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HR Analytics and the challenges

If I may, I'm going to start with a somewhat base level analogy, but one that I think serves a purpose!

Big data is like teenage sex: everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it...

HR analytics seems to be exactly the same

We started Harnham in 2006, and reflecting on our 8 years, the market and industry is almost unrecognizable from the early days of our business. The use of data is of course growing exponentially, and companies are placing more importance on using data to make intelligent decisions. The era of just following gut instinct seems to be over.

With an increase in the volume of data available, companies begin to look at new ways to use the data at their disposal, both for external and internal gain. With that in mind, I attended a conference on HR analytics recently and got a fascinating insight in to this growing sector.

Of course the term HR analytics is not new. This has been around for a long time – but I learnt that there is a real desire and a real need to use the data available in new ways, and to change the analysis that companies are performing to add additional value.  

The buzzword from attendees at the conference seemed to be "journey". Companies have spent years gathering and collating data on employees, but now seem to be at a crossroads - do you continue just compiling this data and generating excel reports on whatever metric has been asked for by a manager that week, or is there a better way to use this data? Are we at a point where we can start going further? Can we start using this data for predictive analysis?

Here is where I feel we hit three challenges.

1. ROI

There was a fascinating presentation at the conference in which a case study was shared by a major retailer. They found that in a 3 year study, they could prove a link between an engaged workforce and the profit of a store. I'm sure you'll agree that this is a great find and a useful exercise, but I wondered how many organizations would be willing to spend 3 years analyzing the relationships in their business to find out if it would have a small increase in profits at a local level. Herein lies the problem, - as the actual analysis of this data seems to be a new thing but how many management teams are willing to invest in it?

It seemed to me that the analysts and data managers that I met were confident that they were able to give amazing insights to their businesses, but did not have the time and resources to get in to the data and have a look around.  Instead they were simply required to submit excel reports to show what has happened rather than predict what this means for the future or make recommendations on what the organization to do as a result.


2. Data Quality

The systems where this data is stored largely seem to require input from a manager within the business, and at the point they're inputting this data it is likely that they are either just dealing with someone leaving the team or joining the team. In either of these situations, I would imagine they're busy and stressed, so will potentially not be too worried about what they're putting in to a workforce management system. 

The upshot is that the data you're then analyzing may not actually give you a true reflection of the fact. Again, it seems like the person inputting the data needs to understand the value to them of making sure that it is correct and I was not convinced any of the presenters had quite got this right in their business.

3. Skill Set

I listened to a fascinating debate at the conference about what skills would be needed to grow a team of HR analysts, and I would say the room was split almost 50/50 between the "data is data" opinion and the "HR knowledge is essential" group.

I reflected on this afterwards based on a comment made during the discussion.

It was noted that HR analytics is probably 5-10 years behind other analytics disciplines such as logistics and marketing analysis for example. I would agree with this, but rather than worrying about this fact, the teams should look at the reasons why and also how to utilize those skills.

Analysts in marketing or credit risk don't study marketing or credit risk at University. They study mathematics, physics, statistics or similar and then apply these techniques to an industry. They don't know everything about marketing strategies on their first day in the role, but they can model data to tell you with a very high degree of certainty what the propensity for something to happen is. Data is data - you just ask it the questions.

So if companies don't utilize these data skills, my concern is that they will stay behind other analytical disciplines and only be able to do a small proportion of what could be possible with the data available to them.

The Ethical Standpoint

People are more aware of their personal data now than they were 5-10 years ago, and also more willing to share it - as long as they get something in return. Therefore the data available for HR and workforce analysis now is vastly different to 5-10 years ago - you only have to look at the growth of Facebook and LinkedIn in that period to know that you have more opportunity to know more about your teams than ever before.

Here is another question then - the interests on someone's LinkedIn profile or Facebook page will give you a huge amount of insight into skills that you may not see on a day to day basis in their role, and may mean that you consider them for roles that they wouldn't normally be considered for, but is it ethically right to look at this page for the potential benefit of the candidate? Where do you draw the line?  It is potentially for their benefit, but does that make it right?

I heard of tools where members of staff could link their Facebook to a talent management tool within the business - the take up was very low. Let's be honest, you may not want your company seeing your personal photos and online conversations, even if it could mean more chance of an internal promotion!

Putting the onus on the employee seems to be the best course of action then. If they fill in their internal profile similar to how they would a Facebook or LinkedIn account, then you have all you need to be able to draw better analysis. They have a vested interest in the outcome, and as long as this is understood you should get pretty accurate data to use. However, building an internal platform to match the functionality of the likes of Facebook and LinkedIn can be costly and once again requires more data experts to analyze the new data it will generate so we are back to the ROI challenge.

In conclusion

I agree that HR analytics could and should have a direct impact on business profit, but just in the way that all new concepts need to; HR teams need to harness the skills of other analytical disciplines to achieve all that is possible to prevent falling further and further behind. It is also going to take companies being brave and setting the trends for the use of this data to show what is possible before others will follow.

As someone put it when discussing how companies improve the potential and usage of analysis in HR and workforce planning - we should talk about it a lot in conferences and meetings to share as much as we can to make sure that we all learn as much as possible from each other, but we don't want to share too much so that nobody can do it better than us…!

At the end of the day, being better at anything within the sphere of analytics and data gives you competitive advantage and you don’t want to lose that.
By David Farmer - Partner, Harnham