7 Secrets Every CHRO Should Know About People Analytics

A major shift has occurred in Human Resources over the past five years. The world went from a handful of companies experimenting with people analytics - early adopters - to thousands of companies investing in dedicated roles and teams to take on a new way of thinking about Human Resources. What can you learn from the early adopters? Every CHRO who has moved forward with people analytics has some secrets to success. These secrets will help you provide a better, faster way to more effectively deploy HR resources and build a successful organization.

Better human resources strategy means better business

You need to accept and measure change

There will be change. That is the only constant. Change could come from any number of places like new technology, new customers, new leadership, new products, new competition, new market and strategies. You will get maximum benefit from your HR strategy if you accept the reality that change is the only constant - the only certainty is a world of uncertainty.

If you want to survive in a world of uncertainty you need to have a process to constantly take in new information to understand changing reality and use this new information to adapt. You need a way to measure to see if your organization is changing in the way that you and your leadership team expect. Change is what people analytics is for.

Hire specific talent for a meaningful business advantage

The problem is that most HR strategies are far too general to develop any sustainable advantages: “We will hire great people.” Great idea - you and everyone else! You cannot do everything well all the time - as the cost to attract and retain top talent just gets more expensive so you have to choose. You have to choose specifically where you want your business advantage to be and then you have to figure out how to create this advantage through People.

In this way we and others may realize that the people's perspective of the business is not necessarily based in “soft stuff”, “political correctness” and administrative minutia, but profound business insights that arise in conjunction with observation and reason. Basically there are two types of insight: that which is not based on any special observable reason and that which is backed by observable reason. In the case of the second type of view, an individual is motivated to examine an insight and investigate its relevance to his or her situation, needs and requirements. Actions are applied after seeing the reason why this insight is advantageous. Change with people, new action, is motivated by new insight; that insight is powered by people analytics.

Don’t get led astray by “traditional” HR metrics

it is not always clear how to relate HR actions to business impact, and so we settle to monitor activities as a measure of progress which is a traditional metric for success. Measuring progress as activities that have an unknown relationship to current business objectives leads HR into waste. HR is broken into multiple functional centers of excellence (Staffing, Benefits, Compensation, Labor Relations, Talent Management, Organization Design), each with different goals and activities, we end up with hundreds of metrics that do not align with each other and do not drive towards a unified goal. This results in efforts that either have no impact or work against each other, not to mention waste in the process of analytics itself.

Because we have not previously devised a single HR metric that has a direct business impact that can be applied universally across organizations and sub organizations, we substitute simplistic measures that while a good intention, may not be a universally good idea, may conflict with other objectives and may not correlate in any way with measurable business impact. This results in the wrong efforts/objectives.

Investing heavily in quantitative metrics doesn’t automatically give us solutions. Metrics can usually tell us what’s going wrong, usually not why. The more you invest in quantitative metrics, with a process for qualitative input, the more you end up drowning in a sea of non-actionable data.

Create a culture of success

Those leaders who want to create a healthy organization or “culture of success” are motivated (or should be motivated) to attain a genuine camaraderie with all people in an organization. When a group of people have a common vision, maintain a sense that they are all in it together, and have compassion for each other then there is nothing that cannot be accomplished. At this juncture, in addition to many great spiritual teachings of varied doctrines, we also have a foundation of great insights in science and engineering and access to those examples and methods. At the heart of it: we analyze people within an organization for benefit to that organization - and that is also the people. It must be both. Useful analysis helps us all understand current reality and take the right actions now to achieve optimal outcomes: an outcome of joint benefit to managers, employees, shareholders and possibly society. A continual reduction in tenacious organizational problems and continual reinforcement of a culture of success is the ultimate result of useful analysis. Disciplined action (as opposed to frantic thrashing) is the benefit of useful analysis.

Our concept of a healthy organization is not something physical. Therefore the spread of a healthy culture depends on increasing the depth of understanding of the benefit of new actions to provide strong motivation to pursue those new actions. When we are able to reduce the defects in how we think about people in an organization a healthy culture will naturally increase. Thus, effecting positive transformations in organizations through observation and feedback situation by situation, subdivision by subdivision, manager by manager, and employee by employee is the method we will employ to effect the change we desire. Unlike manufactured goods it should be fairly obvious that culture is not a tangible entity, that it cannot be sold or bought in the marketplace or physically constructed.

Watch out for HR constraints (budget, credibility, time)

Most of the programs HR watches over have very large budgets. Labor costs are frequently 70% or more of revenue. Benefits may represent 30% or more of labor costs. On an absolute basis these costs increase over time as the employee base grows. Things get sideways when business plan projections get off track and the cost of labor grows faster than revenue or when revenue retracts. It is critical for CHROs to be able to identify—quickly, early, and accurately— whether a project or activity is worth pursuing, rejecting, continuing or dropping so it may protect its commitments and preserve resources for those programs that drive the most value.

Besides the obvious constraint of budget, the other constraint is credibility. In order to influence, HR professionals need to hold on to and build on what little credibility they start with. As CHRO you will have to justify HR’s right to have a seat at the business table by demonstrating the business impact of your programs to a CEO, management team or business line head to whom you support. At some stage, you will all be called on to demonstrate progress.

Finally, we are all constrained by time. Every minute spent on an activity that is doomed to fail is wasted. HR has historically relied on two categorical measures of progress: how much stuff they are doing and how much people like what they are doing. Yet unfortunately, both of these metrics are unreliable proxies of business impact and both of these lead us down the wrong path—building something that ultimately does not matter, has no impact on the business or worse, the wrong impact.

People analytics can be hard

First, there is a misconception around how successful earth shattering people analytics get built. The media loves stories of “wunderkind” nerds invading HR who are so smart they helped the moribund HR function (usually at some cool tech company) figure this problem out. The reality, however, rarely plays out quite as simply. Even the unveiling of the hiring algorithms at Google, in Laszlo Bock's words, was years in the making, built on the contributions of many and several incremental innovations (and failures).

Second, the classic technology-centric Reporting or “Business Intelligence” approach front-loads some downstream business partner involvement during a “requirements-gathering phase” but leaves most of the HR business partner and business customer validation until after the reporting solution is released. There is a large “middle” when the Analytics function disengages from the ultimate intended users of these reports for months, maybe even a year, while they build and test their solution. Sometimes the solution is rolled out in HR first, just to be sure it is safe for humans before inflicting it on the rest of the organization. Imagine a few wild eyed HR people hiding in the bushes outside the office preparing to jump up on an unexpecting executive on his way into work one morning. During this time, it’s quite possible for the Analytics function to either build too much or be led astray from building anything remotely useful to the organization.

Third, People are complex and messy. People are not structural engineering challenges that are within the abilities of an engineer to control precisely. People and organizations are not like machines or computers. There is always a certain degree of uncertainty about the effect of our actions on people and organizations. We try things based on an entirely plausible premise and they fail. Usually we had not factored in or considered the thing or things which made it fail. There are too many variables, too many possibilities and too much change occurring within and all around us. Is this not in some sense the beauty of life? Would you rather take this away? In human systems, failure is not the problem, the problem is failure to learn from the failure. If we want to improve HR we should shift our attention to how we can learn more quickly.

These Secrets are the CHRO’s Real Guide to People Analytics

People analytics gives CHROs a better, faster way to more effectively deploy HR resources and build successful organizations. People analytics enable better listening, learning, strategic focus, measurable business impact, and rigorous process.