An International report reveals that 82% of organisations expect to begin or increase the use of analytics in the HR function in the next three years, with a modest increase over 2012, but doubts remain about HR’s strategic value. By Nhlamu Dlomu and Mark Spears
All organisations, whether large or small, gather data about their employees. Whether this data is used effectively for decision-making at C-Suite level depends on a variety of factors, including the level of maturity of the human resources (HR) function.
The level of sophistication in the South African business environment is disparate. At one end of the spectrum is a proliferation of companies that have basic data-capturing abilities, whose the HR departments are capable of tracking simple data such as employee numbers, addresses and contact information. These are typically kept in low-tech environments such as spreadsheets. At the other end are companies with highly sophisticated HR environments that have systems, processes and strategies that enable a high level of analysis.
Human resources data should be the cornerstone of decision-making for all HR departments across South Africa. The time has come for C-level executives and HR leaders to embrace the use of this data to track employee turnover, revenue, leave days and other HR-related matters or risk missing opportunities to retain staff and identify key areas of focus.
Nhlamu Dlomu, Head of People & Change at KPMG in South Africa says: ‘Mature organisations demand advanced levels of delivery from their HR departments. These are trend-setting and forward thinking organisations that require their HR function to be agile and responsive to business needs. These organisations have the desire and capability to use data and analysis effectively to make meaningful decisions about the HR requirements of the business.’
‘In less mature organisations, the capability for deep analysis may not be present. However, that does not mean that no analysis can take place,’ says Dlomu. ‘Depending on the kind of data on hand, HR departments can still deliver insights to the business that will drive effective decision-making.’
These are some of the themes that emerged from a report compiled by KPMG International, Evidence-based HR: the bridge between your people and delivering business strategy, which tracks how organisations across the globe are using data to substantiate their HR decision-making.
According to the survey conducted by the Economist Intelligence Unit on behalf of KPMG, an overwhelming majority of respondents (82%) expect their organisation to either begin or increase the use of big data and advanced analytics (‘evidence-based HR’) over the next three years. Yet, more than half of survey respondents (55%) remain sceptical about the potential of evidence-based HR to make a real difference to the HR function, even as CEOs grapple with regulators, customer requirements, talent, and the demands of the workforce.
Compared to KPMG’s 2012 report, Rethinking HR in a changing world, there has been a modest increase in respondents who say their organisation’s HR function excels at providing insightful and predictive analytics – from 15% to 23% – but it is still far from satisfactory.
‘We’ve never before had such a rich variety of data available for the HR practitioner to prove without a doubt that their decisions can be backed up, as opposed to relying on instinct and best practice,’ said Mark Spears, KPMG Global Head of People & Change and a partner in the UK firm. ‘For the first time in my 30 years’ experience in this space, HR can demonstrate that their activities and processes have a direct impact on the delivery of business objectives.’
EVIDENCE-BASED HR STILL AT EMBRYONIC, PIONEERING STAGE
Evidence-based HR uses data, analysis and research to understand the connection between people management practices and business outcomes such as profitability, customer satisfaction and quality.
According to the survey, however, there are still considerable bumps in the road towards widespread acceptance of this approach. One major roadblock may be the credibility of the HR function. Nearly one in three of non-HR executives (30%) believe that the HR function does not play a sufficiently strong role in meeting the organisation’s strategic objectives, a view shared by only 8% of respondents within the HR function.
Yet, despite this large gap in perception, there is still a strong view amongst non-HR executives that HR can become more value driven. Forty-nine per cent of respondents agree that HR leaders are able to clearly demonstrate tangible correlations between people management initiatives and business outcomes.
Said Spears: ‘Becoming evidence-based requires an effort of will and a sufficiently changed mental model. Many successful organisations are the ones where C-level executives invest in and work alongside HR to connect a company’s people strategy to positively impact business performance. While this approach is not yet widespread, with the right skills and support, it is just a matter of time. Companies and HR practitioners must respond urgently to avoid losing ground and stay ahead of the competition.’
Other findings from the study include:
More than a third of respondents (35%) have either not yet applied advanced analytics or big data tools to improve the efficiency of the HR function or don’t know whether they do or not.
Over three-quarters of respondents (76%) expect the increasing use of data-driven insights in the HR function to positively impact profitability over the next three years.
Corporate culture is cited as the single largest obstacle to the use of evidence in people management (32%), followed by lack of skills and resources (30%) and the quality of the data (29%).
Author: Nhlamu Dlomu CA(SA) is Head of People & Change at KPMG in South Africa and Mark Spears CA is the KPMG Global Head of People & Change and a partner in the UK firm