With the new technological advancements in people analytics, it’s becoming increasingly important for HR to strategically integrate with the business and operate efficiently. In a connected organization, CHROs are able to integrate organizational capabilities such as integrated talent management, digitally-enhanced collaboration tools, HR IT architectures and digital strategies. However, the success of these integrations has be measured by linking HR and business outcomes.
In the past, HR was oftentimes thought of as an intuitive function. While many HR decisions were and still are focused on individuals, on culture and on office dynamics, people analytics finds a way to organize all those instances where HR decisions were made, compare them to workforce trends and improve HR processes, supporting the execution of business strategy.
“Earlier, when CEOs and CFOs talked, the conversation was based on solid data. HR conversation, however, was merely anecdotal. Now, thanks to data analysis, HR is able to spot trends, make predictions, create a roadmap to succeed and have conversations with other C-suite members of the company based on solid facts.”
Shaswat Kumar, partner, Aon Hewitt via Business Standard
Connect business outcomes to HR metrics
Start by understanding your organization’s business strategy and the goals it sets. Most likely, we’ll be looking at revenue goals, costs-related goals, market share goals, customer satisfaction or return on capital.
Take each of these goals and break them down into processes and secondary objectives until you reach a HR-related area, where you’ll find your correlative metric.
Brainstorming some initial activity-based metrics can be a useful exercise in order to reach that measurable, strategic objective which will prove to the other members of the executive C-Suite that HR is an invaluable business partner.
Let’s take an example: One of my company’s business goals is to increase customer satisfaction by X%. As the CHRO, I’ll be looking at what drives customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal, and productive employees. Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers. (Service-Profit Chain) So my HR objective is going to be to increase employee satisfaction by Y%.
Use people analytics to bridge the gap between HR and business outcomes
People analytics combines traditional HR data with real-time data from a myriad of mobile apps. engagement apps and feedback apps, that come together in a database of what people are doing and how it’s impacting their performance.
This data is extremely valuable if interpreted correctly, giving way to a predictive function within the HR department that can address business problems like improving sales productivity and leadership pipelines, reducing turnover and increasing productivity.
Coupled with design thinking and the employee persona, this data enables HR managers to predict absences and turnover, improve internal communication and create effective learning and development plans. Download our new white paper and learn how HR managers are able to better predict, manage and measure the impact of their operations, using people analytics.
These analytics are used to model and predict capabilities so that an organization gets an optimal return on investment on its human capital, as well as quickly answer workforce-related questions, monitor potential risks, and identify trends. Its potential is so vast because it gives palpable data that cat inspire truly creative solutions to attract, engage and retain top talent.
Here are just a few examples that Thomas H. Davenport, Jeanne Harris and Jeremy Shapiro referenced in an article for Harvard Business Review:
- “Almost every company we’ve studied says it values employee engagement, but some—including Starbucks, Limited Brands, and Best Buy—can precisely identify the value of a 0.1% increase in engagement among employees at a particular store. At Best Buy, for example, that value is more than $100,000 in the store’s annual operating income.
- Many companies favor job candidates with stellar academic records from prestigious schools—but AT&T and Google have established through quantitative analysis that a demonstrated ability to take initiative is a far better predictor of high performance on the job.
- Employee attrition can be less of a problem when managers see it coming. Sprint has identified the factors that best foretell which employees will leave after a relatively short time. (Hint: Don’t expect a long tenure from someone who hasn’t signed up for the retirement program.)
- Professional sports teams, with their outsize expenditures on talent, have been leading users of analytics. To protect its investments, the soccer team AC Milan created its own biomedical research unit. Drawing on some 60,000 data points for each player, the unit helps the team gauge players’ health and fitness and make contract decisions.”
While it’s hard to distance yourself from daily, administrative tasks, true value comes from having a strategic overview of how the entire business roles and what your role, as an HR professional, is in making that business thrive.
Aligning key talent metrics to the financial and managerial strategy of the company, is a first step in proving talent ROI and the importance of strategic HR. Implementing, tracking and measuring those metrics can be easily automated and managed with the help of people analytics systems such as Halogen Software, PeopleInsight or People HR, that free up your time and mental energy, to allow space for strategy and business perspective.