Transforming the Future of HR: Human Capital Analytics

Modern days bring more complex questions thus requiring new data and completely different way of thinking.

Fast IT development pace and employer ambitions to reach higher can be both – a great opportunity and a challenge for the HR.

While many companies are still lagging behind with the implementation of human capital analytics, numerous companies who have done it are still finding it difficult to develop their analytical capabilities.

Within the next paragraphs we are going to discuss the nature of HCA (human capital analytics), why and how it benefits the company as well as what challenges it proposes.

HR analytics clearly adds value when a number of pre-conditions are met

Human capital analytics (often referred as human resource or talent analytics) provides the company with critical insights on effective ways how to manage workforce, so that the business goals are achieved.

Moreover, it analyzes employee preferences, effectiveness and contribution in business success. Main goal is to promote growth and changes.

In recent study academics Jorrit van der Togt and Thomas Hedegaard Rasmussen refer to analytics as the game changer for the future of HR. This trend has been driven by current globalization, competition, connected workforce and more complex business issues.

While it is true that HCA can be highly beneficial for the company, it also takes quite an investment establishing it.

As recommended by Peter V.W.Hartmann, Business Intelligence Expert at Mærsk Drilling, begin asking yourself a few questions that could help you decide whether your company is ready for HCA.

Ask yourself:

Is it fashion or do I really need it?

How does it relate to my business strategy?

How does it ensure the implementation of my business strategy?

Human capital analytics (HCA) has been in spotlight among businesses, consultants as well as academics.

Despite numerous LinkedIn blogs and consultancy reports available online, a study by Deloitte (2015) revealed alarming results.

The majority of surveyed companies (75%) believed HCA plays an important role in business performance, yet only 8% evaluated their organizational capabilities as „strong”.

Why such insecurity?

Today’s HR leader has to think like an economist

A lot of companies are still using operational reporting.

While moving from operational reporting to true analytics is the preferred scenario, some companies manage to operate well and succeed the old-fashioned way, creating well-designed dashboards and distributing backward-looking reports to business units.

Although operating this way may be sufficient for some companies, nevertheless there are reasons why companies are encouraged to move to analytics.

Let’s do a little comparing!

Today, many HR leaders are dealing with more complex, challenging questions than the ones their predecessors faced

Award and Ghaziri (2004) discuss the difference between data, information and knowledge revealing the correlation with competitive advantage of the organization.

Academics believe that data itself is not relevant, and while information may be a source of short-term performance parity, it is knowledge that drives competitive advantage.

While operational reporting is all about collecting data thus making the processing easier, HCA is a lot more sophisticated yet also more beneficial for the transformational processes of the company.

In order to fully show the impact HR department has on a company as a whole, analytics should be intuition, experience and beliefs combined with facts and evidence.

That way organization is able to focus on the most important aspects, successes and see opportunities for growth.

A few companies that have made a significant progress in the use of HCA include such high performing organizations as Google, HSBC and LinkedIn.

Analytics has been called a game changer for the future of HR

Why is it hard for companies to transition to analytics?

Although it is clear that analytics and evidence-based decisions are the future, implementation may be easier said than done.

Some of the reasons are the following:

1.) Analysts lack logic

Analysts are often lacking the understanding of how important the relation between human capital and performance is.

That leads to strategically irrelevant questions making the HCA (human capital analytics) ineffective.

Therefore, it is important to learn from the organizations that have succeeded.

Levenson and Fink (2017) point out that “effective organizations in their analytics projects put the main focus on a key question or investment decision”.

In that way it is clear what has been analyzed and what measures further need to be taken.

2.) Analytics models lack sophistication

Although some analysts have proven to be successful using simplistic models, organization is a complex system that requires more sophisticated models for the analysis to be accurate and worthwhile.

While simplistic and underspecified models are often about whether variable X leads to variable Y that helping to determine simple correlation, there are numerous factors that affect the results.

However, while analytic models lack sophistication, another common challenge is no consistent system to identify HC, making the data hard to analyze.

3.) Data is poorly organized

Instead of focusing on big data, the emphasis should be on smart data which is organized and continuously updated.

Data duplication and incorrect entries are all part of company’s inability to manage its data which can turn out to be very costly.

Moreover, data sets become useless making the analyses hard to compare, combine and thus also to reveal the impact human capital has on organizational outcomes.

4.) Organization-wide network is underestimated

While it is important to have a skillful analytics team that will lead the organization through transformation, having capable individuals throughout the organization is also essential.

That way analytics team can be supported when integrating the findings into business routine.

Such close cooperation between members will result in organizational actions.

* * *

Analytics is about impact rather than percentages and about explanations rather than associations.

Despite its remarkable entry, for many companies human capital analytics (HCA) has not been fully discovered yet.

While the benefits are evident, there is still a long way ahead for both – analysts and HCA as such.

Yet more and more companies show interest in academic research wanting to know what drives performance.

In order to make analytics actionable researchers and practitioners must work hand in hand.

Finding out what else can be researched to support practitioners, as well as looking for ways how companies can contribute to encourage further research may wave away insecurities and open the door to possibilities.

Sintija.