Kent McMillan, managing director at Accenture Strategy, explains the steps that HR needs to take to become an analytics-driven function, and why it matters.
Every function, in every business, is on an analytics journey but some have established a clear lead on others. Take marketing, for example. Until relatively recently it was seen as much more of an art than a science. But now, an activity that was based largely on instinct, experience and, frankly, in some cases educated guesswork, is a numbers-driven game.
HR is now setting out on the same journey that marketing has travelled. It’s a massive opportunity. Adopting analytics within HR will open new possibilities for the function to uncover and deliver commercial value. So, what do HR directors need to do to take advantage and move their discipline decisively toward a more data-driven approach?
Ask commercial questions: where is the value?
The first task confronting any function seeking to benefit from data science and analytics is the ability to ask the right questions. Sounds obvious. But if you don’t know what you want from data, you’re unlikely to get very far with analytics. For HR, framing those questions means investigating, at a fundamental level, what levers it can pull and the insights that will generate real business value.
For example, what are the cost benefits of reducing employee churn? What are the optimal staffing levels required to give customers a great experience? Why is one sales team’s performance stronger than others? What levers can we pull to address a cost challenge in factory X? How can we influence engagement, and what impact will it have on productivity? Analytics can not only answer these questions but can help HR to predict the skills that will be required to drive business strategy and make sure that a pipeline of people is ready to fill positions – even before they are open.
Look for data outside the ERP box
So, you’ve identified the types of questions to ask. Where are you going to go looking for the answers? You’ll need to start searching in some unfamiliar places. Most HR teams are traditionally restricted to whatever people data is held on the ERP, which might be quite limited in scope, or self-reported surveys on employee engagement, competencies or time allocation which are by their nature subjective.
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Fortunately, in most organisations today we now have access to an almost untold richness of data about people, but you have to know where to look. Just think of the data exhaust of all the digital tools we use.
Social network analysis can help HR understand who is really working with who and on what projects e.g. who are the most impactful collaborators with other functions? Who are the go-to people for particular subjects? Workforce analytics tools can examine emails and calendars, and combined with non-people data such as sales and costs, can help build a new and insightful picture of performance. Of course, employee privacy is paramount to any discussion around HR analytics, but it’s possible to address those concerns while gleaning valuable insights that can have real commercial impact.
HR analytics capability: build, buy or share?
Having framed the right questions to ask, and thought carefully about the available sources of data, the next step gets down to nuts and bolts: how do you set up an analytics capability for HR? A word of caution is needed here. Hiring data scientists to work in a dedicated HR analytics function may be the right route for some organisations, but it’s not the only path available.
Rather than setting up a dedicated in-house HR analytics function, with all the challenges that will entail, another option might be to ensure that HR has a seat at the table as the organisation’s central analytics hub is developed.
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This has two clear advantages. The first is lower time and effort to get started and the other is the ability to more easily combine people data with a wide range of other functional and business inputs – including corporate performance. The success of this approach will depend on whether the organisation has a seasoned analytics team in place with the right level of resource and commitment to dedicate to HR analytics.
Of course, that doesn’t mean responsibility for analytics can be entirely left to others. While HR may not all need to be data scientists themselves, the ability to use data to create insights is critical. It’s how HR will move from a passive supporter of the business to an agitator for improved people productivity and employee performance.
Strategic insights for organizational effectiveness
And this leads into the fourth key point on the analytics journey for HR: the ability to challenge and ‘hack’ the organization to continuously make improvements to how the business operates.
By creating visibility, owning people data and using it to challenge business performance, HR can set the pace for continuous experimentation and organisational improvement.
The appliance of science
Analytics offers HR a significant opportunity to positively impact business performance. By applying science to people, HR can identify what drives commercial value and implement actions that drive up productivity.
Harnessed effectively, analytics has the potential to elevate the strategic importance of the HR function to a place where it can demonstrate its contribution to the top and bottom line more clearly than ever.