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Micah Fairchild Managing The Measurement, The Truth About Human Capital Analytics

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 By Micah Fairchild

Questions & Answers Regarding an Under-Utilized HR Technology

"You can't manage what you don't measure" has become a staple quote of authors, consultants, and organizations world-wide who are trying to make the case for analyzing Human Resources data. You've probably even heard the buzzwords that accompany that quote like "scorecards", "HR metrics", "dashboards", and my particular favorite "behavioral-based economics" (thank you Gallup). Companies that make their living from analyzing this HR data promise grandiose organizational insights by consolidating workforce information into easy-to-understand charts, graphs, and interfaces, and HR departments are doing their best to work out how to keep up. Indeed, "The business demands on HR are increasingly going to be on analysis just because people are so expensive," says David Foster of Aberdeen. Yet, many companies aren't clear about the concept, the methods, the technology, or even the verbiage for this type of analysis. We're talking about Human Capital Analytics, and here's the truth about it.

What are Human Capital Analytics?

As it relates to software technology, Human Capital Analytics is simply software (designed for managing talent) that aims to present key data for the employment lifecycle in ways that are both simple to understand and strategic in nature. Whether it be recruiting the best employees (in form or fit); assessing employee competencies; or any of the myriad other functions of strategic HR, analytics applications are about gleaning insight and making smart, fact-based decisions.

To be sure, analyzing workforce information can run the gamut as far as complexity goes—from simple demographic breakdowns to multi-variant employee performance analyses. As such, the data for these analyses is often all over the place. A spreadsheet here, a financial system there, but as Ventana Research's VP Kevin W. Grossman states "many organizations don't have [the] technology to aggregate, synthesize and analyze [their HR data], and so [they] cannot easily use it".

Does HR really need to be measured in order to be managed?

According to Gartner's Hype Cycle for Human Capital Management Software the business impact of human capital analytics is sizeable. Workforce dollars can be more accurately targeted; regulatory reporting can be more closely monitored; and even "operational reporting can be more strategic" by leveraging HR data. However, it should be noted that in order for analytics to be truly transformational (rather than simply transactional in nature), information gleaned from these analyses must be used to improve both individual and organizational performance—not simply justify an organization's HR department. Indeed, McBassi & Co.'s report (Raging Debates in HR Analytics) found that not only is departmental justification misguided, "It is a misuse of analytics that fails to create any lasting value for an organization".

Who's conducting analysis on their human resources?

The overall adoption of human capital analytics (let alone the adoption of the technology to support those strategic endeavors) is all over the map. Co-research by the International Association for Human Resource Information Management and Knowledge Infusion through a recent survey found:

  • 52% of organizations (with 2,500+ employees) only used "very light to moderate [HR initiative] assessment"
  • 24% of respondents aren't measuring HR initiatives at all
  • About 25% "had implemented workforce analytics software"
  • 35% of those surveyed indicated they were in the process of HR analytic software deployment
  • 30% planned on making significant HR software investment in the near future for analytics software

Likewise a study by Ventana Research found:

  • Slightly over 50% of respondents indicated a "need to gain visibility into basic talent metrics and Key Performance Indicators (KPIs)"
  • 38% of participants had plans in place to "change the way they generate and apply analytics"
  • 35% indicated that changes to HR analytics gathering are "needed but are not a priority now"
  • 41% of those surveyed said that a major barrier for necessary change in the HR analytics arena was driven by a lack of "suitable software"

One possible reason for this adoption disparity is that HR software companies have not made tools that seem applicable to organizations' unique requirements. With nearly every organization having different needs (and different ideas of what key human capital metrics are), there is a drive for organizations to want to customize each and every report needed for analysis. For example, even though they have 250+ ready-to-go reports, Lawson's Cecile Alper-Leroux says "More than 50 percent of our customers use 25 or fewer of those reports out of the box". So, whose fault does this disconnect lie with—the customer or the HR software vendor? Gartner's James Holincheck, thinks it's the vendor, saying "Different stakeholders need different metrics … [and]… vendors haven't really delivered on that".

What do I need to know to get started with analyzing HR data?

Gartner's Thomas Otter says, "It can be useful to start with a single metric (such as head count) or a single issue (such as how to get the most impact from a training initiative)". Because human capital analytics impact such a wide swath of the organization, using single metrics can help build a successful foundation for larger initiatives. Says Otter, "Use such pilot efforts to gain quick wins and support to build out the infrastructure required for enterprise-wide workforce analytics". End

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"The business impact of human capital analytics is sizeable. Workforce dollars can be more accurately targeted; regulatory reporting can be more closely monitored; and even operational reporting can be more strategic by leveraging HR data."

 

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