Needs to move beyond reactive to predictive, prescriptive: Report
While employers are embracing and analyzing “big data” to transform business and industries, and spur innovation, HR functions have made little progress in using this information to provide insights critical to strategic decisions, according to a report from the Conference Board in New York.
It is not only important for HR to embrace analytics but to move beyond analyzing to predicting and prescribing solutions that align with enterprise-wide goals, said Human Capital Analytics: A Primer. The report came from a research working group involving 25 representatives from 14 companies.
Human capital functions have failed to keep pace with other business leaders in using analytics, according to Rebecca Ray, senior vice-president of human capital at the Conference Board in New York.
“Collectively speaking, as a profession, we have not moved as far enough down the field as we should.”
There are a lot of HR folks who have a human capital strategy, but they talk about it as a separate strategy, she said.
“Inherently, the problem with that is human capital strategy needs to be subsumed as part of or intrinsically linked to business strategy.”
A lot of people also don’t have access to the same data other business leaders are using, said Ray, so it’s not necessarily connecting to other enterprise-wide databases.
And then there’s the lack of time and resources when it comes to the tactical issues a traditional HR professional is charged with, she said.
“It leaves very little room for someone to step back to acquire the skills or develop the skills or even think strategically.”
Early adopters have got the basic measurement discipline down to a habit, but the next challenge is presenting this to business and showing the value, according to Ian Cook, director of the HR Metrics Service and director of research and learning at the B.C. Human Resources Management Association in Vancouver.
“We’ve got a number of good organizations who actually have some skill, but they’re still relatively unsophisticated compared to the analytics capability that you have in a marketing group or… finance group.”
There’s definitely a rising tide, with HR being more analytical in its approach, said David Weisbeck, chief strategy officer at Visier in Vancouver, provider of workforce analytics.
“HR has, in the nearer term, become much more strategic to the business. But as soon as you say ‘strategic,’ it has to be numbers and evidence-based, it can no longer be ‘I just think.’ So HR has to make that transition because business is saying, ‘People are more strategic than ever before, now we need you as a department to raise your game.’”
The analytics skills gap is probably one of the most challenging areas facing employers and there are few HR professionals with an analytics background, according to the Conference Board report.
“This requires a skill set that many human capital professionals have traditionally not brought to the table,” said Ray. “Undertaking this process is sometimes a very frightening thing, very uncomfortable for some members of our profession. And I think that they should take heart in the fact everybody has to start somewhere.”
It goes back to the education, said Cook, as HR needs to see analytics capability as important and invest in that.
“Analytics capability is as much about crunching the data as it is telling the story, and it is more about telling the story than it is the data,” he said.
Some cross-fertilization is required, as few people in HR have been trained in good data processing techniques and can do financial analysis but also know how to make the people business work, said Cook.
“Where some of the gap comes from is because it’s really interdisciplinary. The quality people I’ve met come from that balanced discipline.”
There are a number of challenges for HR when it comes to analytics, according to the report, such as buy-in from senior leaders, making the case for analytics and aggregating data into a single, centralized database.
There is also weak interest in predictive analytics, but those companies that take this approach are more closely aligned with business strategy, found the report.
Being able to predict with a reasonable degree of certainty what is going to happen makes your function more valuable in the human capital analytics space and as a strategic partner, said Ray.
“Predictive analytics is valuable only if it helps you suggest what’s the best course of action. So you might say, ‘Given what we know has transpired and given the facts as we see them, this is what we believe will occur. And if we want to avoid this shortfall, turnover rate or whatever it is, or… execute against strategy, we believe we need to make these changes and here’s how.’”
The bulk of people today are on the reactive side when it comes to analytics, with the executive team or other business leaders asking the HR department for analysis — but they hope to be more proactive, said Weisbeck. And predictive analytics are still leading edge, aside from hot spot areas such as credit card fraud, and can require the skills of a data scientist, he said.
There are some amazing places to go with predictive analytics, said Cook, citing as an example Google research around turnover and managerial competencies.
“You get to prediction by using the model of the past and then running scenarios from it. The future isn’t like the past but if you’ve no idea what the past is, it’s very hard to predict the future.”
In Canada, for example, the HR Metrics Service has three years of data so it’s been able to bring in a new metric around resignation rates by top-quartile performers, he said.
When an employer sets expectations well and runs a high-paced, high-performance organization, fewer of its best people leave and more of its worst people leave by choice.
“By being able to report resignation rate by top-quartile performer, we can give an indication to a business of how well they basically set and monitor performance, whether it’s driving their success or whether they can tighten up, so setting feedback processes, a whole system around how they set, monitor and drive expectations,” said Cook.
Steps for improvement
Here’s a working set of human capital analytics guiding principles:
• Focus on the critical few.
• Focus on getting a return on the analytics investment.
• Develop actionable information.
• Embrace predictive analytics.
• Partner with other functions.
• Aim for high-quality standards.
• Rely on intuition if needed.
• Balance a desire for accuracy with a need for information.
• Balance the quantitative with the qualitative.
• Use meaningful metrics.
• Communicate data effectively.
• Develop capability throughout HR.
Source: Human Capital Analytics: A Primer, Conference Board