Winning the People Strategy through Talent Analytics

22/10/2012

By Abhinaya Chakkirala

“Do you think you know how to get the best from your people? Or do you know?”  challenges Tom Davenport in an article titled Competing on Talent Analytics, in the Harvard Business Review. Establishing the value of anything necessitates quantifiable evidence and the premise is relevant for Human Resources domain as well. The ascent of HR from an administrative and transactional function to a game changer at the strategic table can be ascribed to reliance on talent analytics to correlate the value addition of people management to business performance and in creating competitive advantage.

Measurability of HR
For a very long time, the credibility of HR function in organizationswas far from adequate because of the belief that the performance of processes, impact of policies and the gamut of activities that comprised the HR framework were not measurable in terms of economic value. Whether the HR departments made any difference to the bottom line remained a subject of inquiry that depended on precedence and gut instinct. As the function evolved, the concept of ROI emerged and the core questions of the why of what were explored, resulting in definition ofpeople metrics and talent analytics gaining a strong focus in the field of HR.

TALENT ANALYTICS IN ORGANIZATIONS
HR analytics is the application of sophisticated data mining and business analytics techniques to given set of employee data. Two major categories of HR analytics include:

Workforce Analytics:Workforce Analytics a broad term for an evidence-based approach to smarter decision-making by tracking past employee activities to predict future outcomes. This is typically done by the HR department and does not include performance data.

Talent Analytics:Talent Analytics is a quantitative employee dataset about people doing the work that represents the de facto standard for business leaders interested in understanding the impact of their people on performance.This data adds value to existing activity data such as workforce analytics. It provides an opportunity to dig deeper and push towards the why by enabling companies to look at trends and correlations between people and performance.

Talent analytics is an emerging discipline and organizations that champion transformational people practices have already made it central to their HR philosophy.

“Google is really at the leading edge of that,” says Todd Safferstone, managing director of the Corporate Leadership Council of the Corporate Executive Board, who has a good perch to see what HR executives are up to.

In order to support its highly analytical culture and practices, Google created its people analytics function called People and Innovation Lab (PiLab). The PiLab plays the unusual role of conducting applied research and development within its people operations. The members of PiLab include leading industrial and organizational psychologists, decision scientists, and organizational sociologists whose mission is to conduct innovative research that transforms organizational practice within Google and beyond. One of the most celebrated successes of the PiLab is Project Oxygen , which made use of talent analytics and had a statistically significant improvement in manager quality for 75 percent of their low- performing managers.

Metrics, Tools and Techniques
The complexity in implementing Talent Analytics the right way exists in identifying what metrics to measure and their relative importance to business success. In order to realize this, the decision should be a shared one between the CEO, CFO and the head of Human Resources, making it easier to ascertain the people metrics having the utmost linkage to business performance and revenue productivity.

Some of the most commonly used metricsare in the following key areas as identified by Society for Human Resource Management:

Dr. John Sullivan, a well-known thought leader and a strategist in the field of Human Resources segregates the Hot List of Metrics for large organizations into first-tier and second tier metrics and further lists 37 individual metrics under 14 different categories. A snapshot of the first tier metrics includes the following:

Overall Workforce Productivity:

1. Percentage improvement in workforce productivity. Improvement in dollars spent on people costs for every dollar of revenue or profit generated (as compared to last year).
2. The dollar value of the increased workforce productivity between this year and last year.

Employee Engagement:

3. The percentage of employees who “look forward to coming to work” everyday (from survey results).
4. Percentage of employees who feel that their managers exercise expected management behaviors (from survey results relating to two-way communication, challenging and exciting work, exceptional growth and learning, recognition and reward, some degree of control over their job, and knowing that their work makes a difference).

Recruiting:

5. Number of overall days that key positions were vacant (due to recruiting)
6. Average performance appraisal score of new hires (compared to last year for the same job)
7. Manager satisfaction with new hires (survey hiring managers; compare results to last year’s average)
8. The turnover rate of new hires within the first year
9. The percentage of diversity hires in managerial and senior positions
10. The dollar impact of a bad hire in key positions

Retention:

11. Overall employee turnover (not recommended)
12. Performance turnover in key jobs (where performance turnover means that the top performer turnover is “weighted” more heavily and bottom performer turnover more lightly than the average worker turnover)
13. Preventable turnover in key jobs (where a sample exit survey is used to identify the real reasons individuals left the organization and whether the turnover could have been reasonably prevented)
14. Diversity turnover in professional, managerial, and technical positions
15. The dollar impact of employee turnover in key positions
16. Managers’ overall satisfaction rate with HR’s retention efforts and the impact of these efforts on team productivity (survey of a sample of managers)

Overall HR Costs:

17. Dollars spent on HR costs for every dollar of revenue generated (compared to last year)

Manager Satisfaction:

18. Average ranking of all individual HR functions in a manager survey where managers are asked to rate all the individual overhead functions, specifically on their contribution to productivity and in helping the manager to meet his or her performance goals

Dollar Impact of HR on the Business:

19. Estimate of the overall dollar impact of HR as a result of last year’s recruiting, retention and productivity improvement (ROI) efforts

Various tools and techniques come in at a stage where people metrics that will be actively driven in the organization as a part of the strategy are clearly defined and agreed upon. The industry has myriad technology offerings to capture the data, process it and present it across multiple parameters to aid in inferences and decision-making. It is advised to invest in technologies and platforms that are fully integrated with the organization’s strategy and encompass elements of end-to-end HR deliverywith the flexibility to customize as per organizational dynamics. This helps in the system acting as a one-stop shop for all the analytics requirements, eliminating opportunities for inaccurate and conflicting data obtained from multiple sources.

HR Analytics and Decision-Making
To master the domain of HR Analytics that acts as a feeder to the strategy and vice-versa requires capabilities around high quality and accurate data sourcing, technological support for processing the data and analytical leadership to derive conclusions that can steer the decision-making process. Some of the pitfalls to be avoided while making enterprise level decisions guided by Talent Analytics include:

• Not capturing all sources of information to validate contrary points of evidence
• Not investing in technology and continuing with error-prone and effort-intensive manual approach to analytics
• Limiting applicability of metrics to workforce in lower and middle-level positions
• Using metrics to validate a decision already made as compared to data-driven decision approach
• Insisting on waiting for complete availability of data in order to make a decision, by which time the context may have expired
• Prioritizing metrics orientation over people-centricity leading to employees perceiving that activities are done in order for the numbers to look good on the scorecards
• Continuing to drive metrics that are obsolete and not in line with the organizational changes
• Driving far too many metrics than a critical handful ones causing choked up HR bandwidth instead of value creation

Talent Analytics is an emerging dimension of Human Resources and close observers of the discipline would agree that the future of HR would largely depend on influencing strategy by deploying talent analytics for a competitive edge. The immediate future of talent analytics would be characterized by conventional standalone metrics being replaced by people metrics that are directly linked to business results and by the emergence of standards for commonly used metrics across industries (for instance, cost-per-hire as a standard reference metric for benchmarking). People-centric organizations should hence invest in leveraging their talent analytics function to shift gear in winning their people strategy and play the influential partner in building enterprises of the future.

Abhinaya Chakkirala is a Chennai-based HR professional with a large IT organization. Her experience spans across Employee Engagement, Talent Management & Organization Development, in the IT, ITES industries with organizations like Dell & General Electric.