How HR data is bridging the ‘boardroom’ perception gap
According to a recent survey by the Chartered Institute of Personnel Development two in every three HR leaders believe they play an integral role in strategy making at the organisations where they work. The bad news is that only one in three business leaders agrees with them. So what’s causing that perception gap? Is HR overestimating the value it adds or is the profession just failing to demonstrate that value to senior management in a convincing way?
The key point here is that board level decision making is increasingly driven by data, it’s quantitative. HR on the other hand is still widely perceived as qualitative, often seen as driven more by relationships than data, and for boards used to relying heavily on analytics that's a concern.
HR analytics have been around for a while, and in fact the CIPD has asserted HR analytics “enables better decision-making by providing an organisation with insights about the workforce and the HR policies and practices that support them”. So if we know that HR analytics makes for better business decision making then why are so many companies slow to make the move from standard reporting to HR Analytics?
Jeff Schwartz, principal in Deloitte Consulting’s human capital practice and co-leader for Deloitte’s global talent initiative states:
“CEOs are interested in revenue growth, profitability, innovation and the ability to retain customers,“ and “they are interested in business issues and talent issues, but not HR issues.”
However if we consider the idea that digital technology is reshaping HR, then data is the catalyst for that change, making data for better understanding and executing a business strategy.
Whilst HR as a specialism is still very much viewed as a qualitative function executing the core processes of: basic terms and conditions, the employee lifecycle, employee performance, culture and organisational development; they are still responsible for a resource within the company. Similar to finance, operations and sales, today's modern HRD is accountable to showing a ROI and through data, providing evidence of streamlined activities resulting in cost efficiencies.
Today's HRD takes a lead organisationally in the same way the FD takes a lead financially, but it’s often a misconception that it's not their responsibility to deliver the numbers.
One way to look at this misconception is to address historical challenges in turning a perceived qualitative function into a quantitative business driver, and this is where HR analytics comes into its own.
For some time, HR data has simply been viewed as a method to record what is happening and to be able to provide standard reporting to the board demonstrating HR functional expertise. So, if we revisit the initial challenge we can explore how it's more likely that HRDs are failing to demonstrate value to senior management and address how HR analytics can enable this.
In a previous model we explored the concept of analytics maturity in relations to employee relations cases and discussed the five stages of information type approach; looking at the tasks, benefits, and example of each stage. This exploration of data evolution discusses the varying levels from standard reporting - allowing you to manage and update cases, to a more advanced analysis of trends and root causes, to the final level of proactive analysis to improve time and cost efficiencies. The key here was to establish that for data to drive costs and time efficiencies it requires meaningful data and ultimately an understanding of how this level of HR analytics can visibly demonstrate a contribution to the business bottom line.
If we revisit Schwartz's views on what CEO’s are interested in, along with the CIPD findings that only one in three business leaders agrees that HR plays an integral role in strategy making; then the challenge is for HRD to demonstrate to the board that HR can be qualitative and that HR analytics demonstrate a visible ROI.
In our experience of employee relations case management, the first challenge is often demonstrating that HR have the necessary tools in place to calculate and show this ROI. In a survey, by PwC1 they concluded that workforce is the single largest annual investment. For most companies, it accounts for more than 30% of revenue. So regularly reviewing people data, like hidden labor costs and turnover trends, can bring to light issues that’ve held back your business, or opportunities where your people could work more effectively. Yet too few companies have a people analytics function in place bringing these insights to leadership. It’s surprising to discover that a large proportion of HR departments still use multiple spreadsheets to record data providing limited if no reporting or analytics. Of twenty-one categories, nearly 44% of endorsements were for improved technology support for HR analytics, they found that only 14% of respondents were “very satisfied” with their current HR analytics technology.
The first step is for HR to realise that with better tools in the hands of employees and managers, HR resources can be untethered from much of their paper pushing and transaction processing tasks, which allows them to spend more time proactively working with their business partners and that secondly achieving these types of results doesn’t just happen by accident. It starts with a solid business case with expected results clearly defined. Achieving greater predictability around cost is one of the key benefits for HR analytics.
The best HR analytics programs take a deliberate approach that begins with a framework synchronized to who, what, why, when, and how. If you’re still ailing from the inability to extract useful, accurate information from voluminous data, focus your efforts by answering the following important questions:
- Where should we start on the workforce analytics journey?
- What insights, if we had them, would have the greatest impact to the business?
- How do we use the different technologies to reach our goals?
- How do we use analytics to make our current enterprise business intelligence and reporting more relevant?
- How do we use the predictive value of HR information to drive business decisions?
- What data will be useful in the future and how do we prepare for that future now?
- How do we build a sustainable organisation and staffing structure to drive workforce analytics across the organisation?
Now is the time for HRD to be armed with solid business cases demonstrating how HR cloud technologies can provide a demonstrable ROI and by harnessing the power of data and people analytics, you can make more agile decisions and become a strategic partner in any organisation.
The need for timely, meaningful, and insightful data and information continues to be a key driver within this transformation, and if this need isn't being driven down from the boardroom, then today's HRD needs to drive this change from their department up.
If you'd like to discuss how HR cloud technologies can improve your departments time and cost efficiencies through meaningful analytics, we can help you to develop a robust business case and guide you through the key considerations when making the move to the cloud.
1 What’s now and what’s next in human resources technology, PwC’s Human Resources Technology Survey, August 2017