Better HR Analytics Needed

A centralized data source may allow HR departments to conduct analyses to understand how factors such as leadership, operational efficiency and customer/financial outcomes are interrelated, but convincing an organization's leadership still may be a tough sell.

Monday, December 10, 2012
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By Andrew R. McIlvaine

The human resource profession may be awash in data, but actually putting that data to constructive use -- "constructive" as defined by HR's business clients -- may be another thing entirely.

"I wouldn't say the information provided by HR to business leaders is useless -- they may consider it mildly interesting, but it doesn't provide them with any real insight," says Paulette Welsing, a managing director at KPMG in New York and global head of the firm's HR Transformation Center of Excellence for the Americas.

A recent KPMG survey of 400 senior executives, titled Rethinking Human Resources in a Changing World, found that only 15 percent of respondents viewed HR as providing insightful and predictive workforce analytics. Another recent report, this one from the Conference Board titled Human Capital Analytics: A Primer, finds that despite the plethora of data made available by today's technology, HR has made little progress in using it to "provide insights critical to making strategic decisions."

"Quite often, the HR folks have a lot of information available from their own HRIS, but it isn't always connected to, integrated with or reflective of the enterprise-wide data that's used to make decisions," says Rebecca Ray, the Conference Board's senior vice president for human capital. "It's one thing to know time-to-fill -- but it's quite another to know the business impact that that length of time has on the organization."

Too often, says Welsing, the data provided by HR simply tells organizations where they've been -- turnover rates, engagement scores -- but little in terms of where the organization is headed or what it needs to do to get there.

"The turnover rate is high or low -- but so what?" she says. "The real question is, who is leaving and why, and if we're going to replace them, should it be with someone just like them or, are we going to need different skills and capabilities in the workforce going forward?"

From a systems standpoint, HR needs to create a repository of data collected from "point" solutions, such as those used for recruiting, performance management and workforce development, rather than letting the data remain siloed within each solution, says Todd Randolph, a member of KPMG's enterprise technology solutions team. This will make it easier for HR to mine the data for larger patterns and trends and share it with business leaders, he says.

It's also important to link such data to other informational sources within a company. According to a study last year by Cornell University's Center for Advanced Human Resource Studies that included participation by 30 large companies, "centralized data" was cited by many as a "critical enabler" in making good use of HR analytics. 

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Access to such centralized data allowed these organizations' HR departments to "conduct analyses to understand how factors such as leadership, operational efficiency and customer/financial outcomes are interrelated," according to the report, titled State of HR Analytics.

Examples cited in the report include a company that used its centralized data to assess which leaders are able to increase performance in a "down" market. Other companies used it to assess the performance of front-line supervisors on the basis of factors that "may drive performance of the team or group they manage" and to determine whether there were varying drivers of performance across different generations within their workforce.

Data aside, HR also needs to build a case for itself by talking with business leaders to get a better understanding of what they're trying to achieve, says Welsing.

"Find out what their growth objectives are, uncover their biggest challenges from a people perspective," she says. "Then, show them how the data can provide them with insights that can help them accomplish their objectives."

The KPMG survey clearly suggests that business leaders will appreciate this data: 63 percent agreed that, over the next two years, coming up with the best talent-management practices will be a key for their ability to compete in the global marketplace.


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