Why HR analytics matter and what HR teams should be looking for

HR is sitting on a vast pool of underutilised data. KPMG’s Robert Bolton looks at how the information available to HR can get it a strategic place in the boardroom.

For the past 15 years, the HR function has tried to transform itself into a strategy player and earn a place at the boardroom table. It has done so with very limited success, in part because it has focused on rolling out generic HR models and universal best practice, rather than customised solutions that support the business strategy.

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On the other hand, the HR function continues to operate squarely in its comfort zone of collating, analysing and reporting on data that is essentially backward looking, such as the number of people recruited, training days delivered and annual appraisals completed. However, if growth is to be stimulated against a backdrop of tough economic conditions, organisations must re-skill, up-skill and reinvigorate their staff – and this needs to be done now.

Look forward, not back

In this context, HR’s focus on “rear view” mirror actions cannot possibly provide the business with a true reflection of how it is matching up against the goal of identifying and delivering the skills needed for long-term growth. In short, not only must the view of predictive HR analytics as useful rather than essential be consigned to history, but the HR function must now step up and deliver analytics to maximum effect.

The use of predictive HR analytics to drive the people agenda – and thereby growth – is applicable across a core of HR activities. For example, comparing the personality traits or ratings against behavioural competencies of sales people with their actual sales achievements (and identifying those most likely to sell the most) can provide critical information to a business both in terms of hiring decisions and as a route to understanding skills development needs. In many ways, an activity such as this is not new, as the comparison of sales people’s characteristics with their sales performance has been done by industrial psychologists for years. However, the rapid ability for HR itself to collect, integrate and interpret large amounts of data and predict its business impact are important new developments.

Integrating data

To capitalise on these developments each HR function needs to get its house in order. First off, HR needs to integrate its data. All too often, HR attempts to draw data from a range of unconnected, non-integrated systems. Such initiatives can, by their very nature, be time consuming and expensive. However, technological advances – particularly the introduction of cloud-based HR management systems – make it increasingly easy for all people data to be housed in a single, standard format.

Once the data has been integrated, HR leaders need to find a new kind of HR specialist with strong analytical and statistical skills sets to make the most of the data available. In essence, what was once considered a niche skill set within HR needs to be given a far greater degree of prominence within the function.

Aim for peak performance

With the right information, the right system, and the right people in place, HR can then begin to start asking the right questions. The resulting hypothesis can then be tested rigorously. First and foremost, employee engagement has to be at the heart of this inquisition. The connections between employee engagement and the peak performance of an organisation should never be understated. Too often, the temptation is to believe that an employee’s commitment and involvement is enough to improve productivity levels.

Employee engagement then needs to be linked to employee capability and capacity. This needs to go beyond the well versed mantra of “the right people in the right place at the right time”. What is called for is a deeper understanding of how capacity and capability are evolving – and are predicted to evolve – against a set of specific long-term business goals. Capability and capacity must then be matched against cost and compliance issues, which are two further critical areas against which HR must be collating meaningful data.

Most importantly, however, HR must clearly demonstrate in all its data analysis and interpretation what the interplay is between various measures. If the HR function can now step up to the plate and capture and provide the business with inter-dependent, predictive metrics that illustrate the relationship between the human capital within the organisation and the business results, it can rightfully take its place as a strategic player in the boardroom.

Robert Bolton is a partner in KPMG’s global HR Centre of Excellence

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