Most companies publicly communicate the belief that employees are their most valuable assets. However, if you look privately how they invest in human capital, their actions often do not match the rhetoric. Why? Corporate managers and HR professionals continue to struggle to quantify the value of investments in employees. This lack of clarity causes an unintentional misallocation of human capital budgets. In this webinar, we will explore how employee behaviors lead to real positive or negative financial outcomes for businesses. With clearer key performance indicators, companies can better allocate and measure the results human capital investments.

1. Turning Employee Experience
Into A Financial Strategy
John Frehse Shelley Trout
With: Moderated by:
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2. We believe great businesses are powered by great people. Guided by
decades of experience and innovation, Kronos® offers the industry’s
most powerful suite of tools and services to manage and engage your
entire workforce from pre-hire to retire. And because workforce needs
are constantly changing, Kronos solutions are designed to evolve with
you to help meet the challenges you face every day — regardless of
your industry or where you do business.

3. About the Series
6 Education-packed sessions

4. 4
Click on the Questions panel to
interact with the presenters
www.recruitingbrief.com/webinar-series/tactical-hr
www.humanresourcestoday.com/webinar-series/tactical-hr

5. About John Frehse
John Frehse is a Senior Managing Director at Ankura, based in the New York office. He has more than 20 years of
experience focused on labor and operations strategy.
John has developed and implemented strategies for more than 100 companies, and he delivers to corporate leaders
innovative labor solutions that incorporate solutions to employee needs. His work has spanned a wide range of
industries, including food and beverage, automotive, chemical, electronics, pharmaceuticals, power, call centers,
banking/insurance, distribution, telecommunications, mining, government and healthcare.
John’s professional philosophy is that people are the most valuable resource of every company. His experience has
proven that in order to create long-term success, a thoughtful and methodical approach to labor must be created.
About Shelley Trout
Shelley went to UC Berkeley and majored in Anthropology & Archaeology. After working at the Center of Digital
Archaeology, she became fascinated with digital representations of personality and culture, and now leads Webinar
Production at Aggregage, providing some of the most interesting thought-leaders across a wide variety of industries with
a space to celebrate the diversity, depth, and experience of their professional cultures, personalities, and passions.

6. Negative Engagement

7. I Am The
Smartest
Pursen Hear!

8. (Only my mother thinks I am brilliant!!)
I Am The
Smartest
Person Here!

9. “We believe employees are every
organization’s most valuable
resources.”
REALLY?

10. Values ≠ Value

11. CHROCFO
Small Fissure or Giant Chasm??
Finance Human Resources

12. Different Mindsets & Points-of-View
CHROCFO
Strategic partner to CEO Champion of employees
Every employee a cost Every employee is valuable
Compliance & reporting Compliance & reporting
Deal maker Organization builder
Financial gatekeeper Steward of culture
Drive shareholder value Promote continuity & cohesion
Quantitative (& qualitative) Qualitative (& quantitative)

13. 46%
71%
63%
0% 20% 40% 60% 80%
We have implemented an
enterprise-wide employee…
Employee engagement
metrics lack financial…
Measuring employee
engagement is not a priority.
Organizational Performance Survey of CFOs
2016 Industry Agnostic Survey; n = 237; March 2016
Why Employee Engagement Measures
May Be Necessary But Insufficient
“I intuitively believe in improving
employee commitment and
engagement – what could be the
counter-argument? But, the level
of employee engagement we
have here is not a business
outcome our investors care
about.
The antecedents and
consequences of employee
engagement remain unclear.
Third-party correlation analysis is
insufficient for us. Until we can
map (employee) engagement into
our short- and longer-term
financials, we view investments in
employee engagement programs
as second- or third-tier
allocations.”
− CFO, Public Industrial
Services Company

14. New Times…
Financial capital is abundant but carefully managed; human capital
is scarce but not carefully managed.
Why?
In part, it’s because equity markets have historically measured and
rewarded good management of financial capital. CEOs were held in
high regard for their clever management and allocation of financial
capital.
But today’s best CEOs are equally great at managing financial,
physical and talent capital. This will accelerate as the GAAP Gap
continues to widen.

15. 13.0%
46.8%
25.2%
13.0%
2.2%
23.8%
41.3%
23.3%
9.0%
2.5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Excellent
place to work
Better than
most
About the
same
Somewhat
worse
Worst
company in
the area
Client Normative Database
Survey Says! Compared to Other Companies…

17. I worked at Indeed.com full-time (Less than a year)
Pros
Benefits, catered lunches, nice building
Cons
I would have gladly traded every free lunch, every free snack, and
every day of unlimited PTO for a genial, approachable team leader
as opposed to the nongenial, wholly unsupportive,
unapproachable, abrasive, snarky boss I had. This jerk could have
written, produced, directed, and starred in Horrible Bosses 1 and 2
(and any other sequels). I understand she is no longer with the
company. Good. I'm sure the office is more pleasant now. Too bad
that she didn't leave before I got there.

18. What If You Don’t Care About Them At All?

19. 19
Getting there…
Workforce Engagement
as a Financial Strategy
“Your employees come first. And
if you treat your employees right,
guess what? Your customers
come back, and that makes your
shareholders happy. Start with
employees and the rest follows
from that.”
Herb Kelleher, Founder
Southwest Airlines
Purpose or
Mission
Customer
Experience
Employee
Experience

20. World discovers a new hero

21. 21

23. Impact on the business
• $25,000 to repack/fix the
slide
• 100 Passengers delayed
• Other flights delayed
• Airplane out of service while
repairs took place
23
Steven was under stress
• History of drug/alcohol abuse
• Recently cared for his
deceased father
• Caring for his dying mother
• Challenged by a passenger
What’s the impact?
Could it have been prevented?

24. 24

25. United Airlines Still Hasn’t Quite Gotten There…
25

26. 11 deaths, 184 injuries

27. Takata first said (before all the lawyers
got involved) that propellant chemicals
were mishandled and improperly stored
during assembly, which supposedly
caused the metal airbag inflators to burst
open due to excessive pressure inside.

29. All Companies Say
“Engagement Matters”
Few Companies
Believe This.

30. 30
How value is created
in the contemporary
economy
During the past 4 decades, there
has been a steady decline in
market value attributable to
tangible assets (on balance
sheet), while there’s been a
steady increase in market value
attributable to intangible assets
(off balance sheet).
83%
68%
32%
20%
16%
17% 32% 68% 80% 84%
0%
20%
40%
60%
80%
100%
1975 1985 1995 2005 2015
Components of S&P 500 Market Value
Tangible Assets Intangible Assets
TODAY
*Generally Accepted Accounting Principles
This we refer to as
the GAAP* Gap

31. Because companies don’t understand
how to invest in human capital, they
make bad decisions and drive poor
results.

33. In God we trust. Everyone else bring data.
~ Chief Financial Officer

34. HR has a seat at the table, but…
…often doesn’t have enough to
say.

35. “The head of HR at every
company should be at
least as important as the
CFO.”
− Jack Welch

36. Payroll Burden
True Labor Cost
Straight
Time
Overtime
Double
Time
Health/Other 21.20%
Retirement
Contribution
7.36% 7.36% 7.36%
Social Security 6.20% 6.20% 6.20%
Unemployment 1.10%
401K 4.85% 4.85% 4.85%
Life/LTD 1.59%
Medicare 1.45% 1.45% 1.45%
Total 43.75% 19.86% 19.86%

37. Payroll Ratio
True Labor Cost
Hours Worked Hours Paid
Scheduled Hours 2,080 Hours Worked: 1,702.4
Less: Plus:
Vacation 144.0 Vacation 144.0
Holiday 127.5 Holiday 127.5
Sick 44.1 Sick 44.1
FMLA 53.0 FMLA 53.0
Mat/Pat 5.1 Mat/Pat 5.1
Work Injury 2.0 Work Injury 2.0
Personal-Unpaid 1.8 Personal-Unpaid 0.0
Unexcused-Unpaid 0.1 Unexcused-Unpaid 0.0
Total Hours Worked 1,702.4 Total Hours Paid 2,078.2
2,078.2 (Total Hours Paid) / 1,702.4 (Total Hours Worked)
Hours Paid to Hours Worked Ratio = 1.221

38. Calculation
Base Wage*:
Straight Time Burden:
Pay Ratio:
Calculations:
Straight Time:
True Labor Cost:
=
Overtime: x 1.5000
Adverse Cost of Idle Time:
Adverse True Labor Cost:
Adverse Cost of Overtime:
Overtime Burden: Double Time Burden:
Double Time: x 2.0000
Adverse Cost of Double Time:
Adverse Cost of Straight Time:$0.00
$31.16
$31.16
$31.16
$31.16
43.75%
x 1.4375
19.86% 19.86%
x 1.1986
x 1.1986
1.22
x 1.221 $54.67
$56.01=
$54.67
$54.67$56.01
$54.67$74.69
-
-
= $1.34
= $20.02
$74.69=
Idle Time is 40.69 Times More Expensive Than Overtime
True Labor Cost

39. The Tale of Two Companies….
Company A Company B
Fully Loaded Cost of Straight Time: $54.67 $17.22
Compared to other Companies Pay/Benefits Are Good: 96.0% 77.8%
Management Really Cares About Employees: 15.9% 98.5%
I Feel Like I Am Part of the Company: 53.2% 90.8%
The Management Team Focuses More On Office Workers: 78.2% 21.2%
The Management Team Communicates Will With the Employees: 35.6% 69.2%

40. Did You Know There Is
More Than One
Currency?
1. Cash
2. Fringe Benefits
3. Time Off
4. The chance to make a positive impact
5. Investments in training
6. Visibility
7. Structured mentoring
8. Flexibility
9. Public recognition for performance
10.Leadership enabled success
11.Merit based promotions
12.Etc…………….

41. Time Off
FMLA/Sick – 7% of Employees Responsible for 60% of FMLA/Sick

42. Let’s Look at the True Cost of
Absenteeism:
OT Fill-In: 400 ee * 3% unplanned absence * $1.34 *
2080 hours/year = $33,446
Person Absent: 400 ee * 3% unplanned absence * $18.00
in benefits * 2080 hours/year = $449,280
Total Cost: $482,726

43. Work Days 260
Days Off 104
Weekends Off (Full) 52
Longest Break 2 days (52x)
Max. Number of Shifts in a Row 5
120-40, Balanced, 1 X 3 Crew, 8-Hour, Fixed, Fixed, Every Weekend Off
Crew/
Week
Mon Tue Wed Thu Fri Sat Sun Totals
1 8 8 8 8 8 - - 40
Avg. 40
8-Hour Shifts - 5 Day Coverage

44. Work Days 173
Days Off 191
Weekends Off (Full) 52
Longest Break 6 days (17x)
Max. Number of Shifts in a Row 3
120-40, Balanced, 3 X 2-Crew, 12-Hour, Fixed, Rotating, Long Weekend
Crew/
Week
Mon Tue Wed Thu Fri Sat Sun Totals
1 12 12 12 - - - - 36
2 - - 12 12 12 - - 36
3 12 12 - 12 12 - - 48
Avg. 40
12-Hour Shifts - 5 Day Coverage

45. 168-42, Balanced, 4 X 3-Crew, 8-Hour, Fixed, Rotating Model
Work Days 273
Days Off 91
Weekends Off (Full) 13
Longest Break 3 days (13x)
Max. Number of Shifts in a Row 7
Crew/
Week
Mon Tue Wed Thu Fri Sat Sun Totals
1 - 8 8 8 8 8 8 48
2 8 - - 8 8 8 8 40
3 8 8 8 - - 8 8 40
4 8 8 8 8 8 - - 40
Avg. 42
8-Hour Shifts - 7 Day Coverage

46. 168-42, Balanced, 2 X 2-Crew, 12-Hour, Fixed, Rotating EOWO
Work Days 182
Days Off 182
Weekends Off (Full) 26
Longest Break 3 days (26x)
Max. Number of Shifts in a Row 3
Crew/
Week
Mon Tue Wed Thu Fri Sat Sun Totals
1 - 12 12 - - 12 12 48
2 12 - - 12 12 - - 36
Avg. 42
12-Hour Shifts - 7 Day Coverage

47. Human Equity Valuation™ & Reporting is Inevitable

48. But If You Do Want To Change…..
Homework:
(for which I have no authority to assign!)
1. Take Inventory of Leveraged Currencies
2. Do True Labor Cost Calculation
3. Start With Simple: Cost Out Absenteeism

49. 49
Q&A
Shelley Trout
With: Moderated by:
Senior Managing Director, Ankura
Linkedin page: linkedin.com/in/johnfrehse/
Twitter ID: @ScheduleDoctor
Website: www.ankura.com/
Webinar Production, Aggregage
Linkedin page: /in/shelleytrout/
Twitter ID: @hrposts / @recruitingbrief
Website: www.aggregage.com
www.recruitingbrief.com/webinar-series/tactical-hr
www.humanresourcestoday.com/webinar-series/tactical-hr
John Frehse