners (The Trade Unions, the Private Sector and Government) for the people of Barbados. NISE’s mandate is to assist Barbados in consistently delivering Service Excellence and be recognised internationally for this. In this way, an enabling environment will be created within which Barbados will be able to attain its vision of being a developed country by 2025.
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he issue of employee engagement is one which many organisations throughout the Caribbean have had an interest in throughout the years but one for which no solid empirical evidence was available. Seeing the need to provide Barbados and the Eastern Caribbean region with requisite data, the National Initiative for Service Excellence (NISE) Inc. embarked on its landmark 2011 NISE Employee Engagement Index (NEEX) study which provided Barbados and the Caribbean region with its first empirical look at the level of engagement in Barbados and how it compares to other jurisdictions such as those in North America and Europe. When looking at the issue of employee engagement, it is more than just about workers being satisfied or motivated. Engaged employees have a sense of personal attachment to their work and organisation which means they want to give their best to help it succeed. Engaged employees also tend to speak positively about their organisation and have an active desire to stay. Taking a look at the results for our 2011 NEEX study, our findings revealed that only 3 out of 10 Barbadian employees, or 32% of Barbados’ workforce population were truly engaged at work, with the results showing there was little difference between employee engagement within the private sector (31%) and public sector (33%). These results compared favourably with the level of engagement at organisations in the United States of America (USA) at 29% but the rate of non-committed employees in Barbados was much higher. In what can also be seen as an additional benchmark,
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>> Engaged employees have a sense of personal attachment to their work and organisation which means they want to give their best to help it succeed. according to statistics from Gallop research for Q3 of 2010, world class organisations had 67% of employees engaged while only 7% were non-committed. Statistics such as those for world class organisations are what organisations in the Caribbean should be striving for. Not resting on our laurels and always
staying at the forefront of creating national awareness on customer service excellence and innovation, in 2014, NISE introduced the NISE Innovation Index (NIX), which will in the first instance, seek to identify to what degree Barbadian organisations possess the required skills to drive an innovation based economy. The inaugural NIX index was concurrently launched with the 2014 edition of the NEEX with results for both studies to be published by Q2 of 2015. To ensure as high a participation rate as possible, both the NEEX and NIX indices are administered in a number of ways including online at www.nisesurveys. org , islandwide at public survey stations and through in-house visits to public and private sector organisations. The introduction of these assessment tools form part of NISE’s strategic and visionary direction to continually improve service delivery and competiveness in Barbados and to remain at the forefront of innovative thought process and programmes. We understand the importance of business leaders having access to relevant information and data in order to make informed decisions and have been pleased with the response received from many business executives subsequent to the publishing of the 2011 findings. Words such as “outstanding” and “long overdue” were used to describe the publication of the findings with feedback received from business leaders throughout the region. While we are a Barbados based organisation, NISE has also done work throughout the CARICOM region and we recognise that ground-breaking initiatives such as NEEX and NIX will help pave the way for a stronger Caribbean economy. ■
Employee Engagement Increases the Bottom Line IMPROVED PROFITABILITY Customer satisfaction increased
Less shrinkage
Better quality and less defects
Improved safety and fewer accidents
Increased productivity
Lower employee turnover ?
Lower absenteeism
INCREASED EMPLOYEE ENGAGEMENT RESULTS IN . . .
Courtesy Lenstec, Barbados
Making the Case for Evidence-Based HR A new era in people management
Melanie Greenidge - Director, People & Change, KPMG Barbados Regional Service Line Lead for People & Change, KPMG Islands Group melaniegreenidge@kpmg.bb | kpmg.bb
In September 2014 KPMG International commissioned the Economist Intelligence Unit (EIU) to conduct a global survey of 375 executives to investigate the use of evidence for people-related decisions within organizations. This article is based on findings from Evidence-Based HR - the recent KPMG report emanating from that study. 10 CEC Employment Compass
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ost HR practitioners can attest that at some point in their careers they have been asked the question ‘What value does HR add to the business?’ There has never been a better time to respond to the sceptics. For the first time in my 25 years in the industry, HR has a massive opportunity to demonstrate the value it adds to the delivery of business objectives. I’m talking about evidence-based HR: which is, simply put, using data, analysis and research to understand the connection between people management practices and business outcomes such as profitability, customer satisfaction, productivity and quality. It is not only about understanding the connection but also about applying the research findings in a way that helps key stakeholders – employees, line managers, customers, and investors realise their goals. Although, the growth of evidencebased HR is gaining momentum globally, our KPMG report conducted with the Economist Intelligence Unit (EIU) “The Case for Evidence-Based HR” reveals this new era of evidence-based people management is by no means guaranteed. Talent issues are firmly on the C-suite agenda - organizations across the globe are grappling with HR issues ranging from talent acquisition and retention to skills shortages and employee engagement. Now, more than at any other time in my career, I’m seeing HR’s opportunity to leverage technology and data in order to demonstrate its ability to deliver against these issues. And while our report supports this and indicates that there have been some modest gains in the perception of HR’s ability to deliver strategic value since our report in 2012 (15 – 23 per cent), it also presents some troubling findings, namely that while an overwhelming majority (82 per cent) of companies plan to increase their use of evidence-based HR, over half (55%) of executives are still skeptical about its potential to make a real difference. Further, the report reveals, and my own experience supports this notion, that whatever the obstacles and whatever the resistance, the growth of evidence-based HR will gain momentum. What is irrefutable is
that organizations who have embraced an evidence-based approach are and will continue to lead the way. But it’s not just about the HR function. CEOs need to embrace and lead this change while at the same time demanding more accountability from their HR leaders on how they are integrating data into their people management strategies to assist in achieving overall business results.
>> Making decisions informed by scientific evidence is a turning point for HR practitioners – it is a big step that will not be always easy. Becoming evidence-based requires an effort of will and a sufficiently changed mental model . . . It starts with three critical success factors: 1) Get Comfortable with Data This means moving beyond basic HR KPIs to data that can deliver predictive insights about the role of people in your business. To do this well, data scientists should work within the HR function. Indeed, a number of our clients globally are recruiting data scientists as well as working out how to make the transition from analytical insight to action. 2) Hone Your Organizational & Industry Knowledge You have to develop both your industry and company knowledge. HR is not a generic thing, nor is it industry agnostic. You must apply what you know from an HR perspective to your industry and to the specific needs of your company. You should also know how to frame the questions that will direct your analytical efforts. 3) Shake up the HR Department HR needs to be reconfigured so that HR and management work together within a model that promotes evidence-based people management. A lot of thought should go into designing the components of an evidence-based operating model:
• Information flows: Who sees what, when and where? • Visualization: How to portray data and insights in a way that leads to action? • Decision-making: Where, how frequently and under what governance are things decided collaboratively? Specifically, decisions that are required or implied by predictive insights as opposed to “rear view mirror” insights. • Responsibilities and critical people management roles: Who is accountable for what? • Capabilities: What skills are needed to enable and implement evidence-based decision-making? How can HR evaluate the best research within the organization and combine with external management and social science thinking to determine which research is pointing to something really important? Making decisions informed by scientific evidence is a turning point for HR practitioners – it is a big step that will not be always easy. Becoming evidence-based requires an effort of will and a sufficiently changed mental model that will surely be a challenge for many companies. I am, however, seeing a move amongst early adopters towards embracing big data and becoming more evidence-based. It’s not quite widespread yet but I believe it is just a matter of time. Learn more about evidence-based HR and how it can put your organization ahead at www.kpmg.com/harryross ■ Melanie Greenidge is a Director in the People and Change (P&C) function of KPMG in Barbados. She is also the Regional Service Line Lead for P&C for the KPMG Island Group, KPMG’s network of island practices on both sides of the Atlantic. She is a human resources management and organizational development specialist with over 25 years’ experience gained in both the public and private sectors in Barbados and throughout the Caribbean. Melanie’s focus is on improving the effectiveness and efficiency of private and public sector entities, which today are facing new economic realities, ongoing and increasing globalization, shifts in culture, and changes brought about from new technologies.
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Evidence-Based HR The Bridge between your People and Delivering Business Strategy KPMG Global
For more information contact our regional People and Change Practice Leaders: Contact details on inside front cover
An excerpt from the report Evidence-Based HR that outlines the current state of evidencebased human resources (HR), the obstacles it faces and its potentially transformative effect on performance. Throughout the report you will see how early adopters are using evidence to show connections between HR and business KPIs and opening doors to new processes and people strategies that impact the bottom line of the organization. Download the full study at kpmg.com/harryross. 12 CEC Employment Compass
KPMG: EVIDENCE-BASED HR
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hose with a rose-tinted view of how organizations and professionals operate might assume that important decisions are only reached after poring through reams of detailed and relevant information. But the reality is that gut instinct is frequently the dominant decision-making mode in many areas of human activity. For example, it was only in the 1970s that proponents of evidence-based medicine, such as Archie Cochrane and John Wennberg, exposed the life-and-death decisions of medical practitioners as excessively subjective, and insufficiently based on the mass of available research evidence. The personal bias of the practicing doctor could largely determine the chosen course of treatment for an illness, however serious. Even as late as 1997, in his book “A Skeptic’s Medical Dictionary,” doctor and journalist Michael O’Donnell criticized highly experienced practitioners for continuing to make “the same mistakes with increasing confidence over an impressive number of years.” Thus it is perhaps no surprise that the use of evidence for people-related decisions within organizations has not yet fully taken hold. This report sets out the current state of evidence-based human resources (HR), the obstacles it faces and its potentially transformative effect on performance. Given the increasing reliance on evidence in other business functions within major companies, HR must act now if it is not to be left behind. Executive Summary • Evidence-based HR still at embryonic, pioneering stage There is a strong sense from both the executive survey and one-to-one interviews that evidence-based HR – which we define as using the best available evidence to support people-related decision-making – has yet to gain momentum. Major companies tell us that their work in this field has been under way for only a short time. “It is only during the last two to three years that we have been able to produce datasets that stand up,” says James Stringer, Information Services Director at Unilever. “Up until two years ago, it was a tricky job to assemble information that would allow
you to do sophisticated analytics,” agrees Iain McKendrick, Director of HR Strategy Planning and Analytics at AstraZeneca. Meanwhile, business school professors we interviewed emphasize that the evidence being used is far from comprehensive. They claim that companies still too often overlook a vast archive of academic research on HR. • The progress of evidence-based HR is hampered by a negative perception of the HR function Although more than half of all survey respondents (55 percent) remain skeptical about the potential of evidence-based HR to make a real difference to the HR function, the overwhelming majority of these skeptical executives (82 percent) plan to increase their use of Big Data and advanced analytics in the short term. We can deduce from these two findings that the obstacles to the successful implementation of these tools are considered to be substantial. One stumbling block may be the credibility of the HR function. Less than half of nonHR executives (49 percent) agree that HR leaders are able to demonstrate tangible correlations between people management initiatives and business outcomes. In other words, the skepticism is not about big data but about HR practitioners’ ability to use it effectively. However, there is certainly hope that this obstacle can be overcome, as more broadly 85 percent of all respondents do agree that the HR function contributes strongly to enterprise goals. Moreover, the proportion of respondents who say their organization’s HR function “excels” at providing insightful and predictive analytics increased from 15 percent – in a 2012 EIU survey sponsored by KPMG – to 23 percent in 2014. Over the same period, the proportion who say the function excels at measurably proving the value of HR to the business rose from 17 percent to 25 percent There may be concern that the HR function does not have enough of the right people in place for this new era. About 30 percent of all survey respondents rate lack of skills, resources and experience with analytics as the second biggest obstacle to the use of evidence people management, behind only corporate culture. “We need more mathematicians and data modellers,”
>> There may be concern that the HR function does not have enough of the right people in place for this new era. About 30 percent of all survey respondents rate lack of skills, resources and experience with analytics as the second biggest obstacle to the use of evidence people management, behind only corporate culture.
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All About the Evidence in these videos: Detective Harry Ross and his team of data scientists leverage the power of evidence-based HR to crack the case and drive real business results
Bank Job Brewing a Strategy Caring Solutions
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CONTENTS & CREDITS
>> The sight of competitors registering a commercial advantage from an evidence-based finding is sure to elicit a significant reaction throughout the marketplace, intensifying the quest for similar wins.
KPMGGlobal What is Evidence-Based HR? in this video: Messages from KPMG HR leaders around the world about evidence-based HR
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says Per Scott, Vice President of Human Resources at RBC. “These are not typical HR people. We also need our existing HR people to become more numerically proficient and be able to explain data insights, to communicate the business relevance of our findings in a compelling way to senior leaders.” • Evidence threatens the established order, inevitably triggering resistance as a consequence Those without these new skills, or the potential to acquire them, may fear that the move to evidence-based HR will leave them stranded in their career. But several interviewees have pointed out that the transition will also give rise to a more fundamental threat to personal status and reputation. “The rise of evidence undermines the magic wand school of management we have been in thrall to,” says Rob Briner, Professor of Organizational Psychology at the University of Bath. “But many high-status careers, and the associated financial rewards, depend on the image of the miracle worker manager.” • Whatever the obstacles, and whatever the resistance, the growth of evidence-based HR will gain momentum; companies and HR practitioners must respond urgently to avoid losing ground Several factors will help ensure the progress of evidence-based HR. Our survey reveals a commitment to the increased use of Big Data and advanced analytics in HR over the
KPMG: EVIDENCE-BASED HR
next three years. A new breed of HR practitioner, schooled in analyzing and interpreting data, will slowly emerge as a consequence of this commitment. However, in the words of Paul Sparrow, Director of the Centre for Performance-Led HR at Lancaster University Management School, “The real boost comes when evidence is not just used to solve or react to problems such as employee turnover, but makes a major positive business impact.” As detailed later in the report, Professor Sparrow’s department worked with McDonald’s to create such an impact by clearly demonstrating the financial value of older workers in restaurants. The sight of competitors registering a commercial advantage from an evidence-based finding is sure to elicit a significant reaction throughout the marketplace, intensifying the quest for similar wins. Noteworthy business successes from the use of evidence-based HR, establishing clear links between aspects of people management and revenue, are already emerging. To stay ahead of the competition, HR directors need to obtain the necessary commitment from company decisionmakers to invest in changing the skill profile of the HR function, so that it can boast a potentially powerful combination of analytical acumen and the always-crucial human insight.
>> An inescapable logic dictates that we are extremely close to the point of lift off, the point where laggard organizations are likely to pay a heavy price. Conclusion: The Unstoppable Force It may be true that the evidence-based HR project has yet to fully gather pace. Stumbling blocks, both practical and cultural, still hamper its progress. Nevertheless, the immediate future still looks bright. An inescapable logic dictates that we are extremely close to the point of lift off, the point where laggard organizations are likely to pay a heavy price. A solid foundation of wellorganized data has now been established in many major companies. Small but committed teams of analysts, recently ensconced within HR functions, are helping their colleagues to see the benefits of evidence-based HR, and to handle it in the most effective way. Measurable successes from the use of evidence, some particularly eye-catching, will help to spur the much-needed enthusiasm of senior executives and encourage investment in developing and recruiting the skills that will cement progress. “Without the current demand for evidence-based HR from senior leaders, it would be a lot more difficult to do what we are doing,” says Iain McKendrick of AstraZeneca. CEOs who do little more than pay lip service to evidence-based HR are already starting to look outdated. The HR mindset of the past, negatively regarded by some interviewees, will soon inevitably erode and reconfigure itself along very different lines. “HR will become a more analytically focused function because it has to become that way,” says Jim Link of Randstad. With the contribution of evidence, the links between HR measurements and commercial and financial performance will become clearer, particularly as the technology develops and intriguing discoveries trigger specific, deeper investigation. As this process gathers pace, the emphasis will shift from retrospective analysis to predictive modelling. Indeed, the survey findings indicate that this shift has already begun. A survey conducted by the EIU in 2012, sponsored by KPMG, found that only 15 percent of respondents believed their organization’s HR function excelled at providing insightful and predictive workforce analytics. The 2014 survey found that this proportion had increased to 23 percent. Analyzing the behavior of human beings will of course always require subtle and subjective judgment and companies with a regard for social responsibility will not apply the results callously. Yet, the days of basing people decisions on the whims or personal motives of one person at the helm are about to end. Organizations that acknowledge that inevitability already have a substantial head start. ■
Download the full study at kpmg.com/harryross
eCommentary April 2015
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ABOUT KPMG
KPMG
is delighted to sponsor the inaugural publication of the Caribbean Employers’ Confederation Employment Compass. At KPMG we are passionate about people – the people in our communities, the people at our clients and the people inside our own organisation. Thus it was easy to come on board in a venture to produce a journal for Caribbean professionals involved in the vital area of people management. The theme of this first publication “HR and the Bottom Line” is especially relevant to us at KPMG, since we have been in the vanguard globally of a movement to bring rigour and sophisticated analytics to support people-related decision-making. We are pleased to provide readers with ground-breaking research in the area of evidence-based HR. For the first time ever C-level and HR leaders in organizations can draw a clear line of sight between HR activity and business insight. We hope you find this research both useful and thought-provoking and invite you to download the entire study, view the short videos and contact us to discuss how we can help you build the bridge between your people and delivering your business strategy.
Brenda Pope - Partner, Advisory Services, KPMG in Barbados
Head of Management Consulting, KPMG Islands Group | bpope@kpmg.bb | kpmg.bb Management Consulting service lines comprise People & Change, Information Technology Advisory, Strategy & Operations, and Financial Management
Diagram courtesy KPMG
Message from Our Sponsor
KPMG’s established service offerings provide the necessary support and guidance to address the People Agendas of organisations across all industries. KPMG is one of the leading professional services firms globally with over 162,000 employees and 9,000 partners delivering audit, tax and advisory services to a wide range of businesses worldwide, helping them respond to opportunities and challenges, improve their performance, and increase their value. KPMG recognises that its clients and stakeholders are facing an increasingly complex and changing business environment. We believe that as members of the KPMG International global network we have the expertise and capacity to help our clients understand and cut through this complexity.
16 CEC Employment Compass
Case for Evidence-Based HR
The A
CEOs across the globe are grappling with issues from talent acquisition and retention to the need for greater employee productivity. B Technology is available to access data from many sources and provide predictive insights that can drive business goals. C HR has a massive opportunity to drive significant business value...and be seen to do so.
What is Evidence-Based HR?
Why us e
Evidence-based HR uses data, analysis and research to understand the connection between people management practices and business outcomes such as profitability, customer satisfaction and quality.
it?
82%
of respondents* expect their organization to either begin or increase their use of big data over the next three years.
Identify a business challenge.
How does it
work?
1
7
To bridge the 'knowing-doing' gap we will reconsider our HR Operating Model to take account of evidence based practices. 6
A retail bank wants to improve branch performance.
5
Develop your hypothesis. There may be a link between the types of employee in a branch and its overall performance. HR and senior line leaders work together to formulate hypotheses worth testing.
How can I
implement it
2
3
Understand your data: identify what you have and need.
Identify what you have and need. We have HR and workforce data; we need financial performance and customer data.
successfully?
1
Get comfortable with data.
Move beyond basic HR KPIs to data that can deliver predictive insights about the role of people in your business. To do this well, data scientists may be required to work within the HR function. 2
Hone your industry knowledge.
HR is not generic, nor is it industry agnostic. You must apply what you know from an HR perspective to your industry and the specific needs of your company. You’ll need to know how to frame the questions that will direct and focus your analytical efforts. 3
Change the HR structure.
HR should be reconfigured so that HR and management work together within an operating model that promotes evidence-based people management.
Continuously leverage an evidence-based HR approach.
Leverage the insight into business decisions. We may run a pilot to test our conclusions before going organization-wide.
Validate the data and findings with internal and external sources. If it’s good, move on. If not, go back to step 2.
4
Analyze the data: what is it telling you?
Senior leaders in HR, customer engagement and branch will work together to test the hypothesis.
Think about the best visualization of the analysis so that leaders understand the implications of the analysis in an engaging way.
What skills are required? Persuasive: Aware of the importance of visualization of data analysis in order to lead the viewer to the required decisions. Able to tell a story with data using facts, opinion, anecdote and metaphor. Makes the analysis come to life. Questioning: Able to frame hypotheses with business leaders. Doesn’t need to be a data scientist, but will want access to someone with those skills. Systems Thinker: Capable of understanding how people drive value in the organization can distinguish cause from effect, as well as able to interpret the downstream consequences of past, present and future interventions. Creativity: Ability to look at a problem in a variety of ways including visualization. Understanding that answers exist outside of basic metrics. Being able to identify hidden internal/external variables impacting people and the organization. Asking questions outside the normal realm.
What now?
Learn more about evidence-based HR and how it can put your organization ahead at www.kpmg.com/harryross.
* Source – Economist Intelligence Unit Study, commissioned by KPMG International: Evidence-Based HR: The Bridge Between your People and Delivering Business Strategy, 2015 © 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.