2015-03-26

Focus on workforce analytics: why HR needs to adopt metrics and predictive analysis

Dr. John Sullivan & Drake Editorial Team

“Given the importance of talent and people, it’s time to move beyond instinct, gut, and tribal wisdom in making workforce decisions. If you’re not using workforce data and analytics to drive your talent decisions, you may be behind the curve — and at risk of losing your competitive edge. As HR works with business leaders on the front lines, analytics are becoming critical in making more effective decisions related to workforce planning and recruitment, compensation, development programs, and deploying critical talent.” This excerpt from Human Capital Trends 2011 – Revolution/Evolution by Deloitte quickly captures why workforce analytics matters.

“Only about 4% of HR departments are using any form of predictive analytics today,” said Josh Bersin of Bersin by Deloitte a research and advisory services firm. However, workforce analytics are becoming an increasing focus for many organizations, and an executive survey by the firm found that “more than 60% of organizations are increasing their investment in talent analytics.”

Drake’s work in workforce analytics Every company needs the ability to make well-informed HR decisions. However, many organizations have not invested in capturing and analyzing workforce data to the same extent as other areas, such as finance and procurement. As Bersin noted, this is changing as a larger percentage of organizations increase their investment in talent analytics.

Driven by client need and innovation, Drake has added Drake Synergizer Workforce Analytics to its suite of Talent Management Solutions. This unique, highly visual, cloud-based workforce analytics solution provides HR departments with access to accurate, multidimensional workforce analytics in real-time scenario modelling, generating powerful insights into an organization’s human capital investment.

What makes Drake Synergizer unique is our Workforce Analytics Dashboard that brings static data to life and provides workforce details when and where you need them.

Our Dashboard is the only platform to provide these benefits:

• Predictive analysis

Connect the critical data points throughout your company — finance, business intelligence, human resources, and more in a user-friendly way that everyone can understand.

• Human capital financial statements

Measure your human capital ROI by integrating financials with key talent management metrics to quantify the bottom-line impact of recruiting, training, productivity, turnover, trend shifts, and more.

• ‘What if’ scenarios

Leverage the dashboard to perform predictive and cost-based analytics, including workforce planning, forecasting, and modelling.

• Affordable solution for small to large workforces

Customize this cost-effective solution to match your business needs at a price-point you can afford.

Drake Synergizer’s Workforce Analytics Dashboards help forward-thinking leaders by transforming data into real meaning to provide powerful insights into the ROI of their human capital investments. Deeper insight and actionable business intelligence enables business executives to make better decisions about their people.

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Dr. John Sullivan, Professor of Management at San Francisco State University, has written extensively on workforce analytics. Below he shares his views on the importance of Workforce/HR Analytics.

Why HR Needs to Adopt Metrics and Predictive AnalyticsA 2013 study by the Harvard Business Review group found that the advanced firms that most effectively managed their workforce by using analytics improved their firm’s profit by as much as 65%. A 2013 AMA/i4cp survey reviewed the most frequent users of analytics and metrics in the corporate world. Finance was ranked #1 as the most frequent user of analytics and metrics. And the executive team came in #2 because, along with finance, they are at the forefront of demanding more metrics and analytics from HR. HR itself ranked at the very bottom, with only half of its functions being classified as advanced users of analytics. The remaining business functions — operations, R&D, marketing and sales — all had a higher percentage of advanced metrics users than HR.

Reasons for HR corporate talent function to embrace metrics and a data-based decision model

• To improve business results and increase profit: As noted in the survey, an organization’s profit can be dramatically improved using workforce/HR analytics.
• To demonstrate your business impacts: Working with the CFO’s office, it is possible to quantify the dollar impact that HR actions have on business goals. Quantifying the business impact in dollars makes it easy to compare yours with those of other more visible business functions.
• To influence managers and executives: Executives and managers are frequently fanatical about numbers, so numbers can be used to influence them and to change their behaviour.  As Google said, “The best thing about using data to influence managers is it’s hard for them to contest it. For most people, just knowing that information causes them to change their conduct.”
• To reduce error rates: Because metrics highlight errors, their use and distribution will dramatically pinpoint the number of major errors that have occurred and the weak decisions made in the HR function, including bad hires, preventable turnover, and delayed termination.
• To get everyone focused on the right things: Selecting what to measure and what not to measure lets everyone know what is important and what is not.
• To find out if existing HR approaches are working: Metrics can help HR leaders see which of their existing programs and tools are working and which are not, so that they can stop using them or fix them.
• To assess the effectiveness of new programs: All new talent programs should have goals and performance metrics so that program leaders and executives can quickly see the effectiveness of new HR programs.
• To make the HR function more businesslike and results oriented: Because many other business units shifted to a data-based decision model a long time ago, the use of metrics makes HR more businesslike and results oriented when it finally makes the shift.
• To provide “I know” responses: To give accurate advice, the use of metrics enables HR to use data to make informed decisions and know what works and what doesn’t.
• To funnel resources into high business-impact areas: Once HR knows the highest business-impact programs and the ones that are not working, they can more accurately allocate their budget and staff to the areas where they can have the highest impact and ROI.
• To speed up and increase the consistency of talent decisions: By periodically gathering and reporting metrics, HR's decision making will be faster as well as more consistent and accurate. And because most metrics are in electronic form, it will be much faster and easier for decision makers everywhere to have access to the same data and information.
• To increase funding/executive support: Since CEOs love metrics, incorporating them into HR's plans and proposals will increase the likelihood that they will get more executive support and funding. By reporting the ROI of individual talent programs, HR will be able to compare their effectiveness to those of other business functions.
• To enable HR to use the CFO’s language and logic: Metrics forces those in HR to use the language of business (dollars and numbers) and to present the information in a way that’s consistent with the business presentations of other functions.

 

How to raise your HR metrics efforts to the next level with predictive analyticsWhile HR metrics reports on what happened in the past, predictive analytics analyze past and current data and reveal patterns and trends that may allow you to accurately predict upcoming people management problems and opportunities.

To sell your leadership on switching to predictive analytics, you can give them these 11 reasons that make predictive analytics worth the extra effort.

1. They initially make you aware of shifts in historical patterns: Forward-looking predictive metrics begin by searching for patterns, so they can let you know which historical patterns will remain steady and which ones will no longer hold true. This information can inform decision makers that their current HR programs may no longer work.
2. They enable you to stop guessing about the future: HR leaders can reduce “off the top of my head” guesses and instead routinely make informed decisions about what is likely to happen in the future.
3. They alert you so you have time to prepare a plan: A fast-moving world presents many opportunities to be surprised by unpredicted events. Because predictive analytics are forward looking, they tell you what is about to happen. And because managers are alerted in advance, they have time to prepare a plan to mitigate the damages or even avoid the upcoming problem altogether. They can also warn decision makers about upcoming positive talent opportunities like a period of reduced talent competition in the recruiting marketplace where you can fill your jobs with top talent more easily. You will dramatically decrease costs because you mitigate problems before they get out of hand.
4. They provide the opportunity to be strategic: Being strategic implies being forward looking. So implementing predictive analytics can demonstrate to executives that you are acting strategically by forecasting, assessing risk, and preparing for the future. Because strategic metrics are predictive, they make it more likely that elements of the HR plan will be integrated into the strategic business plan.
5. They enable you to understand why shifts are happening: The best predictive analytics identify not only which factors are changing but also why they are changing, so decision makers can implement solutions that best fit the root cause of the problem.
6. They increase the odds that decision makers will act: Actionable predictive analytics are designed specifically to increase executive action, as executives are more likely to act when they read them. Actionable metrics advise decision makers on the impact on business with estimated costs of upcoming problems, the cost of doing nothing or delaying, and which actions have the highest probability of completely solving the predicted problems.
7. They reduce the time to respond to an executive query: Making decisions quickly in a fast-moving world is vital. Because most predictive analytics approaches are electronic and more integrated and comprehensive than traditional HR metrics, the time it takes to get an answer to a decision maker’s query may be reduced dramatically.
8. They allow you to model different approaches: Advanced analytics processes allow decision makers to develop models allowing them to test alternatives and vary constraints and the assumptions to see how the results would change. Such models, or ‘what-if’ scenarios, can excite decision makers, while helping them avoid major errors because new approaches have been mathematically simulated.
9. They provide your company with a competitive advantage: If your talent competitors don’t develop predictive analytics, the predictions provided to your decision makers can give your firm significant talent and business advantages.
10. They cover all critical talent areas: Predictive metrics can provide alerts in all important talent areas, including recruiting, retention, leadership, performance management, and internal movement.
11. They make you aware of new relationships in talent management: Predictive analytics can reveal new relationships between talent factors that did not exist in the past. For example, a policy shift requiring part-timers to work under 30 hours per week to avoid health insurance costs may have the unintended consequence of significantly hampering recruitment and increasing turnover problems in jobs that had no past history of recruiting or retention problems.

SummaryIf you have been hesitating to completely implement traditional or predictive analytics, their multiple benefits should convince you that the time to act is now. In the business world where every function makes decisions based on data, HR and talent management can no longer be looked upon as a laggard in this critical business area. Instead of guessing, it’s time to know with reasonable certainty what is about to happen in talent management.

Key Metrics That the Recruiting Process Omits Ask your leaders if they routinely measure the key metrics listed below that recruiting omits. You may be surprised to find that many of the measures that are essential in other functions simply don’t exist, or they only get lip service in recruiting. Because so many other business functions already do them on a regular basis, it’s hard to argue that the numerous omissions presented here are hard to do. These are the measures that we don’t bother to calculate in recruiting:

We don’t measure the failure rate of new hires: Even though the failure rate of the hiring process has been reported to be as high as 46%, recruiting functions do not define process output failure or measure it.

We don’t calculate the new hire success rate, the quality of hire based on new hire performance on the job: Talent acquisition rarely measures the actual percentage of improvement in new hire performance compared to last year’s hires.

Even when we calculate quality of hire, we don’t use the information to improve recruiting: About 30% of firms measure the quality of hire, but almost no one uses that data to better identify the factors that predict new hire success on the job.

We don’t calculate the ROI of the recruiting function: ROI ($ of return compared to $ spent) is the most commonly calculated metric throughout the business. However, because recruiting does not quantify its business impact, recruiting leaders can only report the costs in isolation.

We don’t quantify our overall business impact in dollars: Every major business function calculates its overall yearly impact on key corporate goals like revenue, profit, customer satisfaction, and productivity. However, recruiting routinely fails to put a dollar value on its results.

We do not continually measure user satisfaction rates: Rarely does any corporate recruiting function continually measure satisfaction with the hiring process among each group of its users, including prospects, applicants, candidates, new hires, and hiring managers.

We provide only historical metrics and no predictive analytics: Every metric in recruiting is historical, exclusively reporting what happened last month or last year. Other business functions have learned that to improve their decisions they need real-time metrics that tell what’s happening today. To become forward looking, recruiting must also develop predictive analytics to avoid surprises.

We don’t calculate the unintended hidden consequences of excessive cost cutting: Most business leaders are experts in limiting budget cuts to their function. Many influence their business leaders by calculating the often partially hidden negative consequences that follow excessive cost cutting. For example, business executives may think they’re saving money when they cut the recruiting budget, but that saving dissipates quickly if the lower level of training that “saved” $10,000 actually resulted in hiring salespeople who sold $20,000 a month less.

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Used with the permission of Dr. John Sullivan, Professor of Management, San Francisco State University and a thought leader on strategic talent management and human resource practice. For more information, email [email protected] or visit www.drjohnsullivan.com