Much like big data has revolutionized marketing and finance, industry experts say that HR analytics -- workforce metrics that can help companies glean information about their talent pool -- will transform human resources. But are HR professionals ready to assume a more data-oriented role?
Not without better analytical skills, says Josh Bersin, president and CEO of Oakland, Calif.-based consultancy Bersin and Associates. "HR teams are not very analytical in their thinking yet," Bersin said, despite broader adoption of talent management software. "That is holding them back from doing more data-driven decision making."
Ron Thomas, director of talent and human resources solutions at New York City-based Buck Consultants, has a similar opinion. Thomas said it can be difficult for HR managers to get away from "gut-feeling" decision making.
However, as an increasing number of companies venture into HR analytics by adopting talent management software, it is becoming costly to lag behind. In situations where HR employees are unprepared to serve as statisticians, experts say companies often hire specialty staff while the HR department plays catch up.
And catching up is not impossible if HR professionals make a conscientious effort to bring themselves up to speed, say these experts. "There are so many articles and white papers being written. It's kind of like going back to school, so to speak," Thomas said.
Benefits of HR analytics
HR professionals have long been data collectors, amassing and keeping track of employees' personal information, salary rates and the annual number of retirements. But to grasp the potential of HR analytics, HR managers need to become data interpreters, according to Thomas.
"When you think in terms of all the information HR collects in a year, there's enough right there if it's used properly. But the key to analytics is interpretation," he said. "You can have all the data in the world and still not know how to use it."
Thomas used the example of turnover to illustrate the benefits of HR analytics. "What if there was a way to figure out why you were having high turnover besides exit interviews? If 6% of the people are leaving in one year, you know there's something wrong culture-wise because they're eager to get in, but once they're in, they want to get out."
Thomas explained that an HR manager who has good data interpretation skills is more able to spot trends. After trends are identified, he or she can then come up with a course of action based on the data. "That’s a way of looking at turnover as a number and digging down by what the data is showing."
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Bersin named several other benefits of HR analytics. "When there's a retention problem, you can look at the characteristics of the team or manager that's causing people to leave -- or it could be the compensation, or the way the work is organized. You can look at skills gaps, and where people are untrained."
Bersin said talent management software is making predictive analytics possible, which can help HR professionals make wiser choices based on historical data.
"If you can collect a lot of data about the workforce and look at it holistically, you can predict who the right people to hire are, and who are most likely to be successful as leaders," Bersin said. "If out of the last 20 people we hired in this job, the four people with this background failed, we're not going to hire people with that background again."
Howard McMinn, lead partner for workforce analytics at Deloitte UK, said that once the predictive layer is in place, HR can begin to do what-if scenario planning. This can help place HR on the same level as more data-driven divisions of a company, such as finance and marketing. "HR managers need that interpretive skill," he said. "It's the ability to speak as the rest of the business does."
Self-education is key for building analytical skills
HR academic programs are evolving to include courses on statistics, so the HR professionals of tomorrow will enter the field with the necessary analytical skills. But for today's HR managers, analysts say self-education is critical to staying on top of the changing field.
Thomas recommended that HR professionals read as much as they can about analytics and network with their peers. "People are going to have to educate themselves. They will need to attend some conferences and come out with some type of game plan about how they're going to bring their department with them," he said.
Bersin said HR managers need to gain a solid understanding of the business' goals if they don't already have one. This context will give them a clearer idea of how HR analytics can serve the organization. "Before they collect a bunch of data they need to know what the company is trying to do -- most know, but some don't. If they know the goals, their job is to assemble the information that will help the company make decisions."
As for business leaders who are anxious to reap the rewards of HR analytics, Thomas said many companies are taking a two-pronged approach by hiring specialty staff to work alongside the HR department. However, eventually the role of the HR director will change to incorporate analytics, he said.
"The future of the HR director is going from the generalist role to the strategist -- the people strategist," Thomas said.
And these experts cautioned that those who do not take steps to transition to the role of the strategist risk being left behind. As Bersin put it, "This will become a core part of the way HR works, and it'll never go back."
Top vendors for HR analytics
While most talent management suites have HR analytics built in, Bersin said some vendors offer better functionality than others.
"The real leaders in analytics are Oracle and SAP. They have the most sophisticated and integrated analytics solutions," he said. In terms of smaller vendors, he named SumTotal Systems and PeopleFluent as frontrunners.
He also pointed out that there are several niche HR analytics vendors whose products can be integrated with talent management systems for companies that would like to significantly ramp up their analytics capabilities.
Vendors aside, McMinn underscored the importance of venturing into HR analytics. "Businesses that aren't thinking about analytics risk being outcompeted," he said.
Emma Snider is the Associate Site Editor for SearchFinancialApplications.com. Follow her on Twitter: @emmajs24.
This was first published in September 2012