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Why HR is becoming a numbers game

Via The Economist : This is the year when human resources goes digital, so HR executives must overcome any lingering “data phobia”

This year, according to HR guru Josh Bersin, is the year in which HR becomes digital, meaning that the use of analytics to monitor and manage employee performance will become mainstream.

In fact, according to the biannual HR Outlook of the Chartered Institute of Professional Development (CIPD), some 92% of HR respondents say that they are already using HR analytics to some degree, with over three-quarters of them stating that this is boosting their ability to contribute strategically.

The CIPD defines HR analytics as “the application of analysis and data processing procedures to HR/people data to provide information and insights about the nature of individuals in organisations and the value that they add”. That’s a definition which, on the face of it, sounds more like an IT role, but in reality it’s indicative of a change in the nature of the HR role.

In the past, HR’s relationship with technology has often been troubled. The first generation of human capital management (HCM) systems, designed to automate HR processes, were in practice often rigid in their approach and difficult to customise to particular organisational practices. Many HR practitioners felt they undermined the “people skills” aspect of their roles in favour of data entry.

But the rise of a new generation of cloud-based HCM systems has had a more enthusiastic reception, with some 44% of 650 organisations polled for the PwC Annual HR Technology Survey having moved core HR functions to the cloud, with a further 30% stating their intention to do so within the next three years.

Unlike the clunky first-generation systems, the new cloud systems are accessed via web browsers with user-friendly interfaces and can be run off mobile phones and tablets as well as traditional desktop computers. They are also agile and flexible enough to support the introduction of new HR practices quickly, such as self-service appraisals and admin by employees.

On the back of this has come a greater interest in what can be learned from the data held in HR systems, both in terms of understanding the current state within an organisation and also potentially gaining a predictive understanding of what might happen, enabling HR to intervene before personnel problems arise and employees become disgruntled or decide to leave.

The promise of such insights explains why the CIPD survey finds that 78% of HR leaders polled see analytics as an essential technology to support their ability to deliver strategic value to their organisation, while nearly half (48%) can see that predictive analytics would deliver return on investment (ROI) through anticipating trends, such as employee retention risk.

But whatever the reason why CIPD members reckon they are using HR analytics, it’s still early days for most organisations to specify the extent of that use. The PwC study finds that while HR analytics is cited as a major priority, over half of respondents (52%) don’t have a dedicated HR analytics team, while 44% don’t have an HR analytics strategy in place.

There is also a cultural barrier to get past, one that might be characterised as “data phobia”. This is the mantra from more dyed-in-the-wool practitioners that “I’m a people person, not a numbers person”. This is a mindset that needs to be challenged in the longer term through investment in skills around data management for HR professionals, and in the short term through a closer working relationship between HR and IT departments.

There are some organisations that are setting an example in the analytics field, such as currency-exchange firm Travelex, which has recently set up a dedicated HR analytics practice on the back of its multi-year move to HR in the cloud. Other organisations will take their own time to get to such a stage, but the direction of travel is clear. As HR systems complete their transition to the cloud, HR analytics adoption will follow.

Written by The Economist Intelligence Unit

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