HR analytics holds the promise of helping organizations to operate in the sweet spot—the intersection of sustainably profitable and enlightened management of people. Aspiring to achieve this outcome is a powerful impetus for designing, executing, and sustaining your organization’s HR analytics strategy.
It’s always important to start with the end goal in mind. And ideally, it should be BHAG (a big hairy audacious goal, such as the one noted above. Otherwise, your HR analytics efforts run the risk of devolving into another HR-check-the-box reporting initiative long on activity and short on value.
To achieve your BHAG—and avoid falling into an activity do-loop—you’ve got to start by asking the right questions. This requires looking beyond HR’s or L&D’s perspective and thinking like an owner or investor in your company. So, rather than focusing on solving HR problems, such as reducing time to hire or improving training evaluations, think like someone who has (or is considering) investing in your organization, regardless of whether it is a publicly-traded company or not.
What is it that any potential investor would want to know about the people side of your business? Most investors focus pretty quickly on an organization’s capacity for growth, which includes the people-related risk that the business will not have the human capabilities critical for growing the business. How could your strategic HR measurement and analysis inform an investor’s perspective?
And of course, your Board of Directors should want to know everything that investors want to know, and then some. Similarly, your CEO, CFO, and the executive team should want to know everything that the board wants to know, and more. And senior HR leaders should want to know everything that the executive team wants to know, plus still more. You get the idea.
Now, here’s the thing: The current reality is that investors, boards, and executive teams are asking for (demanding) only a very limited set of HR metrics. That’s because they don’t know that more is possible. Your job is to educate them—so they know they can and should expect actionable insights that provide them with the facts and analyses they need to make better business decisions. More importantly, these facts and analyses need to go far beyond executive comp and executive-level succession planning. That is the essence of HR analytics. (See our blog post from last month for more detail on this.)
Here’s our advice. Rather than focusing on the traditional narrative about the great value that HR and L&D can create, incorporate into the narrative perspective on the critical risks that your work mitigates. Risk is, in fact, the other side of value creation.
Another very important lesson we’ve learned in our work with clients of all sizes and industries is that “risk sells”—all decision makers are concerned about it and want to understand better how to minimize it.
Here’s a human capital risk framework to get your creative juices flowing:
- Capability Risk: Do your people have the knowledge, skills, resources, and business processes that will enable them to perform effectively?
- Alignment Risk: Do your people really understand your business strategy and goals and do their day-to-day jobs in alignment with those goals?
- Turnover/Demographic Risk: Are you retaining key people? Do you have a pipeline sufficient to replace departing employees? Are you able to achieve/maintain diversity in your workforce?
- Labor Market Risk: How are labor market conditions impacting your ability to find and acquire the right people?
- Health/Well-being Risk: Do what extent does your work environment contribute—positively or negatively—to the safety, health, and well-being of your employees?
- Leadership Risk: Do you have the leadership depth and quality needed to ensure that key initiatives will be successful?
When you stop and think about the work that goes on in the HR and L&D functions, every activity, project, and initiative is designed to mitigate one or more of these risks—by creating people-related value for your organization. By expanding your thinking, language, metrics, and analysis to incorporate the risk-mitigating impact of your work, you will lay the foundation for an HR analytics strategy that is worthy of sustained, high-level executive and organizational support.
The most appropriate risk-based BHAG for your organization will depend on your organization’s specific people-related challenges. Maybe you use HR analytics to evaluate your skill pipeline in the areas of the business where turnover is the highest. Maybe you target capability risk, such as using employee survey results to identify under-performing subunits and determine which processes or resources need to be improved to help those units perform better. The only limit is your imagination—and having the available data!
Remember: HR analytics is not about generating piles of reports. It’s about generating insights in areas that affect the very life-blood of your organization.