“Building a Leadership Legacy”
North Carolina Healthcare
Human Resource Assoc
ROI of Human Capital
Saratoga
Agenda
–
–
–
–
Over view of Saratoga Institute
Current Workplace Trends
ROI of Human Capital
What Employer of Choice Companies are
Doing
Saratoga
Saratoga Institute
Helping clients improve profitability and
productivity through the strategic application of
human capital intelligence
Saratoga
Saratoga Institute
Who Are We?
– Founded in 1977 by Dr. Jac Fitz-enz
– Based on over twenty years experience in human
capital research
– Data and interviews from over 900 companies in
19 industries
– Over 1 million data elements from potential,
current and past employees
– Relies on continuing academic research and
studies
Saratoga
Saratoga Worldwide
10 affiliates reaching clients in 25 countries
Belgium - France - Germany - Italy - Netherlands
Portugal - Spain - Sweden - Switzerland
Canada
U.K.
SI
Mexico
Guatemala
Venezuela
Malaysia
Singapore
Brazil
Indonesia
Chile
Uruguay
Argentina
South
Africa
Hong Kong
Philippines
 Micronesia
Australia
Australia
New Zealand
What We Do
– Publisher of the world’s largest database
of human capital intelligence
– Experts in Employee Commitment
Surveys and Consulting
– Thought leaders in the human capital
industry
– Design and implement Human Capital
programs
Saratoga
The Big Picture
Current Workplace Trends
The People Problem
100
80
60
40
20
0
20
40
60
GDP +96%
BIRTHS -33%
1965
1998
Saratoga
The Trends
Escalating Costs
Cost/Hire
-exempt
Time to Start
Voluntary Sep 1-3 yrs
Training Invest Factor
1997
2228
6481
58
26%
441
2000
3072
8932
78
30%
495
2002
3655
10,581
92
33%
549
*Data based on research from Saratoga Institute
Saratoga
2005
4529
13,054
113
38%
630
Current Workforce Trends
– Unemployment is low:
- Latest is 4.1%*
- Range of 3.9 to 4.1 since October, 1999
– Turnover is high:
- Median Separation Rate for all industries is
16.5%**
– Absenteeism is high:
- The rate of absenteeism has increased by
more than 14% since 1996***
- On average, absenteeism costs $603 per
employee
Sources
*
U.S. Department of Labor
** Saratoga Institute, Human Capital Benchmarking Report 2000
*** CCH Inc. Unscheduled Absence Survey, 1996
Saratoga
Hospitals / Healthcare Industry
Current Status
Voluntary Separations by Length of Service
0 -1 year
32.9%
1+ - 3 years
29.2%
3+ - 5 years
11.1%
5+ - 10 years
12.0%
10+ years
12.3%
Turnover in early time frames leads to
increased staffing and training costs
Source: Saratoga Institute 2000 Benchmark Data
Saratoga
Hospitals / Healthcare Industry
Current Status
Add Rate: Number of new jobs added last year
National Median
Highest
6.4%
21.7% (services industry)
Lowest
1.4% (chemicals/petroleum industry)
Hospitals/Healthcare
2.9%
Industry in slow growth period
Source: Saratoga Institute 2000 Benchmark Data
Saratoga
Hospitals / Healthcare Industry
Current Status
Replacement Rate: Number of jobs needing replacement
hires last year
National Median
13.8%
Highest
22.7% (services industry)
Lowest
4.7% (manufacturing industry)
Hospitals/Healthcare 21.7%
Industry has very high turnover
Source: Saratoga Institute 2000 Benchmark Data
Saratoga
Current Workforce Trends
Changing Demographics
Generation
1996
2000
2005
Pre-Baby Boom (Born before 1946)
26%
15%
6%
Baby Boom (1946-64)
50%
50%
50%
Generation X (1964-)
24%
35%
44%
-Key talent aging
-Median age increased from 28 in 1970 to 35 today to 40
by 2010
-2001 Baby Boomers become eligible for early
retirement
-6.5 million will turn 55 by 2002
-15% decline in 35-44 year olds over the next 15 years
Despite the tight labor market, only 65% of the companies today actively
recruit older workers to fill their vacancies
Saratoga
Current Workforce Trends
Changing Demographics
– 75% of the jobs of the future will be knowledge
based jobs
– and yet...
–
75% of current workforce (age 25 to 34) have not
completed college
–
70% of workforce will not be college graduates in the
next decade
–
21% of the current adult population has only basic
literacy skills
–
75% of workers will need retraining within the decade
Training Invest Factor
1997
2000
2002
2005
$441
$495
$549
$630
Saratoga
Today’s Organization
Struggling with Employee Commitment
– Profound Organizational Upheaval
–
–
–
–
–
Uncertainty
Lack of A Clear Corporate Vision
Mergers and Acquisitions Activity
Intense Competition for Talent
Changes in Executive Management
–
–
–
Share holder value
Impact of Unfilled Jobs
Struggle to maintain work/life balance
– Pressure to Deliver Results
– Decreased Productivity
– Apathy
– High levels of turnover
Saratoga
Five Most Negative Gaps
Concern
 Upper mgmt leadership skills
GAP
2.32
 Current bonus or add’l pay plans
 Earnings potential
2.26
2.12
 Company stability
 Company loyalty to employees
2.16
2.12
Saratoga
Current Workforce Trends
Maintaining a competitive advantage
means focusing on:
- Recruitment
- Retention
- Becoming an “Employer of
Choice”
Saratoga
ROI of Human Capital
Saratoga’s Approach
In A Knowledge Economy,
The Primary Profit Lever is
People
Saratoga
The Secondary Profit Lever
Is
Information
-Hard and Soft Data
-Employee Opinions
-Saratoga Institute
Human
Capital
Benchmarks
Saratoga
Information Is Power
Without Objective Data,
People Have Opinions
With Objective Data,
People Have
Competitive Advantage
Saratoga
Importance Of Intangibles
“...the factors most important to
economic growth and societal wealth
are intangible, such as intellectual capital,
research and development, brand names
and human capital.”
Unseen Wealth: Report of the Brookings Task Force on
Understanding Intangible Sources of Value
Saratoga
Measurement State Of The Art
“81% stated their performance
measurement system is not well
aligned with corporate strategies”*
* Cap Gemini Ernst & Young
Center for Business Innovation - 2000
Saratoga
Uses For Hard Data
Communicate Performance Expectations
See (vs. “feel”) & Understand Outcomes
Compare to Standards / Benchmarks
Identify Performance Gaps
Support Resource Allocation Decisions
Recognize & Reward Performance
Saratoga
Performance Analysis
 Unit Cost of Products & Services

Cycle Time of Key Processes
 Volume of Output over Input
 Error or Defect Rates (Quality)
 Customer Satisfaction Scores
Saratoga
System Linkage
Enterprise Goals
Knowledge Management
Business Unit PQS Objectives
HC Management
Acquire - Maintain - Develop - Retain
Saratoga
Human Capital
Value Chain
ENTERPRISE GOALS
1
Financial: Profit - EPS
Position: Market Share
Brand: Sign of Quality
Reputation: Employer of Choice
OPERATING OBJECTIVES
2
HUMAN CAPITAL
MANAGEMENT
Hire
Pay
Support
Develop
Retain
Service: Customer
Satisfaction
Quality: Six Sigma
Productivity: Unit Cost
Cost
Time
Volume
Quality
Reaction
4
3
Saratoga
Human Capital Value
Case Study
Organization Profile:
– Multi-location healthcare provider with a workforce of
5,000.
– Hospitals/Healthcare Organization Performance
Metrics for X-ray technicians.
– Waiting time for Drs. scheduling patient tests.
– Number of patients scheduled.
– Number of tests completed.
– Number of tests that have to be redone.
– Revenue generated per test.
Saratoga
Human Capital Value
Case Study
Human Resource Management:
– Management responsible for recruiting and
interviewing.
– Criteria for hire may vary depending on urgency of
need for X-ray technician staff.
– Criteria for needed skills vary.
– Division HR supports managers once candidates are
identified. Provides screening support and
assistance with hiring technicians: background
checks, offer and processing of new hire paperwork.
Saratoga
Human Capital Value
Case Study
Current State
– Time to start for X-ray technician is 90 days
average.
– Turnover for X-ray technicians with less than 2
years of service is 65%.
– There are 200 open positions for X-ray
technicians at this healthcare organization.
Saratoga
Human Capital Value
Case Study
Time to Start 90 Days
Inconsistent Hiring Criteria
X-Ray Technician Team
Penalties
for delays
Fewer customers served
Less revenue per test
Missed
Performanc
e
Goals
Customer
Delayed scheduling time
Redone tests
Missed Organization
Performance Metrics
Saratoga
Cost of the Turnover Gap
Using the Saratoga Data
Cost Per Hire measures the average dollars spent on
hiring costs per employee hired.
Average Cost Per Hire for Hospital/Healthcare Industry $ 1,254
Multiply by 200 open positions with average time of 1 quarter to fill
Results in turnover costs of at least $250,800 per quarter
Extending Tenure Measurably Decreases Costs
Cost Per Hire Source: Saratoga Institute 2000 Benchmark Data
Saratoga
Cost of the Turnover Gap
Using the Saratoga Data
Revenue Factor measures the dollars of revenue
generated per FTE annually (productivity measure)
Median Revenue Factor for Hospital/Healthcare Industry
$ 102,438
Divided by 4 = revenue per FTE per quarter
$
25,609
Multiply by 200 open positions with average time of 1 quarter to fill
Results in revenue loss of $5,121,800 per quarter
Reducing Time to Start Can Increase Revenue
Revenue Factor Source: Saratoga Institute 2000 Benchmark Data
Saratoga
Human Capital Data Management
Workforce
Planning
Acquisition
Retention
Support
Development
Evaluate the Effect
Saratoga
Human Resource Data Points
Staffing
Developing
Retaining
Cost
Cost / Hire
Cost / Trainee
Cost / Turnover
Time
Time to Fill
Cost/Trainee Hr
Turnover by LOS
No. Hired
No. Trained
Turnover Rate
Quantity
Quality
Hire Rating
Skills Attained
Readiness
Reaction Mgr Satisfac. Trainee Response Turnover Reason
Saratoga
Human Capital
Management Scorecard
Acquisition
Cost per Hire
Time to Fill Jobs
No. & Quality of Hires
Maintenance
Average Pay
Benefits / Payroll
Process Costs
Retention
Voluntary Separations
Separation by LOS
Cost of Separations
Development
Training Cost / Payroll
Training Hours / EE
Training ROI
Job Satisfaction
Employee Morale
Saratoga
Effects On
Operational Processes
Process
Recruiting
Change
Time to fill
shortened by
implementing
new staffing
program
Impact
Value
Fill 14 days
faster, meet
Scheduling
Demands
Patient
Satis.
Higher
Rev / day
= $XXX
Increase
Cust Sat/Dr.
Satis
Quality rating
increases
= $XXX
Saratoga
Operations Data Points
Service
Quality
Productivity
Cost
Cost / Contact
Redo Cost
Cost per Serv
Time
Time to RespondRecall Rate
Time to Treat
Volume Calls Handled
Rework Rate
Errors Misinformation
Misdiagn Rate
Human
Patient
Satisfaction
Patients Trted
% Misstrd
Turnover Rate Srvc / Worker
Saratoga
Human Capital
Corporate Scorecard
Financial
Human
Revenue / FTE
Accession Percent
Human Capital Cost
Contingent Percent
Human Capital ROI
Professional Ratio
Human Capital Value
Added
Supervisory Ratio
Separation Percent
Human EVA
Saratoga
“If you don’t measure
your results,
you’re only practicing.”
Robert Galvin
Retired Chairman
Motorola
Saratoga
Human Capital Value
HCROI: Revenue
$1,000,000
Expense
800,000
Pay/Benefits
500,000
Nonhuman
300,000
Adjusted Profit
700,000
Divided by Pay & Ben
500,000
HCROI Ratio =
$1.00 : $1.40
*Return on investment on $ spent on people
Saratoga
Company Profile Report
KPI
SamCo
Results
Revenue/FTE $125,000
Expense/FTE
HCROI
Ttl Comp / Exp
Ttl Lbr Cost / Exp
Mgt Ratio
Competitor Industry
Results
Mean
$120,000
$110,000
110,000
95,000
90,000
$1 : 1.43
$1 : 1.86
$1 : 1.58
30%
32%
5.50 - 1
26%
31%
33%
38%
8.37 - 1
8.08 – 1
Saratoga
Hire / Retention Report
KPI
SamCo
Results
Hire Rate
Add (Grow)
Replace
17.1%
2.8
14.3
CPH - EX
Fill Time - EX
T/O - EX
Training Comp
HR Investment
$8,573
38
7.5%
1.12%
0.39%
Competitor Industry
Results
Mean
11.6%
5.5
6.1
18.4%
8.3
10.1
$9,847
68
$9,010
65
3.6%
6.6%
1.45%
0.85%
1.86%
0.68%
Less time and $ spent on Human Capital side of the org.
Saratoga
Best Practices:
Critical Elements Keys to Winning and Keeping Talent
• Develop retention strategies
• Develop talent
Instill
Talent
Mindset
Improved
Financial
Performance:
• Recruit talent continuously
• Build high-performance culture
• Create “extreme” employee
value proposition
Top Talent Firms
1.7 times greater
RSE than
Mid Talent Firms
Adapted from McKinsey’s War For Talent 2000
Saratoga
Employee Dissatisfaction
Voluntary Terminations*
Compensation
Supervision
16%
Opportunity
Leadership
12%
19%
12%
* 14,180 interviews from 50 companies in 2000
Saratoga
Benchmark Database
Revenue & Expense
Headcount & FTEs
HR Department Cost & FTE Ratio
Compensation Cost Management
Benefits Cost Management
Staffing Costs - Time - Volume
Separation Rates & Costs
Training Costs & Volume
Employee Values & Needs
Industry
Size
Region
Growth
Saratoga
What Successful Organizations Are
Doing
– Retain Key Talent - Attract, Assimilate, Develop
– Effectively Manage Workforce Costs
– Distinguish Between Core and Non-Core
Capabilities
– Measure the Impact of Human Capital
– Implement Efficient Technology Solutions
– Foster High Levels of Employee Commitment
Saratoga
Saratoga’s Value Proposition
Assessment
Executio
n
Strategy
Intelligence
Information
Data
Time
Saratoga
If you measure it,
you can understand it.
If you understand it,
you can improve it.
Saratoga