How HR can realise true enterprise people analytics

How to demonstrate ROI from people using analytics

In the future, the CHRO role will be as critical and influential as that of the CFO, as organisations begin to recognise the critical importance of human capital and the fact that it is at least as important as financial capital, according to Aon Hewitt.

In order to achieve that goal, however, the value of human capital needs to be quantified and in some ways robustly linked to the top line and bottom line of the business.

“That’s where true enterprise people analytics come in, connecting data from across the organisation and bringing in data from outside the enterprise and combining that with business insights to produce truly actionable, forward-looking business insights,” said Eddie Short, managing director of data & analytics for Aon Hewitt.

These insights will inform leaders on what they could do and what they should do, in the context of people-centric business problems and/or opportunities, he explained.

Speaking at Aon Hewitt’s recent Reward Think Tank in Sydney, Short said the boldest organisations will go further and publish these results to their shareholders – not merely as a footnote that highlights the importance of their culture or diversity and inclusion, but as a passionate statement of how people are driving business performance.

He gave the example of investment services and management firm BNY Mellon, which became the first major institution to produce a people report alongside its annual financial statement and report.

This report shows that BNY Mellon is both passionate about its people and how critical they are in meeting clients’ needs and the strategic goals of the bank, Short observed.

“If HR departments focus only on performance data of employees without the broader business context, they will continue to struggle to see the big picture”

Successful business planning is about being able to anticipate and preparing for the future, however, Short noted that DDI’s Global Leadership Forecast found that only 18 per cent of HR departments saw themselves as “anticipatory”.

“If HR departments focus only on performance data of employees without the broader business context, they will continue to struggle to see the big picture,” he said.

“The key to extracting insight is to combine multiple layers of data to see find correlations, and employee engagement data can be combined with leadership feedback to build the profile of leaders that are generating the highest discretionary effort and productivity from their people.”

Ultimately, he said these insights will improve the overall quality of future investments in leadership recruitment and development.

Short also noted that key business outcomes such as sales and revenue growth are board-level priorities – and talent is now at the same level.

As organisations begin to map their people data to business outcomes, he said they can begin to predict and build business scenarios to determine.

“For example, which high-potentials are most likely to develop tomorrow’s game-changing product?”

“While implementing this type of mindset is not yet ubiquitous, one thing is clear – analytics are only as good as two things: the access to quality data and the specific insights that they can provide,” he said.

“And perhaps the greatest challenge of all – identifying the questions that move the business forward and mapping the right data to be able to answer those questions.”

“Analytics are only as good as two things: the access to quality data and the specific insights that they can provide”

There are some practical and demonstrable ways in which companies are using analytics to demonstrate return on investment from their people, Short added.

“The fact is you can’t predict the future, particularly when it comes to human beings,” he said.

“However, historical data can help business leaders better understand trends to help predict even more unpredictable elements of the world – human behaviour.

“This, implemented intelligently, can help leaders make better decisions about what they could do, and what they should do.”

Best-in-class organisations are using analytics to solve business challenges; however Short said there is a very clear difference between prevalent analytics and high-value analytics.

“Most HR analytics look at dashboards that review simple metrics like turnover, headcount, talent movement, and diversity representation,” he said.

“While these metrics are important, it is in the high-value analytics that business challenges can be solved by connecting the right people data to the right business data.”

He gave the example of banks, which have had to recruit tens of thousands of risk and compliance personnel since 2010, and this has dramatically impacted their cost/income ratios.

“Now, the leaders are looking at how they can use people analytics to optimise their risk culture, whilst reducing the overall burden of non-producing compliance staff and/or moving them to lower cost locations,” he said.

Others are using analytics to optimise the productivity of their salesforce, to provide assessment, insight, and training in order to improve the output from their median sales professional to close to 80 per cent of their star salespeople.

“Leaders are looking at how they can use people analytics to optimise their risk culture, whilst reducing the overall burden of non-producing compliance staff and/or moving them to lower cost locations”

Short also predicted that environment and behaviours will be the next horizon of business strategy, as organisations have been following a process-centric approach to managing their businesses for 100 years.

While processes are great for linear streams of activities such as automotive manufacturing (for example, you can’t put an engine in a car, if the chassis has not been built first), Short noted that today 80 per cent of western economic value comes from service industries.

“Service industries do leverage many processes, but the reality is much of this people-centric work does not need to completed in the traditional linear way and contains a series of activities where ad-hoc teams are brought together to complete tasks and while sometimes the order matters,” he said.

“For example, you can’t edit a book, before the core content has been written,” said Short, who added that sometimes order doesn’t matter (for example, authors write the last chapter of a book, before they write the rest of the story).

“In business terms, the process-centric world focuses on reducing the number of steps, and automating as many steps as possible,” said Short, who gave the example of the automotive manufacturing process in which computers and robots do not need to be motivated.

“In the services world, while we are seeing a lot of automation of tasks, many require us to improve the quality of the individual work producer such as a person or team.

“If a sales team or contact centre team are not highly motivated the quality of their work and productivity will be dramatically reduced,” he said.

“As such we have to better understand our key workers attend to their knowledge, skills, rewards, and recognition.

“For a highly skilled software engineer, while pay and benefits clearly matter, receiving recognition for great work from their peers and managers is incredibly important.

“Likewise, human beings benefit from moving away from the traditional ‘management offices’ and ‘pens’ and instead working in open, flexible and agile work environments, where they can easily collaborate, share thoughts and ideas.”

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