In a dynamic world, human capital is arguably the most sustainable source of competitive differentiation and value creation. The role of HR is central to ensuring businesses are tapping into the vast potential of human capital, and interestingly, blending it with automation and digitization in unique ways.
But achieving this is of course no mean feat, as HR teams need to grapple with a growing array of tools and resources designed to drive real insights and opportunities. This calls for an approach to decision making that is based on facts and numbers, rather than intuition and guess work. Analytics is therefore taking centre stage in the HR realm, more so when the entire practice of HR has successfully moved from systems of record to systems of engagement.
Analytics can help quantify return on investment, effectively holding HR departments accountable in the same way business unit or product leaders are. In addition, HR teams are able to effectively direct funding to specific initiatives, measure success and quantify overall impact on the business – particularly important for board-level discussions.
While the numerous benefits of utilising HR analytics may be clear, organisations struggle with knowing which analytical model is the right fit. Typically, there are three engagement models to choose from, while using third-party services, and it’s important that the pros and cons are duly evaluated:
Project-based HR analytics:
One-time consulting-type engagement where the organisation needs a solution to a pressing problem within a fixed time-frame. This is presently the most popular model and is often used to better understand the potential benefits of analytics within HR.
Outsourcing-based HR analytics:
Ongoing agreement as part of an existing outsourcing engagement, of which there are two different strands. The Business-as-usual (BAU) construct whereby the outsourcing contract does not specific the usage of analytics but the buyer expects the service provider to utilise analytics in a BAU construct to make incremental improvements. This slightly differs to the specified analytics construct, where analytics is specifically mentioned in the initial contract or incorporated at a later stage. In this instance, the buyer may engage the analytics service of the service provider on multiple isolated projects as required.
Ongoing engagement over a period of at least a year, where analytics-related services are the only processes in scope of the arrangement. This could be chosen as a point-in-time assistance tool regarding compensation structuring or workforce planning. The buyer will engage a service provider who comes at specified times during a year to assist in the work. The arrangement might also include a technology component where the service provider gives access to the analytics tool to the organisation on an ongoing basis, therefore providing ‘stickiness’ to the relationship.
As the three models above suggest, it is no longer a question of ‘why’ but rather ‘when’, ‘where’ and ‘how’ to utilise the power of analytics in HR. Advancements in the science and art of analytics, coupled with the emergence of focused solutions and providers, are making it possible for HR organisations to better address traditional challenges and start their analytics journey with confidence. If used effectively, this will afford HR leaders a valuable opportunity to quantify the direct impact of their processes and initiatives on business outcomes.