Case Study Analysis

CASE: HR44 (A)

DATE: 10/11/17

ROYAL BANK OF CANADA:

USING PEOPLE STRATEGY AND ANALYTICS

TO DRIVE EMPLOYEE PERFORMANCE (A)

INTRO

In 2015, the Royal Bank of Canada’s Vice President of Human Resources, Per Scott, was driving

forward his new agenda: collecting and analyzing huge volumes of data about RBC employees

and customers to help the company achieve its strategic goals. Scott spearheaded this agenda in

2012 when he brought on Robert Carlyle, Senior Director of Workforce Management, to build a

People Analytics team, and Ivy Chiu, Director of People Strategy, to bring her deep knowledge

of corporate strategy to the human resources (HR) department. Chiu was in charge of building

bridges where gaps might exist between RBC’s business strategies and HR initiatives. RBC collected data from a number of sources, such as sales figures, branch performance metrics,

customer evaluations, employee evaluations and employee opinion surveys. The team also used

data about employees, such as tenure and performance. Scott, Carlyle and Chiu’s initial goals

were to use the data to improve operational and employee performance, determine and improve

managerial effectiveness, and select the right individuals to promote or hire.

As a large and prominent bank in Canada, RBC had five business segments: Personal &

Commercial Banking, Wealth Management, Insurance, Investor & Treasury Services and Capital

Markets. The largest financial institution in Canada, RBC had almost 80,000 employees and 16

million clients worldwide. Revenue for FY2017 was C$38.4 billion, with net income of C$10

billion. RBC had received many accolades in the previous few years: Global Retail Bank of the

year in 2015 and 2014 (Retail Banker International), best bank in Canada (Global Finance),

most trusted investment bank globally (the Economist), and fourth strongest bank in the world

(Bloomberg’s Markets Magazine).

Debra Schifrin and Professor Kathryn Shaw prepared this case as the basis for class discussion rather than to

illustrate either effective or ineffective handling of an administrative situation.

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This document is authorized for use only by Alex Chen in HR Analytics taught by David Kruetter, Columbia University from Nov 2018 to Apr 2019.

p. 2Royal Bank of Canada: Using People Strategy and Analytics to Drive Employee Performance (A) HR44 (A)

Human Resources departments across industries had long talked about using data analysis to

help companies improve performance, but the advent of big data created a step change in the

ability to make that happen. As data storage became cheaper over time, companies realized they

could measure and analyze much more data (by orders of magnitude), and create a competitive

advantage if they used the data effectively. These new capabilities also allowed companies to

innovate around the acquisition of data.

With the abundance of data available, and many potential ways to use it, RBC chose projects that

had the greatest potential ROI. For a project to have value, business units needed to collaborate

with the People Analytics team to develop empirical insights that drove tangible change in

business practices. They would begin by identifying ways in which businesses could act on the

data analytics, and make those actions appealing to managers so they would implement changes.

CONNECTING HR TO STRATEGY

After attending Stanford Graduate School of Business and working at management consulting

firm Bain & Company, Chiu came to RBC to build out the strategic thinking capability of HR.

Scott and Chiu recognized that if RBC were going to develop a performance strategy around a

business unit or function (such as sales or operations), the company needed to build an HR

strategy to facilitate and achieve it. “We knew analytics can provide opportunity-specific benefits, but for a systemic and sustained stream of value, we had to elevate and integrate

strategic planning and analytics together,” said Scott. Chiu said the issues that People Strategy examined included workforce planning, employee engagement, recruitment, and culture:

People implications arise from any business strategy we ultimately decide to

pursue. If we find areas where potential gaps exist to derail us from achieving our

business strategy, we work with stakeholders in business segments and in HR to

conduct the necessary analyses, mitigate risks, and build plans to bridge these

gaps. For example, the banking industry is facing a changing competitive

landscape due to disruption in technology and shifts in demographics that affect

how clients engage with their bank. Business leaders at RBC work with the

People Strategy and Analytics teams to ensure the enterprise has the right

capabilities to achieve long-term success.

BUILDING THE PEOPLE ANALYTICS TEAM

The People Analytics team “deconstructed backwards” early on, looking at where the business decisions in the corporate process were located, and where people decisions could have an

impact. The team asked themselves the following questions: 1) What are the management

routines that need to be put into place or adapted so that we consistently make better decisions

using data? 2) What are the analytics and reporting that need to be put into place to support those

specific decision points in those processes? and 3) What is the data and technology that needs to

underpin all of that?

To be able to answer these questions, Carlyle built the team not as a research group, but as a

group that could support ongoing movement to improve business practices and decisions,

whether they were tied into budgets, sales planning, or other ad hoc issues that arose. The team

For the exclusive use of A. Chen, 2018.

This document is authorized for use only by Alex Chen in HR Analytics taught by David Kruetter, Columbia University from Nov 2018 to Apr 2019.

p. 3Royal Bank of Canada: Using People Strategy and Analytics to Drive Employee Performance (A) HR44 (A)

consisted of scientists, programmers, data analysts, an actuary, and others with varied HR

experience. Carlyle has a doctoral degree in strategic planning and spent his career prior to RBC

in consulting.

The work of People Analytics included forecasting: using simulations and system dynamic

models to build forecasts of the workforce. This enabled the team to know the likely impact of

any intervention the business made in terms of the flow of talent through the organization or the

shortages or surpluses that RBC might have.

INNOVATIONS IN THE ACQUISITION OF DATA

RBC collected and analyzed classic HR data, such as employee demographics, work history,

performance evaluations, the Employee Opinion Survey (EOS) asking employees annually about

their views of RBC and of their managers, and employee attrition figures. The People Analytics

team integrated that data with business outcome data, such as sales figures, customer evaluations

of services, and customer loyalty measured by “Net Promoter Scores” (assessing how often a customer would recommend RBC to others). Carlyle wanted to ensure that RBC could

specifically identify what was driving business outcomes, as opposed to just having interesting or

anomalous findings:

Actually saying that we know something drives a business outcome has made a

big difference. We are starting to see the transformation: If we find we can

improve sales through better managers, increased employee diversity, and early

career coaching to get people into jobs where they can thrive – then leaders see that their sales or performance strategy has HR elements in it. This would be a

sales performance strategy rather than an HR strategy. That recognition is already

happening among some business leaders, and they are taking action based on it.

The goal is to make People Analytics, housed within HR, add clear business value as business

units rely on it to increase their performance.

USING PEOPLE ANALYTICS TO ACHIEVE PERFORMANCE GAINS

The data analysis process that RBC followed was for all the analytics to be done by a central

team in People Analytics in collaboration with teams in the business units, such as the Client

Experience Design and Insights Group that focuses on better serving clients. The first step was

to create an insight, which was achieved by using data analytics aimed at addressing a customer-

related improvement or question. The two groups then worked with HR business partners, who

were the HR professionals in the business units, to shape the analysis for the business unit. The

insight ideally would lead to action, and HR business partners would collaborate with non-HR

business leaders to develop action plans. Ultimately, business leaders would choose the action

plans for the projects that use People Analytics insights to improve business performance.

Business leaders had complete discretion over what actions, if any, they would implement.

The first step in adding value through People Analytics was to structure and get to know the

RBC data, determine what insights they might already have that they could pass on, or what new

projects they should recommend for extensive work with the business units. The team

For the exclusive use of A. Chen, 2018.

This document is authorized for use only by Alex Chen in HR Analytics taught by David Kruetter, Columbia University from Nov 2018 to Apr 2019.

p. 4Royal Bank of Canada: Using People Strategy and Analytics to Drive Employee Performance (A) HR44 (A)

occasionally developed interesting insights that it had not yet figured out how to execute on to

raise business performance, and those insights would remain on the shelf.

Example #1: Improving Managerial Effectiveness

In 2010, the HR group had developed what they believed had shown to be the important traits of

managers at RBC. They advertised a set of traits that are displayed in their “People Management Framework” (See Exhibit 1). However, as the People Analytics group grew in size, they realized in 2011 that they could run a complementary data-driven initiative called the

“Management Effectiveness Program.” People Analytics could use internal RBC data to empirically identify what the traits of great managers are, to identify who might or might not be a

great manager, and to help those managers who could benefit from coaching.

The Manager Effectiveness Program began by using the Employment Opinion Survey (EOS) in

a new way. HR chose a subset of 12 questions from the EOS in which direct reports evaluated

their managers on effectiveness. HR then used that data to rank managers. Those EOS questions

fell into three subcategories:

1) Driving Results

2) Enabling High Performance

3) Strengthening Partnerships & Relationships

In these questions, employees were asked if they agreed with statements such as: “I have the information, tools and resources I need in order to achieve my goals” (Driving Results); “My manager helps me find opportunities for professional growth and development” (Enabling High Performance); and “Differing opinions are openly discussed in reaching decisions in my unit” (Strengthening Partnerships & Relationships). People Analytics used answers to these 12

questions to develop one overall Manager Effectiveness Index for each manager.

Once the Managerial Effectiveness Index was calculated for each manager, the managers were

placed into four quartiles based on their Index. The bottom quartile was the group of managers

who most needed development (such as coaching or training) or perhaps those who would not be

helped by such interventions and should be moved into non-managerial roles. To choose the

specific managers from the bottom quartile whom HR would either put in development programs

or re-assign, HR also looked at some context, including tenure in a management role and

whether a manager entered a challenging or turn-around situation. For example, if a manager

had not improved over time with tenure, perhaps he or she did need to move to another role.

The Management Effectiveness Program began in 2011 with a pilot in RBC’s Canadian Banking Operations group focusing on the 100 managers most in need of intervention. Interventions for

these weaker managers included one or all of the following:

For the exclusive use of A. Chen, 2018.

This document is authorized for use only by Alex Chen in HR Analytics taught by David Kruetter, Columbia University from Nov 2018 to Apr 2019.

p. 5Royal Bank of Canada: Using People Strategy and Analytics to Drive Employee Performance (A) HR44 (A)

1. Formal Coaching: Being observed by their supervisory managers, who provided individual

coaching on a biweekly or monthly basis. RBC found this to be the most effective

intervention.

2. Feedback: Meeting with their supervisory managers to receive feedback at biweekly or

monthly check-in meetings – and as needed and when employee engagement scores were published. Managers also received feedback from their direct reports.

3. Formal Training: Taking part in a group training and coaching program that RBC developed.

Over the next few years, the Manager Effectiveness Program grew. By 2015, thousands of

Canadian Banking Operations managers were given the Manager Effectiveness Index scores, and

RBC took some sort of action for about 10 percent of them – again, typically the lowest performing group.

The process of analyzing the data to create the Management Effectiveness Index allowed the

People Analytics team to use their 71,000 employee comments in the EOS survey to update their

list of the characteristics of top managers. This list is displayed in Exhibit 2, and was widely

circulated in RBC.

Example #2: Diagnosing Retail Branch Performance Drivers

The People Analytics team and the Client Experience Design and Insights team collaborated on

an initiative to diagnose whether any specific branch, region, or product innovation was not

doing as well as it could be – and why not. RBC surveyed their retail client after a customer interaction, to identify different attributes of that interaction and overall satisfaction with RBC.

The teams aggregated customer survey results in RBC’s retail branch network with customer loyalty data and link these customer outcomes to employees of the retail branches. They had

700,000 customer survey data points that they could attribute to specific employees who worked

directly with customers in the retail branches. RBC used that data to monitor its Net Promoter

Scores and the customer satisfaction level for its branches. “Because we can tie this back to our

employees and service staff, we can understand the different drivers of performance,” said Carlyle. RBC could link customer evaluations and loyalty to the Employee Opinion Survey

(EOS) submitted by each employee, where the EOS survey has not only the manager evaluations

used in Example #1 on Manager Effectiveness but also questions of employees on things that

they did in their day-to-day work.

CHOOSING PROJECTS & DETERMINING ROI

In determining which projects to prioritize for using data analytics (like the two projects

described above), the HR team made ROI estimates for each alternative project. For example, for

the Manager Effectiveness Program, the team did a quick assessment of the kind of variability

that existed between top and bottom performers (and the number of employees in each group)

and then factored in how easy or hard it would be to implement action to turn around managers’ performances. The People Analytics team always focused on projects that connected with

business outcomes. For example, in looking at improving retail branch performance (in their

second project above), Carlyle said, “If improving a branch performance from poor-to-good is 10

For the exclusive use of A. Chen, 2018.

This document is authorized for use only by Alex Chen in HR Analytics taught by David Kruetter, Columbia University from Nov 2018 to Apr 2019.

p. 6Royal Bank of Canada: Using People Strategy and Analytics to Drive Employee Performance (A) HR44 (A)

points on the Net Promoter Score, and good-to-great is another 10 points – I’m going to do this because the business value created is enormous.”

Carlyle added that for the more strategic projects, it came down to the underlying value of the

strategy: “If it is around transforming to more digitization in banking, that is an upside of over a

billion dollars to RBC, and quite frankly it’s driven by the people who are acting in about 200

critical roles, so our analysis around helping people in those 200 roles outweighs anything else

we can do.”

CONCLUSION

As HR continued to grow and develop its capabilities, it had begun to be much more rigorous in

running the HR strategy as a portfolio based on the likely impact of its actions, arising from the

insights created by data analyses. As such, it was focusing HR strategy on the areas of highest

potential impact. Scott said, “We’ve seen the impact that people and culture have on business performance only grow in recent years and our experience is that the strategic and analytic

capabilities of HR must keep growing to keep pace.”

For the exclusive use of A. Chen, 2018.

This document is authorized for use only by Alex Chen in HR Analytics taught by David Kruetter, Columbia University from Nov 2018 to Apr 2019.

p. 7Royal Bank of Canada: Using People Strategy and Analytics to Drive Employee Performance (A) HR44 (A)

Exhibit 1

RBC People Management Framework: Traits of Good Managers

(Determined by the reflections of the HR group in 2010)

Source: Royal Bank of Canada.

For the exclusive use of A. Chen, 2018.

This document is authorized for use only by Alex Chen in HR Analytics taught by David Kruetter, Columbia University from Nov 2018 to Apr 2019.

p. 8Royal Bank of Canada: Using People Strategy and Analytics to Drive Employee Performance (A) HR44 (A)

Exhibit 2

Top 10 Traits of Great Managers

(Determined by 71,000 RBC Employee Comments from the Employee Opinion Survey)

1. Genuine: Managers show interest in and respect for employees, express confidence in their

abilities and recognize their contributions.

2. Inspiring: Managers model effective behaviors, provide a clear vision to strive towards and

support diverse team members and perspectives.

3. Fair: Managers are respectful, equitable and honest when interacting with, managing and

evaluating employees.

4. Decisive: Managers make decisions quickly and proactively.

5. Optimizing: Managers make work easier for their employees by solving problems, removing

barriers, simplifying processes and improving program and service delivery.

6. Directive: Managers identify clear team and individual goals while supporting employees in

managing workloads, balancing competing priorities and reducing stress.

7. Communicative: Managers regularly share and receive open and honest feedback to improve

individual, team and own performance.

8. Supportive: Managers collaborate and support the work of their employees by providing

employees with the required information, resources and up-to-date tools to get work done while

remaining accessible and responsive.

9. Development-focused: Managers provide informed and accurate coaching, guidance and

development activities, so employees can ensure they are always learning new knowledge, skills

and capabilities required for current and future roles.

10. Empowering: Managers place trust in their employees and team to work autonomously and

collaboratively while encouraging employees to advance their own ideas and opinions.

For the exclusive use of A. Chen, 2018.

This document is authorized for use only by Alex Chen in HR Analytics taught by David Kruetter, Columbia University from Nov 2018 to Apr 2019.