To kick off the final day of WorldatWork’s “2021 Total Rewards Conference and Exhibition” in Phoenix on Oct. 6, keynote speaker Solange Charas, CEO and founder of HCMoneyball, spoke to attendees about the importance of using analytics to improve total rewards.
Addressing the audience at the Phoenix Convention Center, Charas emphasized her compensation background and the fact that she “speaks the language.” However, while lauding HR’s integral role in navigating the COVID-19 pandemic, thus increasing its influence within organizations, she asserted that analytics would need to be integrated to maintain that influence.
“We’ve waited a long time to get a seat at the table,” Charas said, “and now that we’re here, we have to speak a new kind of language to be understood.”
Human capital is becoming increasingly important to companies. Thus, it’s imperative that HR and rewards professionals measure it in a way that explains its significance to leadership, Charas said. Plus, there are additional challenges at play, including recently passed rules from the U.S. Securities and Exchange Commission (SEC) requiring public companies to disclose quantifiable data on the material impact of human capital. In essence, the SEC has reclassified human capital from organizational expense to an intangible asset, meaning it should be measured.
Seeing human capital through this new lens means HR and rewards professionals can help usher in a new era by following what Charas deemed “the three A’s.”
The Three A’s
The first “a” Charas outlined was accountability to the board. This means HR professionals must show that human capital is actually material to the organization and that HR is making the right decisions to have a positive impact on the organization. Charas listed several key ways in which rewards professionals can inform their board of human capital metrics:
- Measuring the material impact of investment in people on financial performance, which will inform business decisions and resource allocations.
- Measuring the impact of employee programs and dynamics on company productivity, which will support overall company performance and effectiveness.
- Measuring effectiveness and progress of programs and activities, which will support a fair and equitable workplace.
The second “a” was answerability to stakeholders and executive management. By executing this piece, you can ensure you’re optimizing all of the investments being made in human capital and human capital programs to demonstrate there is a return on that investment. Charas said HR should be answerable to
- Executive management
- Learning and development
Employees are a relatively new part of this equation. Charas asserted that organizations should be transparent about the programs and opportunities they are working to provide their employees and, further, communicating the results and financial metrics of these policies and programs, which will make the workforce more engaged.
“Aren’t employees our greatest asset? So why wouldn’t we be reporting our financial info and other human capital info to them,” Charas said.
The final “a” was analytics, which is the crux of the entire formula. HR should provide insights demonstrating critical thinking and the use of analytics informing decisions about human capital budget allocations.
“All decisions should be analytics driven and evidenced-based — anything else is just a guess,” Charas said. “We want to show that we’re not just guessing and that there is real data beneath it.”
To drive home her point about the importance of analytics, Charas provided an example of the power of not only investing in human capital, but also measuring what the return on that investment is (HCROI). In an analysis of Bank of America’s 2020 human capital management report, which focused on demographics, diversity, equity and inclusion, and other workforce elements, Charas found that a larger investment in human capital by the bank led to less turnover and more engagement. And, this reduction in workforce turnover improved the bottom line dramatically.
Ultimately, Charas’ analysis revealed that Bank of America had a 2% per person increase in human capital investment, which led to a 13% per person improvement in asset size in 2020.
Additionally, Charas cited her own company’s research, which found organizations that had human capital analytics built into their human capital management had a 270% higher HCROI. These organizations also had a 14% higher human capital efficiency compared to organizations that didn’t use analytics, and saw a 23% increase in productivity compared to organizations that don’t use analytics.
“If [analytics] isn’t the way to accelerate value creation in your organization through human capital,” Charas said, “I don’t know what is.”