People Analytics in the Era of Big Data

CHAPTER 10 Employee Lifetime Value and Cost Modeling

Pasha Roberts

Chief Scientist, Talent Analytics, Corp.

How far would Moses have gone if he had taken a poll in Egypt?

—Harry S. Truman

UNDERSTANDING THE MOST EXPENSIVE ASSET

Practically every business shares the same biggest cost—employees. This makes sense, because even in this age of robots and computers, human talent is behind everything that a company does. People are the source of innovation, growth, and competitive edge for every company.

Given this importance, it’s a bit strange that data science is only beginning to look inward at the workforce. We have measured the consumer behavior from every angle. We can quote the lifetime value (LTV) of our customers to three decimal points, though we don’t really know them. Our employee relationships are deeper, longer-term, stickier, and more laden with potential value than customers in almost every industry.

But most hiring and employee development happen by intuition or chance. Long-term workforce planning is done at only a very high level for very common roles. Rules of thumb and industry benchmarks from magazine articles dominate employee strategy. However, there are more rigorous and methodical methods available.

ARE EMPLOYEES COSTS OR ASSETS?

From the perspective of generally accepted accounting principles, most employee expenditures are considered to be costs. Employees are not subject to depreciation, as are machines, for example. This isn’t changing anytime soon. ...