82% of organizations expect the use of HR data to increase in the coming years. (1) The "datafication" of HR is clearly underway.
82% of organizations expect the use of HR data to increase in the coming years.1 The "datafication" of HR is clearly underway.
People analytics, HR analytics, HR big data, talent analytics, strategic workforce analytics, HR datafication. All of these concepts refer to the synthesis of qualitative and quantitative data that businesses must have in place in order to make better decisions regarding the management of their human capital, which can then lead to a clear competitive edge.
By analyzing their performance data in more than 400 restaurants in the United Kingdom, McDonald's was able to ascertain that customer satisfaction averaged 20% higher in restaurants where employed staff are 60 years or older. An older market segment was drawn to the restaurants and the older employees had a positive impact on the team morale.
The HR Insights and Analytics Team from S&P Global (formerly McGraw Hill Financial) mapped the profile of the employees that were the ones most likely to leave the organization in the near future. With this information in hand, the organization can put measures in place that are focused on retention.
These two cases show what people analytics can mean for an organization.
The most elementary form of people analytics, the reporting on the basis of dashboards with KPIs regarding inflow, turnover, absenteeism, and others, gives clear insights into the effectiveness of the HR administration. It is also interesting to compare this with benchmark data of similar organizations. Using such an approach, it is rather unfortunate that the organization looks principally at historical information and does not have access to the necessary insights about how the effectiveness of the organization could be improved for the future. Advanced analytics is the key.
As indicated in Figure 1, more mature analytics allows for the identification of the HR administration's impact on other business processes. Similar to McDonald's reviewing the relationship between the demographic composition of the staff, on the one hand, and the customer satisfaction, on the other hand, people data can also be paired with the information concerning performance, customer retention, accidents, fraud, etc. The resulting insights place an organization in a position to quantify the importance of HR interventions.
Another form of advanced analytics is the assessment of causes behind certain trends in people data. In this way, an organization can assess what the causes are for turnover behavior by ascertaining an evolution in staff turnover numbers. Think of the example from S&P Global, where the profile of the employee who is most likely, in the short run, to leave the organization is mapped out. With insights such as these, an organization can predict which parts are the most susceptible to high turnover and can implement focused interventions.
The possibilities of HR-analytics are endless, as soon as accurate data is available. For example: in order to gain an insight into the impact of (1) the leadership style from team leaders on (2) the sales figures from teams, the data must be available for both points of concern. The presence of (cloud) HR information systems (HRIS) can address the central availability of data.
However, as shown by KPMG's 2016 Global HR Transformation Survey, it is true that the mere plugging in of (cloud) HRIS does not automatically lead to data-driven insights and better strategic decision-making. Only 20% of the respondents indicated having better people analytics at their disposal via the implementation of (cloud) HRIS 2.
This surprising result is due to the fact that only a third of the organizations specifically possess the right skills to begin working with people analytics 3. Successful transformation of the HR administration requires a clear vision of the future of HR and how technology can bring that vision to life in the interaction with the right people, skills, and processes.
Which skills are required in the people analytics team? It is essential that statistical know-how and knowledge concerning data privacy and data management can be combined with excellent understanding of business. Data needs to be applied to the business issue, and not the other way around. In addition, the results from the analyses must be linked to a business issue – rather than a mere display of data. Only in that way can the HR strategy be tailored to action-oriented insights, which are, in turn, also measurable.
1 Source: Economist Intelligence Unit Study, on behalf of KPMG International: Evidence-based HR: The bridge between your people and delivering business strategy, 2015.
2 Source: Cloud HR: the future belongs to the bold report, KPMG International, 2016.
3 Source: People analytics: Gaining speed, DUPress, 2016.