You can’t manage what you don’t measure. This adage applies to everything in business from customer loyalty and retention to overhead costs. According to Miami University management professor Joshua Schwarz, it even applies to human capital.
“Using data to provide insights into management is something that all organizations need to be doing,” Schwarz says. “So many people manage based on gut feeling, but evidence-based management – using good data to make managerial decisions – is more effective.”
Schwarz teaches a course on human capital metrics in Miami’s Farmer School of Business. Students in this course collect and analyze data relevant to current business problems facing real clients.
“The class is about quantifying various aspects of people management and showing connections to measures of organizational performance,” Schwarz says. “Students work on a broad range of problems. The thing that unifies them all is that they’re all about data analysis.”
Since 2005, Schwarz’s students have completed more than 150 projects for dozens of clients of all sizes, including GE Aviation, Cleveland’s Rock and Roll Hall of Fame, and the City of Dayton.
This past fall, Schwarz’s class worked with Alcoa, a global leader in lightweight metals technology, engineering and manufacturing, to help reduce employee turnover at one of its locations. Turnover is a problem for many businesses because hiring and training replacement workers is expensive. According to a 2012 study by the Center for American Progress, those costs, plus lost productivity, can total as much as 20% of the typical exiting employee’s annual salary.
Alcoa wanted to know if a three-hour-long pre-employment assessment they were already administering could help predict which job applicants had staying power. So they came to Schwarz’s class for help developing a candidate profile that correlated performance on the assessment’s 12 dimensions to employment longevity.
Five of Schwarz’s students took on the project: senior management and leadership majors Griffin McCarty, Alexandra Ohly, and Alexa Blumling (who graduated in December), senior psychology major Marisa Murray, and junior psychology major Deepika Hebbalalu. Both aspiring human resources professionals, Hebbalalu and Murray were especially eager to work on the project.
“This was my first consulting project,” Hebbalalu says, “and it was an amazing experience to work on an actual business problem and apply what you learned in class so directly. As a psychology major, I learned all these statistical analyses and methods in class. It was exciting to actually get to apply them to a real data set. It made it really relevant.”
Murray agrees, and adds, “To have the first professional experience of talking with a client was really cool too.”
Hebbalalu, Murray, and the rest of their team compared employees’ total and individual dimension scores to how long they stayed with Alcoa after being hired. Ultimately, they were unable to find a correlation between Alcoa’s screening test, as a whole, and which job candidates were likely to stay with the company.
“However,” Murray says, “we found that the reading and cognitive dimensions were correlated to whether an employee stayed with the company.”
For Alcoa, knowing what doesn’t work may be just as valuable as knowing what does work. That’s because they stand to reduce costs by following the team’s recommendation to eliminate the ten non-predictive dimensions, and give job applicants only the reading and cognitive dimensions going forward.
“Shortening the test would require less time from a proctor and fewer test materials,” Hebbalalu says, “so it would be cheaper to administer. We did a calculation of return on investment if they were to revamp the test to figure out how much money they’d save.”
Schwarz cites the team’s work as a straightforward example of the value his students offer their clients. “In this case,” Schwarz says, “the students were able to clearly demonstrate return on investment because all they were proposing to do was cut down on costs so that the company wasn’t spending money on something that wasn’t adding value.”
Having completed Schwarz’s course, Hebbalalu and Murray now serve as undergraduate assistants in the spring semester class, where many of the projects focus on recruiting and retaining Millennials. It’s a way for them to give back and pay forward at the same time. Not only are they using their experience to help current students navigate the course, Hebbalalu and Murray are also helping their fellow Millennials shape the workplace they will soon enter, and even manage.
Written by Heather Beattey Johnston, Associate Director & Information Coordinator, Office for the Advancement of Research & Scholarship, Miami University.