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Author Grace McGillick at Leathwaite.

Damned Statistics: The relationship between HR analytics, ROI and how HR can get a seat at the table.

People analytics, when effectively used, gives HR the ability to provide substantive information allowing the business they support to reap significant commercial gains.

This shift finally provides an entry for HR to obtain the much-vaunted “seat at the table” and to build commercial credibility in an environment where previously they may have been seen as a thoroughly transactional function.

The Deloitte Global Human Capital trends paper stated that 2016 has seen a real leap in terms of analytics capability and interest, with 77% of respondents believing that people analytics is important.

IBM similarly has confirmed the adoption of people analytics by organisations across the globe.

Will HR take the opportunity to move the function forwards with all of the capability that people analytics offers?

What is the current state?

Over the last two years we have seen huge investment in HR Systems.

This rise in investment in largely cloud based systems should give companies the opportunity to look at their data in an integrated way, with the knowledge that they can access accurate data in a relatively easy way.

This increased ability to extract data provides a unique opportunity for HR to truly provide Return-on-Investment (ROI).

In the CIPD’s HR outlook survey for winter 2015 – 2016, it was highlighted that just 8% of HR leaders who had responded were using no form of HR analytics.

However only 7% of respondents who had people analytics capability in their function were optimising their use of analytics, moving towards predictive analytics which was in turn being used to inform both the HR and the business strategy.

Within this sample, just two fifths of HR leaders believed that internal stakeholders were satisfied with the HR analytics they were provided and this was reduced to 22% when asking internal stakeholders directly!

30-percent

Perhaps most importantly, research from Bersin by Deloitte shows that the 14% of businesses with mature people analytics capability were able to demonstrate a clear link between talent and leadership pipelines, cost reduction and efficiency gains. The share prices of these pioneers was 30% above the S&P average from 2011 – 2014.

With this in mind, companies which invest in people analytics talent will gain a clear competitive advantage commercially – HR will be able to provide definitive ROI.

What skill set is required for People Analytics?

Given the commercial importance of this talent pipeline, there is a definite need to address whether HR has the existing capability or skill set to truly drive the people analytics agenda forwards.

To understand where the talent pipeline must come for people analytics, fundamentally you have to understand exactly what the purpose of people analytics is.

People Analytics as defined by Mike West (thought leader and passionate advocate for people analytics) is ‘the systematic application of statistics and behavioural science to Human Resource Management to achieve probability derived business advantage.’

Essentially people analytics practitioners are the statisticians of HR. Having said this, using statistics and data in HR, unlike in marketing and finance, is still seen as incongruent and potentially awkward as West helpfully points out. Arguably there are some cases where realistically the capability may not exist.

It is likely that people with this skill set will come from what would traditionally be thought of as more business focused experience and you may find them in other functions of the business, for example in operations or finance. Alternatively some parts of management consultancy will have developed these skills, as seen within PwC or McKinsey to name a few.

Statistics and data aside, arguably the hardest element of people analytics is implementing the changes recommended by the analysis.

As Bersin points out, while the statisticians are the foundation of people analytics, the real discipline of people analytics is multi-disciplinary. Successful teams will include: process re-engineering specialists, OD specialists, project management specialists as well as core IT professionals.

What have the people analytics pioneers done?

It is interesting to look at the 8% who currently measure themselves as optimising their HR analytics function.

As David Green (Global Director people analytics solutions at IBM) identifies, Google is the ultimate pioneer of all things analytics in HR. They popularised the idea of predictive analytics in HR and even created the brand People Analytics.

google

It is well known Google employs a three-thirds model to its hires in HR: one third from traditional HR, a third from academia and a third from strategy consulting.

Put quite simplistically, their HR talent have a fundamental understanding of the business and can deal intuitively with problems.

The strategy consultants understand business, can take a complex issue and provide results and the academics provide a force for evidence.

Clearly this is a different make up to a standard HR department and would provide some explanation as to Google’s success in using predictive analytics.

Given that Google has topped the Fortune’s list of the ‘100 best Companies to work for’ for six years in a row and the incredible speed at which the business has grown, it’s arguable that people analytics has had an incredible impact.

Cisco similarly has looked more widely than just the HR talent pool in order to build capability in predictive people analytics.

cisco

Ian Bailie, who leads the Talent and People Planning Operations team, recognises that in the early stages analytics may be a side project, however as it becomes more integral, investment in dedicated resources will become critical.

In his team of four he found some recruiters who were numeric and data driven and hired a dedicated programmer.

Although a programmer is unusual as a hire, he now has a resource who can build the Cisco dedicated data visualisation tool that he could not find in the wider market.

This team is maximised due to the interface between the analytics capability and strategic sourcers who can interpret this data and apply it to talent issues the business is facing as well as offer direction to externally focused recruiters.

Patrick Coolen leads the analytics team at ABN AMRO and since 2012 has been partnering with INostix & Bright Company for its HR Analytics projects.

abn

His choice to do so was born out of a lack of data scientist talent with knowledge of the HR domain.

He also recognised he didn’t have the time to build up capabilities and needed an SME quickly.

This is an alternative way to ensure quick results, plug the talent gap and allows time to build up succession talent internally.

How to plug the talent gap

So what are the options for those who are comparatively in their infancy in the people analytics domain?

If HR are looking to build out their analytics capability whilst simultaneously bridging the talent gap and ensuring the build out of a capable team, it is proposed that a three-step approach would be best.

  • Identify numeric HR talent, who understand data and are able to digest it and have established networks within the firm which will enable them to push the people analytics agenda. Also look for real change specialists within the HR space, who are able to drive forward change projects.
  • Use Coolen’s approach and look for strategic talent partners who are able to plug the talent gap for data scientists with knowledge of HR – be that an executive interim provider or opt to work with a small specialist management consulting firm with this capability.
  • Once both of these are working in conjunction and HR is close to a fully functioning people analytics team, begin to pipeline future talent and build out a permanent talent acquisition strategy. HR could also use interim/management consultant talent to carve out the true roles and skills required in the team.

The above approach gives companies the ability to be agile and nimble with regards to their people analytics strategy.

It also affords time to create a full, well informed strategy for building talent in the people analytics space.

Furthermore it gives companies time to define what people analytics means to them and how it can work prior to making a permanent investment in head count.

Conclusion

Given the commercial advantage that people analytics affords, competition for talent will heighten.

Those who have chosen to align themselves with a human capital services firm who have the established network and ability to attract the unique experience required, will reap the rewards both short term and long term.

As people analytics moves in to the main stream of HR, those who are still in the early stages of adopting technology and building teams with data skills are running the risk of being left behind.

PEOPLE ANALYTICS EVENT – Feb 2017: register your interest here