Impending Crisis: Analytics for the top-line

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I’m sitting here staring at a book on my shelf entitled, “Impending Crisis”.  Even knowing the copyright date, 2003, it could still be about any one of several possible crises: healthcare, financial, energy, education, environment.  But no, in this case the impending crisis in question is provided by the subtitle: “Too many jobs, Too few people.”  A perfect storm of demographics, education and technology that was supposed to hit the Western economies by the end of the decade, a crisis ultimately stillborn, upstaged and derailed by its antithesis – The Great Recession, with its concomitant double-digit unemployment.

Predictive-Analytics-for-Human-Resources-Wiley-and-SAS-Business-SeriesBut still, it was there on my bookshelf for a reason.  If the derivative-driven economic implosion of 2008-‘09 had never happened, the book’s thesis represented a most likely case.  At the time, the US Bureau of Labor Statistics was predicting an overall workforce shortage in the US of about 10 million workers by 2010.  A decade has now passed since its initial publication, so besides the Great Recession, what else has changed?

The demographics are what they are, but with everyone now placing an additional ten candles on their birthday cake.  The state of education may be even worse, with No Child Left Behind turning into No Child Left Untested.  The cost of higher education is the fastest increasing segment in the national economy, outpacing even healthcare, as the ratio of full-time faculty to management and staff declined from about 2:1 twenty years ago to roughly parity today.

Technology seems to be the big unknown.  For a thorough perspective, I highly recommend this study from the Pew Research Center: “AI, Robotics and the Future of Jobs”.  To illustrate what a challenge this subject is, the nearly 2,000 respondents were roughly evenly divided on the question of the future of jobs, with 52% taking the non-Luddite view that there is nothing as constant as change and that in the end more jobs will be created than lost.  The other 48% would likely find themselves more in agreement with Bruce Springsteen, who wrote in “My Hometown: “These jobs are going boys and they ain't coming back”, their main supporting point being, ‘You want evidence?  Just look around, it’s happening now, it’s happening everywhere, it’s been happening since at least 1990 if not before.’

One more datum to add to the mix:  $6 trillion.  Or make that $35 trillion if you are thinking globally.  That’s the annual labor cost in the US / World respectively – representing 40% of US GDP, 50% at the global level.  So when you impact labor productivity by more than a few percentage points, you’re likewise talking trillions (for comparison, energy costs run about 10% of GDP).

Stepping into this ill-defined, undiscovered country from which perhaps no job returns, is strategic human capital expert Jac Fitz-enz and his co-author, John Mattox, with their new book, “Predictive Analytics for Human Resources”.  What makes this such a worthwhile read for anyone interested in applied analytics is the authors’ broad general business experience.  If you want, you can take their analytic approach completely out of its HR context and drop it wherever you are facing an analytic need.  Whether it’s the chapter on ‘Getting Started’, or ‘Data Issues’, or ‘Analytics in Action’, or my nomination for best-in-show, ‘Developing an Analytic Culture’, this is the analytics primer you’ve been searching for, no matter whether your business problem is quality, customers, process or people.

While the obvious application of analytics to human capital (see my prior post, “Strategic Workforce Planning”) is the cost impact, hence the $6 trillion reference above and its prominence throughout the book, I want to direct your attention to the issue from the other direction, the top-line versus the bottom line, and the mixed realities of the post-recession employment picture.  Moreover, I want to tie all of this into another important business paradigm – Treacy and Wiersema’s ‘Value Disciplines’.

Official unemployment in the US currently stands a tad over 6%, with the unofficial rate, which counts those who have stopped looking for work, at 14%.  The comparable figure for the EU is slightly over 10%, with the extremes running from 5% in Germany to over 25% for Spain.  With that many people out of work, who needs workforce analytics?  Just run the ads and take the lowest bidder, right?

Not so fast.  If your chosen Value Discipline is Operational Efficiency, then you most likely aren’t hiring in the Western economies anyhow, you moved those jobs offshore long ago.  On the other hand, if your Value Discipline is Innovation or Customer Intimacy, cost is not your primary concern (a truism whether your specific business problem is workforce, or something else like quality, innovation, service or retention, and a truism your approach to analytics should reflect).

What is your concern is the shortage of STEM and skilled workers - the lingering high unemployment rate being a rather asymmetrical affair, primarily affecting the lower skilled job classifications. Besides, you’re not looking for the cheapest engineer, scientist, cyber-security specialist, nurse or marketer.  There are multiple stories making the rounds of manufacturers in rural, low-wage regions of the country with 100 applicants for each shop floor position, but unable to find and attract the design and manufacturing engineers and the management to run the place.  Silicon Valley’s recently uncovered anti-poaching cartel is certain proof for the reality and seriousness of the issue.

The benefits of using an analytical approach to addressing STEM and skilled workforce management issues will show up in the revenues, not just on the bottom line, of those companies that depend on innovation, quality and customer service as the foundation of their business model, and who need the right people, not just the least expensive, to make that business model work.  As the saying goes, you can’t just save your way to prosperity, eventually you need to put the emphasis on growth.

Lest you think this STEM shortage is fairly straight forward and one-dimensional, let me scare you to death with reference to this series of posts on LinkedIn by Heather McGowan - “Jobs are Over: The Future is Income Generation”  (the link is to Part 2 of this four-part series, Part 2 being where I became truly frightened for my children’s future) (and I won’t even get into the unnerving picture that Fitz-enz paints at the end of Chapter 7 of his book – I’ll leave that for you to discover – just don’t be taking any three-day weekends).

Here’s McGowan in her own words: “The era of using education to get a job, to build a pension, and to then retire is over. Not only is the world flat, but this is the end of employment as we once knew it. The future is one of life-long learning, serial short-term employment engagements, and the creation of a portfolio of passive and active income generation through monetization of excess capacity and marketable talents.”

Let that sink in for a bit.  A future that some might call entrepreneurship, but others might label ‘gigs’, everyone a temporary contract worker, no benefits, competing to create monetized portfolios (how would you have fared in your twenties or thirties, trying to start a family, under such conditions?).  Is your business ready to address a workforce strictly defined by contractual short-term gigs and monetized marketable talents, whatever that might mean?   While you might initially think you’ve got the upper hand when it comes to employment negotiations with such relatively insecure ‘income generation seekers’, focusing on cost, as I mentioned before, would be missing the point for most organizations.

I’m not saying McGowan is right (and I’m hoping she’s wrong), but I do have to admit that the trends she identifies are all already here. The ‘market economy’ is becoming the ‘market society’, with little indication that this socio-economic movement is slowing down let alone running into obstacles that might halt it. In such an environment, and without a far-sighted, disciplined and analytic approach to workforce planning and management, you’ll end up with a top-line going nowhere fast, and a bottom-line spelled I-R-R-E-L-E-V-E-N-T.

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Leo Sadovy

Marketing Director

Leo Sadovy currently manages the Analytics Thought Leadership Program at SAS, enabling SAS’ thought leaders in being a catalyst for conversation and in sharing a vision and opinions that matter via excellence in storytelling that address our clients’ business issues. Previously at SAS Leo handled marketing for Analytic Business Solutions such as performance management, manufacturing and supply chain. Before joining SAS, he spent seven years as Vice-President of Finance for a North American division of Fujitsu, managing a team focused on commercial operations, alliance partnerships, and strategic planning. Prior to Fujitsu, Leo was with Digital Equipment Corporation for eight years in financial management and sales. He started his management career in laser optics fabrication for Spectra-Physics and later moved into a finance position at the General Dynamics F-16 fighter plant in Fort Worth, Texas. He has a Masters in Analytics, an MBA in Finance, a Bachelor’s in Marketing, and is a SAS Certified Data Scientist and Certified AI and Machine Learning Professional. He and his wife Ellen live in North Carolina with their engineering graduate children, and among his unique life experiences he can count a singing performance at Carnegie Hall.

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