Making Data Your HR Champion
The HR function is traditionally seen as a “touchy feely” cost centre. But what if HR decision-making mirrored the data-driven metrics used in professional sports?
The world is still abuzz with the big 2019 NBA championship win by the Toronto Raptors. Those of us who watched rode a roller coaster of emotions as we cheered for our team (I confess I could barely watch as the tension rose and fell on a moment’s notice). Amidst the excitement, we were fed a steady stream of statistics: 110 points scored per 100 possessions. Fred VanVleet’s 30 points made on 57 attempts. Superstar Kawhi Leonard’s amazing average of 30.5 points per game. One of the most crucial aspects of basketball today, in fact, is analyzing and comparing athletes. Player analysis factors into every aspect of the game – recruiting, player development, strategy and more. Professional sports today in general is data driven. So, what if we applied the same data-centric thinking to the world of HR?
In the sports industry, statistics and data were not always given such strong emphasis. In the past, coaching and scouting talent was all about the “feel” the scout and coach had for the player. Sure, they could assess whether the player scored a lot of goals or played a two-way game, but it is only very recently that scouting and coaching started to put a lot of emphasis on data analytics to complement the “touchy feely” side of assessing players, or what coaches and scouts call their instincts. Today, the world of human resources (HR) is also gradually waking up to the power of data. HR traditionally has been regarded as the soft side of the business. It has never won the respect or focus that finance and other departments receive within a corporation due to a lack of numbers to quantify its impact. With no hard facts and figures at their fingertips, HR leaders have been unable to prove the true value and return on investment (ROI) of their function within the organization. While there are some signs of change, HR is still struggling to effectively use metrics in order to link employees’ productivity to enterprise results. For this reason, corporate leaders continue to label human resources as “just a cost centre”. In reality, HR is a great deal more than a cost centre. To make its case to the executive team and the board of directors, HR must strengthen and systematize its “touchy and feely” approach with data analytics to operate more productively. When used properly, HR metrics can powerfully link workforce productivity to enterprise results. Suddenly, the HR function dramatically transforms from a cost centre to a profit centre.
In the world of sports (as in the corporate arena) people are the number one asset for any franchise. Efficient professional sports leaders, however, do a far better job of recognizing the importance of great talent within their organization. They are laser-focused on their athletes: who they are, how they play and what they value. Their top priority is attracting retaining and engaging the most talented players available. And they do this very effectively through a) building a powerful culture and b) offering a set of customized monetary and non-monetary rewards to draw the best of the best: competitive salaries, optimal care, individual development, fame, etc. World-famous organizations like the National Basketball Association (NBA), understand, perhaps better than anyone else, the link between people and bottom line.
How the NBA demonstrates the worth of athletes
In sports, data plays a major role in people management. This is certainly the case inside the NBA. Many rewards offered to the players are tailored and quantified. Data or metrics are used to precisely track rebounds, assists, points, steals, blocks, turnovers, field goal percentage, free throws percentage, fouls and beyond. These firm numbers give coaches, trainers and key actors in the franchise a clear window into the state of the team and the performance level of each player. Data allows them to make predictions, including:
- Areas where player development is required
- Levels of player efficiency
- Overall team strengths and weaknesses
- Which adjustments are required to improve overall play in future games
What’s more, solid metrics empower and enable the leadership team to estimate risks, plan meaningful player transfers or trades, calculate winning probabilities, estimate returns on investment and measure profitability. It provides sports franchise leaders with an undisputed correlation between people and the bottom line. That is what data analytics does, especially when it is “efficiently managed”!
But how can we apply such metrics to link people and bottom line in non-sports organizations?
Can it work in our own companies as well as it does in the NBA?
How can we measure the impact of HR from top-down or bottom-up?
Rethinking HR as a predictive science
First, we must understand that HR IS NOT different than other functions in the organization. Just as there are ways to predict sales, there are many HR decisions that can be just as predictive and require a proactive approach. Sadly, many leaders are still very reactive when it comes to workforce-related decisions. Here are two common obstacles to success.
1. Hasty hiring
Strong employment decisions require a medium to long-term planning. HR managers often make last-minute hiring decisions, right at the moment they discover a need for additional support (excluding hiring decisions due to a sudden employee resignation). Hiring decisions work best when they can be planned far ahead, ideally 3-6 months in advance or more depending on the job. This decreases the likelihood of hiring the “wrong” candidate too hastily, someone who is not properly vetted and may lack requisite skills, motivation to succeed or is simply not a good fit with the company culture. NBA teams have a minor league or players on the bench to offset these sudden departures due to injury or a trade.
2. “Touchy feely” approach erodes value
Many people exclusively approach HR as a “touchy feely” function. This has been a stumbling block and significant reason why HR is not adequately valued and respected by company leaders. The value and true worth of HR is still not recognized by a large percentage of corporate leaders; some of them do not even see the need to hire an HR professional to recruit, manage and oversee their workforce. For instance, in small and medium-sized organizations (SMEs), it is commonplace to have HR-related responsibilities (onboarding, hiring, employee relations, performance management, recognition, compensation, etc.) delegated to a non-HR specialist. Often this is the owner themselves, an administrative assistant or operations person. I have even seen mature companies with as many as 75 employees using a non-HR professional to handle all people-related matters! Why? The exclusive “touchy and feely” side of HR has over time served to erode its value.
Effective HR management defies these limiting beliefs and powerfully demonstrates the true worth of the HR function to company leaders. After all,
HR is both an art and a science but typically only the art side is emphasized. (the definition of science “meaning the state of knowing [or] know-ledge as distinguished from ignorance or misunderstanding.” Merriam Webster Dictionary).
For this reason, the proper use and analysis of data is critical for HR leaders. Effective data analysis can maximize an organization’s ability to attract, retain, develop, motivate and engage talent for the realization of organizational goals. What’s more, meaningful data can empower business leaders, helping them make more “evidence-based” decisions and facilitate forecasting. Most importantly the use of intelligent, proactive, data-led HR practices will serve to powerfully increase the credibility of HR as a vital and valued function within your overall organization strategy.
So, considering what HR is and the importance of data, how can HR leaders optimize the impact of the HR function? How can they leverage data analysis in order to measurably contribute to the organizational success and profitability of their company?
Re-imagining metrics: beyond sales and customer support productivity
In applying the success story of the NBA and other successful sports organizations, it becomes clear that the impact of HR can be optimized by:
- Seeing the organization as people-driven: an “engine” that can only produce expected results if all the parts operate efficiently, and
- Focusing our energy on training, testing, evaluating and sorting people based on data in a way that resonates with shareholders.
Every player matters: organizations as engines
When it comes to basketball, many would agree that without Masai Ujiri (The president of basketball operations for the Toronto Raptors) and Nick Nurse (The head coach of the Toronto Raptors), the two-time basketball champion Kawhi Leonard would have never joined the Toronto Raptors and lead the team to their first championship victory. The historic success of the Raptors has not rested squarely on the shoulders of one person but rather has been the outcome of everyone’s efforts within the organization! Even the staff in charge of preparing the players’ jerseys had an impact. This reality applies in non-sports organizations as well.
In his book Principles, the billionaire investor/philanthropist Ray Dalio defines an organization as “a machine consisting of two parts: culture and people”. He recommends to “think of [our] teams the way that sports managers do: no one person possesses everything required to produce success, yet everyone must excel”.
This principle opposes the traditional bias towards sales and customer support roles within an organization. In fact, the level of productivity of sales and customer support units are always a “hot topic” during leadership and board of directors’ meetings because they are perceived as more quantifiable and linked to revenue. However, we should be able to say the same about other units in a company. This reality in organizations is an opportunity for HR to step up and make an additional, measurable and meaningful impact on the bottom line.
Organizational success truly depends on each and every one’s excellence as part of the team. To make this case to management, HR leaders need to take steps to define for every role in the organization (not just sales and customer support), using meaningful statistics that tie to bottom line. With solid data in hand, the executive team and shareholders will get more visibility and greater ease in decision-making. As a result, the value of HR will finally be incontestable.
The process starts with clear definitions. So, how can we begin to define which HR metrics have the potential to transform HR from a cost centre to a profit centre?
(Note: These metrics will serve you best if you have already hired the best-fit employees and have the right HR processes in place. Also, the examples in tab 1 are not an exhaustive list and vary depending on the responsibilities of the role and hierarchy within the organization.)
(Definitions from Wikipedia)
|Equivalent HR metrics
(Definitions from the Author of this article)
Def. When a team loses possession of the ball to the opposing team before a player takes a shot at their team's basket.
|Number of errors or Products defects
Def. Mistakes that can be easily handled and, if immediately resolved, won’t affect the organization. The impact of the mistake is typically internal to the unit, department or organization and does not touch the customer (e.g. Wrong numbers or math in reports, typos in communications, bugs in programming)
Def. Infraction of the rules more serious than a violation. Most fouls occur as a result of illegal personal contact with an opponent and/or unsportsmanlike behavior.
|Number of Complaints (from clients and colleagues)
Def. Heavy mistakes from employee that cause a client escalation (e.g. Privacy breach, bad product delivery). This can have an impact on the client loyalty and/or company reputation. These can also be complaints from colleagues (e.g. Harassment, assault, discrimination) and they ultimately have an impact on the company image and potentially on the bottom line if not promptly managed.
Def. Steal: When a defensive player legally causes a turnover by his positive, aggressive action(s).
Rebound: When a player retrieves the ball after a missed field goal or free throw.
Block: When a defensive player legally deflects a field goal attempt from an offensive player to prevent a score.
|Number of leadership initiatives
Def. Actions that demonstrate employee leadership and desire to improve things, address issues that can slow the process of achieving the goals of the unit or the organization (e.g. Recommending a new process to reduce errors, roll up their sleeves and jump in to help the team when necessary, i.e..: launch a revolutionary product ahead of competitors).
Def. When a player passes the ball to a teammate in a way that leads to a score by field goal, meaning that they were "assisting" in the basket
|Number of instances of effective teamwork and fellow employee elevation
Def. Actions that demonstrate employee engagement for effective teamwork and employee elevation (e.g. Knowledge transfer/training, coaching, empowering others, promotions processed per direct report).
|Fields goals percentage/ points
Def. Field goal: A basket scored on any shot or tap other than a free throw, worth two or three points depending on the distance of the attempt from the basket.
Points: Score in a game. Points can be accumulated by making field goals (two or three points) or free throws (one point).
In summary, the moment has come for HR to evolve, and shine, like the Raptors and other successful sports organizations, through the effective use and analysis of HR metrics. As an HR leader, it’s time for you to rise to the challenge of data analytics and systematize your HR practices to increase productivity, drive higher levels of engagement and prove your department’s true worth. New measurement tools and tactics are now within your reach, to transform your department’s image. No longer will you be perceived as merely a soft ‘touchy feely’ side of the organization once you quantify your value and emerge as a true profit centre. Be guided by a data-driven approach tied more closely to your organization’s mission and wonderful things will transpire. You’ll gain greater visibility, win the respect of senior executives, inspire your staff — and make a predictive, measurable impact on your company’s bottom line.