New research identifies four levers that distinguishes leaders in the area of HR analytics and reporting from the rest. HR analytics is most successful when it is positioned strategically, focuses on business impact with support by key roles and capabilities, captured in clear processes and responsibilities, and when it is underpinned by a solid data management fundament.
Since its introduction less than a decade ago, HR analytics has been food for thought among HR practitioners, experts and researchers. At one side of the spectrum, data driven HR is being praised for the its massive potential to unlock value, with some even saying HR analytics is ‘the new normal’ in the human capital space, while at other side of the table there are those that remain reserved on the tangible benefits or have second thoughts before they truly embark on embracing the phenomenon. In a bid to understand that state of the HR analytics landscape, Top Employers Institute teamed up with Bright & Company, a boutique HR consultancy firm, and surveyed more than 200 HR executives from 36 countries.
The researchers kick off their analysis by demistyfying two forms of commonly used data driven HR approaches: HR reporting and HR analytics. The latter refers to all analyses on HR / business data in order to measure effects of workforce characteristics and HR practices on organisational objectives and performance indicators, while the prior relates to HR reports or dashboards with descriptive metrics to support all people processes in an organisation.
The findings of the survey reveal that, across the board, between 41% to 52% of the organisations have a formal strategy and execution plan in place for HR reporting and HR analytics, with a slightly lower percentage (between 36% and 41%) holding a dedicated budget for the development and maintenance.
In the area of HR reporting, 55% of the organisations indicate that they enjoy proven business impact through improved insights, while 64% say that they have dedicated roles for the management and delivery of the process. The score for HR analytics is slightly lower, at 44% and 50% respectively.
Despite the uptake, an analysis of the maturity of studied organisations shows that, in general, HR leaders still have a long way to go before they can fully reap the benefits of HR reporting and HR analytics. Around 40% have a low maturity on both aspects, while just 5% score high on both HR reporting and HR analytics. “The vast majority of the organisations taken under scrutiny can be categorised as a starter in the domain, leaving significant opportunity for growth and development in supporting human capital related decision making”, remarks Rob van Dijk, HR analytics expert at Bright & Company.
The authors find that maturity in HR reporting is strongly correlated with maturity in HR analytics, and that size matters when it comes to using data driven HR solutions. Larger organisations (2,500+ employees) often use more advanced types of HR reporting and HR analytics than small and medium sized organisations (approximately 15% versus 4%). Although much comes down to available budgets and the value larger volumes of data can have on better insights swept back into operations, much also comes down to, according to Van Dijk, the hard structures and governance which are in place.
Four levers for HR analytics excellence
Based on a comparison of the front runners vis a vis the rest, Top Employers Institute and Bright & Company have unraveled four levers that set leaders apart. The first, and by a distance most important lever, focuses on having a clear strategy, derived from a firm’s broader business strategy and people strategy. “HR analytics is a strategic tool to analyse and predict HR’s effects on key organisation outcomes. Front runners position it as such. This means they organise all HR analytics efforts to optimise the impact of HR interventions on their business and increase the chance of successfully attaining business objectives”, explains Van Dijk.
The authors highlight several success factors related to the strategic positioning of HR analytics. Only when senior leaders take HR analytics seriously, it can pave the way for sustainable benefits – overall, over 60% of organisations indicate senior
management actively promotes the use of analytics and data driven decision-making, however, at front runners this percentage is significantly higher. Sharing and celebrating successes is another key component: “the impact created must be made visible to the business, especially in the first HR analytics pilot projects, as business leaders are often unaware or skeptical of HR analytics added value in the beginning” says Van Dijk. Leaders also have a sound governance, including clarity about processes, roles and accountabilities; demonstrate a clear link between their HR analytics and reporting functions; and have a procedure in place which paves the way for concrete action to be taken following insights from HR reports.
To successfully execute a HR analytics strategy, budgetary constraints should be cleared. This also includes ensuring sufficient investments are allocated to data & IT architecture, to ramping up the capabilities of talent and to the assembly of dedicated teams, which may involve external expertise, in order to create impact.
Building the right team and capabilites
In order to come to the right analytical insights, key roles and capabilities should be in place to be able to execute all necessary tasks in HR analytics projects. Analytical capabilities, IT capabilities and management capabilities are important, but front runners also acknowledge the importance of HR business partners capabilities as the critical link between business and HR. “The HR business partner role is very important in the context of data driven HR. Their role is to understand both business and HR and figure out how HR can help solve business issues through analytics. For HR analytics to work, you need HR people who understand how analytical techniques and technologies work and how analytical outcomes should be understood, interpreted and acted upon”, says Van Dijk.
On this aspect, the study finds that there is large diversity in maturity. While 35% of starters indicate HR business partner capabilities are a serious factor for HR analytics maturity, 93% of leaders highlight the aspect.
Also in this lever, the role of senior management is brought forward as an important success factor. “Senior management must be supportive of HR analytics roll-outs”, says Van Dijk. “Key roles for senior management support are CEO, CFO, CHRO and CIO, and each one of them could be convinced of the added value of HR analytics in a different way,” with in particular the CIO and CHRO earmarked as key players. Support from IT teams and systems is one of the most cited bottlenecks. “Respondents commonly highlight IT capabilities as a major limitation. Without proper support from IT any effort to leverage data driven HR will be strained. HR needs to work together closely with the IT department to collect and improve HR data, gain access to other data sources and the latest statistics tools.” While front runners do perform better on the matter – 67% say they enjoy sufficient IT capabilities – the area remains an improvement point to watch for organisations of all maturity.
Managing processes, roles and responsibilities
The third main lever identified is: successful execution of HR analytics requires good governance. All key players and other stakeholders should be on board and involved, should know what to do, and understand the relations and interdependencies between roles.
Three areas stand out. Cooperation between players in the chain of command is important, with front runners outperforming starters by more than 50%. Secondly, front runners (87%) are strong in involving their key stakeholders – essential players are informed and clear about their roles in the process. Moreover, best practice performers also largely agree on having clearly documented activities and capabilities in regard to HR analytics for all relevant roles within HR.
The fourth key factor for HR analytics success is according to the analysis easy accessible (available for use) and reliable (accurate and up-to-date) data. 80% of front runners state that HR data is easily accessible to those who need it within their organisation, and almost all (85%) front runners indicate that the HR data used in their organisation has a high level of accuracy. The gap with the starters is over 40%, a feat which is described by the authors as “worrying”, considering that data is the fuel for “basically any analytics project.” Van Dijk adds: “The availability and quality of data is often overestimated, behind the scenes much work needs to be done to ensure it is readily usable and of sufficient quality for HR analytics.”
Data management should too comply with a range of international/national regulations and privacy standards. “There are strict ethical and legal standards to abide by and meeting those standards is often considered a rocky road for many organisations. It means dealing with works councils, compliance and legal in order to have a unified and documented set of agreements on how to deal with people data”, states Van Dijk. The authors advise decision-makers to develop a clear data governance approach, and roadmap for how they can deal with specific requirements.
“Analytics is a great method to contribute to the advancement of business strategies and people management. Practice shows that starting organisations can learn (and further develop) from leading analytical companies operating at the frontline. Positioning HR analytics within the strategic realm of the organisation through delivery of actionable insights with business impact is the essential starting point, followed by organising for HR analytics success”, conclude the authors.