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Is 2013 the Year HR Takes Analytics Seriously?

While there has been much discussion about using analytics in the HR space, recent surveys show that it may be more talk than walk. But some experts believe 2013 could be the year in which HR starts to get serious about analytics. 

Friday, January 25, 2013
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With all the recent talk about analytics in the HR world, you would expect a transformation is underway when it comes to measuring talent investments. Based on two recent surveys, that assumption would be wrong.

That doesn't mean an HR transformation fueled by powerful analytic tools won't happen. But it hasn't happened yet, say some experts and research reports.

According to a survey of U.S. employers of all sizes conducted by Atlanta-based ACT Bridge, a majority (56 percent) don't measure the return they're receiving on their talent investments -- despite a widespread reliance on the use of analytics to make evidence-based decisions.

Equally troubling, says Kurt Ballard, ACT Bridge principal, is the fact that even among those employers who do measure the return on their talent investments, only 42 percent measure the RTI of their education and training programs, 32 percent measure the RTI of their HR information-management tools and systems, and 25 percent or less measure the RTI of the recruiting firms, job boards, social media sites and other key resources.

Not very encouraging numbers, Ballard says, adding that these findings are "disconcerting" for two reasons. The first, he explains, is organizations that actively measure RTI stand to gain a quantifiable metric that can be tracked and used to establish critical performance benchmarks that are instrumental in making decisions that produce desired results. Secondly, measuring RTI is a powerful way to establish and reinforce the strategic value of HR to senior management.

"That second issue is especially meaningful in today's data-driven, cost-conscious business environment," Ballard says.

Other survey findings from ACT Bridge include:

*           Among employers who do measure RTI, just 33 percent use software to do so, while 71 percent use spreadsheets, which are significantly less reliable.

*           61 percent of employers do not know how their talent investments are impacting their profitability.

*           59 percent of employers do not know how their talent investments are impacting their growth.

"We conducted this survey because we want to help employers and HR professionals better monitor the impact of their talent investments on the organization's performance," Ballard says. "But you can't maximize your talent investments or move the needle on the organization's performance unless you're actively measuring RTI on an ongoing basis.

"As our survey shows, too many employers aren't doing that," he says.

Elissa Tucker, HCM expert at APQC, the benchmarking and best-practices research firm in Houston, says that, roughly speaking, APQC's Open Standards benchmarking data appears to be in alignment with the findings of the ACT Bridge study. APQC found that 65 percent of organizations participating have HR performance metrics and 35 percent do not. However, RTI is a measure used by only 46 percent of organizations surveyed.

APQC's recently concluded survey of HR professionals, called The Current and Future HR Professional (conducted jointly with the Association of Internal Management Consultants), showed even stronger results: Only 25 percent of participants indicated that their HR organization has a performance measurement scorecard that includes the measure RTI.

"These results are hard to interpret, but they do raise questions," Tucker says. For example, she says, does HR feel it already has the skills necessary to conduct strategic performance measurement? Is something other than skills the barrier to many HR departments not measuring performance and RTI? Does HR need additional skills but not realize it?

Tucker also speculates that other barriers, besides a lack of skills, might include incompatible data storage and retrieval systems, unusable data due to incomplete or inaccurate data entry, lack of financial resources to conduct measurement, a lack of HR manpower to conduct measurement, etc.

Tucker says APQC's Best Practices studies consistently show that best practice organizations do evaluate the effectiveness of their human capital investments.

"In tough economic times, HR may need return on investment evidence to protect against potentially harmful budget cuts," she says. "In good economic times, this evidence can help HR make the business case for new investments in the organization's workforce."

Tracy McCarthy, chief human resource officer at SilkRoad, the Chicago-based provider of talent acquisition and social talent-management solutions, says the ACT Bridge survey results aren't very surprising and probably accurately reflect reality.

"Measuring some of the less tangible aspects of HR, or of any discipline, can be tricky – and for some downright impossible," she says. "It really depends upon the practitioner's access to the right data and their understanding and comfort level with metrics."

To McCarthy, the most important reason why RTI isn't measured is because it isn't demanded or important to the executive leaders of the 56 percent of companies who responded that they don't measure return in the ACT Bridge study.

"I suspect that if measurement was expected, like it is with financial data, the percent would be higher," she says.

That said, McCarthy says metrics and analytics do represent a mind shift that is taking place within the HR profession.  However, she says, the idea of measurement has been around for decades, but putting it into practice was never as easy as measuring more overtly tangible aspects of business.

"It takes discipline, knowledge and, most importantly, access to information to do it well," McCarthy says.

As a vendor SilkRoad provides customers with guides, buyer's kits and ROI calculators to help them embrace this shift and measure the return on their HR technology investment. McCarthy says doing this helps the HR buyer make a better informed decision and enables them to communicate that decision and its returns to the executive team in more concrete business terms.

Loni Spratt, who runs a recruiting service and is founder of IntelliTalent, a service that provides sourcing analytics to small and medium-sized businesses, also is not surprised with the ACT Bridge results. She says most companies she works with have systems and processes that have changed very little over the last decade, even two decades.

"It's likely that most do not know how to measure or what exactly to measure, so they just bypass measuring altogether," she says.

Spratt calls it "interesting" that that the largest area measured according to ACT Bridge is education and training programs -- an area that is the easiest, most direct area to measure because there typically is an exact correlation between the implementation of education/training based programs and the improved results they bring.

The most pressing challenge, however, is talent acquisition, and the least is training and development, she says.

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"It would seem fitting that more effort and resources would be spent measuring talent acquisition and talent supply chain areas since those seem to give companies the most challenge," she says. "However, those areas are less tangible and thus harder to measure, so most companies shy away from being proactive about it."
Also, the fact that an overwhelming majority of those measuring RTI, 71 percent, are still using spreadsheets as their measuring tool -- even though there are many more accurate and less time- consuming measurement tools out there -- speaks volumes.

"This alone shows how little companies have changed," Spratt says. "My guess is that it's not that they are unwilling to change, it's just much easier to stick with what you know, even if it's clearly inferior to the other more viable options out there."

Tom Monahan, chairman and CEO of CEB, the Washington-based business-advisory firm, says it requires four things to successfully bring analytic rigor to any business problem: A clear business problem that you are trying to solve; a valid set of relevant data with some predictive power; tools for storing, manipulating and analyzing, and finally, people with the skills to realize the power of (and recognize the limits of) analysis.

"Too much of the energy -- in HR and beyond -- has been directed at the technology tools and far too little at crystallizing and prioritizing the problems or marrying data with judgment," Monahan says. "If there is one lesson we should take away from the financial crisis, it is that an industry with massive data sets and technical capabilities veered into crises because the right judgment wasn't applied at the right part of the process." 

So can 2013 be year HR finally begins to take analytics seriously?

Monahan says it's already happening, because the biggest single driver of corporate performance and growth in companies worldwide is talent.

"Most companies are taking this mandate seriously," he says. "Along with leadership readiness and the changing work environment, talent analytics has risen to the top of the agenda for more than 80 percent of the HR leaders we work with. 

"One surefire path to failure, however, is an obsessive focus on 'doing analytics,' " he adds. "The best companies will merely be bringing new levels of analytic rigor to the core decision that HR has always influenced: who should we hire [or] fire?  Who should get what development and career experience?  Who should advance rapidly through our company?"

APQC's Tucker is optimistic, as well. "The conversation around HR analytics came to a head in 2012, and in 2013 we'll definitely start to see practitioners put their money where their mouth is," she says. "Between the rise of external data and benchmarking, and internal information that's easily accessible through more user-friendly technologies, HR has more tools to support analytics within arm's length than ever before."

IntelliTalent's Spratt, however, is less sanguine about it.

 "In my experience, it will take HR more than a study to finally start taking analytics more seriously," she says. "I think HR will need much more information about this area and if more start to implement it and see direct results, more companies will follow."
For example, she says there was a time when most companies had implemented electronic/email-based documents in most divisions of the company, but HR still had applicants mail in or fax resumes

"It was as if they refused to cross over from what they had known," she says. "Then, all of a sudden, the majority began adopting this new concept and it became the thing to do. They directly saw the benefits and time savings so they finally crossed over."
Regarding analytics, Spratt says, "[i]f enough innovative and recognizable companies begin to take action and see great results, then we may see some great changes this year, but I wouldn't hold your breath."

"In 2013, data will be the new currency of HR, so it's time to invest wisely," says ACT Bridge's Ballard.

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