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Metrics for the Future of Work

By Ravin Jesuthasan, CFA, Author and Managing Director, Willis Towers Watson

Ravin Jesuthasan, CFA, Author and Managing Director, Willis Towers Watson

Much has been written about how work in this Fourth Industrial Revolution (4th IR) is fundamentally different from the previous three. While artificial intelligence and robotics get much of the attention, the reality is that we now have a new plurality of means for getting work done. Far removed from the 2nd IR’s binary choice of either hiring or developing traditional employees in full-time jobs, we have at least 8 different options for getting work done today as described by Boudreau, Jesuthasan and Creelman in Lead The Work: Navigating a World Beyond Employment (Wiley, 2015).

"As HR’s remit shifts from being a steward of employment to being a steward of work, it is vital that the function play a leadership role"

Unfortunately, most metrics for analyzing work today only consider our primary legacy means (i.e., traditional employees). The other options are typically considered separately with different metrics and by different stakeholders (e.g., procurement focuses on outsourcers while corporate development focuses on alliances and line leaders focus on free agents or talent platforms). In addition, the basis for accounting for the various relationships may be quite different (e.g., the investment in robotics and alliances may be capitalized while most of the other relationships may be expensed annually). To address these issues and create a coherent and holistic approach to measuring work in this 4th IR, consider the following two metrics; Total Cost of Work (TCoWTM) and Return on Work (RoWTM). Here is how each would be defined:

•  Total Cost of Work (TCoWTM) = Total Labor Cost (FTEs + free agents + talent platforms + volunteer engagement cost) + Vendor Cost (outsourcing cost + AI/robotics vendor cost) + Annualized Capital Charge for capitalized investment (annual cost of capital charge for AI/robotics + alliances)*

* To get all these work options on a comparable basis, one could multiply the company’s cost of capital by the total capital investment in work options like AI, robotics and alliances so as to capture an annualized charge for the utilization of these options.

•  Return on Work (RoWTM) = Total revenues /TCoWTM

While the work of gathering the data to measure these two metrics is likely relatively straightforward, there are two steps that are critical for shifting mindsets and behavior:

1) Track and report on TCoW and RoW alongside other traditional metrics – given that what gets measured get managed, it is critical that these metrics are part of every budgeting and planning conversation. More importantly, they should also feature in incentive pay metrics for key leaders.

2) Ensure accountability within HR for monitoring, reporting and management - As HR’s remit shifts from being a steward of employment to being a steward of work, it is vital that the function play a leadership role in monitoring, reporting on and managing these two metrics. Clearly, this will require engagement and collaboration with other stakeholders like Finance, Procurement and Corporate Development but this is the opportunity for HR to continue its evolution from a support function that enables to a business discipline that leads.

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