The HR Function has evolved significantly over the years from Policy Policing, Labour Management, Personnel Management to Human Resource Management/Human Capital Management until recently Strategic HRM, Business HR, Business Partnership, Transformational HR, Talent Management and HR Analytics. The HR Function is not devolved from the Big Data Bug. Big data has become such a ubiquitous phrase that every Function or Department in the organisation is now, under pressure to use it to show real value to the business.
HR Analytics or otherwise called Human Capital Analytics or People Analytics is the use of people data in analytical processes to solve real business problems. The business imperative for HR Analytics stem from the fact that HR has huge amount of data it has amassed over the years scattered across business. It uses both people data, collected by HR systems and business information. At its core, it enables HR practitioners and employers to gain insights into their workforce, HR policies and practices, with a focus on the human capital element of the workforce and can ultimately inform more evidence-based decision making (CIPD). It is mainly to unlock valuable insights from data for informed decision making as shown thus;
Significant investment is being made to develop HR analytics capabilities, consequently, different organisations are on different levels of the analytics curve. It is important to identify where an organisation is on the HR analytics journey (see diagram below), as this will determine the support, resources and investment required to scale up.
Integrating HR analytics into core business activities enable better strategy execution, accountability for talent investment and optimisation of people investment. While several business leaders are not very optimistic about the capability of HR to use data in creating value for the business, there are opportunities for HR. According to the CEB CLC HR Analytics Survey, “less than 18% of business Leaders trust the talent data and insights coming out of HR. Even worse, 80% of those leaders do not believe their HR staff have the skills to improve their analytic capabilities”.
The key questions/issues business leaders or CEOs are expecting HR to address with the use of analytics include:
- Hiring & Onboarding – How can we determine which profiles are right for the job? Which experienced hires are likely to succeed?
- Workforce Planning & Exit – Which roles or departments are most susceptible to flight within the next 1 to 2years? What is a predictor of good performance after 4/5years of leaving school – is it GPA, class of degree, work experience, age, attitude etc.? Is exit prevalent in specific workforce segments or departments? Are we losing the right people (low performers) or the wrong people (high performers or critical roles/skills)?
- Leadership & Succession Planning – what do the future leaders of the company look like – are they getting younger or more experienced? What demographic segments will make better leaders or managers? Which employees are most likely to be successful as future leaders? What work styles or leadership style result in high performance across our branches?
- Performance, Learning & Development – how can we predict the readiness of each employee to capitalise on learning opportunities? What value are we getting from training investments? Any correlation between training and performance? What factors contribute to predictable high performing sales or marketing person?
- Retention & Engagement – How can we extract high-employee value? How can we predict potential attrition of our high performing employees and focus efforts on them? Which teams are more collaborative or engaged than others? What factors increase employee stickiness?
- Culture, Collaboration & Diversity – How do we determine an individual’s degree of alignment with the current or target company’s culture? How do we measure collaboration in the company? Which departments are under-performing and what characteristics defines the team and what is the leadership style in those departments? What is the culture quotient or culture intelligence of our global leaders? How do we increase diversity?
Building HR Analytics capabilities is a journey and will not happen overnight. It is imperative for HR to build the capability for establishing structures and building requisite skills to make best use of the enormous data that is available. The key requirements for establishing an HR Analytic driven function starts with getting the basics right which entails having “data” including:
- Defining the HR Data Strategy and aligning to business priorities, needs and issues. HR should discover what is important to the executive and business leaders to determine what to measure and how. HR needs to understand the difference between HR metrics and HR analytics as presented in the Maturity curve. For example, time to hire, absenteeism rate, turnover rate are HR metrics and are just numbers. If turnover rate is 10% – the question is so what? Analytics on the other hand, goes beyond just the numbers to determine why people are leaving or the causes of high turnover? Find out if the trend is going up or down? Determine how turnover relates to or affect performance – is it high performers that are leaving or low performers? Etc.
- Getting the main input for analysis – Data must be in the right quality. It must also be available, accessible and in the right form to enable analysis. There is need to bring data in disparate systems or locations together (i.e. paper files, spreadsheets, HRIS, Cloud etc), clean up the data and define standards for measurement and reporting, to align with data need of the organisation. Cleaning HR data is a long and laborious process that can take years to clean up and put together
- Building capability to carry out analysis and draw insights to tell a meaning or story for informed decision making. Providing insights is not about crunching numbers but understanding the “why” behind the data to either predict the future or describe the current. It is not about quantity of data but about the logic used to link metrics to results and connect business outcomes. It is about asking the right questions within the context of the business to enable the right hypothesis testing.
Developing HR analytics processes, structure and infrastructure
- Deploying the required systems or technology and tools for analysis. There are several analytics solutions that can be integrated including MS-excel and access
- Building HR analytics skills and competencies. The key diverse skill sets for the HR analytics team are consulting, statistics and research. The team should also have strong critical thinking and problem- solving skills, analytics acumen and business knowledge. They should be curious – curiosity drives deeper and deeper into data, like digging for gold. Experience building queries in SQL, VBA and macros in Access and Excel are also very good. Knowledge of industrial and organisational psychology and scientific methodology are helpful skills.
Having the right capabilities, knowing the right questions to ask and knowing where and what to hunt for relevant data can make HR become a “strategic asset”. It may be a tortuous journey to fully develop the capabilities but like the old saying “better late than never”. It is also important to seek professional help in achieving the analytics objectives.