The need for people - vs just business - analytics
Jon Ingham is Executive Consultant, Strategic Dynamics, and author, The Social Organization.
There has been some useful development in HR’s use of analytics over the last few years.
One of the positive aspects of this has been the increased use of the term workforce analytics, rather than ‘HR analytics’, to signal that we are interested in insight on the whole workforce, not just on what happens within the HR department.
A goal which is often linked with this shift is that we need to move further towards ‘business analytics’.
For me, HR analytics refers to the quantities, quality, time and cost of our HR activities.
Examples include investigations into the hire to applicant ratio for different recruitment sources, reviewing the reliability of performance assessments over time, and reviewing the progression taken against personal development plans.
Business analytics is about gaining a better understanding of the way a business works, including how people work within a business, eg reviewing difference in productivity levels between different groups, reviewing which employee populations get better customer feedback, or comparing revenue per employee across different business areas.
It also involves exploring the linkages between what we do in HR and the achievement of these business results.
Whilst I support the increasing focus on business I think we also run the risk of missing something vital if all we focus on is HR and the business.
This missing link is the quality of our people we develop through our HR activities and is illustrated in the following value chain model:
It is the investigation of the value of people in the second step of this value chain that I call people analytics.
This category can also be broken down into three areas.
This is sometimes referred to as human capital. Most of the data for this can be obtained from within an HR system although further research, eg an engagement survey, may be needed too.
Analytics can then look into changes over time, across groups, or as a result of a business change, etc.
There is the value of the way these people are organised, e.g. of the processes, practices, structures and workplace environment which help (or hinder) people to do their work.
This can be referred to as organisation capital. Much of the data for this can also come from the HR system, sometimes supplemented with observation eg to understand time requirements or instances of avoidable errors within processes.
There is the value of the relationships between the people working in an organisation, including the connections between them, the nature of the relationships they have over these connections, and the conversations they have based upon these relationships.
This is often called social capital. Increasingly, connections data is provided as part of a social network analysis survey, or is provided by direct analysis of email or online social network usage.
Relationships can be understood using a survey asking about trust levels and other important aspects of how people relate to one another. Conversations can be assessed via survey or observation.
As well as analytics focused on the people themselves, analytics can also look at the links between HR activities and the results of these in the people working in an organisation, ie in the creation of human, organisation and social capital.
A common example is to correlate levels of engagement with satisfaction with different HR processes to understand what factors influence engagement, as opposed to just being a nice to have.
And analytics can also look at the role of human, organisation and social capital in producing business results. For an example an organisation may look at which of these has most influence on productivity, and which has the greatest impact on customer satisfaction, etc.
These last two opportunities are particularly useful as they provide the basis for descriptive, and potentially, predictive analytics, ie working backwards and forwards along the value chain to identify what has or will cause what to take place at the previous or next step in the value chain.
This additional focus on people analytics is important. Why?
How can we really attempt to understand the management of our workforces if we don’t investigate the attributes of the workforce itself?
In addition, it is the value of our people, ie the human, organisation and social capital they provide to us, that is increasingly recognised as the main basis for sustainable competitive success.
The tendency in HR is to think about the way we can manage, develop and organise people to meet business objectives. But if these business objectives have already been decided we are simply acting as a support function. To be strategic, we also need to think about the outcomes we could create within our people that allows our business to set new or more stretching business goals. That is, we also need to create people based business strategies.
If we only focus on HR analytics or business analytics we will not understand the potential value these aspects of our workforce can provide.
Without this understanding, we will not be able to optimise the ways we can manage and organise people to produce the results that our businesses require. We certainly will not be able to use analytics to offer up new potential opportunities for our businesses to compete as a result of the people we employ.
This is about asking what we could create in our people which would enable our business to do even more. People analytics provides insight to help us answer this question, to help both our people and our business achieve more.
HR analytics are good although business analytics are better. But if we really want to make workforce analytics as strategic as we can, it is people analytics than needs to receive the bulk of our attention.