Using Data Analytics to Improve HR Function, Engage Employees
Human resources is traditionally regarded as a “touchy-feely” function – in essence, a soft side of the business that isn’t as highly valued as sales or finance. Why? With no hard facts and figures at one’s fingertips, the HR function is challenged to prove its true value and return on investment (ROI) in the organization.
One study shows that CFOs transition well to CEO roles because of an ability to understand numbers and link them to the bottom line. Indeed, good CFOs know how to develop detailed strategies, understand the drivers of business value and can communicate this to investors. They also know about budgeting and forecasting, in addition to objective analysis. Unfortunately, this isn’t the reputation enjoyed by the chief HR officer.
It’s no surprise that CEOs don’t usually come from an HR background. But the chances of winning in today’s world are much better if you look at HR as a predictive science.
The reality today is that many small- and medium-sized organizations don’t even hire an HR professional to manage and oversee the work force. Instead, they delegate such responsibilities to a non-HR person, which can be a recipe for disaster.
In fact, HR is both an art and a science, but the science part gets overlooked. This is where the proper use and analysis of data is critical so HR leaders can attract, retain, develop, motivate and engage their people
There are things HR leaders can do, and a good place to start is by making the case of their value to the executive team and board of directors.
HR should strengthen and systematize everything they’re doing with data analytics in order to operate productively. When used properly, HR metrics can link work-force productivity to concrete results, with the outcome that the HR function dramatically transforms from a cost centre to a profit centre. This way, HR wins the respect it deserves. It’s a matter of approaching HR differently through a data-driven lens.
In the McKinsey & Company article The CEO’s guide to competing through HR a leading U.S. health-care company’s HR department was highlighted for its use of data analysis in engaging its employees. The company was seeing high employee turnover, problems attracting quality nurses, bad customer experiences and declining revenues before HR began an extensive analysis of its nursing population.
What HR leaders found was that the company’s ineffective total-rewards programs were the root cause of the problems – so they improved them. Soon, the company was attracting and retaining higher-quality nurses. When HR rolled out the new plan across the company, employee engagement increased, and revenue jumped by US$100-million.
So, if proper use and analysis of data is critical for HR leaders, how can HR leverage data and contribute to the success and profitability of the organization? Here are a few tips for how an organization – big or small – can improve its HR function.
1. Data involve numbers and facts : Hear what employees have to say through confidential, anonymous surveys. This is usually conducted by an outside firm, and it shows what works and what doesn’t.
2. Use an external firm for exit interviews : By conducting exit interviews through an outside firm, a company can ensure a departing employee’s responses are anonymous and confidential. It also offers a way to capture trends and use the information for better decision-making.
3. Job tenure versus performance: By monitoring job tenure versus performance, you can tell if top performers have the tendency to stay or leave, which will help you identify what issues are triggering departures.
4. Three things to monitor : Specifically monitor three things: promotions versus diversity, promotions versus job tenure and promotions versus performance – all of these will allow you to know if promotions are fair, inclusion is present and whether top performers are actually getting promoted.
5. Use “people data” : The best way to impact the bottom line through HR is to match “people data” to that bottom line. Track the impact employees have in their respective departments. For example, monitor the impact of new hires for the sales and marketing teams. Have sales increased since these people arrived? Have customer complaints decreased? Have new hires received accolades from clients or teammates? Get all this data at your fingertips.
Use these tips and shift HR from a “touchy-feely” function to a strategic one. It will help you and other executives on the leadership team – not to mention the board of directors – make more evidence-based decisions and facilitate forecasting. It will also increase the credibility of HR as a vital and valued function within the organization’s overall strategy.
How functional leaders become CEOs (April 2017). McKinsey Quarterly
The CEO’s guide to competing through HR (July 2017). McKinsey Quarterly