Getting Started with Human Capital Analytics
"I’ll let you in on a secret. The next big wave of analytics-led transformation is in Human Capital Management."
Research has matured in this space, and we are now at a turning point where it's beginning to flow into practice. It’s the inevitable evolution of the HR function in the 21st century. Yet many HR practitioners still see it as a fad. Likely because Human Capital Analytics (HCA) is often spoken in the same breathe as Big Data, a word that makes the heads of HR practitioners spin.
But the real issue isn't necessarily one of divided conviction. Rather, it’s the lack of clarity on how to get started.
Having done some pioneering work with a few organisations, let me offer you a 4-step approach to getting started with Human Capital Analytics:
1. Start tactically. Start impactfully.
All successful analytical endeavours are about problem-solving. Knowledge for the sake of knowledge is useless. Don’t focus on such abstracts as Employee Engagement where you have yet to achieve clarity on the problem statement. Don’t focus on creating more Metrics. Instead, identify a ‘burning house’ issue such as crazily-high employee attrition in a critical department, and apply problem deconstruction techniques (e.g. mind-mapping) and data forensic approaches to uncover insights into possible root causes.
Think of employees as customers, and apply similar constructs of 'employee journeys' to understand where experiences are degrading and leading to sub-optimal behaviour and outputs. You will need creative and lateral-thinking business analysts. And you will likely encounter the need for Segmentation, Text Mining and Predictive Modelling in solving these human capital related problems.
2. Get your data in order.
The learnings from the tactical pilot would provide significant insights to your data and toolset infrastructure requirements. You will need a dedicated HCA mart. You will need to start collecting or consolidating data that no one thought to look at - e.g. entry and exit interview transcripts, profile assessments, training outcomes, project assignments and outcomes, team participation. Be prepared for lots of text-related data.
The current set of data that is hoarded within the HR systems are designed to measure efficiencies, but not effectiveness. Data on compensation, promotions, appraisals, absenteeism, etc. will not be sufficient to solve business-oriented challenges around human capital.
"So how should you structure your data? Well, here’s a tip: consider structuring your new HCA data mart around the employee life-cycle."
HCA is about understanding Employee Value, identifying and developing Employee Potential, and enhancing Employee Engagement to achieve incremental business performance. The analytical solutions you develop will be related to one of these 3 ‘pillars’.
3. Decide what you will be responsible for.
The next crucial step is to have a frank discussion on what HR is prepared to own and be accountable for. HCA is truly powerful when HR is responsible for the resulting decision-making process as well. This will elevate HR to the ‘partnership’ position it has been desiring - from ‘payroll administrator’ to ‘business-enhancer’. For example..
Will HR be responsible for employee attrition?
Will HR be responsible for identifying the critical skillsets required to support business success, and ensuring that it is maintained and cultivated?
Will HR be responsible for achieving business performance ROI on the organisation’s training budget?
Will HR be responsible for optimising sales incentive cost?
4. Assemble a dedicated HCA team.
You will need a team of 4-5 talented individuals to start. Forget about getting help from your existing business analytics function, assuming you have one. HCA will not be a priority for them, and you will not get the high-performing talent you require.
"Recruit talent with experiences in consumer marketing analytics - solutions around the customer domain can be re-purposed to solve problems in the employee domain as well."
Complement this with at least one text analytics expert. You won’t need hardcore data scientists. You won’t need real-time data expertise. HCA is not strictly a big data problem, although you will need skills in dealing with a variety of unstructured (mostly text) data.
In summary, there are only 2 inputs to business - financial capital and human capital. The 4 steps outlined in this article should allow you to take more than a tentative step forward on the latter. These are exciting times. Be bold. Unlocking the potential in your human capital may be all that’s standing in the way of being a great company.
At Red & White Consulting, we’ve been making pioneering in-roads into Human Capital Analytics. Come talk to us if you need a helping hand on your journey.