July 3, 2018 9:00:00 AM EDT

People Analytics: The Math Just Doesn’t Add Up

Organizational Effectiveness

People Analytics: The Math Just Doesn’t Add Up

According to a recent study from the Harvard Business Review surveying 168 business leaders, two-thirds of HR departments are using HR metrics, but less than one-quarter deliver metrics to the CEO that link HR metrics to business results. Why the gap? According to the same study, only 39 percent of leaders agree that HR is able to quantify the business impact of the people strategy.

Linking HR performance metrics to business results can be challenging, but can also result in a competitive advantage for your organization by maximizing the value of your HR spend. To efficiently and effectively link HR metrics to business results, it’s important to keep in mind these three questions:

  • What information are CEOs looking for?
  • How are you accessing the information?
  • How are you telling the story?

Let’s look at things your CEO might want to know and see how the framework applies:

What information are CEOs looking for?

Let’s assume your CEO wants to know what was spent last year on recruiting. On its face, the question is about cost. Since HR is not a revenue generating function, this is often the case. However, the quality of talent you are bringing into the organization has a massive impact on revenue, so it’s important to understand the link. Your CEO will be thrilled if a $100 million investment results in $1 billion in revenue. Conversely, your CEO will be agitated if either A) that $100 million investment results in $50 million revenue. Or B) the benefit can’t be quantified. So let’s revisit the question. What is the question that’s being asked here? See below for two ways to answer.

 

null

 

On the left, you’ll find that the question has been answered. You can quickly see how much has been spent on recruiting spread over four quarters. Left without additional context or analysis, your CEO’s reaction will range from mild disinterest to annoyance that costs are rising. On the right, you see a far more developed story. In addition to Cost-to-Hire, we’ve layered in a 90-day turnover metric, an industry benchmark, and several data points on productivity and employee newness. Now you’re ready to speak the language of business. That small increase in recruiting spend has reaped massive benefits for the organization. Your additional layer of analysis didn’t answer the exact question that was asked, but it answered the more important question.

How are you accessing information?

Having access to clean, consistent, well-defined data is a critical first step in building your organization’s people analytics capability. What’s your process for gathering and synthesizing data for complex metrics like regrettable attrition? Loss of high performers, people in hard-to-fill positions, and people with less than one year of tenure can all be classified as regrettable loss. When you’re analyzing and reporting on a metric as subjective as regrettable attrition, though, it’s important to keep in mind a few things:

    1. Be consistent. Solicit a variety of opinions from the business to define the metric, then stick with it.
    2. Document it. Once you’ve defined the metric, make the definition clear and accessible so that anyone who is reviewing the metric understands its components.
    3. Simplify the data gathering. Metrics like regrettable attrition can be challenging to build on an ad hoc basis, and data assembly, cleaning and synthesis can require significant effort. Make it easy for yourself and your team by building a custom report in your HRIS or a dashboard in Tableau or Power BI to reduce manual effort

How are you telling the story?

Just reporting data isn’t enough. To influence strategic direction with people data, you need to present a compelling story and a clear perspective. As an HR leader in 2018, you may be focused on reducing pay inequities between men and women, and how you present this story to your CEO will impact the direction your company takes.

First, consider the likely questions and/or objections your fellow leaders may have, and be familiar with data that supports your POV. Regarding the gender pay gap, many people might raise experience level, performance and job title as explanations for a gender gap in compensation. Be sure you have the information necessary to respond to these.

Next, identify root causes that are contributing the most to the gap. One useful framework is to ask “Why” five times. Take the following fictional situation, where an HR leader delves into an internal pay gap:

  • Why #1: Why are women in the company paid 10 percent less than men in our company? (Dig into historical data) Because men receive raises that average one percentage point more per women per year.
    • Why do men receive higher raises than women? (Continue digging) Because men at the company receive more off-cycle performance reviews than women (note: there can certainly be more than one “because” for each why).
    • Why do men receive more off-cycle performance reviews? (Find managers who have conducted multiple off-cycle performance reviews and interview them) Because men at the company have been more likely to ask.
    • Why have men been more likely to ask for off-cycle performance reviews? (Interview men who have asked for a review as well as high performing women) Because men feel more confident that their requests will be granted.
    • Why do men feel more confident in engineering that their requests will be granted? (Continue interviewing) Because women are familiar with multiple cases of other women who have asked for off-cycle reviews and have been denied and labeled as “too aggressive.”

In this situation, asking the five Whys has revealed a cultural issue where a common behavior by both men and women has been received differently and caused cultural divide and narrowed potential solutions. In this case, however, the company may wish to train employees on subconscious biases, communicate more transparently about gender issues, or review performance management criteria across the organization to ensure consistency.

Finally, present your findings in a way that is visually compelling, drillable and easy to understand. Here is where people data dashboards can be useful tools. Rather than spending time creating and recreating dozens of PowerPoint slides, consider developing a dashboard within your HRIS, or within a simple Business Intelligence tool like Tableau or Microsoft Power BI, which allow you to rapidly generate high impact visuals, slice and dice data, and quickly respond to your CEO’s questions. Building powerful dashboards requires several steps: requirements gathering, metric identification, front- and back-end development, and operationalization, but the benefits – rapid visualization, analysis, and focus – are well worth the investment.

Linking HR data to business data will help you shape and drive your organization’s strategy. Understanding what your CEO cares about, how to quickly access information, and how to convey a compelling story will allow you get the most out of your people data.

Want to learn more about other Organizational Effectiveness trends? Download our Organizational Effectiveness Ebook:

 Download Our Ebook Organizational Effectiveness for 2030

Judy partners with executives and leadership teams to engage and inspire employees in a way that delivers sustainable strategic results. She brings deep expertise and creative ideas to solve organizational effectiveness issues and closely collaborates in a way that builds internal capabilities. Judy has spent over 25 years consulting in a variety of industries, bringing her expertise in behavior to a wide range of organizational issues including organizational behavior change, leadership, change management, culture and engagement.

Related posts