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.
Siemens Healthineers gains EU nod for $16.4 billion Varian buy
BRUSSELS (Reuters) – EU antitrust regulators on Friday cleared with conditions Siemens Healthineers’ $16.4 billion acquisition of U.S. peer Varian, paving the way for the German health group to become a world leader in cancer care therapy.
The European Commission said Siemens Healthineers pledged to ensure that its medical imaging and radiotherapy equipment will work with rivals in return for its approval, confirming a Reuters story. The pledge is valid for 10 years.
“High quality medical imaging and radiotherapy solutions are crucial to diagnose and treat cancer. The efficiency and safety of treatment relies on the ability of these products to work together,” European Competition Commissioner Margrethe Vestager said in a statement.
Varian is the leader in radiation therapy with a market share of more than 50%. The deal received the U.S. antitrust green light in October last year.
(Reporting by Foo Yun Chee)
Battling Covid collateral damage, Renault says 2021 will be volatile
By Gilles Guillaume
PARIS (Reuters) – Renault said on Friday it is still fighting the lingering effects of the COVID-19 pandemic, including a shortage of semiconductor chips, that could make for another rough year for the French carmaker.
Renault reported an 8 billion euro ($9.7 billion) loss for 2020 which, combined with gloomy take on the market, sent its shares down more than 5% in late morning trading.
“We are in the midst of a battle to try to manage a difficult year in terms of supply chains, of components,” Chief Executive Luca de Meo told reporters. “This is all the collateral damage of the Covid pandemic… we will have a fairly volatile year.”
De Meo, who took over last July, is looking at ways to boost profitability and sales at Renault while pushing ahead with cost cuts. There were early signs of improving momentum as margins inched up in the second half of 2020.
The group gave no financial guidance for this year, although it said it might reach a target of achieving 2 billion euros in costs cuts by 2023 ahead of time, possibly by December.
Executives said they were confident the carmaker could be profitable in the second half of 2021, but that they lacked sufficient market visibility to provide a forecast.
Renault struck a cautious note, saying it was focused on its recovery but warned orders had faltered in early 2021 as pandemic restrictions continued in some countries.
The group is facing new challenges as the European Union tightens emissions regulations and after rivals PSA and Fiat Chrysler joined forces to create Stellantis, the world’s fourth-biggest automaker.
The auto industry endured a tough 2020 but a swift rebound in premium car sales in China helped companies such as Volkswagen and Daimler to weather the storm.
Auto companies globally have since been hit by a shortage of semiconductors that has forced production cuts worldwide.
“The beginning of the year has shown some signs of weakness,” De Meo told analysts, but added the chip shortage should be resolved by the second half of 2021. “We have taken the necessary measures to anticipate and overcome challenges.”
Renault estimated the chip shortage could reduce its production by about 100,000 vehicles this year.
The group was already loss-making in 2019, but took a sharp hit in 2020 during lockdowns to fight the pandemic, which also hurt its Japanese partner Nissan.
Analysts polled by Refinitiv had expected a 7.4 billion euro loss for 2020. The group posted negative free cash flow for 2020.
The 2018 arrest of Carlos Ghosn, who formerly lead the alliance between Renault and Nissan, plunged the automakers into turmoil.
In a further sign that the companies have been working to repair the alliance, De Meo told journalists that Renault and Nissan will announce new joint products together in the coming weeks or months.
Renault has begun to raise prices on some car models, and group operating profit, which was negative for 2020 as a whole, improved in the last six months of the year, reaching 866 million euros or 3.5% of revenue.
Analysts at Jefferies said the operating performance was better than expected. Sales were still falling in the second half, but less sharply.
Renault is slashing jobs and trimming its range of cars, allowing it to slice spending in areas like research and development as it focuses on redressing its finances. It is also pivoting more towards electric cars as part of its revamp.
It was already struggling more than some rivals with sliding sales before the pandemic, after years of a vast expansion drive it is now trying to rein in, focusing on profitable markets.
De Meo told journalists on Friday that the French carmaker will make three new higher-margin models at its Palencia plant in Spain, where manufacturing costs are lower, between 2022 and 2024.
($1 = 0.8269 euros)
(Reporting by Gilles Guillaume and Sarah White in Paris, Nick Carey in London; Editing by Christopher Cushing, David Evans and Jan Harvey)
UK delays review of business rates tax until autumn
LONDON (Reuters) – Britain’s finance ministry said it would delay publication of its review of business rates – a tax paid by companies based on the value of the property they occupy – until the autumn when the economic outlook should be clearer.
Many companies are demanding reductions in their business rates to help them compete with online retailers.
“Due to the ongoing and wide-ranging impacts of the pandemic and economic uncertainty, the government said the review’s final report would be released later in the year when there is more clarity on the long-term state of the economy and the public finances,” the ministry said.
Finance minister Rishi Sunak has granted a temporary business rates exemption to companies in the retail, hospitality, and leisure sectors, costing over 10 billion pounds ($14 billion). Sunak is due to announce his next round of support measures for the economy on March 3.
($1 = 0.7152 pounds)
(Writing by William Schomberg, editing by David Milliken)
FTSE 100 ends higher on improving economic activity; gains for the third week
By Shivani Kumaresan, Amal S and Shashank Nayar (Reuters) – London’s FTSE 100 ended higher on Friday after the economy...
European shares end higher on strong earnings, positive data
By Sagarika Jaisinghani and Ambar Warrick (Reuters) – Euro zone shares rose on Friday, marking a third week of gains,...
UK bond yields head for biggest weekly rise since June
LONDON (Reuters) – British government bond prices fell again on Friday as a global debt sell-off continued on expectations of...
Siemens Healthineers gains EU nod for $16.4 billion Varian buy
BRUSSELS (Reuters) – EU antitrust regulators on Friday cleared with conditions Siemens Healthineers’ $16.4 billion acquisition of U.S. peer Varian,...
Teed off: As COVID fuels S. Africa’s housing crisis, golf courses feel the heat
By Kim Harrisberg JOHANNESBURG (Thomson Reuters Foundation) – It sounds like a developer’s dream: A greenfield site in the heart...
UK might need negative rates if recovery disappoints – BoE’s Vlieghe
By David Milliken and William Schomberg LONDON (Reuters) – The Bank of England might need to cut interest rates below...
UK economy shows signs of stabilisation after new lockdown hit
By William Schomberg and David Milliken LONDON (Reuters) – Britain’s economy has stabilised after a new COVID-19 lockdown last month...
Dollar extends decline as risk appetite favors equities
By Stephen Culp NEW YORK (Reuters) – The dollar lost ground on Friday, extending Thursday’s decline as improved risk appetite...
Bitcoin hits $1 trillion market cap, soars to another record high
By Gertrude Chavez-Dreyfuss and Tom Wilson NEW YORK/LONDON (Reuters) – Bitcoin touched a market capitalization of $1 trillion as it...
Shares rise as cyclical stocks provide support; yields climb
By Saqib Iqbal Ahmed NEW YORK (Reuters) – A gauge of global equity markets snapped a 3-day losing streak to...