When it comes to talent management, there’s a paradox that continues to confound HR leaders.
For a long time, HR departments have been called on to become more strategic—less fixated on matters that only concern HR, and more focused on matters that concern the entire business.
At the same time, talent management—a bedrock component of the HR function—is by definition a strategic pursuit. It’s the practice of creating productive employees that actively help a business reach its goals—by hiring new staff that can hit the ground running, developing existing staff to make them even more effective, and motivating and engaging all staff to reach their full potential. Given that the workforce takes up most of the company budget, it’s hard to argue that there’s a function outside of talent management more critical to a company’s ability to execute on its strategy.
But if talent management is inherently tied to business strategy, why does the perception endure that HR lacks strategic clout?
The answer is simple—it’s because workforce metrics and programs have traditionally been difficult to connect to business results. Instead, HR has relied on numbers that are easier to measure, such as retention rates, engagement scores, and recruiting pipelines—important information, to be sure, but at least one degree removed from higher-level business results like revenue, profit, and customer satisfaction.
Connecting the workforce to business results has long been seen as the holy grail by business and HR leaders alike. Understanding what workforce levers to pull to drive business outcomes will revolutionize the impact HR has on business performance.
In fact, many companies have already invested millions of dollars and years of effort in business intelligence projects while trying to make this connection. However, consistent and cost-effective results still elude them, for a number of reasons.
3 Business Intelligence Challenges
#1: Data buried in disconnected systems
First, the relevant data lives in many disconnected silos. Core workforce data lives in a human resource information system (HRIS), talent management data often lives in other systems, and indirect workforce costs—such as those for recruiting, relocation, and facilities—are tracked in still more systems. If an organization uses a contingent workforce, their data is often kept separate from that of full-time employees. And that’s all before business information—sales, financial, customer, and other business data—is added to the mix. Integrating and standardizing the data is a complex project fraught with risk.
#2: Ability to deliver self-service reporting and analysis
Second, the insights an organization can achieve are constrained by the capabilities of the systems it uses. HR systems typically offer nothing beyond descriptive analytics—numbers that describe what’s happening but don’t help leaders understand why it’s happening, decide what to do next, or predict future trends. Organizations that tackle these shortcomings by implementing business intelligence (BI) systems run into further challenges. BI systems are built for experts, which denies the average business users their own interaction with the analysis guided by their sense of discovery. And until subject-matter experts build the analytic application, BI systems are a blank sheet that offer no insights into the workforce.
#3: Cost of producing reports
Third, building a system to generate workforce insights is a long and expensive proposition. IT staff have little time due to competing priorities, and consultants charge a high price for their expertise. Hidden costs add to the bill—every new data source requires more implementation time, and every new analytic needs to be built from scratch.
Alternative for Visualizing and Analyzing Data
In spite of the challenges, the need to connect the workforce to business outcomes is critical, and there now is a viable and effective alternative to BI. New cloud-based people analytics solutions are now available that provide turnkey data onboarding and management at a fraction of the time and cost of traditional methods, leaving HR and business leaders with the time and money to focus on business strategy and decision making.
With the right solution, companies can avoid getting mired in the details of data processing and report creation and instead ask questions that directly tie the workforce to business KPIs, such as:
- Do stores where employees have longer tenure have higher sales?
- Are more training hours linked to a lower frequency of reported injuries?
- How does training spend relate to our defect rate?
- Is the amount of variable compensation paid linked to the number of new insurance policies written?
- How does time in position relate to the first-call resolution rate of support calls?
Dave Ulrich, a leading business consultant who’s known as the father of modern HR, advocates for an “outside-in” approach to HR that’s consistent with the need to connect HR directly to the business. Great HR is about making the business better, and the key to that is connecting workforce plans to specific business goals.
John’s article first appeared in Human Resource Executive in May 2016.