Strategic Analytics

Advancing Strategy Execution and Organizational Effectiveness

Alec Levenson (Author)

Publication date: 10/05/2015

Strategic Analytics
More than ever, data drives decisions in organizations—and we have more data, and more ways to analyze it, than ever. Yet strategic initiatives continue to fail as often as they did when computers ran on punch cards. Economist and research scientist Alec Levenson says we need a new approach.

The problem, Levenson says, is that the business people who devise the strategies and the human resources people who get employees to implement them use completely different analytics. Business analytics can determine if operational priorities aren't being achieved but can't explain why. HR analytics reveal potentially helpful policy and process improvements but can't identify which would have the greatest strategic impact.

This book shows how to use an integrated approach to bring these two pieces together. Levenson presents a thorough and realistic treatment of the reasons for and challenges of taking an integrated approach. He provides details on the different parts of both enterprise and human capital analytics that have to be conducted for integration to be successful and includes specific questions to ask, along with examples of applying integrated analytics to address particular organizational challenges.

Effective analytics is a team sport. Levenson's approach allows you to get the deepest insights by bringing people together from both the business and HR perspectives to assess what's going on and determine the right solution.

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Overview

More than ever, data drives decisions in organizations—and we have more data, and more ways to analyze it, than ever. Yet strategic initiatives continue to fail as often as they did when computers ran on punch cards. Economist and research scientist Alec Levenson says we need a new approach.

The problem, Levenson says, is that the business people who devise the strategies and the human resources people who get employees to implement them use completely different analytics. Business analytics can determine if operational priorities aren't being achieved but can't explain why. HR analytics reveal potentially helpful policy and process improvements but can't identify which would have the greatest strategic impact.

This book shows how to use an integrated approach to bring these two pieces together. Levenson presents a thorough and realistic treatment of the reasons for and challenges of taking an integrated approach. He provides details on the different parts of both enterprise and human capital analytics that have to be conducted for integration to be successful and includes specific questions to ask, along with examples of applying integrated analytics to address particular organizational challenges.

Effective analytics is a team sport. Levenson's approach allows you to get the deepest insights by bringing people together from both the business and HR perspectives to assess what's going on and determine the right solution.

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Meet the Author


Visit Author Page - Alec Levenson

Dr. Levenson is Senior Research Scientist at the Center for Effective Organizations in the Marshall School of Business, University of Southern California. His action research and consulting with companies optimize job and organization performance and HR systems through the application of organization design, job design, human capital analytics, and strategic talent management.
Alec’s work with companies combines the best elements of scientific research and practical, actionable knowledge that companies can use to improve performance. He draws from the disciplines of economics, strategy, organization behavior, and industrial-organizational psychology to tackle complex talent and organizational challenges that defy easy solutions. His recommendations focus on the actions that organizations should take to make lasting improvements in critical areas.
Alec has spent over a decade and a half training human resource professionals and teams in the application of human capital analytics across a broad range of Fortune 500 and Global 500 companies.
His research has been published in numerous academic and business publications and featured in major media outlets including New York Times, Wall Street Journal, The Economist, CNN, Associated Press, CBS, U.S. News and World Report, National Public Radio, USA Today, Marketplace, and Fox News. He received his PhD and MA in Economics from Princeton University and his BA in Economics and Chinese language (double major) from the University of Wisconsin-Madison.

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Table of Contents

Introduction: Integrating Enterprise and Human Capital Analytics
1. Of Elephants and Incomplete Analysis
2. Beware the ROI Bogeyman and Other Monsters Lurking under the Bed
3. Put the Horse in Front of the Cart—Where to Focus the Analysis
4. Step 1—Competitive Advantage Analytics
5. Step 2—Enterprise Analytics
6. Step 3—Human Capital Analytics
7. Putting It All Together
8. Application—Customer Retention and Profitable Growth
9. Application—Go-To Market Strategies and Effectiveness
10. Critical Roles, Competencies, and Performance
11. Making Sense of Sensing Data
12. Evaluating Human Capital Development—Build versus Buy versus Redesign
13. Key Learning and Action Points

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Excerpt

Chapter 1
Of Elephants and Incomplete Analytics
Issues Addressed in This Chapter
Most analytics conducted today by the business and by HR are incomplete and cannot solve strategy execution problems on their own

You need a full causal model to diagnose the entire system and to understand what really drives behavior and performance

Key Questions
What problems are you trying to solve with your analysis?

How does the analysis you have chosen help to improve strategy execution?

You need to know what drives performance in your organization to get strategy execution right. The problem with organizational analytics today is that they tell an incomplete story. Enterprise analytics and human capital analytics are conducted along parallel and separate tracks. Both attempt to determine why performance happens, yet each on its own can tell only part of the story. Without the complete story, we don't really know the best ways to improve strategy execution and organizational effectiveness.

Enterprise analytics can tell us if we're achieving the strategy and details about the operational measures that contribute to strategy execution. A typical analysis addresses questions like these:

What types of customers can best help increase our share in existing markets?

What new markets can we succeed in?

What organizational capabilities do we need for strategic success?

The enterprise metrics used to answer these questions include market share, sales, and margins, among others, and extend to operational and technical measures that describe business processes, such as productivity, innovation, quality, manufacturing uptime, time-to-market, customer service, and others.

On the human capital side, a typical analysis tries to figure out the sources of organizational ineffectiveness, focusing almost exclusively on how work is done and whether people work well together. A typical analysis addresses questions like these:

Who are our best leaders, and what role do they really play?

Is a group or team performing well or working at cross purposes?

What is the right mix of compensation versus non-monetary rewards in motivating performance?

How can we improve our HR practices to be more effective?

The human capital metrics used to answer these questions include leadership and frontline worker competencies, employee attitudes, and measures of human resource (HR) program efficiency and effectiveness.

Enterprise analytics tells us whether the strategy is executed. But it can't tell us which jobs and individual-level behaviors most directly lead to improved strategy execution. The human capital perspective is essential, but only on rare occasions are people from the human capital side invited to contribute when senior leaders conduct business analytics. Instead, they usually are told what happened only after the key decisions were made.

Business analytics and HR analytics as commonly practiced are examples of incomplete analysis: they do not specify and test a full causal model. Rather than looking at the entire system that defines and drives organizational performance, they take shortcuts and focus on too few elements. To illustrate the problem with the analysis of large complex systems based on only partial data, consider the scene in figure 3, which is from a centuries-old fable.

The scene is a group of blind monks who are each touching different parts of an elephant. Modern versions of the story star blind men, and sometimes only three of them, though the specific stars of the story are not important. What matters is the analysis performed by each person, which occurs in isolation and without consideration of the data gathered by the other people.

WHAT'S THE RIGHT LEVEL OF CUSTOMER SERVICE? A SYSTEMS DIAGNOSIS APPROACH.

Business-to-consumer industries. Determining the right amount of customer service is a challenge for all organizations. If you don't provide enough, key customers walk out the door. If you provide too much, profit margins get whittled down to nothing and you don't make any money.

Customer service in business-to-consumer industries is driven by product quality, ease of use, and responsiveness of customer service representatives (CSRs). When customer service scores fall, the directive to operational leaders may simply be “Go figure out how to get customer service back to where it was before.” Suppose product development previously decided to save costs by reducing spending on quality assurance processes. They may have assessed that existing processes are redundant, slowing time to market and reducing sales. If the lower spending on quality assurance is misguided, the end result would be lower product quality and unhappy customers. If the customer service scores do not measure product quality, fingers could be pointed at the CSRs, leading to the incorrect conclusion that they had become less motivated to provide high-quality customer service.

For another case, consider the link between CSR compensation and customer service. Suppose the customer service site leader is held accountable for metrics such as time to resolve customer complaints and efficiency of the operations (call volume, wait times, and similar issues). If she does not have profit and loss (P&L) responsibility for her operations she will push for higher compensation for her CSRs as a way to attract and retain higher skilled employees. Similarly, HR might advocate for greater pay to reduce attrition and improve retention of the longer-tenured and more experienced CSRs. However, evaluating whether better pay is worth the investment requires a complete Strategic Analytics diagnostic that addresses the relationship between customer retention and sales and profitability.

Business-to-business industries. In business-to-business industries, customer service involves striking the right balance between cutting prices to make the sale and maximizing profits. A Strategic Analytics diagnostic looks at the complete set of interactions between the customer and organization, along with the role played by each employee and function. For example, salespeople may be given discretion to set specific contract terms, but they need timely and accurate information on how the terms impact enterprise profitability through metrics such as capacity utilization. And they need to be trained and evaluated on overall profitability, not just sales.

The person touching the tail concludes that an elephant has features like a rope. The person touching the leg thinks the elephant's shape is more like a tree. The person touching the tusk has no idea what the elephant's skin feels like. And so on. All their conclusions seem reasonable, given the information at each person's disposal, but all fail to describe the entire animal properly.

Enterprise analytics today are like the person touching only the head. They are out in front, focusing on a part of the animal that is pointed forward. Yet trying to dictate the direction and pace of the animal by focusing only the head can be a lost cause. If the animal's legs are tethered to a post, it cannot move, no matter what you do. You may point the animal in the right direction, but you will never get it to move forward.

Human capital analytics today are like the person touching only the hind legs. They move in unison with other parts of the body, but they contribute only one part to the animal's full range of motion and have no effect on direction. You can't properly diagnose problems with overall direction and speed by ignoring the rest of the animal and analyzing just the rear legs.

What's missing from both types of analysis is the rest of the body: the front legs that work in unison with the rear legs to propel the body forward and the torso that holds it all together. Excluding the trunk leaves out key information about how the animal maintains its health through eating, drinking, and bathing. Enterprise and human capital analytics, when conducted separately, fall short of identifying and testing a complete causal model. The most accurate insights require a combined analysis that diagnoses the performance drivers for the entire system, not just one part of it.

Data mining is not causal analysis. One of the biggest mistakes I see frequently is simple data analysis that focuses on only one or two pieces of information. The problem is that simple analysis without a causal model can lead to the wrong conclusions: it is just data mining and not science. A typical example is when consultants look at a group of companies and conclude that “the use of HR practice XYZ is more common at high-performing companies,” where XYZ could be the latest leadership development program, incentive pay philosophy, employee engagement strategy, and so on. The implication is that if your organization adopts the same practice, your business results will improve. The implicit causal model is shown in figure 4.

The problem is that HR practices by themselves do not create business results. They are one contribution in a larger system that enables the business results. HR practices can improve strategy execution only when they are aligned with other parts of the system.

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Endorsements

Too many senior executives and HR professionals hide behind a lack of data or incorrectly use data as an absolute decision maker. Strategic Analytics provides a straightforward approach to analyze the right areas to achieve long term impact.
—Jeff Joerres, Executive Chairman, ManpowerGroup

Levenson breaks analysis down into a step by step process – showing how to capture data and truly implement analytics in organizations, creating capabilities that drive strategy execution and, ultimately, competitive advantage. A must-read for H.R. professionals who want to build strategic partnerships and drive game changing results.
—Michael Johnson, Chief Human Resources Officer, UPS

Informed business and HR leaders know how important it is to connect business and talent outcomes.  They appreciate the need for art and science, but rarely have the methodology or tools to make the science real. 
Strategic Analytics helps solve this problem, providing insight on applying big data and analytics to unlock value for leaders and for organizations. 
—Scott Pitasky, Executive Vice President and Chief Partner Resource Officer, Starbucks

In this fascinating book, Dr. Levenson shows how leaders can make fast and accurate decisions in a world that is ever more complex, addressing the half-truths and unsubstantiated claims that abound in many corporations. A must read for anyone determined to improve their decision making.
—Lynda Gratton, Professor of Management Practice, London Business School

Strategic Analytics addresses one of the key complaints about HR today – that the function is not aligned with driving the business strategy.  Levenson gives a step-by-step approach for leveraging analytics to identify the right levers to drive business strategy and organizational effectiveness. The book is both comprehensive and pragmatic, with thoughtful examples to help HR and business leaders alike.
—Tracy Faber, Senior Vice President, Human Resources, McKesson

Strategic Analytics starts in the right place – winning in the marketplace – and assesses integrated solutions that will outlast individuals.  A wonderful book of useful frameworks and tools.
—Dave Ulrich, Rensis Likert Professor of Business Administration, University of Michigan, and partner, The RBL Group

A real breakthrough. Strategic Analytics is a must read for line and human resource executives who strive to make their organization and human resource system a source of strategic advantage. The systemic framework for rigorous diagnosis of organization alignment problems will help executives avoid simple but wrong responses that undermine effective strategy execution. 
—Michael Beer, Professor Emeritus, Harvard Business School, and Co-founder TruePoint

Levenson offers a highly useful framework for sharpening the focus of data analytics within large, complex organizations.  This book cuts through much of the hype surrounding the topic with a pragmatic review of methods that will generate actionable insights within an enterprise.  
Strategic Analytics should redirect efforts commonly seen today that often generate large quantities of data without really impacting business results.
—Alan May, Executive Vice President, Human Resources, Hewlett Packard Enterprise

Do you ever feel like you have all the data in the world but still don't know how to use it or you're not sure which analytics to use?   So many practitioners don't solve their organizational issues because analytics without strategy are useless, or their strategies aren't aligned organizationally so the analytics don't matter.  In this essential book, Levenson provides meaningful, actionable insights for business leaders and HR practitioners to align strategies and priorities to improve organizational effectiveness AND drive bottom line results.
—Kim Warmbier, Executive Vice President, Human Resources, Dean Foods

Strategic Analytics is a must for executives, line managers and HR practitioners seeking to advance analytics of human capital management and understand which interventions will drive tighter linkages between business strategy and execution.
—Patrick McLaughlin, Senior Vice President and Chief Human Resources Officer, Frito-Lay North America, PepsiCo, Inc.

Strategic Analytics is the book we have been waiting for. Levenson provides a roadmap to analyze performance gaps in strategy execution and the causal linkage with how the organization is designed and managed.  He shows the role high performance work design plays in strategy execution, which is the key design area in the new digital modern organization.  This book puts all the pieces together to provide a clear analytic approach to improve organizational effectiveness.
—Stu Winby, CEO, SPRING Network

Getting people and practices aligned to achieve strategy is one of the biggest stumbling blocks in modern management, often made worse by conflicting messages coming from workplace metrics and overall business metrics.  Strategic Analytics offers practical advice on how to straighten out those different measures.  New and much needed guidance for getting strategy execution right.
—Peter Cappelli, Director, Center for Human Resources, Wharton School of Business

Strategic Analytics is a great roadmap for the journey from big data and big confusion to focused and practical sense-making through better business insights. Levenson provides a user-friendly approach for what to analyze, why to analyze it, and how to make more powerful business decisions as a result.
—Ian Ziskin, President, EXec EXcel Group LLC and former Chief Human Resources Officer, Northrop Grumman

Levenson nails the essence of successful analytics work with the statement that “effective analytics is a team sport”.  Up to now analysis in organizations has been a suboptimized, multi-headed monster with each head eating alone. 
Strategic Analytics shows how to effectively use a holistic integrated approach. 
—Jac Fitz-enz, CEO Human Capital Source

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