What’s with all the fuss about HR Analytics? Evidence based decisions are already being made about employees, the labour pool, salary budgets, and so on. Those guys in finance are always happy to run another scenario regarding the bottom line impact of changing staffing levels or increasing salaries. Why burden HR?
Finance Excels at Easy to Measure Metrics
Numbers talk and the department companies have always relied on is finance. Certainly, they can tell you lots about output metrics: how many people are on the payroll from week to week, how much labour costs, the cost of absenteeism, leave liability accrual, what you’ve invested in training and a multitude of other costs tracked through accounts payable. This is what the company wants and needs in analytics, isn’t it?
Finance is so trusted with these figures that decisions related to labour budgets, downsizing, and other belt tightening people measures are also initiated through finance. It’s purely a numbers game – cut cost by 10%, reduce the workforce by a headcount of 25, freeze hiring or training. Simple. The greatest risk to businesses in maintaining this approach is that it doesn’t improve business outcomes other than financial or numbers ones in the short term. Financial decisions are output measures.
Analytics Relies on Input Measures
What businesses really need from the HR department are input measures such as leadership effectiveness, productivity, increasing capabilities, strengthening your corporate culture or helping you make targeted people decisions to maximise the ability to do more with the resources you have in place. Finance doesn’t have the ability to measure inputs or lead indicators. They can’t identify or measure the links between productivity and a good manager. They can’t spot a knowledge gap about to blow open due to retirement in a key position in the next 3 years. They don’t understand that all your efforts to increase diversity will fail unless you uncover why your targeted demographic are also leaving in disproportionately larger numbers. So it’s time to stop asking finance for input and build your HR analytics. Analytics relies on insightful questions based on HR’s unique understanding of people dynamics within the workplace.
You Wanted Tools with That?
But while HR analytics can provide more targeted, business focused insight, HR teams are still being asked to pull the productivity rabbit out of a hat – to create analytic insight with little more than a spreadsheet or a mish mash of unlinked data sources. The problem is that investment in HR systems in general, and specifically analytics software which can integrate data from multiple sources, is not being made. With these tools, HR would have access to real time data and play a significant role in strategic conversations around risk, variability and ROI. Without them, companies are turning a blind eye to proactively managing one of their largest resources – people.
Finance and operations teams have systems to ensure they have the most timely and accurate data but it’s shocking how many HR teams have little to no access to technology other than a payroll system or an excel spreadsheet. And, no, the ‘analytics’ reporting which come standard with most HR systems are only pretty pre-set charts, graphs and dashboards which aggregate or total data into an output that is unusable for further analysis. These charts tell us what happened by they don’t allow us to go beneath the data to understand why. Pulling data from disparate or non-existent HR systems also ensures the data is never timely thus justifying why HR data may ultimately be disregarded.
If companies truly believe people are their most important resource, they need to invest in the tools to enable HR to find actionable strategic insights into people processes. Tools which allow HR to go beneath the totals, averages and trend charts to understand specifically who is at risk, where the greatest need for intervention is, and to help solve larger business problems at the intersection of people and operations. This early insight helps strategic HR professionals to adjust policies and practices to shift outcomes in the future.
Building a Strategic HR Team
If talent is your number one priority, then now is the time to understand as much about talent’s ROI to the business as you know about the impact of operational variations in your product. Strategy starts with insight and insight comes from robust analytics.
Oh, wait, what was that? Why invest in HR and analytics technology when your HR team don’t have the skills to do analytics or the HR Director isn’t very numerate? Your HR team’s ability to contribute at a strategic level to the business bottom line is a reflection of the importance your company places on hiring and developing strategic HR skills. The right HR professionals are out there, you just need to raise the bar on your hiring expectations. You get what you pay for.
So, yes, people decisions are being made in finance based on limited data outcomes because companies invest in the tools and talent within that department. But relying on payroll data doesn’t lead to actionable insights.
If you would prefer more specific, rich, targeted insights based on the inputs and outcomes you can control through strategic HR practices, you must invest in the HR team and technology to help your company take the leap forward. Shift your expectations from knowing what’s happening to understanding why it’s happening to create strategic, actionable change.