HR needs analytics to grow from cost center to benefit center

HR is at a crossroads today. It reminds me of what the finance department has experienced a couple of years ago. It took a financial crisis to realize that Finance could play a significant role within the organization. This department became gradually more important and has more than earned its place on the management board. HR is now being offered the same opportunity, to become a true and respected business partner. An opportunity that you shouldn’t miss out on!

Anyone who browses through an average organization’s financial details, will notice that HR costs still outweigh those of all other departments. Meanwhile, HR is eager to take on a more strategic role within the organization. A role that goes beyond operational tasks such as paying salaries, drafting time sheets and recruiting. A role that naturally follows the CEO’s growing awareness that human resources are their most important assets and key to the organization’s success.

“So what is keeping HR?”, one might ask. Truth is: HR nowadays is mostly struggling with the available data and the use of analytics to fully exploit those data in order to play a more proactive role. As long as they’re still struggling, HR will never become a fully-fledged business partner.

From internal to company-wide metrics

Granted: HR has already been measuring several metrics for a while now. Among them: training evaluation sheets, studies on retention and employee satisfaction surveys. Therefore, most HR departments succeed quite well in measuring and reporting on the internal efficiency and results, based on the available HR data. Parameters such as remuneration, fringe benefits, training,… can help determine the reason(s) behind e.g. a change in absenteeism or in employee retention. Determining the cause is a necessary first step in any strategy aiming to solve an HR problem.

What HR fails to do so far, is to make use of data outside of the HR department, and to analyze these in order to better anticipate the business strategy. This could be data from finance, customer care, ... Only when doing this, you can move from measuring the business impact on HR to measuring the HR’s impact on the business. That is what HR analytics should be about!

So it is no longer a matter of measuring HR’s performance as such, but rather of gauging HR’s performance in comparison to the rest of the organization. Let me illustrate this with an example. Let’s assume that you are organizing a sales training. Measuring the quality of the training is a useful tool, but what if you could measure the impact of the training on the business results? That would be an entirely new level! It would allow you to demonstrate how much this sales training has contributed to the company revenue. And what if you could demonstrate that the new retention policy has contributed to the employees’ loyalty, which in turn has led to a higher customer satisfaction and loyalty? It would be one more proof that HR can actively and positively contribute to the organization’s results.

But how do you proceed to achieve this objective? To be continued.