Companies which excel at people analytics including internal benchmarking, leadership planning models, and data visualisation/storytelling techniques are 3.1 times more likely to outperform their peers financially.
However, the analytics bar is likely rising faster than HR can leap over it – and HR needs to take a more proactive role in adopting people analytics which drive genuine business outcomes.
“As HR’s digital skills continue to lag, attempts to adopt people analytics are increasingly failing,” said Adam Canwell, head of the leadership services team at EY, which conducted the Global Leadership Forecast 2018 – the world’s largest study on leadership – in conjunction with DDI and The Conference Board.
The research found that 70 per cent of HR professionals reported an increase in their people analytics skills and data-driven decision making – but this is not enough, the report suggested.
“HR executives need to get on the front foot with regards to driving value through people and leadership strategies through better use of people analytics and technology to provide strategic insights,” said Canwell.
The research report, which took 25,812 leaders and 2547 HR professionals at 2488 organisations across 26 industries worldwide, suggested HR professionals are now falling behind the business and are seen to be less effective than their non-HR leaders when it comes to meeting the challenges of a disrupted and volatile environment.
“There is evidence that HR people are falling behind in the important capabilities that support transformation,” said Canwell.
“There is a need for HR leaders to invest in their own development – particularly around business acumen and new HR technologies.
“They also need to stop talking about the use of analytics to drive people and talent initiatives.
“HR has to get ahead of the game on this and bring insight-led approaches to the business.”
“HR people are falling behind in the important capabilities that support transformation”
CEOs are also looking for HR to step up and provide strategic advice and drive on their major concerns, however, many senior executives do not believe that the HR team is set up to provide this strategic advice, according to a recent research report.
And over the past three years, the research indicated that HR’s reputation has gotten worse, with more leaders now believing that HR is simply a “reactor” that executes commands rather than an “anticipator” that develops a people strategy that enables the organisation’s business strategy.
Most HR leaders (41 per cent) are seen to be acting as “reactors” – reacting to the needs of the business, while only 11 per cent are seen to be acting as “anticipators” – HR professionals who are proactive about people/leadership strategy.
“Anticipators play a driving role in the strategy process rather than a passive or reactive role,” said Canwell.
Interestingly, he said HR see themselves differently with the majority (62 per cent) seeing themselves acting as partners and 17 per cent as anticipators.
One of the primary challenges in this is that HR is failing to develop digital skills on pace with technology advances, which undermines their ability and reputation to drive digital transformation across the workforce.
As a priority, Canwell said HR executives should focus on creating data-led people and leadership strategies to ensure the business has the right capability and a cadre of ready leaders to drive success in an uncertain and disrupted future.
“All industries and organisations are facing into the reality of having to transform the capability of their workforces – from leaders across all employees,” he said.
“HR has to step and help the business effectively manage the implications of this talent transformation.”
“As digital disruption continues to transform the workplace, we’re facing a massive leadership shortage worldwide”
The research report also found that C-level executives rank developing “next gen” leaders and failure to attract and retain top talent as their biggest challenges in the coming years by a wide margin.
In fact, only 14 per cent of CEOs believe they have the leadership talent to execute their strategy.
“If you’re deeply concerned about your organisation’s lack of leadership capability, you are in the clear majority,” said Evan Sinar, chief scientist and vice president of DDI, and lead author of the GLF.
“The tremendous amount of data we collected in this study shows that as digital disruption continues to transform the workplace, we’re facing a massive leadership shortage worldwide.”
Leadership megatrends changing the workplace
The report also revealed a number of other leadership “megatrends” globally:
1. Digital is reshaping the workforce.
Digital pioneers – defined as the top 25 per cent of organisations with the strongest digital leadership capabilities – financially outperform other companies by 50 per cent.
Leadership, particularly in the current digital era, is of critical importance to businesses, said Canwell.
“It is a top agenda item for CEOs and boards, who are looking for insights on how to embrace disruption to connect people and possibilities.”
2. Data is creating a more inclusive, agile, and fair workplace
Organisations with more women in leadership are 1.4 times more likely to have sustained, profitable growth, according to the research report.
Companies which have reached an above average level of gender diversity overall (at least 30 per cent) and at the senior level (more than 20 per cent) outperform diversity laggards in key leadership and business outcomes.
The report suggested that the leadership strategy of such companies relies not on meeting any single demographic target alone, but in integrating diverse perspectives into people, product and business decision making company-wide.
“If you’re deeply concerned about your organisation’s lack of leadership capability, you are in the clear majority”
3. A diverse, purpose-driven culture defines success
Purpose-driven companies outperform the market by 42 per cent, and culture emerged as a major driver of leadership success in the study.
The data showed that, for leadership strategies to succeed, organisations must build solid cultural cornerstones, such as a clearly communicated purpose, peer coaching, experimentation and psychological safety.
Diversity also plays a major role in building a successful workplace, which includes embracing gender diversity, leveraging diverse mindsets, and understanding the relationship between Millennial, Generation X and Baby Boomer leaders.
4. DIY doesn’t work
Just over half of the organisations in the top third for financial performance have formalised mentoring – and a “do it yourself” mentality leads to leadership failure.
The report provided clear evidence that leaders are increasingly expected to work in shared leadership environments, and that leaders increasingly need to build relationships with mentors to find success.
Additionally, organisations that rely on a self-directed, insular approach to learning are failing to engage leaders in meaningful development.
5. Finding new sources of leadership potential is crucial
Organisations that extend development of high-potential talent below senior levels are 4.2 times more likely to financially outperform those that don’t.
In the past, organisations have often had a narrow definition of the “type” of person who has leadership potential, and have invested their resources into developing a very small group of people who meet that criteria.
However, the report found that organisations that take a broader view of leadership potential prove to be more financially successful, feature stronger top leaders and have more women in leadership.
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