[This article reprinted by permission of Human Resource ExecutiveÂ®]
Data has been the driving force behind innovation in finance, sales and marketing for years, while human resources has struggled to keep up. According to Deloitte’s 2016 Global Human Capital Trends report, 77 percent of companies believe that using "people analytics" is important, but the capabilities are lacking. In fact, just 8 percent believe their organization is "excellent" in this area. Figuring out how to successfully implement data-driven HR is a business challenge every company wanting to maintain or gain a competitive advantage will face in 2017.
For organizations that take the time to invest in data-driven HR, there is a huge opportunity to leverage employee and external data to improve shareholder value. A Bersin by Deloitte study found that companies using sophisticated people analytics see 30 percent higher stock market returns than the S&P 500, and HR teams are four times more likely to be respected by their counterparts for data-driven decision-making.
But for all the good that data-driven HR can do for business, there are still a lot of questions about what businesses need to do to successfully implement a data-driven HR program in the first place.
The reality is that implementing data-driven HR requires a new set of skills and tools not found in HR departments today. A Mercer survey found that 69 percent of business executives do not believe HR professionals possess an adequate skill level to perform more sophisticated analysis. HR professionals are generally very good at reporting and benchmarking, but not as good at more sophisticated analytics.
Source: US and EMEA 2012 Metrics and Analytics: Patterns of Use and Value Survey
These skills are necessary to understand crucial drivers of employee retention, employee productivity and overall return on human investment. So, how can HR work to fill the skills gap?
Becoming data-driven requires both art and science, but it doesn’t mean HR needs to know how to do pivot tables and chi-squares.
HR professionals need to be aware of how people analytics can impact the broader business.In order to have a data perspective, HR professionals first need to have the business acumen to ask the right questions. This means understanding the key drivers of their company’s performance and having the financial knowledge, marketing orientation and strategic perspective to know how they can match business priorities with talent priorities.
HR professionals need be able to communicate effectively through data. Once HR professionals are asking questions that align with their company’s priorities, they need the ability to hone in on what matters in a data stream and use that to prove their hypotheses. This data becomes a communication mechanism for HR to communicate their talent strategies in a way that executives understand and respect.
HR professionals need access to a multidisciplinary team. HR professionals need to have access and support from people who understand statistical analysis to help inform their hypothesis. For example, HR organizations have long screened out candidates who are frequent job hoppers, but through statistical analysis it was discovered that "frequency of job hopping" had no statistical bearing on longevity in a candidate’s next role. This means the development of the right structure and talent within an organization is crucial for data-driven HR to be successful. I often use the following graphic in my conversations with HR leaders to outline both the people you will need (on the left) and the broad and varied team skills required (on the right). This is useful in describing how you build a team of people who think, develop and communicate in a data-driven way.
The good news is this doesn’t mean you necessarily need to restructure an entire team. Today’s gig economy means HR departments can "borrow" or buy the technology and/or people they need to get the job done.
Data-driven HR is the only way for HR pros to truly understand the connection between the work they are doing and the impact it is having on their company. Other business units have had this capability for years and their importance to the company has skyrocketed. The rise of the CMO is a great example. It’s HR’s turn, and the talent and tools are here today.