There are many practical applications of big data for HR. However, a strong partnership between the business and HR is essential if big data is to yield significant P&L impact, writes Heidi Spirgi
Most companies today make hiring, promotion and development decisions based on anecdotal data, a lot of gut feelings and no scientific analysis methods. Salespeople are hired for their “people skills”, call centre reps for their prior work experience and communication skills in the interview, and training budgets are based on perceived gaps by the business. But we all know that these consistently applied “methods” yield wildly inconsistent employee performance results.
For the past 20 years, companies have been reaching for the golden ring of “workforce analytics”, hoping that by grasping it they will somehow drive higher levels of business performance. But these initiatives have, for the most part, brought little insight of any significance.
One of the biggest reasons for this is that workforce analytics typically deal with a very limited worker data set and primarily HR data, so the questions that can be asked are limited. The data set is constrained to hundreds or maybe a few thousand workers, and the questions that can be asked are limited to what can be answered by the data stored in a HR system (and we all know how uninspiring this data can be). Today, a new form of data science termed “big data” has made it possible to capture, store, share, analyse and visualise vast sets of data.
What is big data?
The term itself is used to describe a sufficiently large amount of data that, when analysed, can uncover new knowledge, hidden patterns, and correlations. Analysis techniques range from “data mining” – looking for unknown correlations – to pattern discovery for understanding trends.
From a business perspective, this revealed data is extremely valuable as it can provide advantages over competitors and insight into how to most effectively drive revenue. The application of big data has also helped to define an entirely new mission for HR. With the ability to mine large amounts of data and pinpoint correlations, HR professionals now have insight into how people work and communicate, creating the possibility of more efficiency and innovation within the hiring process. This emerging field of workforce science, which is based on big data and HR, gives companies a new opportunity to make data-driven decisions about their number one driver of business performance – their people.
The data itself comes from a variety of places, including HR systems; operational systems, such as sales; call centres; supply chain and financials systems; as well as social data from outside of the enterprise. Algorithms identify correlations between workforce attributes, such as level of education and years of experience, and business metrics, such as profit, productivity, quality, innovation, efficiency and customer satisfaction.
These correlations can yield very powerful results, overturning long-held falsehoods around what kind of people businesses should hire, what drives high performance in the workforce, and what kind of development activities yield results.
There are many practical applications of big data for HR. For example, imagine if you could:
- tell what your highest performing sales reps had in common so you could look for more of that type when recruiting?
- tell whether prior work experience or an employee’s supervisor had a higher correlation with call centre reps’ customer satisfaction scores, and it could know what it was about the manager or the prior experience that yielded the results?
- tell which attributes identified during the recruitment process actually lead to higher levels of innovation among your engineers?
- know whether a home address or tenure at prior companies were a greater indicator of whether a retail associate would stay at your company for more than a year?
What you need to know now
- HR data is interesting primarily to HR practitioners. Only when it is combined with business data (sales, revenue, quality, output, margin, etc) does it become really compelling.
- For the first time, businesses can now gain true insight into the correlation between their workforce and business performance. These insights can have a significant impact on key operating metrics, such as revenue, sales and customer satisfaction.
- Businesses will begin to use big data to understand the impact of the workforce with or without HR. Either HR will step up and lead the organisation in this direction or it will happen from outside of HR.
- It takes more than data and technology. Organisations need to begin today building the analytical competence to know what questions to ask, tell the story around the insights, and determine the resulting actions to drive increased business performance.
- A strong partnership between the business and HR is essential. HR can’t do this alone. The business can’t do this alone. Each needs the other. A strong partnership around big data can yield significant P&L impact.
Heidi Spirgi is senior vice-president of the advisory practice for global technology-enabled services provider Appirio.