Business measurement and analytics has been growing in importance for many years. It has spawned a whole new type of management thinking about evidence-based strategy and decisions. The sophistication levels keep increasing. Here is an example: an online retailer takes real-time data from their customers browsing habits. They pass this to their suppliers who can then can anticipate sales volumes. The suppliers link this to production schedules and to raw material purchasing leading to a a truly integrated supply chain. There is a real elegance to these systems. They move like a dancer in perfect time and balance, leading to performance excellence.
One of the factors which make this linkage possible is the direct correlation between data and outcomes, e.g. when sales volumes go down so does revenue. Clearly there is a direct link between sales and business success. If the rate at which an organization acquires and qualifies prospective customers slows down this will have negative impacts over time. Similarly if production volumes or quality slowdown or reduce it is clear business will be adversely affected.
This lack of a simple direct correlation is what makes measurement within the HR space harder to do. There are many links between human behavior and organizational outcomes, however the dynamics are often unclear or the impacts hard to define. Is an increase in vacancy rate a problem? At what rate does it become a problem and what level of vacancy is too high? Another example would be resignation rate – what level of turnover is too high and there will always be some movement so how do you know what is too much and how do you quantify the impact this will have.
It is possible to quantify the impact of both resignation rates and vacancy rates. However it is not as straight forward as quantifying the impacts of production slowdowns or reductions in customer acquisition. Quantifying the impacts from the behavior of your workforce requires both a qualitative and quantitative approach. It requires deep insight into the dynamics of human activity at the same time as a detailed understanding of the way your business functions. Instead of dealing with linear relationships you are dealing with systems relationships and several possible outcomes. The statistical modeling and analytic techniques that need to be applied to this area are more involved and sophisticated. This means predictions or projected outcomes are less black and white, but they are no less valuable. Certainty is a myth when it comes to how people behave. However calculating scenarios and the likelihood of these scenarios is much better than making decisions without any analysis at all.
People analytics for business is growing quickly in sophistication and importance. Although we may not yet be as elegant as Fred Astaire when we dance. We are catching up fast. Soon the field will be more like Ginger Rogers who danced alongside Fred, except in high heels and backwards!
Ian J. Cook, CHRP
HR Metrics Service