By Joal Kranc
In the world of finance and number crunching, the use of analytics models and metrics to understand costs and spending is not new. Spreadsheets with qualitative data have always been the norm to identify patterns of return on investment and spend. Increasingly, however, HR departments are taking the same steps, and using this so-called “big data” to inform their decision-making. Metrics, analysis and numbers are being demanded by CEOs and CFOs of their HR departments to justify new programs ans ensure the existing programs are doing the jobs they are meant for.

“There is a trend right now and we are seeing some HR organizations moving towards what we call analytics and predictive talent management,” says Benoit Grenier, a partner with Mercer in Montreal, which has been involved in workforce analytics for 20 years. “It is still in its infancy because the level of adoption is still quite low but there is a huge interest.”

Ian Cook, who is responsible for “product success” with Visier, a workforce analytics solution provider, says not only was there a lack of infrastructure available to HR professionals, there were a multitude of systems collecting data that were never housed under one roof. “A lot of organizations wouldn’t have one data system that is holding all the relevant information about their people… and a lot of organizations have struggled even to use their own source of data as they would need to get it all into one place.”

Grenier attributes the increased level of interest to the data and information technology infrastructure available to HR practitioners that may not have been available to them 10 or more years ago. Newer human resource information systems and enterprise resource planning software simply make it easier and cost-effective for the HR world to collect data about employees. “With this huge amount of data, some sense needs to be made out of it, but HR must now learn to do [a better] analysis of the data that is available,” he adds.

Why Now?
So the data is more accessible and can be used by HR manager to assess their own departments and human capital strategies, but why is the trend going in this direction?

Emree Siaroff, managing director, human capital with BDO Canada, says HR departments have traditionally been good at the collection of employee satisfaction data and its subsequent analysis. However, he adds, satisfaction does not necessarily mean employees are engaged. With technology, results and improvements become easier to measure, as did “the ability to measure bottom line results as it connected to engagement,” explains Siaroff. “That headed us down a [solid] path because not only can a good organization working with you measure overall engagement, you can break it down by demographics,” and other categories, he notes. “What it forces us to do is to [look at] the policies, processes and plans to increase that engagement level and determine where to invest the money to have an impact on that,” explains Siaroff.

Currently Siaroff and BDO are participants of the HR Metrics Service, a benchmarking service owned and operated by the BC Human Resources Management Association in partnership with the Human Resources Professionals Association (HRPA) and other provincial associations across Canada.

Perhaps because of the recent recession a few years ago and the volatile economy that has followed, during the past two to three years it has been increasingly difficult to find and keep good people. Cook says that senior managers are starting to look at this more seriously. “There is a growing understanding of business leaders, not just HR, across North America, that (a) people make a difference and (b) good people have started to become scarce.”

But not all industries are created equal. Grenier says specific industries such as aerospace and defense, are concerned with talent shortages, namely engineering functions and other highly skilled workforce segments. The demographic is also getting older, so HR is being tasked with analyzing, more and more, the scope of those types of issues.  “There needs to be a strategy to fill the gaps and that is done through data-based analysis,” he explains. In these scenarios, HR must look at the longevity of employees, and what is required in terms of numbers.

“All of this cannot be down without numbers or evidence-based analytics and HR had to go one step beyond a qualitative approach,” Grenier says.

Demographics and the aging workforce have played a role in this, agrees Cook. What events such as the recession do is postpone the retiring of certain workers and changing the landscape of the workforce, but the events till occur, just at a later time. And now HR departments are feeling the affects of a recession and demographic shift that they might have felt a few years ago had it not been for the financial crisis.

Besides demographics, sheer numbers dictate the need for HR to dig deeper into its data to make informed decisions. Grenier says that talent represents about 40 per cent of the cost of running a business, noting, “It’s important that you have the same level of rigor when you plan your workforce as when you plan your products, your investments or your operations and I think that message is loud and clear.”

Big Data in Operation
One of the issues with large amounts of collected data is what to do with it. HR professionals might look at the newly collected data and think so what? But Siaroff explains the ways in which it can be used can permeate many facets of HR life.

For instance, he notes, if an HR department has collected engagement statistics, those numbers can be cross-referenced with a host of other issues. Practically speaking, if a low engagement score appears for a certain demographic, Siaroff says one can look at that demographic in terms of the positions they hold and what can be done. Or, if people are unhappy with retirement and benefits packages, HR can once again look at the issues in light of the data and correlate it to turnover and/or cost of recruitment. “You’re doing these things to make the organization more efficient, more effective and to add to the top and bottom line,” he says.

The challenge, adds Siaroff, is the ways in which the data are correlated and compared. While he is confident the data he receives from this third party advisory are reliable, other companies might have to double check the data to ensure there are no anomalies in the information and that if any metrics are being compared, they are an apples-to-apples comparison.

The other side of the coin is the speed at which this data can be retrieved and presented. Cook says in the past, the biggest challenge for HR was moulding the data into the right “shape” to look at it. What his firm and others do is take data into one repository so that it can be sliced and diced into any issue or category the HR practitioner wants. It saves time, it saves money and it allows HR to do its job with faster results. “It’s a technology change that is quite disruptive,” he adds.

Big Data Still Not Well Used
Despite the power of the data being collected and the influence it can have on decision-making in HR and C-suite departments, “big data” and HR analytics is still not that widespread among companies in North America. Grenier says less than half of the companies in North America are using workforce data in their HR department. “Our experience from working with HR departments show that the vast majority of them are poor or behind in HR analytics.”

“What will make the difference is the speed at which HR professionals will develop new competencies,” says Grenier. He adds that HR professionals don’t need to be statisticians and analytics experts, but rather they need to learn the ability to interpret workforce data, the same way finance or marketing professionals are able to interpret financial and sales data. “The key driver of change, considering we have the tools which are much cheaper than they were, is the ability to use workforce and business data in the process of defining your people strategy—and have a strategic approach as opposed to a reactive and operations approach.”

Seperately, Siaroff says the trends also point to data collection and analysis being practiced not only at larger firms but at smaller ones as well—partly because CEOs are demanding it and partly because systems are more manageable at smaller companies.

Overall, HR professionals have more, rather than fewer, tools at their disposal to make better decisions regarding their talent pools. Data, and the collecting of it, is one of those tools that, once explored, can open a new world of opportunity into tracking and altering policy to better reflect the needs and wants of the workforce (and the bottom line).

Joel Kranc (joel@kranccomm.com) is director of KRANC COMMUNICATIONS in Toronto, focusing on business communications, content delivery and marketing strategies.

Reprinted with permission from the Human Resources Professionals Association (HRPA) and HR Professional magazine.