While HR data piles up, most organisations are left scratching their heads over the ‘analytics’. Researcher Steven McCartney and Professor Na Fu, Trinity Business School, Trinity College Dublin, highlight how HR analytics might be useful in the quest to better organisational performance, and how to successfully leverage it.
By CoBS Editor Tanvi Rakesh. Related research:McCartney, S. & Fu, N. (2019 August) “Linking HR Analytics to Organizational Performance through Evidence-Based Management”, the 79th Annual Meeting of the Academy of Management (AOM), August 9-13, 2019, Boston, Massachusetts, USA.
The wheels and cogs of analytics
It is unlikely that candidates signing up for Google’s recruitment procedure have any idea of the forces that lead to their hiring – for Google has developed a sophisticated and data-centric approach to recruitment and development through the combination and analysis of various candidate and employee data. This includes biographical, employee attitude, behavioural, and personality data. Using this information, Google is able to assemble a list of predictors of performance, and through the application of an algorithm they can identify if candidates share these characteristics, finally offering a score which predicts the candidate’s likelihood of success. Google’s secret weapon? HR analytics – but done well.
What to do with the data?
Data, data, data – these days it’s a word that enters every business conversation. It seems some get it right, but most don’t. Steven McCartney and Na Fu describe HR analytics as the transformation of workforce data into organisational insights through the application of various statistical and measurement techniques, which then enable managers to make better workforce decisions. Until a while back, HR analytics were accessible to only the most elite. Back in 2009, Google was one of the first companies to which people analytics was unique, and now many have followed suit. Indeed, HR analytics is now a LinkedIn buzzword. Despite its fandom, people analytics is a skill few possess. A 2020 LinkedIn study that surveyed 7,000 talent professionals revealed that 55% of professionals still need help putting basic people analytics into practice. McCartney and Fu’s study finds that HR analytics are rare as a result of being underdeveloped and lacking in maturity. Many organisations, despite having access to workforce data, are unable to exploit it to its full potential, paralysed by their inability to go beyond headcount, demographic and turnover rates.
Locked and loaded
McCartney and Fu’s study establishes the first empirical relationship between HR analytics and organisational performance. In her latest paper, she argues that HR analytics be considered and viewed as an organisational resource, offering organisations a competitive advantage. She explains that because HR analytics are rare, valuable, non-substitutable and difficult to imitate, they can eventually build into an organisation’s competitive advantage. But the study finds that although numerous organisations have begun to invest and assemble HR analytics teams within their HR functions, very few know what to do next. Behind the great enthusiasm in the adoption of HR analytics in practice, there is a misunderstanding of how organizations can leverage and use HR analytics to better performance. Prof. Fu and researcher McCartney contend that by employing an evidence-based management approach and equipping themselves with the right tools, organisations can take advantage of HR analytics to achieve better organisational performance.
The analytics toolkit
For this, first organisations must be able to collect high-quality data. In order for the insights to be reliable and offer benefit to the organisation, the data for analytics needs to be accurate, consistent, and complete – because inaccurate data could lead to the implementation of solutions which do not address the actual challenges facing the business. Second, organisations need to be able to analyse the data that has been generated. And to make the data usable, organisations need a high degree of analytical capability, with analytics teams able to perform and apply statistical analyses and techniques to workforce data. Moreover, the team needs to develop a narrative from the insights and show the ability to weave a compelling story. Finally, management must be able to take actions based on the insights gleaned. Often, top management teams tend to be reluctant or uninterested in HR analytics due to a lack of understanding of the benefits they may offer. This reluctance can be overcome by transforming the insights into actionable and measurable strategic actions. Organisations should strive to master the above capabilities if they aim to benefit from HR analytics, the lack of HR analytics maturity in organisations usually being attributed to one of the following factors – poor HR technology, poor data quality, few resources, lack of analytical competencies or an overall lack of buy-in from senior management. After all, an organisation’s HR analytics will only be as good as their worst capability.
Nothing better than an informed decision
McCartney and Fu argue in favour of evidence-based decision making, a form of decision making whereby managers employ distinct sources of information to come to decisions. Broadly speaking, there are four: academic papers, organisational facts such as metrics and analytics, professional experience and judgement, and the consideration of outcome on affected stakeholders. An evidence-based approach allows for the blending of HR professionals individual experience, beliefs, intuition, and facts gained through HR analytics, which leads to improved decision-making capabilities and better organizational performance. Establishing and cultivating a culture focused on evidence-based management is critical in increasing the chances of analytics improving overall organisational performance. Indeed, organisations which can establish a culture of evidence-based management and incorporate it into their decision-making process can leverage HR analytics and in turn, positively impact their organisation’s performance.
Tech that tells a story
The importance of the role of technology cannot be understated in the analytics business. The rapid advancement in computing has made the use of HR technology increasingly cost-effective and widely implemented across organisations. McCartney and Fu’s study suggests that high investment in HR technology has a significant impact on HR analytics. Nonetheless, HR analytics is less about advanced and sophisticated models used to analyse data, and more about offering managers and senior-executives evidence in a simple form which tells a story. This is no way diminishes technology’s unique ability to record, process, and aggregate large volumes of data which gives HR greater access to workforce data while also enabling analytics. In the absence of HR technology, HR professionals would be swamped with large volumes of historical data. Ultimately, dashboards, scorecards and other visual formats – generated by such technology – allow HR professionals to highlight workforce trends which help to drive questions that ultimately lead to action; such visualisations and easy-to-digest formats prove to be especially useful in interacting and building a narrative for senior management.
Green and blossoming
HR analytics are still young and a relatively new practice to organisations, and as a result continue to be plagued with its own set of issues. While a majority of organisations treat HR analytics as a priority for the future, privacy laws (such as the GDPR) make this ambition difficult to achieve by preventing the use and adoption of analytics or at the least hindering the process. Apart from high-quality data, analytical competence, and strategic ability crucial to the success of HR analytics, senior leadership’s support is another critical factor which determines the success of HR analytics. Investment in HR technology involves high-cost, long-term strategic planning which may be linked to internal organisational politics thus impacting HR data strategy. A further challenge large multinational organisations often face is the use of different HR platforms across the organisation, which, among other causes, may be due to being locked into licenses. This makes data handling and interpretation a headache for the already stumped HR professionals. A last thorn in the side for today’s HR professionals are HR technology providers – although technology providers may sing praises about their products, in reality they might not be as simple and praise-worthy as the sales talk promised.
With data accessible to all and HR analytics becoming mainstream, practitioners must bear in mind that these challenges should eventually disappear, with analytics finally being able to deliver on its decade-old promise of revolutionizing talent-recruiting and development. All in all, the journey from collecting data to translating it to action is likely to be a tough one, but also the most rewarding.
- View Dr-Prof. Na Fu’s academic profile and research publications
- Link up with Steven McCartney and Prof. Na Fu via LinkedIn
- Study an MBA or EMBA at Trinity Business School.
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