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HRlab Human Capital Analytics Software Guide to HR Analytics

Micah Fairchild The Strategic Guide to HR Analytics System Deployment

 By Micah Fairchild

Strategic Steps to Workforce Analytics Software

I know of very few people that get excited when you start talking about human capital analytics (I know this because I am one of those select few). But start talking about analytics and how HR needs to be more strategically involved with other business functions and suddenly interest in the process of human capital analysis (HCA) spikes. Departments have ideas about what needs to be improved; individual employees have suggestions about what needs to be measured; and the C-suite wants to be a part of the conversation to decide on a solution. So what gives?

In large part, the measurement efforts of human resources departments have not taken off until just recently. For years, companies have dug through data from other business functions (like Marketing, Finance, and Customer Service), but not Human Resources. Forrester's Zach Thomas frames it this way, "At the end of the day, executives have had a lever on things like marketing spend and product development spend, but they've never really had a lever on people". Now, it appears that tide may be turning as the recession drives more and more HR departments into analytics territory. Further, as analytics proliferate, studies are finding that the impact of workforce analytics is much wider than originally thought. In fact, a recent joint study by IBM's Institute for Business Value and MIT's Sloan Management Review, found that the highest-performing organizations are 5X more likely to utilize HR analytics for wide-swath decision making.

Is HR Ready for Analytics Software?

Putting analytics together with HR data has been a goal for the C-suite, 3rd-party consultants, and solution vendors for quite some time. Now that solutions have caught up to that desire, "business demands on HR are increasingly going to be on analysis…because people are [just] so expensive", remarks David Foster from the Aberdeen Group. This environmental shift for HR is simultaneously welcome news and a daunting task all at once. Few other business software implementation projects are as tricky to navigate as those that involve strategic HR initiatives—especially human capital analytics. And this is due in part to the fact that workforce analytics (if done properly) will affect every department within an organization. As such, stakeholder analyses, needs analyses, and vendor analyses all need to be completed before jumping into a software relationship.

Technology Stakeholder Analysis

A fundamental organizational truth is that all employees (whether they be line-staff or CEOs) involved in a given project have different motives and interests. Therefore, it is of paramount importance to analyze these motives and interests so that your project goals reflect the needs of all those people with a stake. By taking these other interests into account, all viewpoints are heard; not merely the individual or department-level's. This single analysis, if done on the front-end of a project, can save hours of frustration later on in the process.

Specifically, stakeholder analysis is the process by which motives, interests, conflicts, relationships, and participation is identified, documented, discussed and prioritized. The first step is to obviously identify who the actual stakeholders in human capital analytics software are. HR? Yes. IT? Of course. Finance? Maybe. The point is to identify all those who have power, influence, or vested interest in this project. Next, you will want to use the power/interest grid to prioritize these stakeholders.

Stakeholder Grid

Arranging The Stakeholders

Each stakeholder will fall somewhere in the above grid with regard to how much power he or she has versus his or her actual interest. The HR Director for example, would have considerable power and interest in human capital analytics. However, the Payroll clerk may have very little power, but a keen interest. Given these differences, the power/interest grid shows how project managers and project sponsors need to manage the communication, satisfaction, and even management of your stakeholders. Hence:

  • High power, interested people are those people must be fully engaged and satisfied. As such, the greatest amount of effort will be spent with this group of stakeholders.
  • High power, less interested people are those people that need to be kept satisfied, but will likely wind up having little to do with your project.
  • Low power, interested people are those people that will likely use the analytics software the most. Though power is low with this group, most of the software details will be ironed out with their input and help.
  • Low power, less interested people are those people that should in all likelihood be kept at arm's length—given some information but little else.

While knowing who your stakeholders are, and the different levels of influence each holds, determining what exactly they need from the business software solution is even more critical. Armed with an understanding of who your critics and supporters will be, you can then move on to analyzing your software needs.

Technology Needs Analysis

Ask five different HR practitioners what needs to be measured in order for strategic human capital efforts to be successful and you'll likely get 5 different answers. This can be attributable to everything from a general lack of business acumen to individual differences in the definition of "strategic human capital efforts". More likely though, is that each practitioner framed his or her answer in the light of what was applicable to their organization's specific strategy efforts. Therein lies the problem for those companies who are looking for direction in planning and implementing analytics-based initiatives. Because strategy is as individual as the company it originates from, organizing efforts for human capital analytics must begin with a thorough needs analysis. Step # 1 may have gathered up those people who have a vested interest in human capital analytics, but now you need to determine what it is exactly that your solution seeks to achieve.

A variety of tools are available for this step, but specific attention should be paid to:

  • Appreciative Inquiry
  • Small group facilitated workshops
  • Brainstorming sessions
  • Kinetic Mapping
  • Focus Groups
  • Process Mapping
  • Guided Visualization

Above all, you want to understand where your stakeholders (especially your key ones) are coming from. In order to do this, effective communication and engagement is needed with all stakeholders concerning analytics. Depending on the size, scope, and function of the HR software solution you're trying to implement any one of the above tools may work at determining what each stakeholder needs. However, it should be noted that needs analyses seek to identify priorities and critical needs—to define the gap between what you have and what you most need. As such, when it comes to human capital analytics you need to ask some questions about current and future state measurement in order to get some baseline data. For example, in order to establish where your organization is at in regards to analytics maturity, ask questions like:

  • Does your current HR system only allow you to store and modify basic employee information (i.e. hire/fire/pay your employees)? If so, you likely at least have the option of running ad hoc reports (for compliance sake) and maybe adding in some performance measures. This is the most basic level to benchmark against.
  • Does your current system allow for Employee Self-Service, Performance Management, or Learning Management software modules? If so, you've at least graduated up to the point where analytical capabilities have expanded to limited utility dashboards and support measures for functions like Payroll and Benefits.
  • Does your current HR system allow for organized tactical process integration into other areas outside of HR (e.g. On-boarding)? If so, then your analytical capabilities have moved you to the point of measures like "time-to-productivity" and allow for root-cause analysis.
  • Does your current system allow for HR data integration into planning cycles outside of Human Resources? If so, then your analytical capabilities have risen to the level of targeting short-term objectives like workforce readiness (1-3 years down the road), and systems are being updated in "real-business-time" (meaning in front of the curve).
  • Does your current system allow for direct interaction and improvement with lines of business? If so, then your analytical capabilities are close to full-maturity, allowing for organizational design impact analysis, event modeling, and long-term forecasting.

Baseline questions such as these will give you a better idea of how to marry what your stakeholders want with what software vendors have to offer.

HR Software Vendor Analysis

Existing HR systems tend to be the products of those who put them into place—they're not integrated, take a computer science degree to use, and provide little in the way of actionable analytic information. These realities have made seeking out workable solutions a priority for many organizations that are looking to move in the "metrics" direction. Yet because of years (perhaps even decades) of legacy system use, few organizations understand what to even look for in new software.

As such, it's not lost on us that selecting a new human resource management solution is difficult. Aside from gathering stakeholders (Step # 1) and determining what it is that your organization most needs from the solution (Step # 2), now you must analyze what is being sold by each vendor to know what is available and will achieve the greatest fit. With literally hundreds of HR information systems and applications on the market though, it can be a trying task to match up your organization's needs with the vendors' offerings. After all, doesn't every vendor claim to be able to cure what ails you? Yet, without the right product your needs will not be met and stakeholders will not be happy. Hence, a proper vendor analysis is needed.

Software vendor analyses can run the gamut of simple web searches to proper software selection projects with Request For Proposals, scripted software demos and weighted scoring calculations. Yet, for all the bells and whistles that a company throws out during this phase, few can put things as succinctly as Gartner's Jim Holincheck, who opined about analytics that, "I want the system to…help me understand…the most likely root causes [of a] situation." Indeed, that's what the bulk of workforce analytics software is supposed to accomplish. Unfortunately, vendors will often set up demonstrations that get to root causes through manual system manipulation; exactly the opposite of why an organization would choose to invest in an analytic software solution in the first place.

That being said, it should be noted that not all functions readily lend themselves to HR analytics. For example, Recruitment is very well-suited to metrics such as time-to-fill, cost-per-hire, etc. Other areas such as Employee Relations aren't nearly as easy to measure. Because of these substantive differences between the HR functions, software tools tend to only focus on a specific area. As Gartner's Hype Cycle points out, "Different tools and methods answer different types of questions". As such, it's important to keep in mind that (at least to date) no software tool is likely to support all the analytics needs you're likely to have.

Human capital analytics as a whole is all about providing interdisciplinary analysis—enabling insight into the inner workings of the workforce. Therefore, it isn't imperative that the solution chosen be end-to-end, as long as integration points with at least the transactional systems like payroll and benefits are there.

Conclusion

Human Capital Analytics are quickly becoming part and parcel with effective practices and are undoubtedly the way that HR will wind up getting a "seat at the table". That said, analytics is not just another hair-brained idea to squeeze more useless information out of technology. Indeed, as SAP's Doug Reed puts it, "[analytics is] not about running a report, it's about getting the information pushed to you, [and] ensuring that you're performing well on an ongoing basis". The question is will the way you deploy a software solution for analytics mean the difference between success and failure? Is your organization ready to "exploit the technology"? With more and more organizations coming on board with human capital analytics, you better hope so, because almost every other department lives and dies by the numbers—and HR should not expect to be different. End

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It should be noted that needs analyses seek to identify priorities and critical needs—to define the gap between what you have and what you need".

 

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