Analytical Views on Analytics
The other day I was reviewing a press release from one of the numerous vendors in the HR Technology market which stated “the new release incorporates highly flexible analytics to deliver key business metrics business leaders are demanding”. That quote (along with a very lengthy delay on the tarmac at O’Hare) got me thinking . Can a HR Technology Vendor deliver meaningful analytics that business leaders are demanding?
What analytics exactly are business leaders demanding?
If I’ve learned nothing else in the 15 years I’ve been in this space, its that HR generally doesn’t know what business leaders are demanding. Not to be negative, but HR has historically been viewed as a highly administrative function which serves a supportive role to the business. Very few HR organizations are actually viewed as strategic business partners and have been able to successfully answer the questions that the C-Suite is really asking. Those that have, generally can demonstrate the following:
- Direct impact on talent-related programs and processes to top-line growth
- Comprehensive understanding of which talent-related levers can be pulled to adjust the overall financial performance of the organization
- How specific talent practices directly contribute to the levels of agility within the organization (effectiveness of core competencies, impact of development programs, bench strength in key roles, hiring talent beneficial to the organization not just people skilled to fill the role for which they applied, etc.)
- What impact incremental investment in HR practices can have on top-line growth
- Impact to both the top-line and bottom-line as a result of speeding up or slowing down hiring
Needless to say, being able to provide meaningful insights into ANY of the points above requires information which goes far beyond that contained within nearly any HR-specific application. For a HR product vendor to claim out of the box business analytics is pure bunk, unless there is a data warehouse capability inherent in the solution. Last time I checked, other than the ERP-based solutions only one HR vendor that I am aware of really offers such a possible solution. In all such cases, the use of a overlay analytics solution is necessary to deliver meaningful business analytics. None actually do this native within the core business application.
What analytics do HR vendors provide?
While its highly unlikely that HR-centric solutions will provide meaningful analytics which answer the exact questions emerging from the boardroom, there are a multitude of rich, meaningful, and helpful analytics which can be produced. These nuggets of knowledge, coupled with financial data can go a long way towards producing some simple, yet meaningful analytics such as:
- Your time to fill metric combined with average revenue per employee per day (annual revenue / headcount / 365) demonstrates the opportunity cost associated with your average vacancy.
- Turnover rate coupled with replacement cost (30% of annual salary is an average benchmark) can be used to speak to the financial cost of turnover. This along with divisional or managerial level detail can help to pinpoint specific segments of the organization needing additional attention.
- Combining individual revenue details for those in revenue-generating roles along with demographic information enable analysis of certain trends such as relationship between tenure and revenue, career path progression and revenue, managerial tenure and revenue generated, etc. All great information to find ways of raising revenue and driving costs out of an organization.
These are just the tip of the iceberg. Armed with financial data and an analytical mindset event the most basic HR information can be meaningful to your company’s leadership. Moreover, by sharing the results of this type of analysis in financial terms HR can and will make progress towards a seat at the proverbial table.
No matter what the metric, unless it can be stated in a way that demonstrates impact to revenue or costs it will not be of use to the c-suite. And as highlighted earlier, unless the application from which the analytics are generated contains financial information you’ll never be able to produce the rich analytics that your vendor would lead you to believe their new managerial dashboard delivers.
What are your thoughts on this topic? I would welcome your input.