Introductions

Paul Rains – IPP

HR SYSTEMS PROJECT MANAGER

RAC People P&L - A Human Measurement Case Study

A roadmap to effective Human Capital

Management (HCM)

RAC People P&L – Topics

● Background

● Key Drivers

● Solutions considered

● Positive Outcomes

● Lessons Learnt

RAC Company History

Leading Motoring Services company in the UK, established in 1897

Services more than 7 million motorists, attending 2.76 million breakdowns last year

Headcount 11,646, FTE 11,182.03

Profit before tax* 2004 - £88.6m – Up 24.39% since 2002

Profit per FTE 2004 - £8,051.42 – Up 43.93% since 2002

Route to Current B.I. Solution

YEAR HISTORY EXTERNAL INFLUENCES

HR STRATEGY MEASUREMENT METHODS

1998 Lex plc implements Group HR system

Corvu installed as BI tool for HR Directors with drill down

1999 Lex plc acquires RAC

First Basic HR measures reported on

2000 Archie Norman advises plc board

Lex implements PS enterprise

KPI reports replicated on Cognos Impromptu

2001 Kingsmill Report

People P&L born P&L data collected manually

2002 Lex renamed RAC plc

A series of Impromptu reports created

2003 Accounting for people

Automate People P&L

2004 Data warehouse approach

Web based solution Cognos reportnet

Key Influencing Factors

Archie Norman of Asda fame joins plc board as an advisor after sale to Wallmart. Plc Board aspire to Asda’s achievement of the top UK company to work for.

C.E.O. 3 balls concept – People focused Happy people = happy customers = happy

shareholders

HR Director invited to join ‘accounting for people’ taskforce set up by the government

Employee satisfaction survey introduced

Plc Board ask for monthly report on People data as well as the usual financial information.

RAC Key People values introduced and linked to colleagues appraisals, PDP’s and Recruitment criteria.

HR elevated to highest profile in group

HR Director appointed to the Plc Board

Group HR System seen as strategic system as opposed to a business support system

HR given more responsibility to support the businesses at operational level

Additional HR resources recruited – Headcount trebled!

New HR structure to reflect new responsibilities

A Significant Culture Change

HR Structure

PLC Strategic HR

LVL Local HR

RAC Local HR

BSM Local HR

Lex Multipart Local HR

HR Board

Plc Board

Conceived in 2001 First Group-wide HR “Balanced Scorecard” HR measures package supporting

Turnover Stability Absence Retention Colleague Satisfaction

Strategic High Level KPI monitoring Delivered using a series of Cognos Impromptu

Reports

The Very First People P&L

Initial Operational Issues

Manual Process 300+ org units * 10 reports = potential 3000+

reports every month Huge workload Slow to collate Labour intensive

Lacked flexibilityLacked credibility, distrust of dataAffected HR System performanceLack of consistency in the data

Potential Solutions

Automate existing processes Evaluate B.I. alternatives

Report directly from HR system Data warehouse approach

Benchmark using other external company

Automate Existing Process

Positives

Cheap option

Negatives

Still meant a large volume of reports to produced and printed / distributed

No-online access for managers

Still impact on HR system performance

Reporting from HR System

Positives

Cheap option

Produces high level reports

A limited form of analysis

Negatives

Lacks depth and flexibility

Resource hungry Personnel, IT & HR

System

No single version of the truth

Single source data

Limited form of analysis Scorecarding Trending Predictive analysis

External Benchmarking

Positives

– Provides Peer comparison

– Can assist company's identify broad issues

Negatives

– Lacks Depth

– Doesn't identify where issues exist at the coalface

Data Warehousing

Positives

Greater depth and breadth

Easier identification of impacting and impacted measures

A measurement and management toolset

Encourages employee engagement

Multiple data sources

Single version of the truth

Information at the touch of a button

Negatives

Cost

Complex Structure

Additional hardware / support costs

The Chosen Solution – Strata HR Analyser

“Out of box” Kimball-based Datamart solution

Cost effective

Ideal fit to RAC HCM principles

Dimensionally rich

Broad range of measures

“Accounting for People” ready

Web based allows easy access for Line Managers to view reports / metrics

Implementation Timescales

Aug 04 Nov 04 Jan 05 Feb 05

Board Approval

Install Pilot Live

Solution Functionality

Data mart delivered a broad range of Dimensions and Facts Track values across time Provided baseline for all analysis Low level of granularity Basis for predictive analysis

HR and absence analysis studio

Easy and advanced reporting studios

Scheduled, stored, secured & audited reports

Scorecards

3rd Party Data Source capability

Extract Transform and Load (ETL) refresh

Key HR Metrics Measured in automated P&L

Employee Satisfaction

Employee Turnover Voluntary Both Voluntary and Non Voluntary

New Employee Retention

Internal Appointments

Absence

Key HR Metrics reviewed annually by HR Board

Your Voice

Colleague satisfaction is reported at PLC, division and department levels (where available). These statistics are sourced directly from the outcome of the latest “Your Voice” Colleagues Satisfaction Survey, which takes place annually during Q4. Therefore, this figure will only change once per year.

 

PLC Targets: Red < 65% Amber 66 – 75% Green > 76%

Turnover

This measures the degree to which colleagues are leaving the organisation. NB: From 2005 the headcount figure used to calculate turnover is an average of the last 12 months, not actual headcount as at the present point in time (as previously calculated). Formula: Actual Number of Leavers in last 12 months * 100 = x %

Average of Total Headcount over last 12 months

PLC Targets: Red > 15% Amber 10 – 15% Green < 10%

Turnover FAQ’s

Frequently Asked Questions Yes/No

Are colleagues who transfer internally to other departments counted? No

Are temporary colleagues included (who are on our Payroll)? No

Are temporary colleagues included (who are employed via an agency?) No

Are colleagues on LTS or maternity captured within the headcount figure? Yes

Are redundant colleagues classed as leavers? Yes

Voluntary Turnover

An additional measure of voluntary turnover introduced to measure the degree to which colleagues have made a conscious decision to leave (as opposed to company enforced e.g. redundancy, restructure, dismissal).  Other turnover (i.e. non voluntary turnover) is defined as: Forced RedundancyDismissalCompromise AgreementRetirement (but not early retirement)Divested / Sold Business

PLC Targets: Red > 12% Amber 8 – 12% Green < 8%

New Colleague Retention 

This measure replaced the previous measure of “Stability” and is a more accurate way of measuring how many colleagues we are retaining within their first year of service. This measure differs from ‘Stability’ as it captures all colleagues leaving with <1 year’s service as a percentage of purely new starters, as opposed to a measure of the number of colleagues who left with <1 year’s service over the last 12 months as a percentage of the full headcount figure.Formula:-   Number of colleagues within the Retention Cohort * 100 = x %

Number of Leavers within the Retention Cohort with <1 year service Retention Cohort – This is the number of new starters who joined the organisation within the last 12-24 months. Therefore, for January 2005 the retention cohort will capture all new starters who joined between February 2003 – January 2004 and out of these colleagues, we will then assess how many of them left with <1 year’s service.

PLC Targets: Red < 85% Amber 85 – 94% Green >= 95%

New Colleague Retention FAQ’s

Frequently Asked Questions Yes/No

Are colleagues who transfer internally to other departments counted?

No

Are temporary colleagues included (who are on our Payroll)? No

Are temporary colleagues included (who are employed via an agency?)

No

Internal Appointments

Previously, the only measure for internal appointments captured movement within the Leadership Group. From 2005 onwards, a new measure of “Internal Appointments” has been created to measure the degree to which talent is moving throughout the organisation (sideways as well as upwards).Internal move categories that are included are:- Job ChangeInter Company TransferPromotionSecondment made PermanentTransfer Promotion Formula: Internal moves___________ * 100 = x %

Internal moves + New Joiners 

PLC Targets: Red < 35% Amber 35 – 45% Green > 45%

Sickness Absence

Absence is reported and entered into the HR system one month in arrears. Therefore, as there is no absence information entered for the most recent P&L month at the point the report is run, the absence rolling year period will look back an additional month.  Sickness Rate Formula: (Average days, per person, per year)

Total number of days sickness over last 12 months = x daysAverage Headcount over last 12 months Daily Compensation Rate:(Gross Pay + Employers Ni + Employers Pension) / 260Average Headcount over last 12 months Total Cost of Sickness: Daily Compensation Rate * Average Headcount over last 12 months

PLC Targets: Red 10 days+ Amber 6 – 10 days Green < 6 days

Sickness Absence FAQ’s

Frequently Asked Questions Yes/No

Are colleagues on maternity / paternity / adoption leave counted? No

Are temporary colleagues included (who are on our Payroll?) Yes

Are temporary colleagues included (who are employed via an agency?) No

Are colleagues on LTS or maternity / paternity / adoption leave captured within the headcount figure?

Yes

Is Emergency Family Leave included? No

Is compassionate leave included? No

Example People P&L Report

Adobe Acrobat Document

People P&L Part 2

Production of a supporting document which gives basic monthly information by org unit which forms the basis of the People P&L. This document contains the following: Actual headcount (Colleagues)Number of new starters (Joiners)Number of leavers (Leavers)Number of transfers inNumber of transfers outTotal number of sickness days (Sickness Days)

People P&L - Benefit Business Cycle

Produce and

distribute reports

Review and

Analyse

Take action

Automated Report Production:

Distribution of reports to the line can be automated, but quality of data must be protected in order to protect credibility

HR & Line managers review P&L values. HR provide analysis to seek reasons for P&L issues highlighted. Improvement actions determined. Affects of previous improvement actions reviewed

Implement Actions:

Until this happens there are no major business benefitsHR in control of accounting for people as an asset, driving benefits from managing colleagues, & contributing to profit margin/bottom line

Financial Benefits

Immediate Automation of P&L (£50k+ savings)

Targeted first year benefits Reduce absenteeism by 1 day per person Reduce voluntary turnover by 2%

Generated > £1m in savings in first year

Operational Benefits

P&L Reports available at all Organisational levels within the business

Speed of delivery One consistent version of the truth. Improved the dynamics between HR and the Line. System enables better review and improvement of HR

business processes. Increased ability to measure management performance. Improves organisational effectiveness & efficiency. Empowers local HR administrators to record accurate data.

Link to Performance / Pay

Key HR metrics linked to individual line managers’ key objectives for the year through appraisal process.

HR metrics reviewed annually by HR board with a view to eventually being in the upper quartile compared to other UK based businesses.

People P&L bonus targets for Senior Management Group (SMG) introduced

If members of the SMG did not carry out Appraisals for their reports and 360 degree feedback from their manager no annual pay review was awarded

Plans to attach bonus to all line managers performance were shelved after Aviva takeover

Other Perceived Benefits

Elevation of status of HR in the business. Adding value Providing Insight Making the business more effective

Closer links between HR & Operational units established to support Line management

Greater Education and support for the business

Greater Management accountability

Regular Director reviews

P&L actuals regularly reported throughout the organisation

Greater confidence in the data

Essential Requirements for success

High level stake holder buy in Active engagement by HR community Must be Strategy led All levels of management need to buy in Clean Data Simple, effective B.I. tool Suitably qualified and trained dedicated HR

staff to analyse / interrogate the reports

HR Director - PLC Board

“HuRBi helps us deliver a comprehensive understanding of HR performance

through the use of metrics and benchmarking.”

Debbie Hewitt, now MD, RAC

Lessons Learnt

Minimise the customisation of your solution

Ensure data is cleansed initially

Ensure effective and efficient processes are in place to keep data clean

We had the Right tool, but the wrong people Need for a Core strategic Analytics Team

Questions

Or Contact paul.rains@transacthr.co.uk

www.transacthr.com