By Brad Minor, M.Ed. Candidate in Human Resource Development, Peabody College of Vanderbilt University
According to Jac Fitz-enz, it is all about starting with logic and asking the right questions. He says, “If you don’t ask the right questions, you don’t get the right answers” (as cited in Babcock, 2009). This is not the answer we might expect from someone who is best known for his application of math and statistical analysis, but it is the intuitive answer that we must keep in mind if we want to use our human capital analytics (HCA) skills to report, and create, value.
“There are five ways to measure anything in business,” according to Fitz-enz (2009): cost, time, quantity, quality, and human reactions (p. 3). It is important to pick the right measure for a given analysis in order to assure maximum predictive validity and utility.
The Current State of HCA Implementation
Unfortunately, in the current state of human resource (HR) affairs, HCA seems to be the normative view rather than the norm. “Less than half (46%)” of the companies who responded to a global poll conducted in 2005 “actively assess the value of their human capital and its impact on business performance” (Pomeroy, 2005). Today’s HR professionals are focusing primarily on historical data and cost reporting rather than analyzing and reporting on metrics that have the ability to drive strategic decision making (Weiss & Finn, 2005). The exact reason for this is unclear, but a lack of executive support for the full implementation of HR analytics in the workplace might be one of the problems. “Senior managers still rely on ‘gut feelings’ when making decisions” because they don’t have the talent and data they need to make the move to analytics, according to survey results released by Accenture in early 2010 (SHRM, 2010).
Furthermore, other survey results show that the number one thing HR professionals believe should be analyzed and reported is leadership team capability (Weiss & Finn, 2005), yet this is a very uncommon practice. This is obviously a touchy subject, because measuring and reporting the negative performance of one’s superior could lead to political problems for the individual or individuals charged with the responsibilities of reporting and/or measuring. Common sense dictates that it is not politically savvy to “bite the hand that feeds you.”
Forward Momentum for the Widespread Use of HCA May Be on the Horizon
Human capital reports are now being requested by investors (Barrette 2004); clearly, business people are beginning to understand the importance of human capital to the bottom line. We need to move past reporting basic metrics, like costs and turnover rates, and into deeper analyses of the various HR issues that impact business results and drive strategic decision making, and this should become easier to accomplish as more businesspeople and investors begin to understand the true value of HCA and how they can use it to their advantage.
In a study of companies in UK and Canada, Weiss and Finn (2005) found that “human capital metrics and reporting need to align to the business strategy to be useful as a key driver of business outcomes.” One way for HR professionals to start making these connections to business results and strategy might be to map out these connections. It might help to literally draw maps of the connections between HR, strategy, and the desired business results, and then hang these visuals in our offices. These maps could become useful references when making a number of HR decisions, and they might keep us focused on what really matters.
Babcock, P. (2009). Predicting corporate success through people data. Retrieved 11 21, 2010, from shrm.org: http://www.shrm.org/hrdisciplines/orgempdev/articles/Pages/SuccessthruPeopleData.aspx
Fitz-Enz, J. (2009, Autumn). Predicting people: from metrics to analytics. Employment Relations Today, 36(3), 1-11.
Fitz-Enz, J. (2009, August). Predictive leadership. Leadership Excellence, 26(8), 20.
Pomeroy, A. (2005, April). People are our greatest asset. HR Magazine, 50(4), 20.
SHRM (2010). Weak analytic capabilities hinder decision making. Retrieved 11 21, 2010, from shrm.org: http://www.shrm.org/hrdisciplines/orgempdev/articles/Pages/WeakAnalytics.aspx
Weiss, D., & Finn, R. (2005). Hr metrics that count: aligning human capital management to business results. Human Resource Planning, 28(1), 33-38.