What We Mean by a Data-driven HR Strategy: Part 1

Adopting a data-driven HR strategy takes intense planning and immaculate execution to sustain business process through periods of stiff uncertainties. A data-driven strategy would enable business analysts to find the best ways to tap into massive troves of information and turn them into fuel for AI-driven decision-making tools. In the fast-changing world, HR leaders are looking at data-driven strategies to stay relevant in the business by reorganizing their efforts in organizational re-designing and strategic change management. Data is the key to culture change and adopting a future-centric organization development that accommodates every expectation in building a positive experience for employees. This has brought the limelight on HR teams to utilize HR technology tools across all their major operations and evolve into a more data-driven, digital function based on evidence and actionable insights using AI, business analytics and Machine Learning-based automation.

What is a Data-driven HR Strategy?

According to a research in 2021, only 3 percent of the business teams are actually able to use data to make sound people decisions. This failure to tap data for people insights is a sure-shot recipe for failure in the highly disruptive environment. Data-driven approach certainly bolsters innovation in every business process that an organization undertakes. It directly impacts the business results through people analytics. This could lead to a data-driven innovation (DDI). According to Gartner, DDI is “the use of data and analytics to develop new products, processes, organizational methods and markets.” Data, together with machine level automation and AI-powered analytics, can drive immense value through continuous improvement and innovation in the HR field, helping organizations cut operational costs by re-engineering the existing business models. A “data-driven” approach of a company means the strategic decisions it makes are based on data analysis and interpretation. This approach helps a business to contextualize and/or personalize its messaging to prospective clients and customers.

Why fluency with data matters?

Data has a very important role in HR strategy. Data’s transformational effect on the organization is expressed through pure performance where high-performing teams are able to validate their analytics using data modelling. These teams also emphasize on the need to improve workforce planning as part of a continuous endeavor, activating a culture of trust and transparency in the way data flows within the organization sans bias and limitations. The automation and AI trends in HR might point to the need for HR professionals to become technical, yet it is not so. A close look at the HR skills of the future showed that the skills most in demand are not limited to the likes of people analytics and strategic workforce planning. The skills to influence change, manage relationships with key stakeholders, and build credibility are critical too for data-driven HR.

The top skills that HR professionals have been learning include consulting and influencing skills. Let’s examine the areas where you can start investing with your data modelling as part of HR strategy management.

A Solid foundation in People Analytics

For an HR lead, it is very important to accurately interpret people’s data and take actions or make recommendations based on this insight. Therefore, building basic data analysis skills is an essential foundation for HR to be a data-driven strategic partner for the company.

For the organization, effective prioritization of business challenges, strong governance, and delivery of tangible business outcomes are the key functions required under people analytics.

Effective conversations

Identifying a burning business challenge depends on whether there are effective conversations with the business. Number crunching and analysis follow later. Recognizing the business needs through communication and relationships with business stakeholders must be the first task undertaken by the HRBP.

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The focus should then move on translating the findings from these conversations into hypotheses that your people analytics function will tackle. Ensure answers to these questions:

  • How to ensure the People Analytics project adds value?
  • How to get to the heart of the issue before beginning the analysis and how to translate the issues into a hypothesis?
  • How to make sure that the analysis is business relevant?

Storytelling with Data

After analyzing the burning business challenge, comes the time to communicate insights with the business. For an effective data-driven argument, craft a powerful story: “The answer to the business question is…”; ‘I know this because…”

The stakeholders need to be taken through the analysis to the key takeaways that require their attention followed by suitable action.

Creating value with a people analytics project

Beyond delivering value for HR’s sake alone, people analytics delivers tangible outcomes against business challenges, such as crisis management, strategic workforce planning, and diversity and inclusion. Both technical and non-technical skills are critical for HR professionals as the field continues to evolve. The jobs that will emerge over the next 10 years showcase that both sets of skills are crucial.

Reasons to turn to a data-driven high impact HR model

Human Capital has been classified as a strategic challenge – not an asset – and has remained a top CEO issue for the past few years. This indicates that CEOs and board members well understand the value of Human Capital and expect a higher rate of strategic change than what HR functions have been able to deliver of yet.

To move to the ‘corporate asset list’ adopting analytics and data-driven decision-making in HR functions has been found to be the key.

HR can become a high business impact function through analytic capabilities as Google, Sodexo, and Netflix have shown us with their ‘data-driven high business impact’ approach. Transforming right from the highest impact area i.e. recruiting, and following it for the other areas – learning, workforce productivity, retention, and innovation is recommended.

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Workforce productivity

Overhead functions directly impact key business goals including productivity, revenue, market share, and innovation. With everything in HR is managed with data digitally, it can show where and how strategic business goals are being impacted. Further, designing effective employee recruiting, retention, and reward systems will help HR in directly increasing the revenue. This has been proven in a recent study by the Harvard Business Review to improve a firm’s profit by about 65%.

Measure business impacts

HR can utilize analytics to identify the factors that increase productivity directly for every key job family (like development approaches, motivators, rewards and management actions)

Increase corporate speed

In the VUCA world, businesses need to adapt quickly to survive. HR can contribute to this by utilizing analytics and developing a hiring process that selects individuals who are adaptive. Also, development and training processes can be enhanced with analytics.

Corporate innovation

A key success factor for global firms is innovation. HR can contribute here by designing recruiting systems to hire and retain the best innovators, and they can use analytics to assess factors that directly increase collaboration and innovation among employees.

Influence managers

It is hard for managers to contest data. So usage of numbers and dollars can be done to influence and change the leaders’ behaviors.

Predict the future & Prioritize resources

Predictive trends help HR view upcoming problems or opportunities. Data also alerts about the shifts in talent patterns at your organization and helps reduce risks. HR data reveals which HR programs give the highest business impacts. This allows HR leaders in allocating their HR budget and staff.

Tapping Data in post-COVID scenario

A more urgent need has never been felt in HR for understanding in real-time what employees are experiencing and how they can be impacted positively. The pandemic has forced digitalization and work-from-home policies, something the C-suite managers have been discussing for years. Pulse surveys are now the tools of choice for innovative and progressive HR departments. The results are often distorted by cultural considerations unless ways are found to eliminate biases.

Cultural nuances

Companies with employees spread across the Asia Pacific need to bear in mind the cultural differences when analyzing and comparing data sets. There are varying talent markets, regulatory requirements, and methods of recruiting which pose challenges in ensuring data hygiene. For instance, Japanese candidates comparatively are less likely to respond to recruitment advertising than candidates in India, Australia, and Singapore.

Use the data smartly and realize real benefits from data. Assess on a ‘market level’ when aggregating data across boundaries.

HR Tech: The Center Piece in Data-driven HR Strategy and Planning

It’s time to learn from business leaders who are able to swiftly switch to a data-driven HR strategy that brings together all other important functions. If you want to use HR that drives HR values, data can get you there. Organizations that use HR technologies with people analytics and AI-based automation could drive up to 2x more performance compared to non-users. AI-driven data strategies for HR teams provides a massive opportunity to grow beyond the traditional auditing and data processing workflows. Automated decision-making, predictive data intelligence and performance-focused reporting makes working with HR technology capabilities so much more effective in developing and executing a high-powered data-driven HR strategy. In addition to having a technology stack for people management and organizational development strategies, the core foundation still pivots on the people who use these tools for success. Organizations should focus on improving data literacy among HR professionals through training, learning and development programs.These would help the HR teams to switch to more matured HR analytics platforms with powerful listening capabilities across HRIS, communication channels, feedback management tools and other employee experience management solutions.