Improving HR's business impact must be a priority for future-thinking, strategic HR professionals. This article looks at one key aspect of impact: the importance of having a data-driven model. If you'd like to delve deeper into this topic and understand at a broader level how to improve HR's business impact, download our whitepaper - Make HR #1 for Business Impact - now.
I am always amazed at how many HR functions still use a strategy with the age-old language such as “hire the best and brightest; create a culture of respect and etc.”
However, that is not as startling as when I find there is no written strategy at all. If you have one or need to write one you should know that the major flaw in most is the lack of measurable outcomes and no mention of how you will impact the corporate goals.
As the father of management, Peter Drucker, is often quoted as saying, “if you can't measure it, you can't improve it.”
If you can't measure it, you can't improve it.
Knowing whether you are functioning at your best or should be functioning differently requires you to know your current state with data and $s. And not by how much you decreased cost but instead by how much of a positive business impact you create.
A successful HR department is one that can show it is a business leader and has the credibility as the most important department in the company.
To achieve this you need an HR strategy that is business-driven and that determines which of the areas need to be focused on in order to meet corporate goals. In addition, it should have the blessing of the CFO. The CFO is the expert at knowing and calculating corporate results.
Actually, it is important to collaborate with the CFO on how you can show a positive financial impact and ensure you have the right calculations to do so.
Next, as you begin creating your strategy, consider these important areas to include:
HR Strategic Focus Areas
- Measure everything you do!
- Use of metrics that show business impact – be aware that many departments have metrics but some are useless or they do very little with them
- Use of analytics to improve and or change – to be most effective you need to know if what you are doing works and be able to predict what you will need in the future
- Focus on corporate goals – HR’s main function is to impact the company’s business goals. For example, maintaining low job vacancy rates, retaining your best performers, training employees to improve productivity, etc. All of these and more have a direct impact on the business and can be proven in $.
- Recruiting – Boston Consulting Group and Google have both independently found that recruiting had the highest business impact of any people management function.
- Hiring HR staff with business and data analytics acumen – more HR departments have begun to hire a staff that includes: data scientist/analyst, researchers, and marketing/advertising backgrounds
- Technology – many of the current HR technologies lag behind other business technologies. For example, sales have had CRM technology for years and yet HR is still struggling and doing a poor job of staying in touch with key candidates and maintaining a talent pipeline.
- Reward high performance highly – HR has been the problem in causing low productivity and losing high performers with their many policies and procedures to maintain mediocracy.
- Nonrisk-averse – HR is risk-adverse to the company’s detriment. As Sheryl Sandberg at Facebook says, “What would you do if you weren’t afraid?” This should be the driver for HR instead of being afraid of lawsuits and job security.
Advantages of these strategic areas
The results from focusing on the areas above will provide you with the information you need to make better decisions, improve your budget, and obtain results for continuous improvement.
Consider the advantages below and the dramatic results you could have.
- Data-driven decisions – By using metrics, data and analytics HR will be able to make data-driven decisions. The results for HR will not only improve its capabilities to impact the business but will also earn credibility with company leaders.
- Quantified HR results in financial terms – the ability to quantify in $s will go a long way in receiving budget increases and more resources.
- Increased workforce productivity – you will find that the combination of the strategy elements above will allow you to know how to create better HR programmes which contribute to increased productivity.
- The importance of innovation and speed – the number one and two competencies in successful companies are innovation and speed. HR can deliver in these areas by attracting and hiring innovators and by using better technologies to improve processes.
- The scientific approach to ensure HR programmes work – knowing what works and what doesn’t is an amazing advantage, however, knowing how to improve and change things is the Moneyball. You can analyze the situation scientifically but you also need to be able to translate the findings into improvements or change to create better results.
Unfortunately, most HR departments are not able to create a strategy that provides these advantages.
Most find themselves fighting the use of numbers and don’t think HR should be a business function.
This thinking will never get your company to perform at its best and HR will only be seen as a necessary evil. I find that there are two main challenges to begin operating as the best department in your company: you and you again.
If you are saying “HR is here to help people” or “this will never work in my company” then the first problem in becoming a successful HR department is you.
The main issue in this situation is the inability to make a mental shift to being a business leader and seeing your role as adding business value.
A great success story to look at is Supply Chain.
The reason why Supply Chain has become the darling in organizations, like Walmart, is by using many of the same elements listed above.
Supply chain, an overhead function, made these changes and is now considered a profit center. So, this has been done before: look at the functions in your own company that don’t make product but have big budgets and are mentioned as important functions to the company’s success i.e. sales, marketing, advertising, and supply chain.
It is important to collaborate with the CFO on how you can show a positive financial impact
You don’t have to go far to get examples and a possible mentor or cross-functional partner. For example, Employer Branding, if you have not collaborated with marketing/advertising you have missed out on a big opportunity to learn how they get a bigger budget and gain resources to help produce a compelling message in all communications to potential candidates starting with your job descriptions.
My final thought is that I find many HR leaders are risk-averse and have “fear of numbers”.The future of HR requires knowledge of business, making data-based decisions and being able to predict the future using predictive analytics.
My advice is to follow in Sheryl Sandberg's footsteps and ask yourself, “how would I do this if I wasn’t afraid?”
Find out more by downloading our whitepaper - Make HR #1 for Business Impact