In the current data-driven era, it is increasingly apparent that leveraging data is essential for making informed decisions across various sectors. Human resources (HR) is no exception. The practice of utilizing data to enhance HR decision-making has gained momentum, originally pioneered through sports performance analysis in the United States. Today, organizations are recognizing the value of data in making well-informed decisions about their most valuable asset—their people.
Drawing inspiration from marketing, where data is extensively utilized for customer segmentation and strategy development, HR can learn to appreciate the true value of data and how to leverage it effectively. By harnessing data, HR professionals can make better decisions when it comes to managing people. Key questions such as identifying collaboration hotspots within the organization, determining the right candidates for hiring and promotion, evaluating the effectiveness of training programs, and assessing the impact of incentives can be answered by delving into the data. This approach helps mitigate biases and improves overall decision-making.
Analyzing talent is not fundamentally different from analyzing customer relationships or managing the supply chain. Employees’ knowledge, skills, and abilities are often considered a company’s greatest assets, necessitating the gathering and analysis of workforce data. People data can be found not only within HR systems but also in other departments such as IT and sales. Leveraging this data presents a clear opportunity to contribute to the business in a more meaningful way.
Traditionally, HR decisions relied heavily on intuition or hunches. However, many organizations are now setting examples of effective people analytics. Teach for America, for instance, tracks teacher performance and compares it to initial evaluations during hiring. Google has reevaluated its interview process, finding that interviews lack the predictive ability for performance. Consequently, they have streamlined the number of managers involved in the hiring process to improve efficiency. Credit Suisse examined talent retention and discovered that job changers were more likely to stay longer, leading to action based on this insight. Data-driven insights facilitate the identification of an organization’s most valuable employees based on factual evidence.
Despite the apparent simplicity, one of the challenges HR faces is the noise in performance measures. Various outcomes are influenced by factors beyond employees’ control, making it difficult to discern skill from luck. Similar to how sports teams use data to distinguish between skill and chance, HR can utilize data to identify areas for performance improvement. Skill endures, while chance is transient.
To effectively harness the power of data, HR professionals should focus on four key levels of analysis. Descriptive analytics provides a snapshot of HR metrics like absence records, attrition rates, and recruitment rates. Taking it a step further, combining descriptive analytics with multidimensional data such as engagement scores and leadership capability allows for a deeper understanding of organizational dynamics. Predictive data enables HR to forecast future trends, such as potential skills shortages, by utilizing robust workforce data. Lastly, prescriptive analytics combines descriptive and predictive insights to recommend actionable options. For example, it can suggest personalized online learning courses aligned with individual career goals.
In conclusion, data-driven decision-making has emerged as a potent tool in HR for making informed choices in people management. By following the examples set by pioneering organizations and leveraging data across multiple levels of analysis, HR professionals can enhance their decision-making processes and unlock the full potential of their workforce.
Integrating data into HR practices not only leads to more accurate and impactful decisions but also enables organizations to optimize talent management, increase productivity, and drive overall business success.
The writer is the Group Chief Human Resources Officer of Galadari Brothers. He is a Chartered Fellow of the CIPD and a graduate of the Wharton CHRO program. His work on organizational transformation has been recognized and showcased by the CIPD, and he has been listed among the top 50 most influential HR leaders in the region by the Economic Times in 2023.