Science: The New Frontier for HR

Friday, May 12, 2017
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This is part of a special advertising section featuring forecasts on navigating changes and challenges.

You've just come off a long overseas flight and you're tired and hungry. Arriving at your hotel, you're greeted by Derrick, a personal concierge, who calls you by name and promptly checks you in and confirms your dinner reservation using his tablet. As he escorts you to your room, you realize you've left your toiletries and cuff links at home. Already stressed about the next day's meeting, you wonder aloud what you're going to do. Fifteen minutes later, there's a knock at the door. It's Derrick, holding a bag of toiletries and a selection of cuff links. Crisis averted, you settle in to recharge for the next day.

As globalization, disruption, increased risk and demographic shifts intensify business pressures, CEOs are increasingly looking to large-scale transformations to help achieve organic growth. Such initiatives typically involve the redesign of major functions, including sales, marketing, supply chain and IT.

Granted, these are all critical for growth, but in our fictional scenario, the single most important element in the hotel's ability to deliver a distinctive customer experience is none of these. It's Derrick.

More than 80 percent of the changes that drive organic growth stem from initiatives focused on human capital, organizational effectiveness, and compensation and incentive redesign.

Why then is the CHRO often relegated to a supporting role when it comes to transformational projects? Largely it's because HR frequently opts to go with its "gut," rather than science, which is counter to the manner in which all other business decisions are made. A CFO wouldn't dream of making a critical decision about financial capital without consulting P&L data. Yet the vast majority of organizations fail to utilize data when making decisions around human capital.

This is a huge missed opportunity when you consider businesses that prioritize human capital initiatives consistently outperform those that don't. Aon's 2015 Trends in Global Engagement report found that companies that drive a five-point improvement in employee engagement enjoy a three-percentage-point improvement in revenue, while Aon 2016 "Best Employers" drive four points more operating margin.

Like their finance and operations counterparts, CHROs must become adept at using data and analytics to drive decisions and link the value of human capital initiatives to business outcomes. There's no shortage of available human capital data -- or the science for HR to effectively use it -- but HR itself must undergo a transformation in order to become a true leader in driving organization-wide transformation. This requires HR to adopt a data-driven approach to the following three areas:

Establish a clear talent baseline. It's easy to see how our fictional concierge, Derrick, contributes to his employer's goal of creating a distinctive experience for its guests. Clearly, the hotelier did something right when it created the role of personal concierge and then hired people with the right mix of skill, knowledge and personality.

HR can use talent analytics to define specific character traits and job competencies and then assess candidates for those traits via personality or cognitive tests and formal interviews. In this manner, an employer is able to use data to help ensure they have a team of "Derricks" pleasing customers and boosting the bottom line.

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Prioritize the human capital initiatives that drive the greatest business outcomes. Human capital projects have a much broader impact than on HR alone. Thus, it's become necessary to define which programs deliver the greatest return. Working together, the CFO and CHRO can employ data to effectively determine which programs are adding to the bottom line and then prioritize accordingly.

Lead by example. HR's role is often considered to be outward-focused -- helping the organization acquire and develop the necessary talent, for example.

However, it's just as important for HR to turn the lens inward and assess its own function. Does it have the right strategy and team to drive improved revenue and growth? Using the wealth of available data, HR can benchmark against leading organizations to determine the effectiveness of its programs and processes.

For two decades, HR has been clamoring for a seat at the table. The problem is not a lack of opportunity, but a reticence among the rest of the senior leadership team to view HR as an equal partner. 

As the CHRO seeks to play an ever-increasing role in leading organization-wide transformation, they must embrace a strategy that is grounded in data and powered by science.

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