Beware the Hidden Risks in Business Analytics

By: | November 1, 2018 • 2 min read

John (Jack) Hampton is a Professor of Business at St. Peter’s University, a core faculty member at the International School of Management (Paris), and a Risk Insider at Risk and Insurance magazine where he was named a 2018 All Star. He was Executive Director of the Risk and Insurance Management Society (RIMS), dean of the schools of business at Seton Hall and Connecticut State universities, and provost of the College of Insurance and SUNY Maritime College in New York City.

There was no way that competitors were a serious threat to Nokia at the turn of the 21st century. Its revenues and profits exceeded $20 billion and $2.5 billion respectively and 55,000 employees were making and selling mobile phones that dominated the markets of Europe, Africa and Asia. The once aggressive Motorola was fading. No competition came from Google as it concentrated on search engines. Samsung was a dull Korean industrial complex.

Advertisement




Thus, we have one of the earliest examples of the misunderstanding of business analytic risk. Apple’s quirky Steve Jobs paid little attention to flawed data that forecast a limited market for smartphones. His success is an early warning sign of opportunities and risks arising from big data.

By way of background, business analytics can be traced back to 1908 and Henry Ford’s Model T automobile. Data was analyzed to help Ford build low-cost cars offering durability, versatility and ease of maintenance. Today, companies collect and analyze massive databases to obtain 21st century competitive advantages. Everybody’s in the game.

A recent count shows 137 U.S. colleges and universities offer degree programs in business intelligence, data science or business analytics. In all the programs, high-level programming languages, regression analysis and other powerful tools mathematically and visually describe relationships among independent and dependent variables. If we know causation or correlation, we gain a better understanding of how to take advantage of current trends and changing markets.

To win the race, we may need to pay more attention to the driver.

All of this is good until we introduce risk management. Many schools are taking a narrow mathematical approach to big data. They may not be preparing students to interpret data in the context of business processes and market behavior. Their students may not be encouraged to recognize that analytics produce more accurate results if they are developed with a curiosity about changing non-quantitative trends and behaviors.

Evidence to support this contention comes from factors including:

  • Massive Systems. We are linking data from financial, health care, credit cards and personal behaviors into a single database. The potential is enormous for complexity to destroy data validity and reliability.
  • False Accuracy. Quantitative tools often overpower the data. If we multiply 4 times 76.34715, we cannot claim accuracy to the level of five decimal points.
  • Limited Perspective. We do no one any favors teaching business analytics without a framework of business, psychology and critical thinking.

Identifying strategies based on prior statistical relationships is only valid when the analyst considers how current events might be changing the data. Absent this recognition, business analytics is making predictions about the past, not the future.

Advertisement




Should we be worried when business analytics is analogous to a race track where owners are going ’round and ’round while constantly seeking new ways to outwit competitors? In this context, regression analysis is a Ferrari. The problem is not the vehicle. To win the race, we may need to pay more attention to the driver.

From a risk management perspective, schools should ensure programs in business intelligence and data science contain content beyond high-level programming languages and complex quantitative techniques. All work and no play makes Jack a dull boy. All regression and little understanding of the context of business and changing markets produces results that can be horribly misleading.

Just ask the energetic and talented managers who were forced into early retirement at Nokia.

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

Advertisement




That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

Advertisement




Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]