HR analytics has been, for the last 10 years, a hot topic for discussion at senior levels in most successful organizations. That’s the good news.
The not so good news is that this “discussion” has been at the expense of “doing.” Few organizations have moved from discussion to implementing effective HR analytics solutions that help the business improve performance, and better yet, create competitive advantage.
Pressure has been steadily building on HR functions to improve their capabilities to develop accurate insights from people data, for business-critical decision making. Many HR functions have tried to dress up HR ametrics as HR analytics and have, therefore, struggled to show real value and gain traction among senior leadership for their efforts.
HR metrics are important and useful but they are one dimensional and only inputs to the broader requirement of using this data to glean meaningful analysis and model potential future scenarios and trends: turning KPIs/metrics into HR analytics.
- KPIs/metrics: Focused on the present and looking backwards in time; tend to focus on the immediate short term impact of business conditions.
- HR analytics: Analytics and insights that focus on the present and looking forward in time; creating insights to current and future business imperatives; uses predictive modelling to support the overall company, help shape the organization strategy and create competitive advantage.
As the approach to HR analytics evolves, a number of key themes/trends are emerging in developing an effective capability:
- Senior management push to use people data to solve a specific critical business issue
- HR software-as-service (SaaS) technology making it easier to create insights into people data
- Increased regulatory requirements and risk management
- Managing costs and productivity in variable and uncertain business conditions
Additionally, there are four main “camps” of thinking, from which organizations are coming at the subject of developing an effective HR analytics approach:
Organic evolution: One where an HR function has become very adept at tracking and measuring KPIs/Metrics and uses this foundation, over time, to start to create deeper and deeper insights into people data. Tends to be an evolution with periodic refinement of process and technology in key business units, spreading to other business units as value is realized.
Technology-driven approach: Over the past five to seven years, a proliferation of new HR technologies has taken place, mainly driven by the development of SaaS HR technology which is based on the idea that people data is at the core of the functionality, creating sophisticated, automated HR analytics modelling tools. Many organizations start with a SaaS HR system and build an effective HR analytics capability on the back on the technology.
Business model driven approach: organizations that have had the most success in recent years in creating advanced and effective HR analytics are those whose business model are very labour and/or knowledge capital driven, e.g.:
- Professional services firms
- Industrial (oil, resources, etc.)
These organizations’ profit and productivity rely heavily on getting right people with right skills in the right place at the right time. Therefore, they have developed sophisticated HR analytics processes, technologies and capabilities to manage their core businesses.
Hybrid approach: Least common approach taken to develop an effective HR analytics capability; however is the recommended approach in most cases. A hybrid combines all of the approaches above into an intentional and cohesive strategy for implementing effective HR analytics technology, processes, capabilities and best practices. It is usually begun from addressing and solving a specific critical business issue, for example: reducing attrition, workforce deployment and planning, recruitment of key skills. As a result, the Hybrid approach builds on the success of solving a particular business challenge which helps the organization understand the value, and creates a pull for the approach.
To access a new HBR report, “HR Analytics: Busting silos and delivering outcomes” and to learn more about how SAP SuccessFactors Workforce Analytics can help HR become a valuable player in strategic decision making, visit here.
Tim Ringo is vice president for HCM EMEA at SAP