Data-Driven HR mindset: Only 2 out of 10 HR departments use data to guide their decisions

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Data-Driven HR mindset: Only 2 out of 10 HR departments use data to guide their decisions

Here’s how you can get ahead

From rising inflation, disrupted supply chains to the ever-changing state of play of COVID-19, uncertainty is on top of everyone’s mind and most boardroom meeting agendas. But as companies learn to live with uncertainty, what can business and HR leaders do to ensure their organizations are not flying into this new era of work completely blind? 

The answer lies in data. While it is impossible to accurately predict all of the future, relying on good data can help you prepare for it the best you can.

The potential of data in HR remains largely untapped 

The benefits of data-driven decisions are now largely recognized by organizations worldwide. For instance, 92 percent of the Fortune 1000 companies are currently increasing investment in data initiatives, so much so that by the end of 2023 the big data analytics market will be worth more than $100 billion

Yet, when it comes to HR specifically, the potential offered by data is largely untapped. Only about a fifth (22 percent) of companies globally use people analytics even though HR data is crucial in addressing some of the most pertinent challenges such as talent shortages, hybrid work, or digitalization.

There’s no going around it. The use of people analytics in HR and business decisions, in general, makes perfect business sense – organizations that use data in HR see an 82 percent higher-than-average profit over three years compared to their low-maturity counterparts. 

What we all can learn from people analytics in retail

One good example of where people analytics in HR has a huge potential to drive positive business outcomes is retail, as the sector is ripe for more use of data. 

According to a recent McKinsey Global Institute report, as much as 52 percent of all activities in retail can be automated (including data processing and data collection), making it one of the most exposed industries to digitalization. 

While much of our attention on retail digital transformation and the use of data has been focused on the operations side of the business (undoubtedly indispensable to serving customers amid the COVID-19 crisis and lockdowns, as well as to changing consumer behavior), there’s a truly fascinating push towards digitalization and data use beyond the level of customers. And it’s inside HR.

For CHROs, the main challenge coming out of the coronavirus pandemic has not necessarily been the digitalization of operations as such but rather making sure their businesses have enough employees to run their operations in the first place. 

The Great Resignation, shortage of labor, and employees’ changing demands have meant that HR departments have been forced to step up their game. 

For instance, one US retailer has found an innovative way of collecting and using candidate data to improve the recruiting and hiring process. 

Through an app that they had developed, the HR department was able to screen potential employees, gather feedback, collect credentials, schedule interviews, and track candidates as they moved through the pipeline. 

Having access to this data and using it to improve the hiring process has led to impressive results. The retailer saw a 60 percent increase in the applications’ processing speed, an 80 percent reduction in paperwork, and higher employee retention rates. All of which has had a positive impact on the company’s bottom line – in particular in today’s tight labor market. 

Other examples from other industries, on how better workforce data drives business impact, are no less impressive (for instance, HR analytics helped Credit Suisse save $70 million a year by reducing turnover risk factors). 

So if the benefits of the use of people analytics (and technology) in human resources and workplaces are so impressive, how come only a fifth of all companies use it?

Why so few HR departments are using people analytics

It’s all about skills. As with most solutions to most problems these days, when it comes to people analytics, HR practitioners simply do not have sufficient skills to make the most of it. According to our own research, only about two-fifths (41 percent) of HR professionals have sufficient data and tech knowledge.

This does not mean they need to breathe and live data. But it does mean that they need some level of data literacy (on top of understanding technology). 

Let me explain.

In today’s world of work, digitalized data is a must. Companies need to be able to collect, analyze, and then utilize data – and do so in a way that will lead to better business performance. So where exactly in this data chain does HR fit?

It’s not necessarily in data collection – most data these days is collected through technology, such as apps or self-service portals (although HR should definitely be involved in helping the IT department choose the right tools to serve the right HR purpose).

And it’s neither in data analysis. Most companies already have strong data analytical teams. This is true for about two-thirds (69 percent) of organizations globally with 10,000 employees or more. These teams are usually situated outside of HR departments. 

It is indeed in the last link of the data chain – in putting data to good use – where HR can bring the most added value. 

To that end, however, they need to develop data literacy skills to understand and utilize data. Only then will HR be able to help make key strategic decisions by turning data insights into action. 

How to master data literacy 

Mastering data literacy as a competency requires two things:

First, HR professionals will need to be data-driven to have the ability to read and use data. They should be able to understand and utilize metrics, reports, and determine KPIs. And second, with these skills, they should be able to translate data (provided by the analytical team) into action, policies, and decisions that have a direct impact on the business.

To be more specific, every data-literate HR professional should: 

  • Comprehend and be able to establish metrics and KPIs;
  • Read and interpret reports;
  • Learn how to produce data visualizations (i.e. dashboards) and use these for data story-telling; 
  • Understand the intersection of people data and the business they serve (which necessitates some level of business acumen).

Beyond what this means for HR professionals individually, data literacy also implies a shift towards a more data-driven culture. Without it, your HR department or organization at large won’t be able to leverage data to its full potential. 

A data-driven culture requires the right: 

  • Mindset – HR professionals should treat data as useful in their daily work lives;
  • Skillset – your HR team will need to upskill to become more data literate; 
  • Toolset – as evident from above, people analytics and technology go hand-in-hand. This means you will need your IT department to work closely with you; 
  • Dataset – people data is not a destination, it’s an ongoing process. The data collected, analyzed and used will need to be constantly assessed to prove accurate and useful.

Don’t wait. Just get started 

Data might not be almighty; it won’t provide all the answers you’re seeking and it won’t always help you predict the future. After all, people analytics, to paraphrase Microsoft’s chief scientist Jaime Teevan, is about having to make long-term decisions with short-term data. 

But the limits to the use of data are far outweighed by the fact that having some data is always better than having none and that even though data won’t map out the whole journey ahead, having an accurate picture of current reality will give you the advantage of knowing what’s around the corner – and that’s much further than most companies will be able to see if flying blind. 

So don’t wait around. Get started now! Become data literate and help upskill your HR department so that your decisions will be based on reality, they will reflect what your organization and employees need and will be instrumental in tackling the current and future challenges.

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