What does a data-driven approach to HR look like?

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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 webinar - Make HR #1 for Business Impact - now.

This article is not about the mere use of “metrics”, but instead, an approach where data is continually used to dramatically improve every aspect of recruiting, retention, development, innovation, and workforce productivity.

So if you are an experienced HR professional that frequently answers with “I think”, be aware that you may soon be replaced with an algorithm!

The new and soon to be required approach can also be called “data-supported”, “data-based” or “evidence-based” HR decision-making, because data or evidence support are the foundations of all major HR decisions that result in direct business impacts.

Be aware that you may soon be replaced with an algorithm!

The goal is not to slightly change HR, but instead to strategically and measurably improve the people management results that are derived from the largest corporate variable expenditure (labor costs). Under the new approach, HR is not merely expected to be “aligned with corporate goals” but instead, to directly and quantitatively impact corporate goals.

Under this new methodology, HR leaders will be expected to continually improve the dollar value of innovation and the productivity of the workforce until the firm leads the industry in a side-by-side comparison.

Moving beyond “a business partner” and into a “business leader” role absolutely requires everyone in HR to begin using “the language of business” (numbers and dollars) and to show how great people management practices measurably increase corporate revenue.

Unfortunately, HR leaders don’t get “a vote” on this shift, because it is being driven by corporate executives and a faster-moving more competitive business world. This shift to become more systematic and businesslike follows the path that has already been successfully utilized by other overhead functions like supply chain, finance, and CRM.

The biggest shift in the data-driven approach will be a move away from “backward looking” metrics and toward “forward-looking data” and predictive analytics. A focus on the future will mean that HR’s current reliance on 100% historical metrics will soon end. This will be replaced with predictive analytics which will forecast trends and alert us about upcoming talent problems and opportunities, while there is time to do something about them.  

An example to illustrate the difference with data-driven decision-making

Employee retention is traditionally one of the “softest” areas within talent management. HR and retention leaders are generally satisfied with only reporting “the overall turnover percentage during last year”. However, under a data-driven approach, more revealing information will be provided.

If you don’t believe that this shift to a data-driven approach is inevitable, I encourage you to visit other business functions.

To start with, for retention purposes, the highest impact jobs and employees will be identified using data. Next, the data will be individualized to reveal “why” each of these high-impact individuals stay, what might cause them to leave and what actions would cause them to stay and remain productive.

Using a data-driven “heat map”, high-impact teams and individuals that were “at risk” would be identified using a predictive analytic and then assigned a “flight risk” percentage indicating the level of potential retention problems.

And finally, an algorithm would be developed to quantify the potential dollar loss if the individual left and a supplemental cost would be added if they went to a competitor.

Individual managers would be held financially accountable for the turnover costs of any “regrettable” and preventable turnover within their team. HR would be assigned the role of identifying the most effective proactive “actions or levers” for preventing key turnover.

Each month, HR would report the dollar cost of key regrettable/preventable turnover, the success rate of accurately identifying those with a high flight risk and the most effective tools for reducing or preventing turnover among those that are considering leaving. If the scenario described above appears to you to be “a pipe dream”, welcome to the new world of data-driven retention.

Powerhouse firms like Google and Apple, firms that excel at innovation, speed, adaptiveness and exceptional stock valuations have already successfully shown the business impacts of this type of a data-driven approach.

You should also be aware that once your firm’s executives find out that this approach is possible, your job may quickly be in jeopardy if you aren’t already making the shift.

Additional examples of data-driven talent management capabilities

Perhaps some additional examples can help you grasp the expanded capabilities of data-driven decision-making in talent management

  • Projecting their “career trajectory” – data will allow you to predict how long employees (and new hires) are likely to stay and how high in the organization they are likely to reach for succession purposes.
  • The impact of workplace features – data will be used to demonstrate which employee perks and office design features directly increase employee innovation, collaboration, and productivity.
  • Improving learning – in a fast-changing world where the single most important competency is rapid self-directed learning, data will reveal the most effective approaches for increasing individual and corporate learning speed and effectiveness.
  • Compensation and benefits - rather than relying on salary surveys or intuition, the new approach will use data to identify which types and amounts of rewards/benefits have the highest measurable impact on employee productivity, retention and external recruiting.

Perhaps you entered HR because you preferred “interactions with people” over numbers and data, but like it or not, that era is ending fast.

You may also be surprised to learn that relying on the well-used excuse “but we’re different” won’t work either.

If you don’t believe that this shift to a data-driven approach is inevitable, I encourage you to visit the business functions of supply chain, CRM, market research, advertising, and finance in order to see what percentage of their strategic decisions are made utilizing hard data.

It won’t take you long to learn that HR is a laggard. So “welcome to the future” where statistical correlations, charts, graphs, trendlines, big and little data and predictive alerts will forever replace “I think” and “I believe” answers in people management decision-making.

Find out more by downloading our whitepaper - Make HR #1 for Business Impact 

About John Sullivan

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