Improving existing operations to reduce risk, increase margins and yield competitive advantage is more important in the current market than ever – and we believe that analytics can provide the answer. This week Capgemini’s Business Analytics team are releasing a daily blog on some of the key use cases of Operational Analytics – today’s topic is HR Analytics.
Why analytics is vital to the future of HR functions within successful companies
Today’s human resources departments need to move beyond the traditional soft HR agenda into helping their businesses create sustainable competitive advantage.
This means not only becoming more effective and efficient in the ways that they work, but also understanding the impact of everything that they do in the business and as a result being able to pull some of the levers that will improve the overall performance of the firm. By doing this can they become full partners within the organisation and enable the organisation to be competitive.
The two key toolkits that HR departments need to adopt are digital and analytics. This blog discusses HR analytics – what it is, what the challenges are and insight into how to build HR analytics capability within your organisation.
How central are HR departments to organisations currently?
Too often HR is seen as being a function that has to implement business decisions, rather than drive the business forward in its own right. A recent survey by Deloitte found that 42% of global companies reported that the impact of HR operations on organisation success was weak. Some 85% of these companies believed that HR should be transformed to meet the new business priorities
But there is a way forward. A recent survey by MIT and IBM reported that companies with a high level of HR analytics had:
· 8% higher sales growth
· 24% higher net operating income
· 58% higher sales per employee
So what is HR analytics?
HR analytics is the application of data processing and analytical techniques to the data and issues that challenge HR. For Capgemini this breaks down into 3 key areas:
Underlying all of this is a need for robust data management to ensure that you have the right data to drive analytics, and also produce the reports necessary for the operations of the business.
How should firms progress to HR analytics maturity?
Most major firms now have coherent HR data across their organisation (which was not the case 30 years ago). Most of these organisations, though, are using this data to describe their organisation in terms of numbers and attributes of staff. Some firms are using the functionality that is now added to the major HR tools to start to explore their staff in a new way.
Forbes reckons that this number is still fairly small (14%). Even fewer (4%) were starting to use the data to predict potential futures.
The Capgemini HR analytics maturity model
Capgemini recognises that firms must learn to walk before they can run, and so recommend that they increase maturity sequentially, first understanding what data they have and what it tells them about their business. Then using this to understand where their business will move in the future, and finally using this information to be able to drive and support key decisions within the business.
What are the challenges to introducing HR analytics?
There are a number of challenges to successful introduction of HR analytics. The major challenges that we have encountered are: -
· The difficulty in creating a business case for analytics: a lot of HR benefits are seen as qualitative. At a time when firms need to focus investment, the ability to demonstrate quantifiable benefits will always improve the chances of getting funding
· The attitude of the rest of the business to HR: whilst HR has improved its reputation and value offered to the business through the business partner model, many still perceive HR to be a support function that is there to assist with processes, rather than a partner that will help them drive the business forward
· Getting people with appropriate skills in HR departments: some HR staff do not have a numerate background
The answer to the first two of these challenges is in our recommended approach to implementing HR analytics: -
It is crucial that early HR analytics projects be about delivering business value, and not solely HR value. That will give the stakeholders confidence that HR understand the challenges facing the business, and opportunities for improved performance. It can also be a useful way of capturing real value, and thus building a business case for further analytics within HR.
The other challenge is analytics capability in HR. Deloitte’s 2014 Human Capital Trends survey found that 86% of companies reported no analytics capabilities in HR and 67% rated themselves ‘weak’ at using HR data to provide insight. This should not, however, be seen as a stumbling block. Another similar business function where analytical abilities have not been seen as quite so important is marketing. And yet, over the last 30 years marketing has undertaken a transformation to become a leader in analytics capabilities.
In order to build analytics capability within your HR team, it needs to be championed. Many HR professionals are nervous about the use of data, not wanting to reduce people to numbers. A recent survey by Rosslyn Analytics found that only 15% of HR professionals said that they used data all of the time to help them inform business decisions. By showing early success in small analytics projects, which generate key insights for the business, HR professionals will see the value of analytics and seek to acquire the skills for themselves.
This process can be accelerated by partnering with analytics experts who will be able to understand your business, collaborate with your HR team and recommend how to best develop your HR analytics capability.
If you would like to know more about HR Analytics, our Operational Analytics offer or where Capgemini has delivered this capability before – please feel free to contact one of the authors.