The Chief Human Resource Officer of our client, a leading telco in Malaysia, overseeing over 3000 staffs is faced with a sharp rise in HR cost in recent years despite maintaining a tight control on headcount and increments. The key questions we set out to answer was why HR cost is increasing and what can be done about it. It turns out to be a case well-fitted for BIIT Analytics Framework.
Descriptive: Understand Past & Present
We firmed up the problem statement by framing staff cost as a function of key workforce dynamics (i.e. hiring, attrition, promotion and increment) and salary. Using component analysis and a fair bit of calculus, we distilled the four main drivers of cost change: cost per head, headcount, structural change and combined effect. It was then revealed that structural change has been the culprit. This is exactly why while hiring and increment were controlled tightly in the past, HR cost kept rising.
- Cost per Head Effect: Change in cost if only cost per head changes at each job level while headcount and structure remain the same
- Headcount Effect: Change in cost if only total headcount changes while structure and cost per head remains the same
- Structural Effect: Change in cost if only structure changes while total headcount and cost per head remain the same
- Combined Effect: Change in cost not explainable by or nonexistent without the other 3 effects
Predictive: Foresee What Is To Come
While stakeholders understand intuitively that such scenario would be disastrous if it were to continue, it is difficult to put an amount to it to compare against other priorities in the business. We studied and ran time series forecasting on the key variables to estimate potential impacts of inaction. The resulting model shows that evolving workforce dynamics will cause the workforce to be fatter at the higher end of hierarchy and thinner at the lower end. If such trend continues, staff cost will very quickly reach an unsustainable level especially when the market is expected to underperform.
Prescriptive: Pinpoint the Right Course of Action
The next question on everyone’s mind is naturally what should be done to contain the cost increase. To contain the cost issues driven by structural change, one can use the four key workforce dynamics as levers. We modelled staff cost as a function of the dynamics and embedded it into strategic and tactical simulators. With simulators at both levels, the HR management team can simulate scenario with different hiring rate etc., and set policies based on the results.
Figure 4 Screenshots of the tactical simulator for line managers to simulate mid-term outcomes of their actions such as promotion, transfer, hiring & etc
Figure 5 Output of the tactical simulator shows outcomes of middle management actions at all levels of organization
Proactive: Enable Action through Technology
No strategy and policy is perfect. The impact of policies should be monitored continuously so that timely adjustments can be made when needed. On that front, we proactively designed and implemented cost tracking dashboard for managers at all levels to ensure their accountability for staff cost incurred. There is also built-in capabilities to customize and periodically push reports to individual managers.
Figure 6 Screenshot of sample cost tracking dashboards at company level. Our solution automates reporting at all levels of organization
Workforce Analytics – Deep-dive analysis into workforce cost
Using historical data, we perform deep dive analysis to uncover patterns through simple data visualisation techniques. The analysis uncovers general historical trends.
Workforce Forecasting Models – Forecasting cost and headcount movements
Using historical data, our forecast models are able to predict the following key information on workforce:
- Headcount by job levels
- Cost projection
- New hires, attrition, and promotions
The forecast is able to provide organizations with the correlation between headcount, structure and cost per head impact.
Workforce Simulator – Real-time simulation of organization re-structuring exercises
- Ability to perform real-time simulation on existing organisation structure (promotion, new hires, termination, relocation, headcount movements etc.)
- Ability to generate reports on directional impact of the simulated changes with high-level commentary
- Ability to load and compare multiple versions of the simulations
- Ability to add new department structures, and new headcount on-the-fly for simulation
- Ability to export outputs of raw data as inputs to HR systems
- Encryption of raw data to ensure security
Workforce Cost Tracker – Management Dashboards to monitor cost
- Ability to monitor and capture historical trends of monthly HR cost and comparison against targets
- Ability to monitor monthly run-rates of staff cost to give managers a true picture of structural impact
- Ability to export the dashboards at multiple levels of granularity (e.g. Company level, Division level, Department level etc.)
We are a company that truly believes that insights are strategic assets which; when leveraged properly – have the potential to transform organizations.
A couple of folks who were passionate about Data & Analytics decided to help organization realize the value of analytics across their enterprise. The company was birthed with a simple mission of providing and facilitating businesses (of any shape and size) with invaluable insights through infallible information enabled by technology.
We view technology as the means to achieve the desired business outcomes, and not the end in itself. As such, we place a large amount of emphasis on helping our Clients derive business value from all our engagements.
BIIT Consulting Sdn Bhd www.biitconsulting.com