New kinds of data are being captured and analysed as part of a more holistic approach to HCM technology and people analytics, according to Bersin by Deloitte.
Data from a range of sources including external market information, social media, and biometric data from personal devices and badges are now being collected for a more informed people analytics strategy, said Christa Degnan Manning, vice president, solution provider research, Bersin by Deloitte.
“It is really in bringing together all sorts of data sources that companies can get creative in tackling their pressing people challenges,” she said.
Such challenges include understanding staff flight risks; distinguishing reasons that cause employees to leave from those that cause them to stay; selecting high performing job applicants; and identifying the unique characteristics of top sales and support teams.
Other similar challenges include predicting potential compliance gaps; analysing aspects of engagement and culture of importance to employees; and helping people identify emerging career paths and leadership capabilities that match company culture and growth plans.
“The list goes on and on,” said Degnan Manning.
“It is really in bringing together all sorts of data sources that companies can get creative in tackling their pressing people challenges”
More broadly, there are three other significant trends in the HCM technology and people analytics space, she said.
These are: tools that support more frequent and real-time measurement; integration of data from disparate sources; and easier, faster analytics and visualisation of data.
Recent data from Deloitte Human Capital Trends 2016 report pointed to a major leap forward in analytics.
One in three firms indicated they are ready for serious people analytics today, up from just one in four when the same question was asked last year.
More than three out of four (77 per cent) organisations believe people analytics is important, not only to shore up and support existing HR processes and policies but to challenge some of the fundamental assumptions that businesses have been run on for decades.
“For example, the idea that academic pedigrees or grade point averages determine career success, or that not getting rid of a single toxic employee does not have that much of an impact to a business,” said Degnan Manning.
Fifty-one of the companies surveyed correlate HR data with business performance compared with 38 per cent in 2014 and 2015, while 44 per cent of companies use HR data to predict workforce performance compared with 29 per cent in 2015.
“This involves a complete mindset shift in HR and frankly the business overall to using tools to experiment”
“People analytics is much more than technology or a data science team,” said Degnan Manning.
“It really is a way of operating the business and changing people’s behaviour based on believable data.
“This involves a complete mindset shift in HR and frankly the business overall to using tools to experiment – test hypotheses, make changes, and measure results.
“And then doing this all over and over again as a new data-driven discipline,” she said.
This repetitive experimentation tends to fit very well into the internal and external environments and dynamics that companies are operating in today, according to Degnan Manning, who said companies, industries, geopolitical environments, and even employees as people are constantly changing in the current business environment.
“So establishing a discipline of people analytics can be seen as almost an inevitable transition that companies will likely have to go through to survive and thrive in the era of constant and rapid change,” she said.
A second practical implication of the use of data and technology to analyse that data is that people analytics is expected to be an integral part of solving business problems, and Degnan Manning said HR increasingly will likely be viewed and believed as a strategic partner with other functions.
“What companies should really focus on is an HR tech and analytics strategy and infrastructure roadmap alongside their other operational business systems”
“Right now, by and large companies are still at the early stages of getting enough accurate and consistent data,” said Degnan Manning.
“Many companies are rationalising and consolidating the systems they use, having better discipline in collecting and cleaning their data, and establishing governance around their data definitions, models, and systems integration. But this is just the beginning.”
While this puts them in the place to start to look at inter-relationships between sets of data, determine statistical significance, patterns and the like, she said it is “part art and science”.
“You can have these massive amounts data, but you also have to know the business and the culture of the company, how the people behave, to understand what questions to ask of the data to get the evidence you need to drive change,” said Degnan Manning.
“And some of that doesn’t require ‘big data’, but small sets of data that collected and presented correctly can simply support what may just be common sense.
“For example, if an employee and a manager meet once a week, there will likely be better employee engagement, retention, and business results.”
Ironically, Degnan Manning said the advent of web-based and then mobile-based applications that enabled employee self-service and manager self-service to some extent have stopped people from interacting directly with HR, and with each other.
“I believe this is linked to a lot of the disengagement and distraction that ultimately impacts workforce productivity today,” she said.
“Multiply that by every new flashy app of the week – what companies should really focus on is an HR tech and analytics strategy and infrastructure roadmap alongside their other operational business systems.”
“How will they enable their customers to be more successful in addressing business challenges?”
In looking at vendors and ultimately realising ROI on a specific HCM solution, Degnan Manning said it was important to ask HR solution providers – particularly those that are software as a service (SaaS) in the “cloud” – what their “customer success” model is.
“In other words, how will they enable their customers to be more successful in addressing business challenges?” she said
“How will they get them to understand how to collect the right data sources, ask the right questions of the data, and identify actions to take and then go back and measure the results of those actions? And how will they do this on an on-going basis.”
These tools can be very powerful, but Degnan Manning said that with great power comes responsibility – both responsibility initially to set up customers to be successful using the tools, and to constantly apply the new capabilities and take action on the opportunities identified by the analytics over time.
“Turning on a new HR solution today is just the first step in a never-ending journey,” she said.
“Of note, back in the day of on-premise single company instance software, companies bought a set of CD-ROMs that had static code on them that the buyer was responsible for implementing.”
Often, the buyer implemented this code with the help of a third-party consultant who had expertise in that software and in establishing business rules that were relevant to a company’s industry or country regulations.
Implementation services were also two to ten times the cost of the initial software and companies then paid 20 per cent or more for software maintenance to fix bugs to and get compliance related updates for the code.
And significant upgrades could be tremendously expensive both in terms of real dollars for new software as well as implementation resources needed both inside and outside the company, said Degnan Manning.
“The effectiveness of HR systems comes down to measuring the value of people to an organisation – and analytics is key to unlocking that value”
“Now with SaaS, the model has shifted primarily to an annual subscription where new capability is available to all customers and complexity can be mitigated by only allowing limited configurations of the software – not complete customisations to the way a company had operated in the past,” she said.
“Without getting into a debate over cloud software deployment models – people just want applications that are intuitive and fast to use – this means that companies today should be fully prepared to understand and apply all this innovation to their businesses and adjust to a relentless pace of change in the software alongside the change in their businesses too.”
Unfortunately, Degnan Manning said many companies made the business case to move to HR cloud software by eliminating internal HR IT staff thinking that the cloud software provider managed the infrastructure.
While this idea is basically true from an uptime perspective, companies still need staff or service providers that understand the other systems they have, not just in HR, but across and outside the business.
Such staff also need to establish and maintain integrations and data collection to do meaningful people analytics.
“Many small start-up cloud software based companies will have their own professional services teams to help with this and established enterprise HCM software players still most often work with third-party consulting firms – so companies should clarify exactly how HR solution providers are going to help you set up and then sustain success,” she said.
“Also probe as to how they are going to scale these capabilities as they and their customers grow globally, including through third-party partner ecosystems.”
Getting the most out of HCM solutions
For years and for many firms still today, Degnan Manning said the primary driver of investing in HCM solutions was typically a chief executive asking: can anyone tell me how many people actually work here?
“The answer was usually no because companies had different systems of record for regulatory compliance in different regions,” she said.
“An example is payroll, which is incredibly hard to do but simply cannot go wrong for organisations or they may face stiff fines so they could not just rip and replace them.
“Then we had more sophisticated systems that had different purposes such as recruiting or performance management and compensation,” said Degnan Manning, who observed that, despite the emergence of integrated talent management or newer cloud solutions, companies likely will always have multiple solutions in HR and across the business.
“So companies should craft their own HR technology and people analytics-driven strategy, understand the capabilities of the applications they already have – and many of them are adding in more embedded analytics and analysis capabilities every quarter – and think about the data they need to solve the most pressing challenges their business has through its people,” she said.
“There may not be a hard dollar solid return on investment in answering alone the question of who works here, but answering questions such as whether those people are productive in their work and supporting business efforts can indeed have significant top and bottom line impacts.”
The implementation of any HR solution, particularly in the cloud, is just a first step in the journey of understanding the people in an organisation, what motivates them, and how to best manage them and the customers they serve, said Degnan Manning.
“The effectiveness of HR systems comes down to measuring the value of people to an organisation – and analytics is key to unlocking that value.”
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