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Julian Holmes

LACE partners

Client Executive Director

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HR analytics: why perfect might be the enemy of good

Too many businesses are delaying decisions because of imperfect data.

Organisations are at different stages in their journey with people data and analytics. Some organisations have been investing in people analytics for decades as they saw a way to attract and retain top talent and drive business performance.

For others, the pandemic created a necessity to start using data to understand their people better and answer questions about productivity and performance.

A common theme emerges: it’s imperative for HR to establish trust in their data and insights to support decision-making within the rest of the organisation. On top of this, making sure everyone is on the same page with data definitions is essential.

Unfortunately, research shows that over 80% of companies rely on outdated insights, leading to incorrect business decisions, increased costs and lost revenue.

Part of the challenge is the idea that data must be perfect to be valid. Because of this, prevaricating over decisions on minor data issues is common, meaning that perfect becomes the enemy of good.

The challenges of people data

Historically, people insights were often the poor cousin of other data within the business, such as finance or marketing. Over the last few years, HR has been slowly catching up.

With the introduction of new HR systems, there is more demand than ever for people analytics. As the mindset of business leaders changes over time, it drives awareness and a greater appreciation of how people and workforce insights can help improve business decision-making.

HR and finance should work in partnership to agree on data definitions that meet their joint requirements.

HR can struggle with poorly implemented software and a lack of good data hygiene. In addition, leaders’ priorities lie more with reporting, which often leaves little capacity for analytics.

Workforce data is presented as tables of figures or dashboards without identifying the key items for review or action. Too much reliance is placed upon the reader to identify issues and request further analysis or testing.

Defining your data

A perennial issue is a lack of consistency of data definitions between HR and finance. When it comes to the workforce, finance is (understandably) mainly focused on data that needs to be reported externally and the data required for budget management.

HR, however, often needs to track data for supervisory, regulatory or employee experience reasons. When this data is tracked in different systems, it often leads to discrepancies, undermining credibility and trust.

For example, data differences arise when full time equivalent (FTE) and cost data are aggregated by management hierarchy and cost centre. We see time and time again that debates and reconciling definitions take so much time that it shifts the focus away from value-add work.

HR and finance should work in partnership to agree on data definitions that meet their joint requirements and be comfortable supporting each other when they require different cuts of data.

The responsibility for data accuracy lies with all

Data discrepancies can arise at both record and field levels due to poor processes, incomplete data, historical inaccuracies or input errors.

The response to data quality issues is often reactive; however, successful data quality management should be an ongoing improvement programme with process, systems, behaviour and governance elements.

Good HR governance and leadership are required to create the right environment for good quality data.

Many ask – could a dedicated people analytics team be necessary to make the HR function more effective? It’s not always considered a valuable investment, but in reality, a people analytics team can help understand and point the way to improve employee experience and, as a result, drive better business outcomes.

Unfortunately, sometimes, it’s a people analytics team that is seen to own data quality, even if they are not the source of errors and lack the means or influence to help address the problem.

What does ‘good’ look like?

Good HR governance and leadership are required to create the right environment for good quality data. In addition, relevant parties must collaborate to maintain that data quality.

For example, employees need to ensure the company holds accurate information about them, while HR and IT departments must deploy appropriate systems to detect and minimise the chance of incorrect data collection.

With business leaders realising how critical employees can be to delivering value, the need for accurate data becomes more demanding.

This creates a perfect opportunity for HR teams to transform their role to not only provide a service to the business, but also shape business thinking about what ‘good’ looks like. They can then guide the leadership teams in understanding what kind of choices and options they have for driving better business performance.

Data quality has many complications, but fundamentally, it requires the business, HR and other functions to work in partnership to minimise and mitigate the sources of error. Therefore, strong governance is crucial to success.

Ensuring accuracy vs ignoring imperfections

Compared to most business insights, the volume of HR data is relatively small yet complex, and tends to be scrutinised much more carefully. Moreover, leaders and managers tend to be much more intolerant of imperfections and inaccuracies.

Organisations can’t fix what they can’t see without collecting those insights.

When dealing with questions of uncertainty and future planning, it’s not infrequent for business leaders to challenge HR data. The question, however, shouldn’t be whether the data is perfect, but whether it’s good enough for the decision they need to make at that time.

Leaders need to understand that due to small data volumes, it is often impossible to build statistical models, and outcomes have multiple external drivers that are hard to gauge. Often, strategic models will deliver valuable insights into the different scenarios a business might face and what decisions can be made today to maximise opportunities and mitigate risks.

Making it part of your strategy

Will a dedicated people analytics team be necessary to make the HR function more effective? Many HR functions lack the confidence or permission to work on high-impact business questions. It is more natural to focus on questions of HR functional performance, as an evolution of HR reporting.

Too often, however, this would be perceived by the business as ‘HR for HR’ and will fail to gain excitement, traction or investment. In reality, a successful people analytics team can help understand and point out the way to improve employee experience and drive better business outcomes.

HR should step up to engage the business with strategic questions that have important workforce and people components. Workforce changes are slow and difficult and should be an integral part of business strategy rather than an afterthought.

Don’t start with data, start with the decision

Research shows that organisations that base their decisions on data are 19 times more likely to be profitable.

Although historically businesses looked at people as being a cost, today, there is more understanding of having motivated employees who deliver value, provide a better customer experience, are more innovative in their solutions to products and services and help build a better strategy and future value.

Organisations can’t fix what they can’t see without collecting those insights.

Too many businesses make people, workforce and organisation decisions without the right data insights and modelling.

Where most organisations collect data internally through employee listening surveys, it’s essential to also collect it externally, perhaps through Glassdoor or social media. Equally, conducting an organisation’s network analysis to determine which departments should work closely together can help shape better business outcomes.

Understanding your people, collecting relevant data and making it actionable is the key to making better business decisions and driving profitability.

Looking forward, not back

The place to start is making sure that people analytics are relevant to the business. There’s no point in perfectly answering a question that nobody cares about – it’s far better to answer a question that people care about, even if it’s an imperfect question and an imperfect answer.

Understand the most critical business questions, consider the information the business has; what insights you can produce with what you have today and what you need to build to better understand the current and future business questions?

In a world of uncertainty and rapidly evolving technology, businesses are still trying to reach their destination by ‘looking in the rearview mirror’ when it comes to understanding their people.

Too many businesses make people, workforce and organisation decisions without the right data insights and modelling.

A strong people analytics function should be an integral part of any business that wants to remain competitive and understand how to supercharge its workforce and employee experience to achieve its goals. Without it, how can they understand how their people can give the customer service, productivity and innovation their business needs?

If you enjoyed this, read: Why HR needs to bring Data and DEI together.

Author Profile Picture
Julian Holmes

Client Executive Director

Read more from Julian Holmes
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