“Dear CEO -tell me- what keeps you awake at night?”
This simple question might be key to an adding value HR, the effectiveness of management decisions and competitive advantage in a demanding marketplace.
Starting from relevant business issues that are real concerns for the board of directors, such as cost efficiency, M&A, organisational design, strategic workforce planning, …, is the best way for HR to play its strategic role and to be of added value to the business. We all know that.
Too much to do = no time to think?
The strategic role of HR has been streamlined for quite a long time by eminent experts such as Dave Ulrich, but is very often uneasy to apply in many organisations because of the utmost operational nature of HR.
Covering the main HR processes throughout the yearly HR lifecycle is extremely time and energy consuming, thinking for instance of staffing & onboarding, learning & development, performance, compensation & benefits benchmark, ……without even mentioning the HR business partner role, which is most often a balancing act where little anticipation can be observed. Unsurprisingly there is no time or resources left to reflect on things from a distance and linking observations. No time for feedback and debrief on these findings with the business. Often a too hasty call to action, based on gut feeling, rule of thumb and leap of faith. And this regardless of the excellent skills of HR people in our Belgian organisations.
It is rather a matter of time and resources that makes of HR a do’er more than a (collaborative) think’er, at least in the eyes of the business managers.
I have been struck more than once, in my own freelance experience, by the variety of cultures and organisational structures HR must fit in, from the small company where the HR person -when there is one- is overwhelmed by personnel administration, going through the middle sized company where the smooth running of the HR operations is the biggest and often only challenge, to the large organisation where HR is segmented in functional expertise centers and project teams very often disconnected of each other and consequently disaligned of the real business needs and concerns.
In all cases, a certain amount of frustrations is experienced on all sides, HR and business. Does that ring a bell?
HR Analytics: 4 Maturity Levels
So, dear manager and HR fellow, the common thread here sounds pretty self-evident: people analytics, or somewhat broader, HR Analytics. A fact-based and data-driven approach for better and more objective management and people decisions. A combination of HR, finance, and data management where IT and statistics play a great part as well.
Some kind of hype, I give you that. A handful of highly skilled experts are talking (and walking) the talk on the international scene of HR analytics, such as David Green, Josh Bersin, and Erik Van Vulpen to name some of them.
But no, it is not only a hype and should not be a management fad either. HR Analytics is actually a very useful function providing that its scope of action is carefully adapted to the size and culture of each company. There is no one-fits-all.
In his book, “The basic principles of people analytics” (2016), Erik Van Vulpen describes four maturity levels that are supposed to be incremental: operational reporting, advanced reporting, advanced analytics and predictive analytics.
The operational reporting works out traditional metrics such as headcount, diversity, turnover, absenteeism, training costs,… It is part of the day-to-day business for HR and is merely descriptive. According to Josh Bersin (Bersin by Deloitte), 56% of the organisations are at this stage
As operational reporting is a basic requirement for reliable analytics in the next stages, the utmost attention should be given to the right metrics, systems, and reporting structure at this stage.
Advanced reporting remains descriptive although it combines multiple perspectives, cross-linking parameters and focusing on efficiency. In this regard it is beneficial to strategic decision-making. 30% of organisations are at this stage.
Advanced and predictive analytics, respectively 14% and 4% of organisations, build on business intelligence (BI) using statistics and models, scenario planning showing the impact of decisions and including financial and operational data from different systems. At this level statistical and programming capabilities should be added to the HR team. HR will then be playing its full strategic role within the company.
HR Analytics for Big and Small
Those 4 levels are very insightful so as to assess the company’s maturity level on analytics. However some flexibility is advised according to the size and culture of the organisation, as the effectiveness of HR analytics lies in the variety and quality of available data (not only HR data, as mentioned earlier, also finance, marketing and sales data).
A small local company should probably not invest time and resources in complex and detailed predictive analytics, as it would be better off with a real-time monitoring of their activities, talent management, costs and investments. The focus should be more on the organisation’s agility and short to mid-term anticipation.
Therefore a comprehensive advanced reporting (level 2) highlighting the interconnections between factors such as finance, sales, HR, competition,… and acting as a mirror towards the business goals is a useful management tool for a small organisation.
Furthermore, small companies often don’t have a sufficient amount and variety of data to rely on as they rarely use integrated systems or just don’t record data other than what is legally mandatory. The first step to a more predictive approach in small companies would then be to design a data management structure on the right scale.
Larger companies, that build their strategic plan on the longer run, commonly 3 years, have everything to gain by going through the 4 levels, up to predictive -and prescriptive- analytics, as the actionable outcomes can be prepared, budgeted and spread over time, often backed by project teams. And the return on investment of these ‘actionables’ can be measured in the next analytics loop, integrating the new data.
So, dear manager and HR fellow, would HR analytics, a tailor-made and goal specific approach, new collaborations outside of HR, more communication with the business on relevant concerns, and a pinch (or more) of metrics and statistics… be a successful recipe for a flourishing business in 2018? It is definitely worth embracing this major turning point for HR. Best wishes!
After 20 years of covering the different HR domains in companies of various sizes and cultures, Laurence is now focusing on what she experiences as the most valuable for her clients: tangible, evidence-based, tailor-made HR that works as a compass for management decisions, for engaged people, and for collaborative organisations towards their strategy and business goals.