Many businesses now routinely use analytics in their marketing, supply chain and finance functions, but we are yet to see a large-scale take up of data analysis for talent management.
“HR is the last corporate function to leverage data. People are typically 70 per cent of the cost of business in mature economies, yet hiring decisions for example are still driven by the gut,” says Tom Marsden, chief executive of people analytics software provider Saberr.
In fact, research from IBM shows that more than 40 per cent of organisations globally use data only to produce basic HR reports, less than half use it to analyse historical trends, while under 20 per cent are capable of applying predictive analytics to workforce issues. Around 16 per cent of companies do not use talent analytics at all.
Eugene Burke, chief science and analytics officer at global advisory company CEB, says one reason for this is that a vast majority of business leaders do not believe more analytics leads to better decisions. “This suggests they’re not focusing on key business issues, they don’t frame the right questions and have no clear sense of the outcomes they want – this is where the value in using these tools lies,” he says.
The cost of implementing more analytics is viewed by some business managers as prohibitive. “But talent analytics should be viewed as an investment which can deliver a tangible return when properly implemented,” argues Peter Cheese, chief executive of the Chartered Institute of Personnel and Development (CIPD).
Another reason is the quality and integrity of workforce data. “Fragmented HR systems and sources of data mean that many businesses have a weak basis from which to develop useful analysis and insight, so ‘garbage in, garbage out’ is still a challenge,” says Mr Cheese. Also, vendors need to provide simpler interfaces. “The software used by customer service functions is intuitive and easy to use – people managers and HR need similar applications,” adds Saberr’s Mr Marsden.
Meredith Amdur, chief executive at HR data provider WANTED Analytics, believes the human resources function is generally not accustomed to working with large sets of data. “Some HR professionals might also think the data and the tools are beyond their skills,” she says. Deloitte’s 2014 Global Human Capital Trends survey confirms this: 86 per cent of companies admit to having no analytics capabilities in HR and 67 per cent rate themselves “weak” at using HR data to predict workforce performance and improvement.
Talent analytics should be viewed as an investment which can deliver a tangible return when properly implemented
It is no wonder HR professionals with proven analytics skills are increasingly sought after. WANTED Analytics noted a 54 per cent increase in recruitment demand at the end of 2014, compared with the same time in 2013. But existing HR teams can also learn and borrow from their marketing colleagues. “Marketing have developed analytics capabilities, including how to analyse unstructured data and target analysis on customer needs as well as outcome metrics to show the impact of decisions and actions,” says CEB’s Mr Burke.
Anthony Hesketh is senior lecturer at Lancaster University Management School and author of the Managing the value of your talent report, part of the Valuing Your Talent initiative headed up by the CIPD and other bodies. He believes the best practice is for organisations to have just one, sophisticated analytical team working across all functions, including HR. He says: “Those HR functions that are still building their own specific data warehouses, deciding on the codification of their own information and looking for their own analysts cannot see the business value for the analytical trees.”
ANALYTICS BUSINESS CASE
According to the report Predictions for 2015: Redesigning the Organization for a Rapidly Changing World from Bersin by Deloitte, talent analytics and workforce planning are now crucial if companies want to succeed in a global environment where competition for talent will be fierce. We are already seeing changes that companies are making to their HR teams.
“Increasingly, senior appointments of chief data officer, head of workforce analytics and head of human capital reporting and analytics are being made within global banks and technology giants, and we expect to see this replicated across other sectors in the coming months,” says Rachel Davis, chief operating officer at people intelligence consultancy Armstrong Craven.
Business managers are also under increasing pressure to deliver better outcomes while facing serious time and budget constraints. “The resource that business managers can most influence are their people so we’re seeing a real push from chief executives, chief financial officers, heads of HR and from investors for greater insight into the role played by people in creating organisational value,” says CIPD’s Mr Cheese.
In fact, talent analytics is perhaps the most important of all business analytics. “One CEO has said to me that there are only two things in business that count: money and people, and that if you get the people factor right, the money will follow,” says Dr Hesketh.
Still, individual business and HR managers may need to build the case for creating a talent analytics programme, particularly if cost is an issue. Mr Cheese concludes: “Illustrate the ‘what if’ scenarios should investment in analytics not occur, focus on the demonstrable value that better insights on people can bring to the organisation, start small, act within budget and partner across the business.”