How Does Human Capital Stand Up to Six Sigma?
Mike Zani, CEO, PI Worldwide
A recent Harvard Business Review survey revealed that 66% of CEOs cite “talent-related issues” as their top business challenge. Finding and competing for top talent is only the beginning: once you’ve hired people into the organization, making sure you are identifying and developing high-potential employees is also a significant concern for organizations of all sizes.
If you look at human capital through the lens of Six Sigma (which focuses on improvement by identifying and removing the causes of defects (errors) and minimizing variability), we find that human capital falls short. Today, most organizations are not even reaching the incredibly low bar of 1 Sigma performance in relation to their human capital success rate (hires and promotes). Most organizations would aspire to hit the 1 sigma failure rate of 32 defects per hundred.
While many organizations continually look for ways to improve their strategic business objectives (market-share, productivity, innovation, etc.), they keep missing the elephant in the room – human capital. This is especially important since the success of companies depends greatly on people – the failure of which can be extremely expensive if you get it wrong!
I can point to the most basic part of the interview process as an example. Believe it or not, the average person only spends six seconds looking at a resume and only 10 minutes preparing for an interview. If we think this method is going to get us where we need to be, we are sadly mistaken. We need to come up with a better system.
When looking to improve, most organizations typically turn to tactics such as interviewing more aggressively, investing more time into the hiring process, or even engaging recruiters. Others turn to behavioral interviews but they are not data driven or even measurable.
There needs to be a huge push to stop getting it wrong two-thirds of the time and to start getting it right 90 percent of the time. By using a science-based behavioral assessment methodology, you can immediately increase the success of the people decisions that support business objectives. Behavioral assessments provide insight into employee behaviors and motivations and the critical intelligence needed to determine the right people for the right roles, while at the same time considering the current work environment, culture, and growth objectives.
Take LEDCO, a 25-year-old mobile computing solutions manufacturer. They incorporated behavioral assessments into the process using the Predictive Index (PI) System to understand the behavioral drives and motivational factors of the employees. Using the PI helped LEDCO better calculate the performance of individuals and teams with measurable, comparative data that predicted how individuals are likely to perform in a given leadership role or as part of a specific team.
Over a four year period, the use of PI played an integral role in LEDCO’s 40% compounded annual growth rate – a change so great that it resulted in a shift from being the 5th in market share to 1st.
Recent research from the Aberdeen Group found that 92 percent of best-in-class companies report use assessment data to improve workplace performance. Using data can enable a much more strategic impact by:
- Reducing attrition – analyzing turnover rates, ensuring strong job fit, drawing conclusions about why good people are leaving, and putting measures in place to get them to stay
- Bringing in new talent – making smart hires based on behavioral data and minimizing the number of “bad hires”
- Justifying costs of each function with ROI – proving the value that different roles bring to the organization, even if they are not revenue producing
This type of approach leveraging behavioral analytics enables leaders to uncover the potential points of friction that can threaten success. Armed with this data, you are able to operate from a point of understanding about what steps need to be taken to thrive.
About the Author
Mike Zani provides overall strategic direction for the organization with emphasis on global growth and product development to drive outstanding client results. Prior to PI Worldwide, Mike served as CEO of ShapeUp, a social SaaS wellness platform, where he grew revenues by 600% in three years. Previously, Mike served as President of LEDCO, a manufacturer of rugged computer peripherals. It was at LEDCO where Mike, a customer of PI Worldwide, developed his passion for the Predictive Index as a vital management tool. Mike is a co-founder and partner of Phoenix Strategy Investments, a private investment fund, which acquired PI Worldwide in 2014. He also worked as a strategic consultant at marketing firm Digitas. Mike began his career in marketing and sales with Vanguard Sailboats and was a Coach for the 1996 US Olympic Sailing Team. He holds a B.S. from Brown University and an MBA from Harvard.