Read Nick Kemsley' six steps that HR functions should adopt in order to overhaul the business value of their approach to HR data and metrics.
As CEOs and Boards push to squeeze maximum value out of their organisations, the need for INSIGHT to guide their decision making and to manage both short and longer term risk has never been greater.
Recent research by the Centre for HR Excellence at Henley Business School has validated the importance of this in the minds of senior HR and business leaders. Leveraging data and metrics is seen as a significant challenge by over 90% of those surveyed as part of this research. As a result, HRDs and their functions have been put under increasing pressure to re-examine the way in which they use people and organisational data. In the past I have encouraged HR functions to focus on providing insight not just information, to align metrics to business goals and to examine outcomes at least as much as process metrics.
What I thought I would offer this time around are some practical approaches which any HR function can adopt in order to overhaul the business value of their approach to HR data and metrics.
These fall into six headings or steps:
- Identify the insight needed to underpin strategy delivery and manage organisational risk
- Understand the decision making data your board needs to support shorter term performance
- Determine the critical gaps between this, and what you currently provide
- Find the most pragmatic way to plug the gaps
- Optimise the format in which the data is presented
- Develop the right skills to analyse and talk about the data.
Step One – Identifying the insight required to underpin strategy delivery and manage organisational risk
The right question to ask – ‘what are the organisational risks which can impact strategy delivery, and what is the best way of validating and monitoring them?’
The key words here are organisational risk. Instead of asking ‘what data do we have which we would like to present?’, We instead need to deduce the type and format of data and metrics which will best support an understanding of organisational risk. When your CEO and CFO talk to analysts, shareholders, potential investors and your employees about the strategy of the business, and make promises around performance, there can be no confidence that any of this will come true without a solid understanding of the organisational risk – since every business has a strategy, and what ultimately differentiates between winners and losers is the ability of a business to activate strategy through organisation.
It may be that this organisational risk analysis has already been completed in your organisation, but chances are that if you haven’t done it, it hasn’t been done. My personal opinion is that pretty much the key deliverable for any HRD is a comprehensive view of how people and organisational risk is being managed in the context of the strategy. Yet often, what HR functions present to their boards does not speak specifically enough to the strategic plan, and in some cases it is hard to find a meaningful link at all. If you wish to gain a top-level view of the organisational risks relating to the strategy, I recommend the application of an organisational model such as 7S, Morgan-Stutt or similar. It doesn’t matter really which one you use since they are broadly similar, but it should allow you to interrogate your strategy/business plan and make a decent stab at the following questions:
- What are the organisational implications of the strategy on resources, structures, facilities, systems, processes, skills, behaviours and employee engagement? – this gives you a picture of the key strategic enablers which your organisation has to deliver to support strategy
- How do these implications compare against current capability, which are the biggest gaps, which are the hardest to bridge? – this draws out the critical organisational risks
- How do these compare against existing support function strategies? – this helps you iterate and align HR, IT strategies to better address these risks.
Step Two – Understand the decision making data your board needs to support shorter term performance
The right question to ask – ‘what things are front of mind for your senior decision makers right now, and what data, in which format, will add most value?’
The role of organisational data and insight here is less about strategic risk, and more about supporting decision making and trade-offs. Get a copy of the last three Board meeting agendas, talk to senior leaders and utilise the experience of your HRD (who usually sits in these meetings) – what are the top five decisions/ issues which they are debating now, and what about in the next six months? What people and organisational data and insight are most relevant to these decisions?
Step Three – Determine the critical gaps between this, and what you currently provide
The right question to ask – ‘how does this top down need compare with what is currently presented, and which are the critical gaps?’
Most HR functions provide a pretty standard pack of ‘HR data’ – something around staff turnover, statistics on sickness and absence, diversity information and the like. This is all good stuff, but if this is all that we provide, how does the leadership of the business get the insight it needs around specific organisational risks to the business strategy, and decision making support for important shorter term performance issues as outlined in the above two sections? Much of the information that we present is just that – information – and can be hard to relate to specific issues. At the same time, some of this information is a regular update on something which simply doesn’t change very often, such as the gender profile within a business, and is backwards looking. The opportunity, having gone through the two exercises so far described, is to consider gaps in:
- The data itself – are we presenting data which is not very relevant at the expense of data which is? Do we have gaps in our data portfolio which we need to plug? Do we have data already which we are not leveraging? Are we presenting outcome data and linking to process where needed? As a general rule, the value of process metrics and data is in working out why an outcome is not happening. It is essential to have process metrics, but these should come second.
- The way we are synthesising data – moving from information to insight. Use of trends, projections, correlations and ratios. Getting underneath the data to understand what might be happening and what it might mean. Tying this insight to what is important to the business. Often the insight is to be gained by a correlation between outcome and process metrics, or between leading and lagging metrics, but rarely does it come purely from process or purely from lagging. Yet often this is our approach.
- The accuracy of our data – how up to date is it? Is it accurate enough to support decision making?
Step Four – Find the most pragmatic way to plug the gaps
The right question to ask – ‘What is the easiest way to generate the missing insight required, starting with what we already have?’
In Step Three, we said that we should understand the nature of the gap. Is it about the data itself, or what we do with the data? If it’s about the data itself, the first resort should always be to look at what data capability you already have. Do you have the data but are simply not presenting it, e.g.leavers by grade? Can you create the data from other data you have, e.g.time spent on training per head? Or do you have to get the data through new measurement or from another source e.g.benchmarking.
If it’s about what you do with the data, then the first resort should always be to look at how insight can be developed simply, as opposed to via effort-intensive data analysis. Creating trends with existing data to develop insights and project forwards, correlating one set of data against another, engaging with data earlier e.g.the difference between strategic workforce planning and simple resource planning. Only when we have exhausted all the easy stuff, should we look to system change to plug the gaps.
Step Five – Optimise the format in which the data is presented
The right question to ask – ‘Who is the customer for the data insight, and what is the best way of giving it to them?’
The first action should be to put yourselves in the shoes of the data’s customers and consider some of the following:
- What data is presented and what is not? The temptation is to present lots of data so that we are seen to have ‘all this’ at our disposal. Better to filter what we present to suit the business need. Give yourself the challenge ‘if it doesn’t align to a strategic risk or an important business performance issue, it doesn’t go in’
- What are the priority insights? What point are we trying to make with the data? The way in which it is formatted should make the point clearly. Choose graphs or tables which serve to make your point evident
- How is insight developed? Does the insight come from the report or from the discussion around it? As a general rule, you should create the insight before it is placed in front of your customers, not ask them to make the connections. A good approach is to have an HR meeting prior to any ‘pack’ being submitted to ensure that it is aligned to priorities, get into some of the texture and detail behind the data and draw out any insights. Some degree of ‘narrative’ is often appreciated which makes a stab at why something may be happening. Any pack should stand alone as a source of insight, not be dependent upon a presenter for the insight to be gained
- What is the appropriate level of detail? How is the data ‘layered’? Key insights should be pulled to the front of any packs or reports, and clear linkages made to the business issues they relate to. Supporting graphs or data should be next. Other ‘data of interest’ can then be included at the rear. Give yourself the challenge ‘if they only read the front page, what do we want them to take away?’
- What claims will the data support? If you are making claims using data, think hard about what you can, and cannot, justifiably say with the data. Don’t be afraid of using phrases like ‘indicates’ or ‘suggests’. Be aware of how sensitive the findings are to margins of error in data accuracy
- What’s the right format and regularity? Is it a report or pack? What’s the right balance of pictures and words. If the insight is to be gained by comparing one set of data with a second, then plot them on the same graph! Make pictures do most of the work.
- What regularity suits which data? What can be reported on a quarterly basis, what monthly, what’s in every pack and what are one-offs? If there is a major risk uncovered by the data, don’t be ashamed of taking more space in the discussion/pack to go into depth on it at the expense of other data items.
Step Six – Develop the right skills to analyse and talk about the data
The right question to ask – ‘Do we have the skills to analyse and talk about data in the right way, and if so, how can they best be harnessed?’
There are two considerations here:
- Skills to gain insight from data
- Skills in presenting insight from data.
Typically, to gain insight from data, you need a combination of micro and macro data skills. What I mean by this is both the ability to delve into the detail of data and understand its strengths and weaknesses (micro data skills); and the ability to see patterns in data, work with imprecise data and scenarios and see connections and correlations (macro data skills). These are often not found in the same person, since what may make you good at one may make you bad at the other. The right question to ask therefore is ‘where do these skills exist in my organisation and how do I best bring them to bear?’ When it comes to presenting data, HR can often shoot itself in the foot by struggling to provide context for the findings, comment plausibly on the statistical relevance of the data, or talk about it in a way which is appropriate for the argument being made. Considerations here include a grounding in basic statistics, an understanding of how data is collated and analysed and a solid view of what the data will and will not support in terms of an argument.
So, what I have tried to do here is to map out a bit of a checklist for examining and pragmatically overhauling your approach to data and metrics – not so much solutions, because one size does not fit all – but a sensible set of questions and considerations which, if applied, will develop insight and lay out what opportunities an HR function can take to add real business insight through data, and therefore build its own credibility.
Nick Kemsley will be speaking at the Mission Critical HR Analytics 2015 in London this summer.