Everyone knows that labor costs show up on the income statement, but the same workforce can’t be found on the balance sheet. It’s considered an intangible asset and does not earn a line on the balance sheet. Did you know that there is another intangible asset that has similar qualities?
It’s the data your company collects every day. Each time an employee fills out or edits a form on a mobile device, laptop, desktop or kiosk, it’s adding to the quantity of data your company owns. This collection of data is relatively expensive and is represented as either a Cost of Goods Sold or an Operating Expense on the income statement chewing away at your profits. Similar to employees it too has no quantified asset value.
CFO’s understand both are extraordinarily valuable but also have a difficult time articulating it as anything more specific than goodwill.
What I have seen in the last year however is that an increasing number of companies are putting these two intangible assets together and finding million dollar insights about their businesses. I am specifically differentiating from companies who have business analysts hard at work tearing apart their data and those companies that are empowering a broader population of employees with increasing amounts of information.
The reason that this is important is that business analysts are relatively few and far between. When the broader workforce can begin making data-driven decisions on a daily basis and view situations with perspective and context based on facts rather than relying on their instincts and week old reports, the value creation is exponential.
Why are some doing better than others in capitalizing on this opportunity? Analytics and Big Data are a frequent topic of discussion with every company I visit. Everyone recognizes the potential. But as with most emerging opportunities, most are talking about it and formulating plans. The successful ones are diving in, learning and profiting. Companies that have accelerated their labor analytics journey are finding they can…
- Identify who is not regularly following the corporate policies put in place from clocking, to editing time sheets to aligning a schedule to demand
- Identify employees that have figured out manipulate the data they enter into so they can game controls and metrics in a way that current reports can’t identify. This results in either fraudulent behavior or boosting performance metrics at someone else’s expense.
- Identify employees who are not following policy and outperforming others resulting in new best practices.
- Identify employees who are overwhelmed with manual production and employee scheduling edits due to smaller batches and increases in product mix. This change in production speeds and patterns with no accompanying improvements in scheduling techniques is resulting in more unplanned Saturday shifts and overtime to accommodate less than optimal schedules
- Locate where cost accountants have made mis-allocations of labor costs due to a lack of visibility to where and when the costs actually occurred.
- Rank employees who are receiving volatile schedules from week to week that can result in increased fatigue and turnover.
I didn’t recognize how big this was becoming until I noticed a trend in the conversations I have been having with companies that provide strategic consulting. Some of these consultants are telling me their jobs are getting harder and in some cases their revenue is falling. Why? One of their bread and butter techniques of identifying opportunities is by interviewing multiple employees from different departments and then aggregating data from different systems. What they are experiencing is that the “low hanging fruit” they could always depend on is gone. Customers have already figured it out. The Aha! moments consultants are famous for are getting harder to find with their traditional techniques. They must evolve too.
Where is your company in maximizing its ROIA (Return On Intangible Assets)? The following list highlights some of what the companies that I visit with were experiencing before they changed tactics. To see how you relate, take a survey of your spreadsheets and business analysts to see if you can identify these situations:
- Is there so much data available that the reports are now being heavily summarized, and detailed and history is not being carried along?
- Is there significant manual massaging, data wrangling to use a fancy term, to reconcile data from different systems…is this causing latency in delivering the information?
- Are different functional areas frustrated with the lack of support in getting at data and beginning to start reporting processes of their own, especially as you move to middle management ranks?
- Have intrepid employees begun adding thousands of lines of macros to spreadsheets to make them automated and interactive to the point that the spreadsheets themselves are unstable?
- Do spreadsheets going to front line managers have hundreds of rows or more and multiple tabs to make sure they have all the information they need?
- Do your spreadsheets analyze mainly the data that users enter on forms or through hardware but ignore the data that the hardware and software generates itself in logs and audit trails?
- Are people frustrated by the fact that they know the data they need is resting on servers within your organization but even your best report writers are not able to put it together to answer the questions and hypotheses posed?
If you see signs of this in your organization, then a review of your reporting processes, skills and tools is in order. You have an opportunity to change the way you think about math.