Published : 5 years ago, on 14/08/2019

By Rupert Morrison, CEO of analytics firm, Concentra Analytics

A new study shows UK firms have overlooked a huge engine of productivity growth and are leaving billions of pounds on the table as a result.

Banking and finance are facing unprecedented challenges and change. New technologies and new customer expectations mean ‘business as usual’ isn’t a viable model. New competitors, including fintech players, cryptocurrency exchanges and online-only financial institutions, are pushing everyone to be more productive. But in all the hype, a key factor is being overlooked: people.

Our research shows that large companies across the UK are leaving £10.4 billion on the table because of poor people planning. That’s how much the country’s GDP would increase if the 50% of firms with the poorest people-planning scores increased performance to match those in the top 50%, according to a recent report Concentra conducted in partnership with the Centre for Economics and Business Research (CEBR).

It’s easy to throw money at flashy technologies like AI, machine learning or a revamped online presence and mobile apps. But financial institutions are forgetting the huge value of their people. Your workforce data is key to improving productivity and profit per worker.

According to Kay Neufeld, head of macroeconomics at CEBR: “People are both the largest cost and biggest value creator for almost all organisations. Our analysis has shown that whilst businesses clearly understand overall productivity, when it comes to profit per worker there is a significant informational deficit.”

Banking and finance have long tried to eliminate variability. Statisticians, risk managers and actuaries work long and hard to eliminate guesswork and deliver better forecasts.

“The numbers don’t lie” has long been the mantra. Finance departments have typically led planning, with HR considered a dull and unnecessary cost centre and workers a necessary cost to be minimised whenever possible.

The missing data

Workforce planning and analysis (WP&A) lets companies unlock the potential of their people, which will benefit companies, workers and the national economy.

People can be profit centres, regardless of their roles. The key is productivity growth. Increasing productivity was identified as a concern by 86% of the companies surveyed. Two-fifths (39%) of companies surveyed called their productivity ‘very concerning’, but those same firms are investing just 0.25% of their turnover in measures/initiatives to improve it.

Conversely, those that do make the investment in WP&A see significant payoffs. Firms with people-planning scores in the top 50% of results reported productivity growth 285% greater than companies with people-planning scores in the bottom 50%.

Think of WP&A as business intelligence, but for people.

The latest technologies can track performance on the level of an individual, a team, a department, a branch or the whole company. The performance data, often siloed in HR and used to calculate pay increments and bonuses and little else, can be integrated with finance data. This allows for better planning.

It becomes possible, for example, to know the cost of every call fielded by John or every sale made by Mary. It’s even possible to calculate how reassigning individuals or restructuring business units would affect costs and outcomes before you commit to those changes. Would the cost per sale be higher or lower if you moved operations to Birmingham or automated parts of Mary’s job? With WP&A that’s easy to determine.

With the ability to model scenarios with multiple variables and employees, WP&A does for workforce analysis what spreadsheets did for financial analysis, only much less laborious

Maximise returns on people investment

Effective WP&A increases productivity per employee, but it can have an added benefit: It allows companies to build a longer and stronger connection to their employees.

Research by recruitment consultancy Robert Half  found that 61% of firms have seen increases in voluntary staff turnover in the last several years. More than half (51%) of surveyed firms expected turnover to increase. Replacing staff who leave voluntarily costs some banks upwards of £800 million per year.

With decreasing headcounts over the last decade and high-profile scandals, banks and other financial institutions might no longer be considered as appealing a place to build a career. There is more competition for the best talent and today’s workers are more loyal to their own progress than to any one company.

WP&A gives financial institutions a clear picture of the talent they have and allows companies to design work and structures that help their staff realise their career ambitions within the company. Making the best use of that information should be part of the strategic planning process. Ensuring people are in the place that maximises their talents, doing the right things at the best cost to the company improves the bottom line and increases employee satisfaction and retention.

Building for the future

Every other part of business runs on objective, real-time data – shouldn’t workforce data be mined as well?

Some companies think so. Within the sample, workforce data is generally regarded as important in shaping workforce planning and analysis, with 38% stating that employee-level data was highly important in the management of costs, while a third (33%) said that it was highly important in assigning people with the right skills to the appropriate tasks.

It’s not just individuals either. Having quick, connected access across business units allows leaders to assess the current productivity of teams and consider how they might be optimised for the best results.

This kind of planning is crucial, as it lets companies adapt to changing market conditions. But it’s more than reacting. Strong WP&A also allows companies to be proactive.

A full three-fifths (60%) said that employee-level data was either important or very important in determining future workforce needs, and 62% indicated that it was important in identifying gaps between the current workforce and future needs. Given the quickly changing financial industry, the evolving regulatory environment and the uncertainties of Brexit, financial institutions need to be agile. A full understanding of their capabilities and resources can mean the difference between success and failure.

There’s £10.4 billion pounds on the table for those that unlock the productivity vault. It’s as good as money in the bank.