The job of managing the workforce is growing in complexity.
At one end of the spectrum, demanding Millennials are now entering the world of employment for the first time, while at the other, growing numbers of employees are choosing to work past the age of 65.
In between these two extremes, however, you will find everything from contractors and virtual workplaces to flexible working arrangements and international hires. But the external picture is just as complicated.
With skills shortages biting in key areas (and likely to penetrate deeper when the economy eventually recovers) and the pace of change continuing to increase, ensuring that your personnel are primed to grab new market opportunities and generate growth is more than a priority – it is a case of do or die.
Therefore, in order to understand, respond to and anticipate these pressures, workforce planning and HR data analytics are becoming increasingly essential tools for HR professionals.
As Mary Clarke, chief executive of workforce planning firm Cognisco, explains: “Having the right people in the right place in the current climate is even more important because of the changing nature of the labour force. There’s a more flexible workforce, more diverse, which includes more people on short-term contracts. Managing that is particularly difficult without analytics.”
Yet, although most companies are overflowing with information about their customers, supply chain and/or financials, very few have yet to apply the same rigour to their most costly and valuable asset: human capital.
Segmenting and correlating data
Sue Brooks, managing director of recruitment process outsourcing firm Ochre House says: “HR has become, par excellence, good at looking at the cost of absenteeism and the wage bill and acquisition, but what they haven’t got is a real segmented view of people.”
HR analytics enable HR directors to measure the value of their talent pool, however, shedding light on the whole employee lifecycle, from recruitment and performance management to succession planning, training, compensation and retention.
But the real power comes from being able to correlate data across each of these various areas in order, for example, to determine how compensation affects attrition rates and what impact raising or lowering it by different amounts has on the situation.
In the same way that sales heads need to know who their most profitable clients are, HR professionals should likewise be aware of what it is that encourages employees to show greater productivity, better quality service delivery or innovation.
With such data at their fingertips, they are able to fine-tune training, staff benefits and learning and development with greater accuracy.
“That need for organisations to be as knowledgeable about their people and to apply talent economies is as key as it is for customers. HR analytics and practices as a way of acquiring and keeping talent are critical,” Brooks says.
Research also indicates that investing in analytics tools can pay dividends. According to a 2010 MIT Sloan survey entitled ‘Analytics: The New Path to Value’, the top-performing companies are three times more likely than lower performers to use analytics software in a sophisticated way and are also twice as likely to use analytics as a competitive differentiator.
HR as a change agent
Analytics can likewise prove a useful means of helping HR departments to become more of a strategic business partner and proactive force in the business rather than simply acting as a support function or cost centre.
“The HR function is being seen more as a change agent and its value to the business is in driving people transformation,” Brooks explains.
A March Aberdeen Group study entitled ‘Analytics into Action’ makes three recommendations for HR professionals to use analytics successfully. Firstly, it suggests that they employ such tools to create a single view of their workforce data.
Secondly, they should align their HR and business data. The study found that 59% of the top performers aligned employee and business data compared to 28% of the lowest performers.
Thirdly, they must ensure that line managers have access to relevant information so that they can both take short-term action and undertake long-term strategic planning.
So if deciding to go down this route, where is the best place to start? One thing that most companies are not short of is data to analyse – a great deal of workforce information can be gleaned from enterprise resource planning and HR management systems alone.
But the secret to success is how you put that information to work. To this end, Cognisco’s Clarke recommends that companies take a close look at what analytics offerings that they already own. “The old way was to buy stuff at the centre and get the line to use it, but you will find many divisions already have stuff in place,” she explains.
A change in mindset
The idea is to see if some parts of the business are already using such software and whether it could be extended into other areas, before employing it to work out where key staff are being lost and why.
Peter Reilly, director of HR research and consultancy at the Institute for Employment Studies, notes that most organisations have a “twin track” attitude in relation to personnel. “There’s the top talent and key performers that the organisation wants to keep, and the rest who are a cost,” he explains.
To use analytics tools to their full capacity, however, companies need to be able to crunch the data to make predictions about which staff and skills are required, where, when and the likely cost.
But making the shift from reporting to predictive analytics is not something that happens overnight: it takes time and investment. It also requires a change of attitude to be able to switch from a reactive environment where reports are created to true analytics where data is created.
Nonetheless, one of the reasons that the adoption of such technology is rising is that it no longer requires a massive upfront IT investment – the advent of Software-as-a-Service and cloud-based offerings means that companies no longer have to invest in on-premise software and expertise, but can rent more or less capacity as needed.
All in all workforce analytics software is proving to be an increasingly important tool for HR professionals keen to play a more strategic role in the business.
But if they don’t grasp the nettle, other parts of the business will as the opportunities and, just as importantly, the risks involved in failing to analyse the problem of human capital and talent management are simply too great to ignore.
