What a CLO must know about Learning Analytics

1. What a CLO must know about Learning (Talent) Analytics Peter Howes Vice President, Workforce Planning and Analytics

2. Truth or Myth? Human Capital Analytics A Powerful Discovery Tool 1. The best source of new hires is your current employees employee referrals? 2. High GPA Scores are a good predictor of successful graduate recruitment? 3. Employee equity awards of ANY size increase retention? 4. Industry experience is a KEY factor in successful salespeople? Myth: Employees hired from referrals, turnover at twice the rate of the best new hire source Myth: High GPA graduates had highest turnover between 2-4 years tenure. Truth: Highly correlated at the company Myth: In some positions studied, salespeople with little or no industry sales experience outperform seasoned people 2 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

3. Global Macro Trends Are Impacting the Workforce and Learning… 59% of all 2013 master’s degrees will be earned by women3 3 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved. Growth through Talent Intelligence Consumerization of Technology Changing Workforce Demographics 48% of baby boomers expect to work past age of 651 80% of company valuations are intangibles related to talent such as IP, know-how, expertise, etc.7 90% of executives whose companies use social media technologies report measureable 60% share of India, business benefits4 other South Asian Nations and Africa in global labor force growth2 +1.3B workers will use mobile technologies in 20155 70% of US economic growth has been driven by knowledge workers over the past three decades6 1) Deloitte 2011, 2) McKinsey Global Institute 2012 3) US Department of Education 2013, 4) McKinsey Quarterly March 2013, 5) IDC’s Digital Universe Study, Sponsored by EMC December 2012, 6) McKinsey “Economic conditions Snapshot” 2010, 7) Deloitte “Extracting Maximum value from intangible assets”, 2010

4. …And Compliance and Cost Are Continuous Issues Compliance Risk • Risk: In 2011, there were more than 1,000 regulatory changes affecting employee data worldwide– not counting industry regulations and legal updates. • Risk: Do workers have the right certifications to do a job? And are they up to date with your industry, and company compliance standards? 4 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved. Cost • Multiple Learning systems • Move from on-premise • Path to unified talent solution

5. Need to Overhaul the Economics of Learning Learning spend per employee Learning budget as a % of Payroll Average cost per learning hour created Learning delivery via ILT (live and online) Source: ASTD, 2011 Study 5 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

6. Are Investments in Learning Paying Off? “The relationship between learning and analytics is often misunderstood and under-utilized. Typically, when people discuss analytics they are talking about reporting within a specific learning management system. They are talking about course completions, scores, pass rates and usage data. Whilst useful, this information doesn’t really help you to make the connection with what is happening in your organization, or whether the training is having the desired effect of boosting productivity, improving service and raising levels of efficiency.” Ed Cohen and Peter Howes, “Learning and Analytics”, SuccessFactors White Paper, 2012. 6 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

7. Research

8. The Opportunity Ahead 8 2 % 8 3 % 8 5 % 8 0 % 8 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved. 9 5 % of business leaders don’t trust talent data of business leaders don’t believe talent analytics are focused on the right issues of HR leaders have not used information gleaned from data analytics to change a business decision of senior HR leaders believe staff capabilities are a barrier to improving HR analytics of senior HR leaders plan to increase investments in HR data and analytics in the next two years Source: CEB | Talent Management Report in The Times, October 2013

9. Business Results of a Strong Learning Culture Organizations with a Strong Learning Culture Significantly Outperform Peers… Innovation 46% more likely to be first to market Productivity 37% greater employee productivity Time to Market 34% better response to customer needs Quality 26% greater ability to deliver “quality products” 9 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved. Skills for the Future 58% more prepared to meet future demand Profitability 17% more likely to be market share leader SOURCE: Bersin & Associates

10. Yet…Many Organizations Are Flying Blind Missing an Opportunity to Drive Business Results? IBM Survey of 700 Chief Human Resource Officers “Only seven percent of respondents say they are very effective at using analytics to make workforce decisions.” Without workforce insight, companies place their ability to grow effectively at risk. They will have difficulty putting the right skills in the right places and will have trouble making intelligent decisions about locations suitable for expansion. They will be challenged in knowing where their top performers are located and will struggle to justify the need for future workforce investments.” Source: IBM, “Working Beyond Borders: Insights From the Global Chief Human Resource Officer Study,” 2010. 10 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

11. Learning World According to Bersin World-Class Chief Learning Officer Source: Josh Bersin, Bersin by Deloitte blog, “Today’s World-Class Chief Learning Officer,” May 2012 11 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

12. We’re not always strategic… More than 65% of respondents view their HR function as a strategic partner to the organization while only 15% of its time is spent on strategic partnering activities. 27% 18% 12% 15% 14% 14% Delivering HR Services Transacting/Recordkeeping Strategic Partnering Designing HR Programs or Systems Internal Management Compliance/Auditing Mercer Consulting, 2010 HR Transformation Study 12 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

13. Your workforce makes up 40-60% of your operating expenses. Are you making decisions about your people with the same intellectual rigor as your decisions about other business factors: Finance, Sales, Production, Supply Chain?

14. The Opportunity for Learning Analytics

15. A Measurement Maturity Model – From Learning Metrics and Analytics to Business Outcomes Value /Impact Measurement Maturity Model Learning Metrics & Scorecards Information – What is happening? Learning Analytics Insight – Why is it happening? 15 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved. Learning Outcomes Impact – How does it affect the business? Time/Expertise Required Current practices in LMS

16. The Talent Analytics Journey…in more detail Data Reporting Metrics Advanced Metrics Bench-marking 16 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved. Analytics Predictive Analytics Stages Foundations Definitions: inclusions exclusions Analysis Dimensions: segmentation trends Aggregation as ratios & percentages Aggregation & weighting to generate index measures External & internal comparisons Statistical analysis: correlations test of significance analysis of variance factor analysis Hypothesis Testing: structural equation modelling

17. What Questions Are We Looking to Answer? Stage of Measurement Maturity Common Learning Questions That Organizations Seek to Answer Learning Metrics  What percentage of employees have an IDP assigned to them and what percentage of them complete the recommended steps on their IDP within each time period?  How many dollars are spent annually per FTE on learning & development?  Do longer tenured employees continue to grow via training, or is training disproportionately offered to, or attended by, newer employees?  What percent of learning dollars are assigned to closing the gap between needed and actual capabilities? Learning Analytics  What is the percent increase in performance as a result of every $1,000 spent on training?  How does the performance of employees participating in optional training programs compare to those not participating?  What percentage of poor performers become good or better performers within a year as a result of specific learning programs? Learning Outcomes  Is there a correlation between the percentage of all people costs spent on learning and firm profitability?  How have leadership development programs impacted productivity or employee satisfaction? Source: Adapted from the SuccessFactors “100 Critical Human Capital Questions”. 17 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

18. More Questions…To How Many Questions Can Your CHRO or CLO Answer “Yes”? 1. Do you know the retention rate of your high performers & whether it is good or poor relative to industry benchmarks? 2. Can you run a headcount report now and segment the results by your primary organizational structure, workforce tenure, and gender? 3. Can you identify your best and worst performing managers, as measured by the performance and engagement of their teams? 4. Do you know the average performance score and the time to full productivity, for new hires? 5. How many people do you have in critical roles? What percentage are at risk and do you have good succession coverage? 6. Which hiring sources provide the most successful employees? 7. What is your average span of control and how does this vary across your company? 8. Do you know whether investment in Learning and Development in your organization correlates, positively or negatively, to increased performance and business results? 9. What is the average promotion speed for high and low performers? 10. What is the ratio of revenue generating to non-revenue generating employees? 18 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

19. Learning Analytic Overview…our view of the world

20. What you get with SuccessFactors… Workforce Analytics Learning Analytics Library of LMS Metrics, Definitions and Formulas Learning Benchmarks Platform Online Report Designer for ad hoc and formatted reporting LMS Reports Dashboards Library of Metrics and Data Feeds for Core HR, Talent Mgmt., Finance, Surveys, etc., Benchmarks Headlines, Question- Driven Analysis, Talent Flow, Analytics Workspace, and More 20 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

22. Examples of Foundational Learning Metrics Personal, Employment and Job Data Dimensions and Hierarchies Training Data Volume • Learning Hours/Classes per FTE & Event • Percentage Filled • Learning Penetration Rate • Total Training Classes Offered Quality • Cancellation, Abandonment, Completion • Course Participation & Pass Rate • Number of Employees Successfully Trained • Satisfaction with Learning 22 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved. Process • Learning Channel Delivery Mix • Learning Program Content Breakdown • Learning Staff Ratio • Trainer Productivity

23. SuccessFactors Workforce Analytics Leverage best practices to drive insight Metric Packs Absence Management Career & Development Planning Compensation Planning Employee Relations Financial Management Goals Management HR Service Delivery Learning Management Leave Accrual Health and Safety (OH&S) Performance Management Recruitment / Staffing Payroll and Benefits Succession Management Survey 23 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

24. Barriers to Business Impact Keeping you from making optimal impact

25. We’re not always aligned 34% 37% We identify key performance metrics to improve with management 25 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved. Learning initiatives support skills the business needs There’s board-level accountability for learning 2012-13 Towards Maturity Benchmark 63%

26. Form Follows Function What are you here to achieve? Why does your department exist? Business Goals Learning Strategy Learning Org Structure • KPIs, metrics, dashboard? • Strategic Workforce Plan? • People Strategy? 26 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved. Funding Model • 39% Employee Engagement • 61% Business Impact • 44% Centralized • 30% Federated • 22% Segmented • 4% Decentralized • 62% Centralized L&D Team • 30% Business Unit L&D Team • 8% Local Manager Spend Source: Institute of Corporate Productivity

27. Better-aligned learning makes greater business impact 7 6 5 4 3 2 1 0 Alignment and Business Results Bottom Q 3rd Q 2nd Q Top Q Number of Benefits Reported Source: Towards Maturity – Alignment Index 2012-2013 Alignment Index 27 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

28. Case Studies and Learning/Talent Analytics

29. Customer Example: The Opportunity Cost of Investing in Poor Performers 60 50 40 30 20 10 0 2008 2009 2010 Exceptional Highly Effective Achieves Expectations Needs Improvement Unacceptable 29 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved. Training Hours per FTE From 2009 to 2010, training hours delivered decreased for all levels of performance EXCEPT for employees rated as “Unacceptable”. • Is this outcome consistent with company strategy? • What is the opportunity cost of failing to invest in training for high performers (those rated “Highly Effective” and “Exceptional”)? Training Hours vs. Performance

31. Do we reward managers who are net exporters of talent? Top 10% of Managers who: …transferred or promoted most individuals OUT, by Performance Rating …transferred or promoted most individuals IN, by Performance Rating Performance Rating Number of People 1-3 25 4 116 5 36 Performance 31 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved. Rating Number of People 1-3 16 4 64 5 21 Average salary increase of top importers of talent (9%) Average salary increase of top exporters of talent (6%)

32. How does labor turnover vary by performance rating & position tenure? Case study for Sales Reps Total voluntary labor turnover, Total Organisation (8%) For our turnover vary by performance rating and position tenure? Total voluntary labor turnover, Sales Reps (16%) Total Turnover by Performance Rating Performance Rating Turnover Not Rated 16% 1 38% 2 19% 3 12% 4 18% 5 22% Average 16% 32 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

33. Case Study: Sales Reps (continued) How does labor turnover vary by performance? Rating and Position Tenure? Total Turnover of Sales Reps: by Performance Rating, by Position Tenure Position Tenure Performan ce Rating < 1 Yr 1-2 Yrs 3-5 Yrs 5+ Yrs Average Not Rated 16% - - - 16% 1 - 32% 55% 17% 38% 2 - 26% 24% 16% 19% 3 - 17% 11% 18% 12% 4 - 8% 36% 20% 18% 5 - 10% 27% - 22% Average 16% 14% 18% 9% 16% 33 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

34. Case Study 3: Sales Rep Revenue, by Tenure and Performance Rating Tenure Sales Rating 4-5 Rating 2-3 34 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved. Average < 1 year $310,000 1 - < 2 yrs $520,000 $390,000 $455,000 2 - < 3 yrs $680,000 $410,000 $545,000 3 - < 5 yrs $685,000 $385,000 $535,000 5 + yrs $665,000 $340,000 $502,500 Average $637,500 $381,250 $469,500

35. Conclusions • Do we address poor performers in their second year of employment inconclusive from information available? • We are losing too many high performers who have been in their current position for more than three years. Why? o Lack of promotion options o Lack of career options o Poorly defined employment value proposition • How do we get Average Revenue per Sales Rep to $600,000 per year? o Reduce recruitment of poor performers o Address poor performance quicker o Retain more high performance Sales Reps (4 and 5) in the 3-5 years of position tenure o 500 sales reps X $100,000 = $50,000,000 increased sales. 35 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

36. Resources

37. Yet we don’t yet have the data analysis skills… US shortage 200,000 workers with deep analytical skills 4 McKinsey Global Institute. Big Data: The Next Frontier for Innovation, Competition, and Productivity. May 2011. 37 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved. • 1.5 million managers able to analyze data and make decisions based on findings

38. Summary….Six Steps to Success 1) Deliver fact/data based business cases for what training you are doing and why. 2) Demonstrate why investing in training program X, will help the company execute on its strategy and deliver ROI through authoritative insight. 3) Engage the business leaders, HR, finance, sales and operations with business metrics to really show what impact training is having and what needs to be measured. 4) Embrace workforce analytics as an integrated part of decision making and combine multiple data sources from finance, sales, HR and training, to allow you to measure the relationship and impact training has on the strategy, alignment, people performance and productivity of your organization, thereby linking your training strategy to the business. 5) Embark on a “transformation journey” - a phased development with each phase representing a more mature use of workforce analytics and a more specific strategic business impact. Move from reporting (understanding what’s happening today) to analytics (why it’s happening), to planning (how do we take action today to ensure we have the right workforce trained for tomorrow). 6) Engage with HR and the business to uncover potential problem areas and ensure that they can quantify the impact of interventions. Source: Ed Cohen and Peter Howes, “Learning and Analytics”, SuccessFactors White Paper, 2012. 38 SuccessFactors Proprietary and Confidential © 2013 SuccessFactors, An SAP Company. All rights reserved.

39. Questions, Comments, Feedback? PeterHowes Vice President, Workforce Planning and Analytics SuccessFactors, an SAP company. Peter.howes@sap.com +44(0)79 7469 6218 © 2014 SAP AG or an SAP affiliate company. All rights reserved.

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