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Using advance Tech for predictive analytics in employee retention

Using advance Tech for predictive analytics in employee retention

This technique can help managers reduce attrition costs.

The future of human resources is changing. Like the rest of the business world, chief human resource officers (CHROs) and their teams are beginning to find that they need to focus on building a robust analytics capability to best prepare for the data-driven world.

“CHROs have said that they feel [pressured] as the only ones not bringing data to the table. The business is expecting HR to have similar numbers to marketing, though maybe not finance or operations,” observed Andrew Marritt, CEO of OrganizationView, a people analytics practice based in St Moritz, Switzerland. According to Marritt, the data-centric modern HR leader needs to know not only what has happened, but what is likely to happen.

A key HR concern for businesses is employee retention. There are significant financial and intangible costs associated with losing loyal and high-performing employees. Investments need to be made to find, hire, and train their replacements. There could also be a negative impact on the stakeholders they worked with regularly such as suppliers, colleagues, and customers. Some companies are starting to look to predictive analytics to increase their ability to mitigate the risk of employee turnover and increase retention.

Investment in building a people analytics capability need not be big at first, and businesses can benefit greatly from it. “Our research shows that the financial costs associated with attrition can range anywhere between 13% and 23% of annual compensation depending on the function/level of the employees under the scope of the study. In our experience, a focused attrition analytics predictive model can help lower this risk by 5% to 8% annually,” said Neeraj Tandon, director for workforce analytics and planning, Asia-Pacific, at Willis Towers Watson, in Gurgaon, India.

WHAT’S NEW

Traditional HR analytics are descriptive in nature and examine employee data across different dimensions such as department and demographics to identify past patterns within metrics like turnover and retention. Conclusions are then used to formulate talent policies. Descriptive analytics, however, cannot predict future outcomes at an individual employee level.

Predictive analytics does this by going a step further and using the evidence from descriptive analytics as inputs for advanced techniques like statistical modelling and machine learning. These methodologies provide forward-looking measures such as flight risk, which quantifies the likelihood of an employee’s leaving the organisation within a certain period of time.

Predictive analytics also identifies hidden connections between key factors contributing to employee turnover. The main predictor variables normally studied include pay, promotion, performance reviews, time spent at work, commute distance, and relationship with a manager. (See the chart, “Factors Contributing to Voluntary Turnover”, for a breakdown of key reasons for attrition at a sample organisation.) Organisations also use external data such as labour market indicators and the current economic scenario as causative variables while formulating hypotheses and building models for retention. HR teams and managers use the findings from the modelling to better design timely interventions to help retain employees.

Factors contributing to voluntary turnover

An ADP Research Institute white paper examined the factors leading to voluntary turnover at a sample company. The graphic below breaks down the reasons cited. By collecting and analysing the factors that contribute to turnover, companies can institute policies and procedures to address concerns.

In this example, management may want to focus its retention efforts on industry veterans who have not been with the company for very long or look at implementing more lenient telecommuting rules to ease attrition.

Source: ADP Research Institute white paper, Revelations From Workforce Turnover Study.

Deloitte estimates that about 8% of global businesses leverage predictive analytics for talent management, and the ones that do tend to be larger. According to Brian Kropp, group vice president at Gartner, organisations that develop this capability tend to be in sectors that are intellectual property dependent such as financial services, healthcare, and fast-moving consumer goods. Globally, businesses in all major economies are working towards acquiring this competence.

COST VERSUS BENEFITS

Organisations looking to develop competence in predictive analytics have several options. Consulting organisations offer expertise towards building this capability. For businesses looking to set up internal capabilities for smaller capital outlay, many choose to employ or train in-house data scientists who may turn to inexpensive software such as IBM SPSS or free open-source software known as R for their initial modelling.

External vendors that set up human capital management systems with predictive analytics capabilities are also available at different price points. However, experts warn that internal teams should make sure that the human capital management systems offered integrate with data systems within the organisation. The systems should not overpromise and underdeliver in terms of features and tools, and vendors should provide the guidance to use them insightfully.

DATA-BASED CHALLENGES

According to Bersin by Deloitte, an HR research organisation, setting up clean and accurate data streams is, and will remain, a challenge for people analytics. As the research indicates, most big organisations have five to seven systems of record for their human resources data. This means that information often used in predictive modelling is inaccurate or unavailable, a serious stumbling block.

“As statisticians, we do deploy multiple data treatments to improve the quality of data. However, often data on some important variable are incomplete, and as a result we ignore these variables. Some of these variables could be important to predict the outputs. Hence, it’s important that organisations continuously focus on data quality improvement,” Tandon said.

Companies should run specific data quality programs to make the data fit for modelling. These programs would be of greater effectiveness if they were directed at key variables that predict output variables such as attrition rather than across the entire dataset, he added.

BUILDING A GOOD MODEL

Besides clean, accurate data streams, a few further steps can be taken to ensure that predictive retention models are a robust tool for decision-making. For one, studying the workforce in clusters of employees with similar characteristics and reasons for leaving the organisation is essential for building models that lead to targeted and effective retention strategies, according to Tandon.

Model building also goes through multiple iterations to ensure it fits the data optimally, which includes choosing or eliminating causative variables scientifically, and testing the model on an existing dataset to gauge how accurately it predicts actual outcomes. With the acknowledgement that numbers do not tell the entire story, intuition is also factored into models. “There is a good reason people are intuitive; they have got experience,” explained Marritt on how this contributes to the model’s effectiveness.

However, a degree of inaccuracy is associated with predictive modelling, and this is where HR and managers play an important role. “Data should just be another voice at the table. Decisions have to be made by humans,” said Marritt, on how these tools can influence employees’ working lives. It is always better to roll up the data and use them at an aggregated level such as teams, rather than at an individual level, because the implications of making an incorrect decision are considerable, he added.

Last but not least, as with any new initiative, organisations must recognise that adequate coaching and oversight mechanisms should be in place to help users leverage the technique correctly and thoughtfully. According to Tandon, managers are being trained on the key objectives of developing attrition models and coached on how to use the information to prevent high-performing employees from leaving, without creating a bias against the identified individuals.

Central governing teams (often comprising business and HR team members) monitor and track interventions taken by line managers to reduce attrition risk for employees identified as a high flight risk. This also helps organisations bring some level of consistency in interventions to control attrition, Tandon added.

TARGETED APPROACHES

Once these checks and balances are in place, a data-driven approach that includes predictive analytics is seen to bring greater transparency and balance to decision-making. “There have been instances where decisions were made by those who were the most vocal. This will be harder in a world where data is needed to support decisions,” observed Marritt.

The key causative variables that emerge during modelling will also help organisations craft more effective retention strategies. If commute distance emerges as a major driver, for example, greater efforts can be directed towards options such as remote working. If a limited training budget is available, it can be used to provide inputs for those employee segments that have a high flight risk. While HR and managers have always designed these interventions, a forward-looking, rigorous technique enables them to direct time and money towards these efforts with greater precision and with greater confidence in the outcome.

Furthermore, finding unexpected patterns in the data can help design retention strategies that make strong business sense. Marritt’s team at OrganizationView, for instance, found that high work pressure was a key cause for attrition at a certain financial services organisation. However, it was more so for low to midlevel performers while top performers actually thrived under high pressure and were more likely to leave in its absence. Since high-performer attrition had a greater financial impact, the organisation focused on this rather than overall attrition.

THE NEAR HORIZON

Companies are experiencing a massive change in the data they have about customers, and the same change is coming to what they know about employees, according to Kropp. Organisations that figure this out and get there faster will retain a higher-quality workforce. It will be the single most successful differentiating factor on that front, and a must-have for businesses that cross a thousand employees, he added.

Over the last three years, Gartner has also seen a significant increase in the number of organisations that collect employee data in unconventional ways, such as social media activity, speed of keystrokes, mood recognition, email text and frequency, and wearable microphones. Organisations are attempting to understand employee behaviour and experience through these experiments, and some of them will be input into models, which will increasingly graduate from predicting flight risk and quality of hire, which are relatively easy to measure, to hard-to-define variables such as employee engagement and performance, Kropp said.

On the maturity front, while only a small percentage of organisations surveyed by Deloitte currently have the capability for people analytics, in a more recent survey 69% of businesses say they are integrating data to build a people analytics database. The analytics function will also grow into a multidisciplinary team that will solve business-critical problems to drive business results.

Source : FM UK

High demand for board positions for CFO’s

High demand for board positions for CFO’s

CFOs to participate on corporate boards is increasing.

Seventy-nine per cent of CFOs are experiencing increased demand for their expertise on corporate boards, according to an Ernst & Young survey of 800 global finance chiefs. CFO and Beyond: The Possibilities and Pathways Outside Finance communicated the results of the survey and a study of 347 companies worldwide with annual revenue over $5 billion.

Current or former CFOs make up 14% of board members of the companies studied, up from 8% in 2002. And 41% of audit committee chairs are current or former CFOs, up from 19% in 2002.

The desire on the part of CEOs to have finance professionals look beyond their functional silo to collaborate effectively on strategic decisions was revealed in the CGMA report Rebooting Business: Valuing the Human Dimension. Those same skills are sought by corporate boards, and CFOs are supplying them.

Jim Ladd, CPA, CGMA, senior vice president of finance and operations at the Institute for Systems Biology in Seattle, estimated that he has served on about 18 boards during his career. His current board responsibilities include an audit committee role for a New York Stock Exchange-listed company, a lead independent director position with a privately owned company in Seattle, and participation on two not-for-profit boards.

He said finance executives can contribute a lot to boards.

“They’re generally sought out initially because of finance background and a knowledge of financial reporting and audit risks and that sort of thing,” Ladd said. “But CPAs have a broader background than that. And people discover that.”

Audit committee a good fit

Finance skills make CFOs ideal candidates for audit committee positions. In many jurisdictions, regulatory requirements demand that at least one audit committee member have financial expertise to keep abreast of evolving accounting standards, risks and regulations.

Public companies listed in the United States, for example, must disclose whether they have at least one financial expert independent of management on their audit committee. The United Kingdom’s Corporate Governance Code says a board should satisfy itself that at least one audit committee member has recent, relevant financial experience.

This can be a benefit and a frustration to CFOs. Eighty-one per cent of them say finance leaders are good choices for audit committee jobs because of their finance acumen. But CFOs want to make sure their skills in strategic development and other areas are recognised, too.

“Some of them can be a little insulted that the breadth of their experience as CFO is not necessarily recognised,” Gerard Dalbosco, an E&Y managing partner, said in the report.

Opportunity to branch out

Although CFOs already have busy jobs, about two-thirds of them reported that they have taken on, or would be willing to accept, more part-time, voluntary or non-executive roles. Twenty-seven per cent said they already have taken such a role, and 40% said they haven’t yet, but would be interested in doing so.

Scott Lampe, vice president and CFO of Hendrick Motorsports in North Carolina, serves on a few community and government boards and said he is willing to consider working on boards of companies that don’t have a lot of risk and are looking to grow organically. “I want to work with companies who share my philosophy about how a business should be run and what kind of contribution it can make in improving the communities is operates in,” Lampe said.

What do CFOs reap from serving on boards? Three-quarters of survey respondents said gaining general management or board level experience is a benefit. Other top benefits included gaining exposure to another company or industry (65%) and getting a different perspective on running an organisation (62%).

“You get to look beyond the purely financial and think more strategically about a different organisation,” Qatar Foundation CFO Faisal Al-Hajri said in the report. “You can also use these roles to play a broader role in society or the community.”

Serving on charitable and community service boards also gives CFOs an opportunity to give back to the community. Mick Armstrong, CPA, CGMA, recently agreed to serve as treasurer on the board of directors of the chamber of commerce in Meridian, Idaho, where he is employed as CFO of Micro 100 Tool Corp.

“We as a company are committed to the community and realise that just our business environment, the quality of life for our employees, all is wrapped up together,” Armstrong said. “So we choose to be involved in the community.”

Protection from liability

Ladd said a key question any potential board member should ask before considering a seat on a board is whether the organisation carries liability insurance for its directors and officers. He said risk exists even at not-for-profit organisations, so board members should make sure they are protected.

In addition, Ladd said, it is important to make sure you are working for an organisation that supports your involvement on an external board. And you need to have the time and energy to fulfil your board duties in addition to your regular job.

Armstrong, for example, said his duties as chamber of commerce treasurer are made easier by Micro 100’s recent hiring of an accounting manager with a public accounting background. As Armstrong moves toward more of an executive leadership role with his company, this distancing from Micro 100’s daily accounting activity also has helped him find more time – early in the morning, at lunchtime and on weekends – to devote to his board duties.

Ladd said he does a lot of his board work during evenings and weekends.

“I sometimes joke with my wife when I come home at night that I’m starting my second job,” Ladd said. “…But most of the meetings are during the day, so you do have to have an understanding employer. That puts some strain and requires extra time in your life. There is no doubt about that.”

Source :GCMA

Strategies to use analytics for competitive advantage

Strategies to use analytics for competitive advantage

Organisations are building momentum for the use of Big Data by integrating data analytics into their strategy in small projects that deliver substantial results, according a new report.

Almost all respondents – 96% – said that analytics will become more important to their organisations in the next three years, according to a Deloitte report based on a mix of 100 online surveys and 35 interviews conducted with senior executives at 35 companies in North America, the UK and Asia.

Although analytics already is an important resource for many companies, analytical technology remains immature and data under-utilised, according to the report. Getting buy-in for further projects is essential, so analytics leaders are starting small.

“Projects that demonstrate analytics’ ability to improve competitive positioning help these initiatives gain traction across the enterprise,” Deloitte Touche Tohmatsu Limited’s Global Analytics Leader Tim Phillipps wrote in the report.

Companies can prepare themselves to use analytics for competitive advantage, according to the report, by using the following strategies:

  • Acquire the right talent now. Talent for analytics and Big Data is in high demand. Talent shortages may become more of a barrier to analytics implementation as more companies use data to drive more processes and decisions.
  • Tie analytics to decision-making. Better data and analysis don’t necessarily result in better decisions. Specific initiatives to improve decision cultures and processes, along with changing the understanding and behaviours of front-line workers, lead to better decisions, the report says.
  • Apply analytics to marketing and customers. Finance operations are the most frequent area of analytics investment, with implementation by 79% of respondents. Marketing and sales groups, at 55%, are the second-most frequent analytics users, and the report says the best financial returns from analytics often come from marketing and customer-oriented applications.
  • Coordinate and align analytics. There is little consistency among companies with regard to who oversees analytics initiatives. Business units or division heads (23%), no single executive (20%), CFOs (18%) and CIOs (15%) were most commonly cited. More co-ordination may be needed to realise the full benefits of data throughout the organisation.
  • Create a long-term strategy for analytics. While current analytical processes are being implemented, a multi-year plan for the growth of analytical capabilities – linked to strategy development – will help organisations better use data over time, the report says.

TOP key concerns keeping directors up at night AND How board can address them

TOP key concerns keeping directors up at night AND How board can address them

Concerns on board members’ minds are similar across the globe, the surveys suggest. Here are the top four:

Managing cybersecurity. “In my opinion, and as reflected in the two surveys referenced, cybersecurity is an area of focus for most boards,” Pickering said.

New digital technologies and cybercrime were two of the three top concerns amongst respondents in the InterSearch survey. The PwC survey found that cybersecurity is top of mind for US directors, with 95% of respondents saying their board is preparing for cybersecurity incidents and two-thirds (67%) saying their board is receiving more reports on cybersecurity metrics. Among the tactics boards are using to address gaps are increasing cybersecurity budgets (57%), engaging third-party consultants or advisers (56%), and providing directors with additional education opportunities on cybersecurity (66%).

The PwC survey suggests that increasingly, directors want the entire board to oversee cybersecurity instead of allocating the responsibility to a smaller group, such as the audit committee. In 2017, half of directors said the audit committee was responsible for overseeing cybersecurity, but in 2018, that number fell to 43%. In 2018, more than a third (36%) said the full board has taken responsibility for cybersecurity, up from 30% last year.

In Pickering’s experience, cybersecurity has best been overseen by the risk committee. “It’s such a specialised area, we really need people who are involved in risk oversight on a more regular basis,” she said, adding that the full board gets regular reports and participates in drills. According to the survey, just 34% of directors said their companies had staged crisis management drills or simulations.

Refreshing the board. Serving as a director is more demanding than ever, said Pickering, who was appointed to her first board two decades ago. “It takes a lot of time. You have to stay informed, read the journals, and make sure you are on the leading edge of what’s coming down the pipe. I believe every director needs to be fully engaged.”

But not all directors are as engaged as colleagues expect, both surveys found. Just 10% of the respondents in the InterSearch survey thought the competencies of current board members matched the competencies needed for the future, and 32% suggested their boards needed alterations. Competencies respondents felt were needed more on the board were digitalisation and new technologies (24.3%), innovation (12.2%), and customer orientation (9.3%).

In the PwC survey, 45% of respondents said at least one board member should be replaced. Directors age 60 or under were also more likely to say a fellow director should be replaced (52%) compared with those age 61 or older (43%) who wanted to replace a colleague. Among their chief complaints about colleagues were directors overstepping their roles (18%), being reluctant to challenge management (16%), negatively impacting board dynamics with their interaction style (14%), and lacking the appropriate skills or expertise for their role (12%). At the bottom of the list, 10% of respondents said they thought advanced age had diminished a colleague’s performance, which ties into long-standing debates about mandatory retirement ages and director term limits.

According to the PwC survey, directors think both mandatory retirement ages (73%) and term limits (64%) are effective strategies for refreshing boards, but less effective than a leadership focus on board refreshment, as well as assessments of the board, committees, and individuals.

PwC recommends annual assessments to identify directors whose expertise no longer aligns with the company’s needs. Less than one-third of respondents (31%) said their boards already use director assessments, but another 46% said they thought the board would be willing to adopt their use.

Avoiding corporate culture crises. Corporate culture is often thought of as the “tone at the top”, but according to the PwC survey, most directors think cultural problems can start both at the executive level (87%) and in middle management (79%). That’s why it’s important to offer employees at all levels opportunities to offer feedback, such as with an anonymous survey, Pickering said.

“You shouldn’t be afraid to ask your employees these questions,” Pickering said. “You need to know if there’s a potential issue. It’s good for culture and the health of the company.”

More than 80% of respondents in the PwC survey said their companies have taken action to address culture concerns, many by enhancing employee training (60%) or improving whistle-blower programmes (42%). But some organisations still are missing the mark by using ineffective tools.

According to the PwC survey, 64% of directors said they evaluated company culture using their intuition or “gut feelings”, even though just 32% said this was a useful approach. Another 63% said they looked to employee turnover to get a read on work culture.

PwC recommends that boards review the quantitative and qualitative metrics the company may already measure to identify gaps and ensure organisational culture is a regular topic on the full board’s agenda. Even if elements that contribute to organisational culture, such as ethics or compensation, are broken off and discussed in committees, the full board should discuss concerns that arise as part of their broader oversight of culture.

Determining the value of diversity. “Gender diversity on boards is still not where it needs to be,” Rand said. “Increased diversity on boards should not be the result of a box ticking or a public relations exercise.”

Almost all directors (94%) in the PwC survey agreed that board diversity brings unique perspectives into their discussions, and 91% said their boards are taking steps to increase diversity on the board, which is a slight increase from last year. However, about half the directors surveyed also said they thought efforts to increase diversity on boards are driven by a desire for political correctness (52%) and that shareholders were too preoccupied with this issue (48%). About a third (30%) said diversity efforts result in boards nominating extraneous candidates, and 26% said diversity results in unqualified candidates being nominated.

In the InterSearch survey, 43% of respondents reported changes in board membership that had already taken place to make the boards more diverse — 67% were driven by the wish for greater gender diversity, 46% to promote greater diversity in competencies, and 25% to provide greater diversity in nationality.

“Being a female, I understand and appreciate diversity,” said Pickering, who was the sole woman on the board for Hancock Whitney Bank for years. “You want to have a diverse board; I believe it makes a huge difference in how boards operate.”

Among attributes, respondents in the PwC survey placed the most importance on gender diversity (46%) compared with racial and ethnic diversity (34%) and age diversity (21%).

PwC recommends that boards consider diversity whilst developing strategies for board refreshment. Boards often recruit new directors by relying on recommendations from current ones, which limits results. The firm encourages boards to look more broadly and consider recommendations from investors rather than board members, and find candidates outside of the corporate world, such as those who have served in the military or worked in academia or at a not-for-profit.

To her board’s credit, Pickering said, it has added two female directors in the last two to three years, including one who was featured in Savoy magazine as one of the “2017 Power 300: Most Influential Black Corporate Directors”. “We partnered with a search firm and found great talent,” Pickering said.

 

What makes a CFO great

What makes a CFO great

A majority of finance leaders said they are increasingly expected to have digital know-how, use data analytics, and manage risks. They also have to deal more with shareholders and regulators than before, according to a global EY survey of more than 750 finance leaders.

Corporate finance leaders face four main challenges. Tackling them will allow CFOs to shape strategy and drive innovation necessary for sustainable growth, but it will also rapidly expand their role, EY research suggests.

Taking on the additional responsibilities is crucial to help develop and enable an overall strategy for the business, provide insights and analysis to the company’s executive management, ensure that business decisions are grounded in sound financial criteria, and represent progress on financial goals to external stakeholders, according to EY.

A great CFO is a partner to the CEO and in private his or her harshest critic when warranted, he said.

Digital know-how. To fulfil critical strategic priorities, 58% of the respondents said they need to better understand digital technologies and data analytics. Two technologies are shaping up to become particularly important for finance leaders to understand: Blockchain, which allows data to be exchanged with the help of a decentralised ledger, could transform corporate reporting. Robotics process automation promises to automate and reduce the cost of back-office processes.

Digital savvy is a priority across industry sectors, because it offers opportunities for growth – in new markets, through new products and delivery models, or by transforming existing products. Financial leaders who understand how their company can deliver on its digital strategy can co-ordinate and focus investments accordingly.

Digital issues to tackle include global tax implications for how goods and services are sold; where companies base their operations; robotics; and new competitors.

A good digital strategy helps a company figure out which technology provides the best return on investment and possibly other intangible benefits. “Not everything will work for your business.”

Data analytics. In the past decade, half of the finance leaders polled by EY have increased the amount of time they dedicate to advanced analytics to provide more insight to the CEO and senior management. Of the respondents in the 2016 survey, 57% said that being able to deliver the data and advanced analytics will be critical for the finance function.

“Using Big Data along with your own internal data makes your internal data even more powerful, and it provides context and connection to the marketplace,”.

For companies to turn these efforts into a long-term competitive advantage, data must become integral to the business strategy, and analytics delivery must match business requirements. To gain more value from analytics, business leaders should focus on training, easy-to-use tools for data users, and aligning incentives, rewards, and measurements.

Risk management. Two-thirds of financial leaders in large companies (more than $5 billion in annual revenue) and 54% of financial leaders in smaller companies said they believe risk management will be a key capability demanded of the finance function.

To play their part effectively, CFOs must think beyond prevention and identify strategic risks, bring up risks in strategic and business planning discussions, and take the time and resources to recruit talent in advanced analytical skills.

“By understanding the pain points of pivotal departments in your organisation,”, “you can look at a balanced level of risk that allows for creativity and mistakes in order to drive the best possible solutions and outcomes.”

Stakeholder scrutiny and regulation. Half of the financial leaders polled said they will have to improve their skills managing relationships with stakeholders, including investors and senior management; in emerging markets it was 59% of respondents.

Understanding what drives stakeholders, communicating proactively, and telling a consistent story about the business will be critical to strengthen stakeholder relationships.

Intense regulatory scrutiny requires CFOs to also work ever more closely with policymakers. Of the finance leaders polled, 71% said they will increasingly be responsible for the ethics of their company’s decision-making.

A great CFO “is a great communicator and is as comfortable talking to boards and investors as [he or she is talking to] a roomful of software engineers,”. “They are flexible and listen to ideas, commercially astute, and up to date with technologies.”

HOW TO TACKLE THE CHALLENGES

To help identify and assess fresh strategic approaches and help their companies, EY considers these five areas as critical:

  • Support innovation and new business models. Collaborating with entrepreneurs and start-ups helps drive innovation and meet changing customer and emerging market needs. CFOs play a key role in building successful collaborations, including effective due diligence on potential partners, aligning incentives between partners, and establishing an effective governance model.
  • Develop and deliver agile strategy. Business strategies should adapt to changing competitive dynamics, differing customer needs, emerging technologies, and a changing regulatory environment. CFOs can develop and deliver these strategies, for example, by unlocking capital for new business opportunities.
  • Drive sustained, long-term growth. Identifying risks as early as possible, managing negative exposures, and seizing opportunities help companies adapt to uncertainties generated by market and regulatory volatility. CFOs can provide investment flexibility to seize growth opportunities, such as new products and services or entering new markets.
  • Inspire and lead the way with strong purpose and ethics. Articulating a business’s purpose and ethical stance motivates employees to meet new challenges. CFOs help embed purpose in the business by leading through example and by grounding it to performance measurements.
  • Support digital. Understanding the opportunities and risks allows companies to incorporate digital into their strategy and into the delivery of the strategy. CFOs can then help the business to deliver the right digital capability at scale, be it by striking a balance between near-term targets and long-term potential or by building the business case for significant technology investments.

10 ways to generate and deliver great insights

10 ways to generate and deliver great insights

A model helps organisations deal with the data deluge and provide insights that support robust decision-making.

In a world where uncertainty is the new norm, where technology is getting smarter, where robots are automating and simulating human activity, and where big data is getting bigger, the pace of winning and losing is getting even faster. The margin for error for organisations is now even smaller, meaning high-quality decisions grounded in insight have never been more important. 

It’s true: Technology is capable of automating a lot of what we used to do when it comes to analysing data. It can even take this a step further and simulate some of our thought processes. That said, technology has one shortfall: It is not human, and generating insights is an inherently human process that needs human traits to interpret what is happening.

Faced with a deluge of data, finding a way to combine these human qualities with the tools on offer will provide organisations with more opportunities to make high-quality decisions grounded in great insights.

I propose a ten-step approach to accelerate the process of generating and delivering insights, which forms the basis of the Define-Determine-Deliver model. The model draws on a number of sources. First and foremost, it is based on my experiences of working with some of the largest insight-driven companies in the UK and US. (Deloitte defines an insight-driven organisation as “one which has succeeded in embedding analysis, data, and reasoning into its decision-making processes”.) I was able to observe best practice in the way these companies collected and organised huge amounts of diverse data, and I gained a profound understanding of performance and how they were able to engage their people to take the right next steps, which led to stronger performance.

Second, the model takes up the themes being debated by practitioners, experts, and authors, in terms of how to organise and interpret the huge, diverse data sets organisations are now collecting. And the more diverse and complex the data, the greater the challenge of communicating insights.

The model consists of three stages. The define stage will help you clarify what you need to do and why. The determine stage offers a set of principles to help you generate insights, and the final stage looks at how to deliver your message to achieve the level of impact and influence your insights deserve.

DEFINE: PLANNING YOUR ANALYSIS

1. Be clear on the value of your insights. The beginning of the insight process involves being clear about what you are being asked to analyse. Over the years of working for a number of insight-led companies I quickly came to appreciate that the significant first question was not “what?”, but “so what?” Understanding the value (the “so what”) that your insights will add helps you engage with what the person requesting the information is trying to do. When you are informed and engaged, you build a more relevant and more focused analysis plan.

Tip: If the person making the request hasn’t already outlined the “so what”, asking them “How will the analysis help?” is a good way to understand what they are hoping to gain from the insight.

2. Partner with an expert. In my experience, those who seek help from someone who knows the particular area of operations well deliver the best insights. They could be a call-centre agent or warehouse manager, for example. Share what you are trying to do with them and ask their opinion. Their support can come in many forms. They may share their experiences of the topic being analysed, may highlight obvious pitfalls, or simply confirm that what you are doing is on the right track.

Tip: Ask the person making the request to recommend the right contact. Once you have a partner, be curious, ask good questions, and listen well to what they have to say.

3. Create a hypothesis. It is important that when you are doing your analysis, you don’t try to analyse all the data available because this could take too long. The process of forming a hypothesis will help you think about the relationships between your data, which should end with your forming an opinion (your hypothesis) on the answer you might find once you have done your analysis. A clear hypothesis, therefore, provides you with an indicator of what to look out for when doing your analysis, helping you to stay focused, whilst reducing any wasted effort.

Always create a hypothesis statement that captures this belief before you start analysing your data (eg, “product availability has decreased because supplier “˜out of stocks’ have grown as the cost of raw materials has increased”).

Tip: Take time to run through your hypothesis with your expert (from tip 2) or any other relevant people. This will help ensure you have a reasonable and balanced hypothesis, and help to avoid confirmation bias.

4. Visualise your analysis. It is all too easy to just dive in and start analysing data. Before you begin, be specific about what you need to analyse. This involves visualising what your analysis will look like once it is finished.

Tip: Get a sheet of paper and sketch out what your data will look like once you have collected it all, listing the rows of data down the left-hand side and the column headings across the top. Then sketch out the analysis you will carry out or the techniques you will apply. For example, do you plan to create a column of data that looks at the difference between two data points or a graph of certain variables? Be as specific as you can, as this will really pressure test what you are planning to do and whether it will add value.

DETERMINE: DOING YOUR ANALYSIS

5. Collect, clean, stay connected. Developing a plan of how and when you will collect your data is important, as this will help to ensure you have everything you need when you are ready to start analysing. Before you start the analysis, you will need to clean your data to ensure it is accurate, complete, and in the right format. There is nothing worse than unclean data undermining the credibility of your insights. Finally, staying in touch with your expert partner from the previous stage will ensure you get the most out of your analysis.

Tip: It is helpful to have a few (but not too many) expert partners. Picking partners with different types of experience is a great way to get a variety of viewpoints, leading to a fuller piece of analysis.

6. Analyse well. In practice, every piece of analysis is different. Therefore, adapt your approach using these key principles:

  • Let the data lead you to the insight. Don’t assume you know the answer before you have done your analysis; this could really bias your analysis. Be open-minded and let the data lead you to the answer.
  • If there is an elephant in the room, say so. Sometimes, when it comes to analysis, we don’t want to accept the most obvious insight; we yearn for something more detailed and more profound. But sometimes the most obvious answer is the right one, and it’s OK to accept it.
  • Correlation doesn’t equal causality. Take care when verifying whether two variables are linked.
  • Focus on what the business needs. If the person asking you for insights needs them in two days to assess an opportunity, then focus on what can be done in that time frame, rather than on the ideal piece of analysis you would produce given more time.

Tip: When analysing data, it is often more useful to focus on trends rather than on single data points. Trends often give you a more reliable view of what is happening. For example, if you are trying to determine which stores are driving low product availability over the year, then focus on the stores that are experiencing consistent decline over the time period (those trending downwards) rather than focusing on one store that had a low score for a small amount of time. (It would be interesting to know why, but don’t miss the big trends contributing to your low product availability.)

7. Bring it all together with a conclusion and indicated actions. Once you have developed some good insights, the next step is explaining what is happening and how the business should respond. This can be a daunting task for finance teams, as the fear of suggesting the wrong thing can create a lot of pressure. Grounding your “indicated actions” in insights will give you confidence in your proposal.

Tip: Seek to ensure your conclusion-indicated actions are correct by writing them out using the following structure: dilemma, insight conclusion, indicated actions:

“I conclude that the reason for ‘the shortfall in sales’ (the dilemma) is because store staff are struggling to get the stock out onto the shelves as the increase in customer numbers means they do not have enough time to restock (the insight conclusion). I propose a pilot project to increase staff in the stores with the biggest declines in sales. If this is successful, I propose a wider review of resourcing in our stores (the indicated actions).”

DELIVER: COMMUNICATING YOUR INSIGHTS

8. Prepare a clear insight message for your audience. The previous step, in which you generate conclusion-indicated actions, is based on what is happening and what you need to do next. The critical difference in this step is that you need to build an insight message to convey to your audience. The insight message is often the only part of your process that the audience sees, and if you want to achieve the right impact and influence, the message needs to be clear and engaging.

Tip: Do the “elevator test” to see if you are ready to deliver your insight message. If you were in the elevator with your manager, could you convey your message (the dilemma, the insights, your recommendation) clearly and succinctly in the time it takes to reach the right floor, all in a way that will resonate and inspire the audience to act on your findings?

9. Craft an engaging message. If you want to deliver an engaging message, then logic alone will not be enough. Engagement requires you to connect to people’s emotions. Your message may well have a good structure, clear visuals, clear arguments, and recommendations grounded in your insight findings. But you also need to build an emotional connection by finding the right tone, forming a connection based on shared aspirations, or focusing on how the proposal will directly benefit the insight requestor and their teams.

Tip: Stories are a good way of helping to deliver a more engaging and memorable message. Stories grab people’s attention, bring messages to life, and help link insights to the big picture. For example, if you are trying to put new customer service metrics into context, you could use statistics. “Customer service scores are at 60%. This is a reduction of 10% versus last year, and we need to do better.” Alternatively, you could tell a story that brings your numbers to life. “Last year we were not at our best for 40,000 customers. That is two out of every five customers that came to us. Here are some of the things our customers said and how we impacted their lives by not being at our best …”

10. Build an insight-led culture. Having a framework is a good way to accelerate the insight process. In the insight-led companies that I have worked for, this framework was embedded into the beliefs of their people, which was demonstrated every day in their behaviours. This level of engagement with the principles of the framework allowed these companies to accelerate insight generation, as well as to adapt those principles to address a particular problem when required.

Tip: Always be a role model for insights, giving your teams or colleagues the confidence and the right to be curious and to always seek out the underlying truth as to what is driving performance.

Source : FM

The habits of highly innovative companies

The habits of highly innovative companies

While companies continue to focus on in-house innovation, they understand that good ideas can come from anywhere. With technology quickening the pace of business change, research and development is taking on new meaning as it goes increasingly outside company walls.

Businesses are creating venture capital arms to mine for on-the-rise companies or new technologies that can be integrated into their operations.

In the first half of 2016, 53 new corporate venture capital units made their first investment, according to CB Insights data, the most recent available. That was on pace to continue a full-year growth trend that started in 2011.

And some investment in innovation is through acquisition. Microsoft bought LinkedIn for $26 billion, and Facebook bought Instagram.

Some lesser-known deals also help companies advance strategic efforts. For instance, Under Armour, a US-based athletic apparel company, has branched out into technology through the purchase of personal fitness applications Endomondo and MyFitnessPal. The acquisitions, combined with the company’s existing app MapMyFitness, give Under Armour data on the exercise habits of about 120 million users from around the world. That sort of insight can help the company tailor products to everyday athletes.

The Boston Consulting Group (BCG) annually ranks top corporate innovators, and more and more of those innovators are looking far afield. General Motors’ investment in tech start-ups such as Cruise Automation, which GM said in March would add “deep software talent and rapid development capability” to the company’s development of self-driving vehicles, was listed as an example in the group’s report.

Under Armour is ranked No. 22 and GM No. 27 in the BCG report, which bases its list on financial metrics and a survey of innovation executives (see below). The report lists three habits that separate strong innovators from their less innovative peers: They cast a wide net; they excel at using multiple data sources; and they use external data in multiple phases of the innovation process.

INNOVATORS LOOK INSIDE AND OUT FOR NEW IDEAS

At least two-thirds of strong innovators often used the following strategies to generate ideas: Employee idea forums (68%), customer suggestions (70%), competitive intelligence (72%), and internal sources (78%). Companies labelled as weak innovators are far less likely to use such strategies. For example, just 15% of weak innovators get ideas for new projects or growth from employees, and just 26% said they used customer suggestions.

Eighty-six per cent of strong innovators said proprietary company data were a strong part of innovation efforts, compared with 36% of weak innovators. Strong innovators also are skilled at using patent data and scientific literature to their advantage, according to the report. And another 86% of strong innovators said their ability to use data analytics was closely tied to their ability to reveal market trends; among weak innovators, just 29% thought that was the case.

It appears that thinking about the value of data collection and analysis has changed in just two years of the survey, when three-fourths of respondents said their companies were not targeting big data in innovation programmes.

THE RANKINGS

In the BCG rankings, Apple maintained the top spot for the 11th consecutive year. Google was second for the ninth time in 11 surveys, followed by Tesla Motors, Microsoft, and Amazon. Eleven companies entered the rankings for the first time, led by car-hailing service Uber at No. 17.

Tesla made its first appearance in the rankings in 2013, when automobile producers dominated the list, putting nine companies in the top 20. Netflix, which was ranked No. 6 on the current list, didn’t appear in the rankings until 2015.

Source : FM

How to develop a global mindset

How to develop a global mindset

Today’s business world is a far cry from yesteryear. An increasing number of organizations operate worldwide, and they are more diverse internally. And that means professionals — including CPAs — must be adept at dealing not only with employees from various backgrounds, but with workers and clients in different countries as well.

But how do leaders ensure that they and their organizations are culturally savvy and prepared to deal with diversity? This was the subject of “Developing Your Global Mindset,” a one-hour talk given by Kim Drumgo, director of Diversity & Inclusion at the Association of International Certified Professional Accountants. Drumgo’s talk was the second in a series of CPA Diversity & Inclusion webcasts aired by the Association.

“In this digital age, geographical borders are no longer clearly defined, so having a global mindset while working globally has become critically important for the success of business leaders, especially in the accounting profession,” Drumgo said following her talk.

Drumgo defines “global mindset” as the “ability to adapt to a culture and influence individuals or groups whose ways of doing business are different than your own.” By having this mindset, by asking questions and engaging in dialogue with others, leaders can improve employee morale, generate greater insight into untapped markets, and gain more credibility with clients. Those who do not develop a global mindset could miss out on client and talent potential, she noted.

She outlined three work environments:

  • Multicultural environments contain several cultures or ethnic groups alongside one another, but who operate independently.
  • Cross-cultural environments include people from different cultures and some acknowledgement of the differences, though one culture remains dominant.
  • Intercultural environments are the “gold” standard for organizations to achieve, as they encompass a deep understanding and respect for different cultures and ideas.

Drumgo also described the “global mindset inventory,” a concept created by the Thunderbird School of Global Management at Arizona State University. Individuals with global intellectual capital or global business savvy have strong analytical and problem-solving skills and an ability to understand international business. Next is global psychological capital, which is an individual’s innate passion for diversity. Then, global social capital is described as a more enthusiastic and outgoing quest to “collaborate with people from different perspectives,” she noted. Those who possess each type of capital are often more effective leaders since they engage and learn across cultures. Psychological capital is the most difficult to grasp as you are “changing your thought process, breaking down biases, and beginning to challenge your old way of thinking,” Drumgo said.

Drumgo offered the following five tips for changing your global mindset:

Forget the golden rule and use the platinum rule. “Treat people the way they want to be treated. Find the positive in other approaches,” she said.

Don’t underestimate the challenge. Dealing with cultural and individual differences can be difficult, and you cannot assume that you know how to handle every situation that can arise. “Having many stamps in your passport doesn’t mean you have a global mindset,” Drumgo said. So don’t underestimate the challenge of leading and working with others across the globe.

Apply multiple strategies. “There isn’t one silver bullet as to how you can interact with everyone. There is not one proven strategy that will help you relate to your entire team better,” Drumgo said. “Applying multiple strategies is really important.”

Be sensitive to differences in language. Communicating isn’t always easy for those who use English as a second language. Be empathetic, kindhearted, and understanding.

Be patient and ask for feedback. “You can’t flip a switch and know how to interact with everyone around the globe,” Drumgo said. “You can’t be everything to everyone all of the time,” she said. “But be the best you can to somebody when it’s time.” Then, she added, you will make a huge difference in developing your global mindset.

Take a hike: Ending client relationships

Take a hike: Ending client relationships

Consider this scenario: A key deadline is nearing, and the client is just now returning your calls and emails. But instead of responding to the open issues, the client indicates there is no real problem and irately demands that services be completed immediately. It is clearly time to end this client relationship.

Many accountants confess to daydreams of uttering “Take a hike!” to a less-than-ideal client. While it may seem like a good idea in the moment, such phrasing is not the most desirable way to terminate a client relationship. However, the process of telling a client to take a hike provides a useful analogy to guide a more professional, less risky end to contentious and cooperative client relationships alike. Treat a client termination as if it were a hike through uncharted lands.

STEP 1: PREPARE FOR THE JOURNEY

Most journeys take expert planning and attention to detail. A client termination requires similar efforts. It is important to remember that both good and bad client relationships may need to end unexpectedly. No signpost indicates when a client relationship takes a wrong turn. The following are tools that may be useful in preparing for an unforeseen client termination:

  • Termination provisions: Including a clear termination provision in an engagement letter, indicating an engagement can be terminated without completion for any reason, can provide significant latitude, if termination becomes necessary. By including such a provision, the CPA firm may reduce the likelihood of a client asserting that the firm cannot withdraw from the engagement.
  • Deadline communication: Clients that are chronically noncompliant with terms of the engagement may need a gentle reminder of their responsibilities in the form of a written communication. Deadlines should be communicated in an engagement letter. A separate stand-alone letter or email may be appropriate if there are concerns about a client’s ability to meet the identified timing. A properly timed communication could even prevent the need for a client termination.
  • Ideal client profile: CPA firms should establish an ideal client profile and regularly evaluate the existing client base against the profile to identify clients that are no longer a fit for the firm. This protocol helps identify potential problem clients before the relationship becomes tenuous.

STEP 2: BE AWARE OF THE DANGERS

Any journey will have its own set of pitfalls and obstacles. The same can be said of client relationships. Though no maps, GPS, or satellite imagery guide a termination, awareness can help CPAs through the dangers of a contentious client relationship. It can be easy to overlook negative indicators, especially if the fees are substantial, the relationship is long-standing, or new clients are hard to find. Even more difficult to overcome are strong interpersonal connections between the engagement team and the client. Recognizing a bias toward retaining a client and being mindful of already serious or mounting issues can be the difference between exiting a client relationship unharmed or falling into a conflict. Common indictors may include:

  • Concerns regarding client integrity.
  • Fee or service complaints.
  • Disputes within the client organization.
  • Untimely or incomplete responses to requests.
  • Negative responses to constructive suggestions.
  • Poor attitude toward internal controls.
  • High accounting or management turnover.
  • Dismissive treatment of engagement team members.
  • Disrespectful treatment of client employees.

While counterintuitive, a client’s rapid success or expansion also could be an indicator that the relationship may need to be reevaluated. The client’s successes may require services and expertise that are beyond the CPA firm’s capabilities. However a proactive plan may prevent the CPA from making unintended errors that could result in professional liability claims, if services were to continue.

STEP 3: MAP OUT YOUR PATH

Whether the end of a client relationship is ambiguous or obvious, a client termination is not complete until it is formalized in a written communication to the client. Guidance on drafting the letter is as follows:

  • Omit the reason for the termination: A termination letter is not the time to win an argument with a client. The letter simply represents a method to inform the client that you are no longer providing services and identify the client’s responsibilities going forward. Explaining why the firm is ending services may only upset the client further or create a problem that previously did not exist.
  • Items for client followupAfter parting ways, your client will need to be pointed in the right direction to complete its journey. The letter should clearly map out the client’s responsibilities going forward and issues that should be raised with a successor CPA. Matters of particular importance to include are deadlines (statutory, regulatory, or operational), internal control weaknesses or breakdowns, and indicators of potential fraud or violations of laws and regulations. If deadlines are missed or a theft occurs and the CPA had not informed the client of those in writing, the client may blame the CPA firm.
  • Fees: At times, clients assert that CPAs knew they did not provide proper services because they do not request outstanding fees. As a result, whether or not you expect to collect unpaid fees, a termination letter should state the outstanding balance of fees due. A final billing statement may resolve any confusion and could be included as an enclosure with the termination letter.
  • Send a hard copy: Advances in technology have made most interpersonal communications nearly instantaneous. Yet, the professionalism and permanence of an actual mailed letter cannot be ignored. Unless there is a looming deadline or other rare situation, a hard copy of the termination letter should always be sent by a method that will confirm receipt by the client. Further, the letter should be sent via a traceable method to demonstrate delivery andreceipt.

STEP 4: FINISH THE JOURNEY

The client termination process is no walk in the park. It involves a commitment of will, time, and professionalism. It is not an easy choice or one that should be made on a whim. Once started, the process should be seen through to completion. The following tips will assist in managing this process:

  • Evaluate your mindset: While it is important to assess the client’s actions in making a termination decision, it is equally important to assess your own mentality once the decision to terminate has been made. The goal of a termination is to lessen or avoid a conflict with a client. Failing to maintain a professional attitude throughout the termination could elicit a client response that results in unnecessary stress, reputational damage, or even a professional liability claim.
  • Stick to the path: Once your services have been officially terminated, do not continue to provide services or reengage with the client for additional services. Allowing a client to talk you into providing services is akin to traversing a bridge that you already know to be perilous. It may seem as though you are performing just one more task before concluding the engagement, but continuing to provide services lessens the likelihood that the client will ever accept that the relationship has ended. Just remember, when the relationship terminates, it is a final decision.

 

Workplace Health and Safety a Vital Component of Mature Risk Management

Businesses of all types are being transformed by technology, and so are the many kinds of workplaces that support their operations. Changing business strategies and increased productivity lead to rapid changes in process, which often means that executives lack a full understanding of the impact on the health and safety of employees and third parties. Workplace health and safety risks are among the most critical to address, as they can result directly in loss of life and limb—not to mention chronic injury and illness, work stoppage, lawsuits, and damage to brand reputation.

Traditionally, workplace health and safety matters have been addressed by dedicated safety teams working apart from the business, and risk management teams relying on spreadsheets, checklists, and incident reports as tools of the trade. As the number and interdependence of risk factors increases, this is no longer a sustainable approach—the cost of managing each regulation, requirement, change, or incident out of siloed programs will continue to rise, while effectiveness erodes.

The growing influence of international standards for risk management (e.g., ISO 31000, ISO 9001 and ISO 45001), and emphasis on integrated risk management as a key factor in cultivating business resiliency have created prime opportunities for workplace safety professionals to raise awareness of their role in risk management and of the impacts of accidents. With the right processes and technology, safety professionals can help protect their organizations from a range of negative outcomes from employee absences to insurance premium increases to fines and lawsuits.

With this in mind, health and safety leaders, C-level executives, and boards should be incorporating workforce well-being into strategic planning, corporate responsibility programs, and risk maturity initiatives across the enterprise. Governance, risk management, and compliance (GRC) efforts are not abstract—they are interrelated, and each function can be made stronger when addressed holistically. Carrying out integrated GRC initiatives (including health and safety programs) involves orchestrating and centralizing numerous interdependent policies, processes, and reports.

Integrated risk management should raise continuous, data-driven improvement of health and safety measures to the same level as other operational risk measures (e.g., cyber security, outsourcing, fraud prevention). Supporting these efforts with a systematic and streamlined process and toolset for documentation, tracking, training, reporting, and analysis is fundamental to incorporating them throughout the enterprise.

Integrated risk management processes help organizations foster accountability and collaboration, form a clear and complete picture of risk, cover compliance obligations more efficiently, reduce safety and health incidents, and improve incident response. The longer problems remain unaddressed, the greater the liability and risk exposure. Ineffective responses to workplace health and safety issues can lead to repeat accidents, illnesses, absences, loss of productivity, higher fines, higher insurance premiums and increased scrutiny from regulators and business partners. The GRC processes that need to be optimized include: performing risk analysis and business impact analysis; maintaining and reviewing process and safety documentation; investigating and reporting on accidents, injuries, illnesses and near misses; analyzing injuries and issues by site to pinpoint and measure risk; automating generation of incident forms for outside agencies (e.g., OSHA and HSE); executing job hazard analyses; managing site inspections and remediation actions; and ensuring employees are aware of safety processes.

There are few excuses for the blind spots that lead to major workplace health and safety issues. If we integrate policies and controls with processes and systems across the enterprise, we can gather and analyze metrics on just about every aspect of operations, as well as incorporating employee input and best practice guidelines. GRC technology solutions that include a health and safety component can help automate and bring a new level of intelligence to the associated risk analysis.

Enterprise-wide data integration enables predictive analytics capabilities, making it possible to identify health and safety issues and communicate them to executive decision-makers before they turn into incidents and losses for the company. Data captured during risk or safety assessments, and investigations into near misses and incidents generates insights to be incorporated into safety protocols and job training. The same types of analyses can be applied to vendor and supply chain management to improve health and safety outcomes throughout the value chain.

Data-driven safety programs should also include mechanisms for gathering input and feedback from the workforce. Whistleblower capabilities, responsive communications, and reliable procedures for following up after an incident or near-miss cultivate a safety-first environment. The ability to reassure workers that their wellbeing is a management priority positively impacts everything from recruitment and retention to incident rates, productivity, and corporate reputation.

Organizations cannot reach a mature, effective level of risk management without incorporating health and safety into their operational risk programs. An informed and comprehensive view of risk leaves enterprises better prepared for planned growth as well as unexpected opportunities and challenges. To strengthen business resiliency and sustain competitive advantage, executives must prioritize the continuous monitoring of health and safety risk and compliance across all business units, partners, and vendors. Mature risk management not only saves lives, but also lowers insurance costs, increases productivity and protects the sizable investments companies make in acquiring, training, and retaining their workforce.