From CGMA Magazine: Executives turn data into internal insight

Prolonged economic sluggishness—which has limited organic growth and stymied mergers and acquisitions the world over—has given many companies something they didn’t have when things were busier: time, and reason, to think differently about new ways to build value. One place they’re increasingly applying the magnifying glass: their own ranks.

More companies are trying to analyze staff productivity, talent, and customer demands in ways that could unlock strategic potential—and long-term success.

The human dimensions of business—areas such as talent development, intellectual property, and relationships with suppliers and customers—will be the primary focus of top executives during the next two years. That was one of the main themes from Rebooting Business: Valuing the Human Dimension, a report released in January by the AICPA and the Chartered Institute of Management Accountants.

And it’s a theme that has been emerging in other research covered by CGMA Magazine in recent months.

“For years companies have tried to get their arms around how to measure the value of their people or their loyal customers, or their great partnerships,” said Debra D’Agostino, editorial director of thought leadership at Oxford Economics,  which conducted the survey. “Over the next few years we’re going to see an even greater focus on that as companies find ways to measure that in a more tangible way.”

Nonfinancial data are helping more organizations understand the relationship between compensation and retention, evaluate the effectiveness of diversity programs, and identify up-and-coming leaders. The information also is allowing organizations to more effectively manage workforces.

Companies are using customer relationship data to more effectively schedule workers for peak hours, according to researchers at Deloitte, which issued its Human Capital Trends 2012: Leap Ahead report in March.

Organizations are also using human resources data to anticipate when employees might be ready for new challenges—or perhaps a departure. That kind of insight helps organizations effectively structure and schedule talent-retention incentives such as tuition repayment programs.

Figures such as housing starts are being used to forecast where future talent may be available in markets aligned with a company’s specific skills.

Historically, organizations were limited by investments in the hardware and software needed to collect, store, and crunch these kinds of data. But that’s changing, says Michael Gretczko, a principal in Deloitte’s human capital practice.

“We actually have data that in the past perhaps we never had the ability to even collect,” Gretczko said during a webinar on HR trends. “We’ve now got it. We’ve also got the ability through some of the advancements in cloud technology and ERP (enterprise resource planning) technology to actually tap into that data and do it in a way that’s not onerously expensive.”

That helps explain why finance executives list implementing business analytics applications, establishing data stewardship, and standardizing data as top technology priorities of 2012, according to research by The Hackett Group, which surveyed leaders at Global 1000 companies for The CFO Agenda: Finance’s Top Issues in 2012. Managing and retaining data was also among the top three priorities listed among business and industry respondents in the AICPA’s 2012 Top Technology Initiatives Survey. “Getting the right information to permit quick action can only be accomplished when mechanisms are in place to gather high-quality data, conduct rigorous analysis, and make decisions with confidence,” the Hackett report said.

Indeed, having the data is one thing. Knowing how to use it is another. And, yes, there are data on that: Half of senior managers and 38% of employees have the skills to properly derive insight from—and make good decisions based on—information gathered from suppliers and customers, according to Overcoming the Insight Deficit: Big Judgment in an Era of Big Data, a report by the Corporate Executive Board (CEB).

Analytical skills are concentrated in too few employees, the CEB says, and executives don’t manage information as well as they manage capital and brand. The report suggests companies educate employees on the limitations of data, develop an analytic training curriculum—and hire quantitative experts who can coach and formalize decision processes.

For more, see these CGMA Magazine articles at cgmamagazine.org:

• “CEOs seeking value in human dimension of business”
• “Data providing more HR insight, driving success”
• “Employees need help to maximise analytics effectiveness, report says”
• “Three ways to obtain meaningful data that supports quick decisions,”
• “Security gets top spot in technology priority survey”

—Jack Hagel, editorial director
CGMA Magazine

CGMA Magazine is published exclusively online at cgmamagazine.org in conjunction with the AICPA’s and CIMA’s new designation, the Chartered Global Management Accountant. The magazine offers daily news and articles focused on elevating and emphasizing management accounting issues. Here’s a look at some of what you’ll find there:

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