Article by Mihaly Nagy, originally appeared here

Can HR be a credible business partner and an enabler or – God forbid – Driver of corporate strategy? Can HR truly demonstrate business value?

 

Why do we even need to talk about demonstrating “HR”value’? I have never ever heard a CFO complaining that business doesn’t take him seriously. Yet, this is one of the challenges of many HR Professionals.

Dave Ulrich, in his paper “Are we there yet, what’s next for HR?” suggests: “In seminars with HR professionals, I often start with a simple question, “what is the greatest challenge you face in your job today?” Inevitably, the answers are around things: building credibility with my line managers, managing the flow of talent (bringing in new people, matching people to the job, or removing people), handling employee grievances, managing HR costs efficiently, and so forth. My sense is that many of these appropriate responses are now dated and need to move forward. HR profession has been through three general waves.  Wave 1 was the administrative work of HR, where HR focused on terms and conditions of work, delivering HR services, and working on regulatory compliance.  Wave 2 was the design of innovative HR practices in sourcing, compensation or rewards, learning, communication, and so forth.  Wave 3 has been the connection of these practices to business success through strategic HR. Wave 4, which is emerging, is using HR practices to drive and respond to external business conditions.”

HR Congress Budapest

How can you effectively respond to external conditions, when we are in a VUCA environment?

Enters Big Data and Analytics for HR

As Josh Bersin puts it in his classic article: “How well do organizations truly understand what drives performance among their workforce? The answer: not really very well.

Do we know why one sales person outperforms his peers? Do we understand why certain leaders thrive and others flame out? Can we accurately predict whether a candidate will really perform well in our organization?

The answer to most of these questions is no. The vast majority of hiring, management, promotion, and rewards decisions are made on gut feel, personal experience, and corporate belief systems.”

To be effective HR cannot operate in a silo anymore. I have recently spoken with Boyce Byerly, author of Human Capital Analytics, head of predictive analytics at Quintiles who said, “anything is touch by people falls under HR Analytics”.

This is also confirmed by a recent research conducted on behalf of Visier. The research identifies that Successful CHROs are:

Data-Driven
80% of executives say their company cannot succeed without an assertive, data-driven CHRO, who takes a strong stance on talent issues and uses relevant facts to deliver an informed point of view.

Business-Oriented
81% of executives say that when hiring new senior HR talent they value business acumen more than technical HR skills

Performance-Focused
78% of executives say that their company cannot succeed without a CHRO that takes on responsibility for contributing directly to business performance.

Being business and performance focused is echoed in Dr. Ulrich’s paper, who continues: “We no longer create value by just serving employees, but by making sure that services we offer inside the company align with expectations outside the company.  For example, we want to be the employer of choice for employees. We want to build on our strengths that will strengthen others.  Every HR practice can be transformed by seeing the value that it creates for those outside the company. This positions HR to not just respond to strategy, but to help to shape and creating it.

How nicely put. How far is this from reality if HR leaders are not empowered to get access to the right data and equipped with the right tools and skills to make the best out of it?

Internal analytics doesn’t tell you enough. You need to see everything in the industry around you. – says Meredith Amdur, CEO of  Wanted Analytics in this Forbes article. With the right data companies can change their strategies not only for individual job descriptions but also bigger decisions like broader hiring, flight risk, or where to better place a new business office.

Unless HR is enabled to demonstrate value by showing evidence based on hard numbers, everything else is merely hot air.

We learnt at our Workforce Analytics Summit in Amsterdam earlier this year, there is still a long way to go. While the journey might not be an easy ride, make no mistakes, getting a firm grip on people analytics is not an option, or nice to have. It’s a must.

However, imagine the possibilities: If we can apply science to HR practices from improving the selection through management, and alignment of people, solving real business problems by evidence-based HR, the returns can be tremendous.

Join us in Budapest and Brussels for the HR Congress and to learn more. Don’t forget to follow us on LinkedIn, Facebook, and Twitter.

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Mihaly Nagy is a passionate Analytics Evangelist, Entrepreneur, creating large scale workforce analytics events, connecting buyers and vendors. Connect with him on LinkedIn and follow on Twitter.

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