Managing for Quality and Performance Excellence 10th Edition by James Evans ,William Lindsay

Exercise 1

Hewitt Associates, based in Lincolnshire, IL, is a human resources (HR) outsourcing and consulting company. The customer service (CS) role at Hewitt-and many other companies that rely heavily on CS to deliver outsourced processes-requires significant training on the proprietary systems used to handle data from client organizations. The organization was losing CS talent at an annual turnover rate close to 100 percent, which is common in this line of work. When the company determined it could save millions of dollars through stronger retention of its CS representatives, senior leaders ask the HR department to make it happen. Consequently, HR embarked on a Six Sigma project.
The first step was to quantify the cost of turnover for CS representatives-to defend the required investment and realize the proposed return on investment (ROI). The cost of turnover includes both hard and soft costs: separation processing costs, replacement hiring costs, new hire training costs, and lost productivity. HR brought together the statisticians, workforce engineers, and line leaders responsible for coordinating and managing the costs of a 2,500-plus person CS center. The team focused on the hard costs of hiring and training, but spent the bulk of time on measuring lost productivity in the CS environment-the biggest cost in any turnover model. The model resulted in an average hard dollar cost savings figure of about $24,000 for each avoided separation. Based on the annualized turnover rate for the current year, the cost of lost CS productivity for the HR outsourcing segment of Hewitt's business was estimated as approximately $14.5 million. Layering in the hard dollar costs for training and recruiting brought the total to nearly $16 million, or about 13 percent of Hewitt's overall net operating income in that year.
Based on the work Hewitt does with its HR consulting clients, the company knows there is a strong positive relationship between engagement and organizational performance. Specifically, companies with higher levels of engagement are likely to have greater sales growth and higher total shareholder return. Hewitt conducts an annual associate engagement survey that measures not only all the standard employee opinion survey components, such as satisfaction with opportunities, but also intent to display certain behaviors known to have an impact on business results (see Figure 4.8). One of those survey items asked: "How likely is it that you will be working at Hewitt one year from now?" Predictive analysis has shown that of the representatives who respond that it is unlikely they will be working at Hewitt, about half actually leave within one year, making this item an important leading indicator of retention.
Hewitt also uses regression analysis to determine the most important drivers of retention for the CS representatives. Elements of the work environment in which satisfaction is low but the relationship to retention is high were identified as opportunities for growth and training and rewards (pay and recognition). Elements of the work environment in which satisfaction is high but the threat to retention is high if the area is neglected were work activities and managers and leadership.
FIGURE 4.8 Hewitt's Employee Engagement Framework

Source: Adapted from Jon Leatherbury, "Talent Show," Quality Progress, Vol. 41, No. 11, November 2008.
The team focused on solutions aligned to the retention driver areas, specifically rewards. A careful review of recent market data then revealed total compensation rates had dropped slightly below market average. A targeted group of proficient CS representatives received a market correction in their base pay. The retention rate for the group of representatives receiving the adjustment was significantly higher than the retention rate of those not receiving adjustments (96 percent vs. 83 percent).
Based on this intervention, the resulting analysis revealed Hewitt was able to avoid losing an additional 80 proficient CS representatives, assuming retention among these proficient CS representatives would have been on par with the overall group who did not receive the intervention. At $24,000 for each separation avoided, the benefit associated with the pay increase equaled $1.9 million-or a return on investment of 217 percent.
At first, senior leaders were reluctant to make further investments in the rewards strategy for a population of associates who historically come and go frequently. But hard data, involvement from line management and, eventually, a bold proposal from HR helped them to see the business problem differently. In the end, the annualized ROI bought credibility with senior leaders and highlighted the importance of HR being in a position to make and defend data-based decisions that yield a strong ROI.
Fixing competitive pay was only part of the solution. The company began to implement additional solutions aimed at the other top drivers of retention for the CS population. HR developed a realistic job profile targeted at explicitly showing candidates up front what the first few months of the role-when turnover is highest-entail. Additionally, HR has implemented a role-based capability assessment to measure job fit at the time of application. The data will aid in understanding how well incoming job fit is predictive of future performance. The goal is to further impact attrition within the first six months that is due to job abandonment, inability to meet basic productivity requirements, or dislike of day-to-day responsibilities.
HR redesigned technical training to ensure associates become productive more quickly and better understand the link between performance and growth opportunity, which is based on productivity results. A formal career path tool is also being constructed to help CS representatives navigate the career journey more effectively. The goal is to decrease time to proficiency and attrition in the 612 month timeframe-a period when CS representatives become more productive but often leave for better-perceived career and development opportunities elsewhere. Finally, HR developed a formal manager effectiveness curriculum for managers and local leaders, focusing this training on interaction management, team leading, and conflict resolution. Manager interaction sessions also will be delivered to improve one-on-one coaching opportunities between managers and CS representatives. This should lead to stronger engagement and retention of CS representatives and managers. Enhanced interactions and coaching opportunities will lead to enhanced productivity.
The Six Sigma method has helped HR professionals at Hewitt think differently about business problems, address root causes quicker and demonstrate the ROI of the talent solutions they implement.
Discuss how the solutions that the company identified support its employee engagement framework and should improve engagement and ultimately retention.