“Now, more than ever, the corporate strategy for large companies hinges on the people strategy.”
This was a key takeaway from a summit of HR leaders and Boston Consulting Group (BCG) experts, who met to discuss the future of HR and the trends shaping it.
It goes without saying that great HR functions are strategic: they play a vocal role in critical business decisions and control a significant portion of a company’s expenses. Management consultant Ram Charan, McKinsey & Co global managing director Dominic Barton, and Korn Ferry vice chairman Dennis Carey have gone so far as to recommend (in their HBR article, People Before Strategy) that “the CEO should create a triumvirate at the top of the corporation that includes both the CFO and the CHRO” that “makes the connection between the organization and business results.”
Why? Today’s business environment is more complex than ever before, creating an unmatched opportunity for HR to create value for the business. PwC’s 18th Annual Global CEO survey, which included a report on People strategy for the digital age: A new take on talent, identified six key priorities for CEOs and HR:
- Rethinking people strategy
- Find the right leaders
- Adapt to changing demand
- Embrace diversity
- Know, and value, your people
- Create value through HR
HR’s role is not simply to translate business strategy — but to drive it.
As BCG captures well in their paper, When people strategy drives business strategy:
“Developing a people strategy was once a straightforward matter of figuring out how to create the best possible workforce to execute an already defined business strategy. But… people strategy today involves much tougher choices and tradeoffs. It may actually drive the business strategy as much as business strategy drives it.”
For example, HR leaders at a professional services corporation used insights gained from their Workforce Intelligence solution to drive the business to change the composition of project teams for multi-year, multi-million-dollar contracts— the result was an improvement in margins by $1-$3 M per contract.
Given that people strategy may actually drive the business strategy as much as business strategy drives it, what has held HR back from achieving this? There are 2 reasons:
1. HR systems are built to enable operational excellence, not strategic excellence
HR has long focused on achieving operational excellence. This has included many multi- (multi!) million dollar investments in systems that manage and automate HR tasks, act as systems of record, and help HR execute on administrative activities faster, with fewer errors.
HR management systems, applicant tracking systems, performance management systems, talent management systems, payroll systems. The list of systems that were built to enable operational excellence in HR goes on and on.
But these systems — while they generate lots of data — are capable of not much more than operational reporting. These transactional systems cannot effectively answer strategic workforce questions, connect workforce decisions to business outcomes, or support future modeling and projections. Their underlying technology simply does not allow it in any meaningful way.
Take Workday as an example, where the underlying transactional technology cannot support analytics:
Workday has had three “at bats” in its attempt to provide more than basic operational reporting to its customers. In all three attempts, Workday had to look to third-party technology, as the Workday transactional technology is not capable of supporting analytics.
Attempt 1 was Workday Big Data Analytics — announced in 2012, Workday hoped to leverage a third-party analytics technology (called Datameer) to “provide pre-packaged analytics that enable customers to combine Workday data with third-party data sources of any type, including big data, all delivered in the cloud.”
This attempt failed, and was replaced with Workday’s next attempt: in 2014 Workday acquired Identified, an analytics technology company, and announced its plans to use Identified’s technology to “create a new suite of applications that will harness the power of advanced data science and machine learning algorithms to equip customers to make smarter financial and workforce decisions.”
This attempt also failed.
In 2016, after a lack of pick up by customers and inability to deliver on its analytics promises, Workday acquired Platfora, a data discovery tool that Workday hopes will help customers “bring more data into Workday.” In its attempt number 3, Workday is trying to solve the problem of bringing more third-party system data into Workday. But it is unclear what will happen when it eventually gets there — if it does — and, once there, how that data will be analyzed.
The short story — even the great transactional HR system vendors are struggling to figure out analytics. Success requires deep expertise, the right technology, knowledge around what questions to ask and how best to answer them, and the ability to bring data together from many disparate sources (including business data) with ease.
2. HR has been underserved by IT
Many HR teams have striven to put the data being generated by their HR systems to good use. They’ve done this in two ways.
One common approach is to call on IT, who typically responds with “you need a data warehouse first” — often a multi-million dollar, multi-year project that focuses on cleaning and integrating data. Once the data is ready, IT professionals, using business intelligence and data discovery tools, then create dashboards and scorecards — only to find that the questions HR and the business care most about are not being answered, the delivery of the insights is insecure, and the data is out of date. Not surprisingly, these projects have high failure rates.
Another approach is to tackle the problem within HR — through reporting staff and, if fortunate, data analysts. But these individuals are equally hamstrung by the capabilities of the systems and tools they use. Often after an initial success with dashboards for leaders, the function hits the wall and is unable to scale to support the needs of the business.
Fortunately, a new platform has emerged to enable strategic HR: the people strategy platform
The people strategy platform complements investments in HR transactional systems by bringing together the data from those systems — and from business systems — to answer important questions that connect people to business results. Focused on providing strategic insights to make better people decisions and plans, and connecting those decisions directly to business outcomes, the people strategy platform enables strategic excellence within HR.
Here are a few examples comparing the role of a people strategy platform to the role of your transactional HR systems:
To achieve the strategic insights listed above, a people strategy platform — at a high level — must include these critical capabilities:
Now is a great time to be in HR. With the CHRO as a key power player in the C-suite, and the rise of the People Strategy Platform to enable strategic excellence, HR organizations have more ability than ever before to create value for the business.