How can you combine systems thinking and design thinking?

How can you combine systems thinking and design thinking?

That’s the question explored in this fab article by Ketut Sulistyawati.

? “We attempt to combine the best of both worlds — uniting the analytical tools of systems thinking with the creative methods of design thinking.”

? Begin by mapping the current state:
1️⃣ Define the problem & map the system
2️⃣ Research & listen to the system
3️⃣ Synthesize & remap the system
4️⃣ Reframe the problem & identify leverage points.

?Then envision the future:
5️⃣ Brainstorm ideas and design levers
6️⃣ Prototype & test solutions
7️⃣ Implement the transition
8️⃣ Measure & get feedback.

✔ Plus keep a watch out for unintended consequences.

Love this.

Read the article here: “A Framework to Embed Systems Thinking into Design Thinking Process” https://buff.ly/3S4an7Q

hashtag#Leadership hashtag#DesignThinking hashtag#SystemsThinking hashtag#EX hashtag#PsychologicalSafety hashtag#EmployeeExperience hashtag#CX hashtag#BehavioralScience hashtag#Innovation hashtag#UX hashtag#DecisionMaking hashtag#InclusionActivate to view larger image,

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How can you measure “belonging”?

How can you measure “belonging”? There’s a lot of talk about it being important and I’ve seen organisations try different approaches.

? This good-humoured research paper by Saga Pardede, Nicolay Gausel, and Magnhild Mjåvatn Høie explores various models and in the end comes up with three dimensions they termed: “belongingness,” “emotion-acceptance,” and “social self-representation.”

☑ Belongingness gets at the need to feel part of something.

☑ Emotion-acceptance is feeling able to express one’s emotions around others.

☑ Social self-representation reflects a need to represent oneself as a person of worth.

(I am summarising quite a bit here!)

They also looked at correlations, and “belongingness” had a positive relationship with both “emotion-acceptance” and with “social self-representation.”

? This means that the more one feels the need to belong, the more one feels the need to be accepted for one’s emotions and to be allowed to share them with others.

? This sits well with other work on how the need to belong is fulfilled through emotion-sharing and reciprocal connectedness.

I found this useful. Are there things here you might be able to put into practice? e.g. I like the item about being able to express your emotions around others (we already use the question about “being myself”).

Here’s the paper: https://buff.ly/3QlFgmB

Reference: Pardede S, Gausel N and Høie MM (2021) Revisiting the “The Breakfast Club”: Testing Different Theoretical Models of Belongingness and Acceptance (and Social Self-Representation). Front. Psychol. 11:604090. doi: 10.3389/fpsyg.2020.604090

hashtag#EmployeeExperience hashtag#EX hashtag#Belonging hashtag#Emotions hashtag#Leadership hashtag#FutureOfWork hashtag#PeopleAnalytics hashtag#IOPsychology hashtag#BehavioralScience hashtag#Inclusion hashtag#PsychologicalSafety hashtag#EmployeeSurveys hashtag#EmployeeEngagementActivate to view larger image,

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Emotions and Performance

How can you understand emotions in the workplace, and the link to performance?

This is a hot topic: Companies are doing more ongoing sensing, using new technologies to track sentiment, in part because there’s a growing concern over wellbeing & anxiety, plus there is an awful lot of change happening, which always stirs up emotions.

This multi-level model of emotions in organisations was developed by Neal Mashkanasy and Ronald Humphrey.

What does it tell you? (Apart from things are complicated):

– Senior leaders need to understand that employees’ attitudes and behaviors are partly the result of an accumulation of affective events (shown here in Level 1)

– In this framework, level 2 highlights the importance of individual variability in personality and emotional intelligence

– Level 3 covers the role of emotions in interpersonal relationships, e.g., trust

– In group situations managers need to understand how the transmission of emotions impacts teamwork (Level 4)

– At level 5, the focus may fall on “emotional climate” and the impact on organisational performance.

It’s a useful picture to keep in mind when you come across simple displays of “emotions at work”.

There’s a lot to unpack, including effects across levels.

You can find the paper here:

https://www.researchgate.net/publication/254089663_Current_Emotion_Research_in_Organizational_Behavior

It’s a fun read as the authors talk about leaders as “mood managers” and the potential damage caused by “emotional contagion”.

#Leadership #EmotionalIntelligence #OrganisationalCulture #PeopleAnalytics #BehavioralScience #Teamwork #HighPerformance

EX Leadership Newsletter – April 2023

It’s Spring in the UK, which means the bluebells are out and that 2023 is flying by. Here’s my latest newsletter. As always, it contains the best EX articles I’ve come across over the last few months. Let me know if you find them interesting too.


First up, I found this report by Marc Effron very useful. It’s full of detail about trends in performance management, which is such a key topic. I worked with Marc when I was in New York. He’s a great person to follow on LinkedIn for all things talent and performance.


This is a thoughtful paper by Jared Peterson on the importance of understanding context. In essence, he argues that when behaviour change solutions don’t create an impact, it’s really because we haven’t understood the context in which people operate (so don’t rush to blame the “solution” itself). There’s a lot to think about here. Save this one for when you have a big mug of tea to hand.

https://medium.com/behavior-design-hub/the-science-of-context-e6cc50252709


I enjoyed this article by Hanadi El Sayyed on sustainability and employee experience. She looks at the link to purpose, wellbeing, and innovation. It’s an area I’m really interested in, as are lots of my clients, and it’s only going to increase in importance over time. Tapping into the energy of your workforce is really key for climate action.

https://www.linkedin.com/pulse/power-pairing-sustainability-employee-experience-hanadi-el-sayyed/


Another person I recommend you follow on LinkedIn is Sarah McLellan. Her series on “culture cracks” is a brilliant read as is this short article on what you need to measure in the new world of work. She highlights things like employee vitality, culture health, and purpose & impact. It’s a terrific list.

https://www.linkedin.com/pulse/new-world-work-measures-success-sarah-mclellan/


I thought this was an interesting analysis of what CEOs talk about on LinkedIn. I’ve not really come across this information before. UK CEOs – and their social media teams – apparently take a relatively personal approach in their posts, including one-to-one interactions with employees and sharing personal career stories.

https://www.kekstcnc.com/insights/kekst-cnc-global-ceo-linkedin-tracker-communicating-in-a-year-of-economic-anxiety-war-in-europe-and-climate-fatigue


This is an interesting paper looking at the manager behaviours that keep people from speaking up and testing some potential (simple and low-cost) interventions. It’s based on work done by Novartis. What it really highlights is the importance of team and individual dialogue.

https://sloanreview.mit.edu/article/proven-tactics-for-improving-teams-psychological-safety/


I’m behind on my own writing, but if you’re interested, I have a draft article on “Engagement & Retention” on Medium. If you take a look, let me know what you think.

https://nickl4.medium.com/can-you-have-high-employee-engagement-and-high-turnover-73741a6399f7

I also did a video to mark the 4th anniversary of my book being published. I briefly talk about what’s changed in the world of EX since then. The main thing is that it was a very windy day in London when I did the video.

https://www.linkedin.com/feed/update/urn:li:activity:7055486041247342592/


As always, let me know what you make of these.

Best wishes,

Nick

Can you have high employee engagement and high turnover?


Yes. Almost 1 in 5 companies see this pattern. So what can you do if you’re one of them?

Source: WTW

Finding engagement

Employee engagement is something that many organisations measure and track, often through surveys. There are good reasons for doing this. Monitoring engagement is seen as good governance. There’s also evidence that high-perfoming companies build a virtuous circle of engaged teams with strong business results.

“Engagement” has a variety of definitions, but there is broad agreement on what it’s trying to get at, i.e. things like:

  • Sense of belonging and connection
  • Pride and advocacy
  • Willingness to invest discretionary effort 

William Kahn is usually credited with providing the first formal definition of engagement. He talked about: 

“The harnessing of organisation members’ selves to their work roles; in engagement, people employ and express themselves physically, cognitively, and emotionally.”

The degree to which employees find engagement is the result of both individual characteristics and factors that are related to their experience at work. 

Employee experience (EX) factors include day-to-day elements, such as the job itself, and how you interact with your manager and your team. Some of these stand out as being especially important, such as feeling recognised by your manager and having a sense of psychological safety. 

Engagement drivers also include broader organisational factors. For example, the ability to grow a career and your confidence in leadership. In my experience, there are systemic capabilities that can provide an engagement lift if you get them right, such as performance enablement and effective communications.

When the CIPD developed an umbrella approach to employee engagement a few years back, it identified the following useful framework:

Source: CIPD

The key point here is that engagement is typically seen as a condition in its own right. In the CIPD’s words, engagement relates to a “state of being”. It’s common to view engagement through the lens of self-determination theory. Another perspective on engagement is to consider it as something akin to “flow”. It’s one reason why engagement has been linked to improved performance outcomes (safety, productivity, sales, etc.)

Engagement is not retention

While you can expect that engagement is related to retention, it’s also different. Retention refers to employees’ intention to stay with their current employer. (Note that I’m using plain language here and avoiding more technical terms like retention rates.) The opposite of retention is turnover — and here I’m mainly thinking about people leaving voluntarily for another job in a different company.

When employees make a decision to leave in this way, it’s the result of a complicated equation that reflects a wide range of considerations.

Some of those are external to your experience at work.

One very obvious external factor is the economy. Is unemployment low? Is your sector growing? Are your skills in demand?

In the last 18 months, another factor has been people simply wanting to make a change after the slog of the pandemic and lockdowns.

In addition, there has been high inflation. If you look at the data behind the “Great Resignation” you see that lots of people have made sideways moves. This may be due to people looking for even a small pay increase during a cost-of-living crisis.

As well as these external factors, turnover is a result of individual characteristics (e.g. risk appetite) and, of course, employees’ experience at their current place of work. Do you have an idiot for a boss? Do you feel your pay is unfair? Is your team short staffed? Are you feeling overwhelmed and even burnt out?

There is lots of research into these EX retention drivers, some of which is summarised below (these data come from the WTW Global Attitudes Survey):

Source: WTW

What’s noticeable is the prevalence of total rewards in retention drivers. That’s not the case for engagement. Engagement is driven by more relational factors. In fact, if you think about employee experience in terms of both “connection” and “contribution” (as I sometimes do — shown below) then engagement is more strongly related to connection (to the people you work with and the sense of purpose you get from work) and retention is more strongly related to contribution (the opportunity to have an impact through your work and the recognition you receive for your efforts).

Source: WTW

Linking engagement, performance and retention

In summary then, engagement is different to retention, but both are impacted — to some degree — by your experience at work. In many scenarios, therefore, you can expect engagement and retention to track one another.

A recent piece of research into employee experience “value drivers” by my colleagues Angela Paul and Steve Young looked in detail at exactly this linkage.

They segmented 350 organisations according to both the level of employee engagement and the level of retention, comparing each to their respective industry average.

They found four segments as shown here:

Source: WTW

The good news is that 37% of companies have highly engaged employees who are looking to stay. Engagement and retention go hand-in-hand here.

These “value drive” companies also have a performance advantage, delivering the best profits and growth, as shown below:

Source: WTW

At the other end of the spectrum are 30% of organisations that have disengaged employees who are looking to leave (“value drag”). Of course, engagement and retention (and performance) are linked here too.

There’s a rump of 15% of companies, which suffer from low engagement, but where employees are not looking for the exit (“value potential”). You can imagine reasons why people might be “stuck” like this. Perhaps these organisations are older corporates with relatively high numbers of long-tenured employees, for example.

What interests me most is the 18% of companies that have the pattern I described at the top of this piece — high engagement, but also high turnover (“value risk”).

It’s worth saying that some leaders I’ve worked with don’t think this pattern is a big problem. They feel it shows they’re doing a great job of developing ambitious people. They might even expect their most-engaged talent to be on the lookout for opportunities— it’s a sign of success.

Moreover, if folks are walking out of the door engaged, then you are building a fantastic pool of potential re-hires. There’s research that shows re-hires can be among the most productive of employees. In some industries, it’s not uncommon for people to move around a lot (and you can argue that this is going to become more common in the future of work).

There’s some truth in this. But there is a cost to turnover and it’s significant. The real total cost of losing someone includes the cost of hiring, onboarding and training a replacement. You also need to account for the loss in productivity and the impact on those who remain (in terms of morale and climate, for example). This can easily end up to a multiple of the leaver’s salary.

You can see from the above analysis that these “value risk” organisations are not as profitable or as fast-growing as their “value drive” peers. There is an overall performance disadvantage. It’s likely that these companies are facing too-high a retention risk; they’ve crossed what might be considered a healthy (or “optimal”) level of turnover.

Three key steps for taking action

To return to the second question I posed at the start of this article, what can you do if “value risk” is a pattern that you see at your company?

There are three key steps you can follow, which I will go on to summarise at a very high level: Understand — Prioritise — Spark Change.

1. Understand

According to the research, there are some areas where the employee experience differs for these “value risk” organisations. For example, employees:

  • Are less likely to believe their voice matters
  • Perceive less equity when it comes to advancement opportunities
  • Feel their organisation doesn’t really match rewards to performance
Source: WTW

This is the general case. You need to understand your own workforce dynamics by analysing people data to build your own picture.

Here is an outline of some of the ways you can do that:

i. What did people who left tell you before they departed?

This is a simple analysis, but powerful. Tag leavers in your prior engagement survey, and review the results for those who were engaged but left vs. those who stayed. Are there specific topics where there are big gaps?

ii. Segment

You can segment engaged leavers and stayers by function, role, and critical talent group. You should also segment by length of service. When in the employee lifecycle do gaps emerge and on what topics?

iii. Analyse

You can model retention by treating the decision to leave as an outcome. Are there experiences and opinions that can be linked to the decision of engaged employees to exit? In this phase, it’s key to integrate and triangulate — to add-in demographic and other data. This might include individual variables such as time since last promotion and pay rate compared to co-workers, and so on. It might also include data on fitness for the job at the point of hire. You can also connect insights from exit surveys, such as reasons for leaving.

iv. Add colour and richness

One way to add colour is by looking at employees’ stated intention to stay or leave (for example, in an engagement survey) and their actual stay/leave decision. If you do that, you can identify people who intended to stay and did, and folks who intended to leave and did, but far more interestingly people who you might call “surprise leavers” and “surprise stayers”. Looking at these “surprise groups” in detail can provide a lot of insights.

If you have multiple surveys, the data becomes even more colourful. For example, you can identify people who have changed their mind (about whether to leave or stay) and isolate the factors that led them to reconsider.

You can also review qualitative data (e.g. survey comments), performance feedback, and exit interview data to add richness.

v. Engage and involve (and validate)

It’s important to validate your analysis with people. We sometimes use virtual focus groups (chat-based discussions at scale). You can engage with Employee Resource Groups and other communities. You can co-create solutions by using ideation/crowdsourcing tools and platforms.


Obviously, I’ve run through all of the above in super-quick fashion, but I hope you get a sense for some of the options available. (Feel free to ask me about them if you would like more detail. The screen shots shown above are from WTW’s Engage software.)

2. Prioritise

The second step is to translate insights into actions. Are there people priorities that need to be accelerated? Are there programme changes you should make? Are there particular EX moments you should focus on?

When we did research into “Transformative EX” organisations, for example, we identified a number of breakthrough moments:

  • Making flexible work work
  • Modernising total rewards and enabling performance
  • Equipping managers to lead through change with empathy
  • Investing in employee wellbeing
  • Encouraging inclusion and psychological safety

When it comes to “value risk” organisations, we know from our research, that one key area relates to fair pay:

A second focus area relates to career experiences and career architecture. In all organisations, careers are evolving:

Source: WTW

As a result, many organisations are shifting from traditional approaches to more of a career ecosystem:

Source: WTW

These are example priority areas to focus on in order to optimise turnover, particularly if you have identified a pattern of “value risk” in your employee experience through the kind of analysis described in Step 1.

3. Spark behaviour change

The third step is to translate actions into impact. When it comes to activating career experiences, for example, most organisations combine tools for employees and managers with consumer-grade technology that personalises communication.

Source: WTW

We recently worked with a global pharma company, for example, to develop a careers platform called “Navigator”. The platform integrates their existing development content with a new role framework — bringing career development to life for employees.

On Navigator employees can:

  • Explore all role families and role profiles across the organisation
  • Identify areas of interest and the skills required for different paths
  • View their current role and suggested upward and lateral moves, making their Navigator experience personal to them
  • Create a career development plan.

You can deploy similar technology to communicate total rewards and to tackle issues related to fair pay.

Source: WTW

I’m skimming the surface here, but you can read lots about this on our website.

Recap — “Value risk” can be minimised

Employee engagement has been a leadership focus for more than a decade. Since the pandemic, and especially in areas where key skills are in short supply, retention has also become a top priority. In many cases, the two go hand-in-hand, but in around 20% of companies it’s possible to see a pattern of high engagement and high turnover risk.

If this is something you see in your organisation, you need to analyse the people data you have to really understand the drivers of retention for engaged leavers. Based on our research, these are likely to be related to “contribution” elements of EX (such as total rewards and careers).

Once you’ve done the kind of analyses shown here to really understand the key factors for your workforce, you can then prioritise programmes and changes that will help to optimise turnover.

In areas like total rewards and career experiences, organisations are increasingly using digital technologies to spark behaviour change and to create lasting impact. I’ve touched on that very lightly here, but for sure it’s something I will write a lot more about in the near future.


NOTE: This is a draft I’m working on. Ping me a message with your thoughts; I’d love to hear what you think — Nick

EX Newsletter – Autumn 2022

@nickl4

Here’s the autumn edition of my newsletter. The days shorten, the temperature drops, the heating bills go up, and I’m a bit worried the content here won’t cheer you up. 🙁


Two excellent articles have analysed data from social networks to measure employee experience. First up, Don and Charles Sull have mined Glassdoor to identify what leads to toxic work cultures. Their answer: bad leadership and poor work design. Second, a bunch of folks from MIT, Harvard and Stanford have explored LinkedIn connections to understand the effects of strong and weak ties on job mobility. Both are examples of analysing “passive data” in order to understand behaviour through networks (an area of growing interest).

https://sloanreview.mit.edu/article/how-to-fix-a-toxic-culture/

https://mitsloan.mit.edu/press/a-team-mit-harvard-and-stanford-scientists-finds-weaker-ties-are-more-beneficial-job-seekers-linkedin


Talking of social connections, when I started doing research into engagement (all those years ago!) I never expected that isolation and loneliness would emerge as a key theme. But it is. In the UK, one-in-five employees feel lonely at work. Importantly, only one-in-ten would ever tell their manager about it. This article by Rachel Botsman (one of my favourite writers) is to the point.

https://www.linkedin.com/pulse/why-loneliness-work-something-we-should-talking-rachel-botsman/


Maybe what’s needed is more compassionate leadership. To that end, this paper by Mark Mortensen and Heidi Gardner looks at how leaders can show compassion without compromising on performance; in their words “being kind and high-performing”.

https://knowledge.insead.edu/leadership-organisations/how-show-compassion-without-compromising-performance


When it comes to changing culture, I found this article by Roger Martin very insightful. “Culture change depends on micro-interventions: small adjustments to the structure, dynamics, or framing of interpersonal interactions, applied consistently over time.” That’s something I agree with – lots of incremental changes that can add up to something big, even transformative.

https://www.strategy-business.com/blog/When-it-comes-to-changing-culture-think-small


I’ve been out and about presenting at conferences recently. It’s great to meet people in person. I’ve been talking about using analytics to better support employees in a cost of living crisis. I’ve also discussed wellbeing and the need to focus on organisational health and resilience. (Someone called this “the state of the world according to Nick” presentation, which I think is fair as I cover a lot of ground, from geopolitics to neuroscience!) Links to my slides from both these presentations are below.

People Analytics and the Cost of Living Crisis

Wellbeing and Resilient Agility


As always, let me know what you make of these articles, and feel free to share this newsletter with other colleagues and contacts:

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If by some horrendous luck you received this newsletter by both email and from Substack, just let me know and I will remove you from one or the other.

Take care and best wishes,

Nick

Talking About Inflation and Resilient Agility

From the SAP SuccessFactors HR Connect Conference

I’ve been out and about presenting at conferences recently. It’s great to meet people in person. I’ve been talking about using analytics to better support employees in a cost of living crisis. I’ve also discussed wellbeing and the need to focus on organisational health and resilience. (Someone called this “the state of the world according to Nick” presentation, which I think is fair as I cover a lot of ground, from geopolitics to neuroscience!)

Links to my slides from both these presentations are below.

People Analytics and the Cost of Living Crisis

Wellbeing and Resilient Agility

EX Newsletter April 2022

@nickl4

Here’s the latest version of my informal newsletter, containing a short selection of the very best EX articles I’ve come across over the last few months (so you don’t have to slog through LI or Twitter).

First up is a terrific HBR article by Diane Gherson and Lynda Gratton on how overwhelmed many managers are and what to do about it. In our data we’re seeing more and more evidence of manager burnout. It’s often a systemic problem that’s fixed by rethinking the role of people leader. There is some great advice in this piece: building people leadership skills, simplifying work, and job redesign. Related to this, I am working on a number of “Manager 180s” for clients at the moment that provide tailored developmental feedback to people leaders at all levels. It’s a great use of our listening platform (and often not part of a traditional “listening strategy”).

https://hbr.org/2022/03/managers-cant-do-it-all

I’m a long-time fan of Joe Pine and Jim Gilmore, the authors of The Experience Economy, one of my favourite books. I really like their latest article on transforming jobs to create more compelling employee experiences. Too much of the discussion about the Future of Work focuses on automation, cost-saving, and efficiency (the transactional side of work). It’s good to be reminded of the opportunity to invest in people, engagement, and trust (by transforming jobs).

This is an interesting article by Ayelet Fishbach on how moderate emotional discomfort can be a signal that you’re developing as a person. It often happens before you can actually detect the benefits of self-growth. In other words, short-term discomfort can be a sign you’re making progress towards long-term gains. Ayelet is author of the book “Get It Done: Surprising Lessons from the Science of Motivation”.

The final pair of articles are both reflections on what has happened over the last 2-3 years:

Here, Eric McNulty focuses on leadership. He sets out a simple process of “sensing-responding-adapting” in order to be agile enough to respond to uncertainty and shocks. I think it’s a very powerful (and simple) framework:

https://www.strategy-business.com/blog/The-best-way-to-lead-in-uncertain-times-may-be-to-throw-out-the-playbook

And here Gethin Nadin asks how you design employee experiences starting from the premise of needing “more conscious and compassionate workplaces”:

https://www.hrzone.com/engage/employees/employee-experience-and-the-rise-of-compassionate-capitalism

As always, let me know what you think!

Nick

EX Newsletter January 2022

@nickl4

Here is my latest EX Newsletter, containing a selection of the best EX articles of the past few months. The goal is that I act as a filter, so you don’t have to spend your time scrolling through LI and Twitter.

Given everything, there’s a lot being written about burnout and stress right now. I’m very interested in the longer-term reasons behind these challenges, which often arise out of complexity and bureaucracy. By adopting an EX lens, you can shine a light on these systemic problems and tackle the root causes.

I hope you find these articles interesting and useful. Let me know!

If you want to receive this by email, just follow Contact me to sign up.

Nick

How Can Business and HR Leaders Simplify Complexity?

I agree with Dave Ulrich that “complicatedness” is one of the biggest challenges that large organisations face. HR has a key role to play in simplifying things; I would argue, by focusing on employee experience.

https://www.linkedin.com/pulse/how-can-business-hr-leaders-simplify-complexity-dave-ulrich/

How to Make Big, Old Companies Act Fast

I really like this analysis by Pia Lauritzen of the shifts that leaders in traditional organisations need to make to transform performance. Her list includes moving from communication to conversation and from feedback to transparency. Great stuff.

https://www.strategy-business.com/article/How-to-make-big-old-companies-act-fast

Coca-Cola’s Foray Into the New Normal

I’ve worked with Coca-Cola since 2004 and I found this interview with Drew Fernandez, Chief People Office of the Bottling Investments Group, very interesting, especially when he talks about simplifying processes in order to elevate the employee experience.

https://www.wtwco.com/en-SG/Insights/2021/11/Coca-Colas-foray-into-the-new-normal-benefits-the-employee-experience-and-more

Toxic Culture Is Driving the Great Resignation

This is another interesting paper from Culture X looking at the link between culture and employee turnover by using Glassdoor data. They highlight the importance of lateral job moves and more-predictable work schedules.  Sometimes it’s the simple things that can make a big difference.

https://sloanreview.mit.edu/article/toxic-culture-is-driving-the-great-resignation/

Including Rewards in People Analytics

I wrote an article recently on why total rewards are a key dimension of EX but are often treated separately. I describe how we sometimes bring rewards and engagement analytics together. I probably don’t talk about this enough! ICYMI, here’s the link:

https://nickl4.medium.com/including-reward-in-people-analytics-39a9eb96855e

Including Rewards In People Analytics

@nickl4

The field of of people analytics has seen rapid growth over the last years. As someone who has explored the links between people and performance throughout my career, it’s been great to see this explosion of interest.

There are various definitions of people analytics, which is sometimes called HR analytics or workforce analytics. Janet Maher and John Boudreau call it “An evidence-based approach for making better decisions on the people side of the business; it consists of an array of tools and technologies, ranging from simple reporting of HR metrics all the way up to predictive modelling.”

Jonathan Ferrar and David Green in their book Excellence in People Analytics emphasise the importance of using people data to provide business value. They describe different ages in the evolution of the field with most companies now focusing on supporting leaders to navigate key challenges: “People analytics is an absolute must-have for any Chief Executive Officer or Chief Human Resources Officer.”

There is a potential hitch in all this progress, however. HR has long been a siloed function and it strikes me that this characteristic is being reflected in the work that is now published and shared in the people analytics community. Recent people analytics books, collections, conferences, and articles all seem to have a glaring gap; hardly any of them make any mention of rewards.

Recent people analytics books, collections, conferences, and articles all seem to have a glaring gap; hardly any of them make any mention of rewards.

There are a few notable exceptions. There has been some great work looking at gender and ethnicity pay gaps, for example. It’s also true that, because of the nature of rewards work, it can be harder to share the outputs in public. But in the main, reward analytics operates as a separate field from people analytics, just as rewards is usually a separate sub-function from talent. Even though rewards is full of data-savvy and analytically-minded people. This feels like a missed opportunity.

That’s because decisions about rewards are important business ones. Payroll is a significant percentage of revenue. Companies source and offer a complicated mix of pay, incentives and benefits. It’s an area where smart analytics can provide a lot of business value and generate a return on investment.

Reward design choices are also important human decisions. Rewards carry emotional as well as practical weight. A lot of organisational energy is spent discussing them. And incentives affect behaviour, often in oblique ways.

Getting total rewards right can mean the difference between competing effectively in the global talent marketplace and being left behind. A consumer-grade total rewards portfolio of pay, benefits, wellbeing and career programmes serves as a catalyst, driving attraction, retention and engagement of talent essential to business success. Yet, in many organisations, total rewards are not evolving quickly enough to keep pace with changes in the world of work.

All of this underlines that when it comes to employee experience (EX), rewards obviously matter. It’s why in our work we include total rewards as one of the four key dimensions of a High-Performance EX, as shown below:

Let me expand on this point about employee experience. I have written quite a bit about EX, and one of the things I believe strongly is that EX requires a shift in perspective. In essence, it means moving away from a traditional and top-down view of organisations towards a messy, conversational, and more personal view of life at work.

From an EX point of view, therefore, all the following things are super-interconnected: jobs, work, performance, skills, careers, learning, pay, benefits, inclusion, engagement, well-being, communications, culture…

It’s a blatantly obvious point, but worth stating — employees don’t experience life at work through a HR lens. Rather, HR needs to think about organisational effectiveness from an employee perspective. That’s the fundamental trick in making EX work.

The same logic applies to people analytics. Talent metrics only address part of the humans and work equation. If you exclude rewards, you’re not capturing the whole picture and you’re not thinking systemically.

Talent metrics only address part of the humans and work equation. If you exclude rewards, you’re not capturing the whole picture and you’re not thinking systemically.

So what does it look like to bring reward into people analytics? One example is the work we do around optimisation. Specifically, Total Rewards Optimisation (TRO) allows you to align reward investments with the employee experience. We talk about finding the “sweet spot” — the intersection that aligns what and how much you spend on total rewards with what your employees value most and least across what you offer — while uncovering how reward changes affect employee behaviour and performance on the job.

There are four key parts to TRO:

  • Understand which rewards employees value most and least using conjoint analysis, a survey methodology used in market research to understand customer preferences. You can also pull in selection data from your flex and benefit programmes to understand actual employee choices and trade offs. We also bring in employee engagement, retention, and performance data in order to analyse the linkages.
  • Assess the return on your total rewards investment, as well as the impact of the programme on your workforce, by combining employee preferences with financial data. We model various investment scenarios in order to help leaders decide how much to spend and where to get the best possible results for the right size of investment.
Modelling total reward options along an efficient frontier
  • Use data to understand what employees see as the most and least valuable components of their reward packages. We help leaders make investment decisions and deliver a talent value proposition that is likely to foster desired attitudes and behaviours at a cost the organisation can afford.
Heat map of perceived value by talent segments
  • Use segmentation to understand the different priorities and attitudes of a diverse and multigenerational workforce towards benefits, cash and work/life balance and build a competitive edge in attracting, retaining and engaging top talent.
Modelling the impact of total reward changes on the engagement of key talent segments

To my mind, TRO is a great piece of people analytics. It’s got interesting and important data, cool maths, fun modelling, nice data visualisation. More importantly, you’re linking together employee preferences and behaviours to business and financial data in order to understand trade-offs and ROI. And those scenarios are typically explored interactively with leaders as different hypotheses are tested and analysed.

My broader argument, however, is that this is an example of how it’s possible to include rewards in people analytics and that this is an important thing to do. It’s one thing to look at engagement, retention and performance drivers for your key talent, and to make decisions based on that data. It’s another to look at those things alongside what you spend on total rewards and how you shape, customise and communicate your value proposition. The latter is taking a step towards thinking holistically about employee experience.

This is especially important right now as leaders are acutely aware of the importance of retaining and attracting key talent in the midst of a period of high turnover. Rather than throwing money at a problem, finding the sweet spot matters more than ever.

There’s also a point here about the state of people analytics at the current time. It’s possible to see the recent rapid growth in people analytics as a transitory moment. A point when data became more available and HR began to explore how it can be used for improving decision making. At first, growth in analytics has mostly occurred with a traditional HR mindset, within HR silos, reflecting long-held budgets and distinct backgrounds and skillsets. But in the near future, the picture might look quite different. As datafication continues apace, the current people analytics community may merge with others to become the analytics engine of an EX function or even an EX analytics team within a business intelligence function. In some of my clients, this shift is already happening.

As datafication continues apace, the current people analytics community may merge with others to become the analytics engine of an EX function.

Jonathan Ferrar and David Green also refer to this kind of transition in their recent book, as they herald a new Age of Excellence in people analytics where “the human resources function itself becomes even more data literate.”

A key question for me is whether that means “business as usual” (such as continuing to think in HR terms) or taking a leap and embedding analytics and design thinking within a truly EX mindset.