Today setting goals, strategies, and actions are rendered meaningless if this is not directly liked to results analysis and measurement. If you bear in mind that people are the most valuable asset for a company’s productivity, the need to integrate analytical processes in the HR function is becoming increasingly crucial to be able to successfully forecast future lines of action.
The evolving role of HR and its approach to business strategy and objectives has come with a series of interrelated analytical notions which are gaining traction in this field:
- Big Data: This concept repeatedly shows up as one of the trends that will transform HR management in the years to come. The ability to analyze and interpret large volumes of employee information will allow more accurate talent management in the future based on objective data.
- Balance Scorecard: New tools based on data analysis enable strategic factors to be monitored for companies depending on company structure, size or activity. These balance scorecards or dashboards allow information visualization and representation through indicators, facilitating analysis of the main people management variables.
- To configure balance scorecards requires setting Key Performance Indicators (KPI) in order to quantify aspects that reflect an organization’s performance. Using such indicators is especially beneficial for measuring actions that are complex to quantify, while providing an automated information system which is continuously updated. In the HR field, KPIs can align such actions with the company’s objectives and business strategy. This is one of the main challenges for the HR function today in assessing different scenarios for decision-making purposes and then measuringto what extentthese actions have been accomplished.
From strategy to action
After putting forward the theory, we need to address the question: how are all these analytical notions useful to the HR function?
Detecting the qualities of high-performing employees and including these in the recruitment process, knowing the reasons why key people leave in order to avoid the brain drain, or designing attractive compensation plans to raise the level of workforce productivity, are some specific examples of KPIs that help us understand how using HR indicators is key to forecasting future lines of actions.
KPIs will be defined by each organization according to their needs and the characteristics of the business, for example:
- Generic: personnel costs, hours worked, number of active employees, sales per employee.
- Results: productivity, profit, variable pay, overtime, external hires.
- Competencies: best practices, strategic skills, core competencies, un-skilled staff, and graduates.
- Motivation: number of employees with bonuses, satisfaction rate, training.
- Work climate: absenteeism, attrition rate, voluntary redundancies.
- Recruitment: cost and average time per recruitment process, number of interviews per hire.
Careful though! All the experts agree that to successfully implement KPIs, it is critical to take the following aspects into account:
- KPIs need a previously defined strategy which is aligned with the business goals that will lead the organization toward the desired outcome.
- Identification and definition of appropriate indicators and the understanding of the cause-effect relationship between these will be essential for good analysis and making the right decisions.
- The organization should easily understand what each indicator is about and what value is associated with it.
- KPIs must be accessible and easy to process using technological solutions.
More work to be done
While most companies are already aware of the need to integrate analytics tools into their processes, it’s apparent that there is still a long way to go. According to the latest report, "Global Trend in Human Capital 2015" by the consultancy Deloitte, the use and analysis of information in the HR field was one of two major gaps detected in organizations.
The conclusions in the report indicate that data and analytics are crucial to overcoming many of the current HR challenges such as engagement, leadership, training or recruitment issues. Companies that are strong in analytical HR and talent will be better prepared to compete in the next few years. Organizations should invest in this new discipline, integrate it with the rest of the business, and strengthen the capabilities of the workforce.
Along the same lines, in another recent report, Tendencias vs. Estrategia (Trends vs. Strategy), by the Spanish language ORH magazine, an HR observatory, investment in talent analytics ranks second to last of the 10 priorities of HR professionals for 2015. For some 25% of companies surveyed, investment in this area is not envisaged in the short term.
Indeed it follows that to overcome these new challenges analytics must be integrated in both processes and in technological talent management solutions. This will undoubtedly encourage the HR function to adopt a leading role in their organizations and to actively contribute towards increasing the value of their companies. Talent analytics is no longer a mere trend, it is an unstoppable reality.