HR Magazine, November 2001: Analytical Tools Give Meaning to Data

By Jim Meade Nov 1, 2001

HR Magazine, November 2001








Effectively analyzing collected information can give HR practitioners a seat in the boardroom, vendors say.

Software analytical tools give HR professionals the option of examining the reams of data they collect so they can help top management make sound business decisions. But software experts and HR practitioners agree that technology is no substitute for sound business expertise.

While analytics are becoming an integral part of many human resource systems, some industry observers wonder whether HR is ready to exploit the technology, because practitioners may be locked into the habit of simply collecting data. Those who break out of that mold can use the tools to determine whether the workforce makeup fits the company’s business strategy, for example.

Software vendors increasingly are offering such tools. PeopleSoft USA Inc. includes workforce analytics in its Enterprise Performance Management series of products, says Row Henson, co-founder of the Pleasanton, Calif., company. “Through our workplace portal, we’re offering analytics to every employee in the enterprise, whether CEO, line manager or employee,” Henson says.

In most instances, of course, line managers and employees would not do statistical analysis. But they would look at bottom-line figures derived from analytics. For instance, they might end up seeing something as simple as “the number of interviews per recruiter per month compared with the number of hires,” says Shafiq Lokhandwala, president of NuView Systems in Wilmington, Mass.

Dr. Jac Fitzenz, founder of the Saratoga Institute of Santa Clara, Calif., notes that companies can go beyond merely determining cost-to-hire. Instead, they can ask “How does our cost-to-hire compare with other companies in our region or in our industry?” The Saratoga Institute provides the benchmarking tools integrated into offerings from PeopleSoft; SAP America Inc. of Newtown Square, Pa.; SAS Institute Inc. of Cary, N.C.; Oracle Corp. of Redwood Shores, Calif.; and Lawson Software of St. Paul, Minn.

Another widely used analytical tool is the Balanced Scorecard, originally developed by professors Robert S. Kaplan and David P. Norton of the Harvard Business School, which SAP and PeopleSoft have integrated into their software offerings.

Trickling Down

While analytics can help transform the HR practitioner from a mere data tracker into a business consultant, the tools are not available in all HR software packages. “The lower down the food chain you get, the less real emphasis you find on analytics,” says consultant Naomi Bloom, managing partner of Bloom and Wallace in Fort Myers, Fla. That is, analytics are included in packages from large companies such as SAP and Oracle, from consulting companies such as Watson Wyatt of Washington, D.C., and from companies specializing in performance measurement, such as Development Dimensions International (DDI) of Bridgeville, Pa. But providers of low-cost products such as ADP of Roseland, N.J., and Ceridian Corp. of Minneapolis don’t offer analytics, Bloom says.

However, even companies serving the middle market offer analytical tools. Spectrum Human Resource Systems Corp. in Denver uses Microsoft’s online analytical processing (OLAP) to offer tools similar to the Microsoft Excel pivot tables, with which users compare two trends on a spreadsheet, says Jim Spoor, Spectrum president and CEO. NuView’s Lokhandwala says his company’s MyHRIS product provides graph or OLAP reports for management and business strategy, compensation reports for managers, cost-per-hire analysis and applicant match for recruiters, along with other analytical features.

Certain functions may lend themselves more readily than others to analytics. In recruiting, for example, practitioners can use such measures as time-to-hire, cost-to-hire and related analytics.

“Compensation planning is one area that is simply crying out for this type of information,” says Julia Simovsky, director of product management at Kadiri Inc., in Burlingame, Calif. Compensation, after all, is numbers-based, and it is easy to quantify such items as salaries, incentives and stock payments.

Tools tend to focus on a functional area. “There are lots of vertical tools in areas such as recruiting, training and compensation management, but very few tools that span across these disparate functions,” says Robert Garmaise, director of program management with Workbrain Inc., of Burlington, Mass.

Companies in the middle and high end of the market are offering more-sophisticated tools. Companies such as Cognos Inc. of Ottawa; SAS Institute; Informatica Corp. of Palo Alto, Calif.; Lawson Software; PeopleSoft; and the Saratoga Institute offer powerful analytical tools that perform extensive statistical analysis.

Such tools let the user introduce variables dynamically and see their effect, often in a graphical display. The user, for instance, could introduce projected compensation figures to see their budget impact.

Tools You Can Use

A question on the minds of many industry observers, though, is simply “Is HR ready for analytics?” Bloom says. “There’s been an outburst of canned analytical tools, but most HR people don’t have a clue how to use them. If you really don’t understand what you’re doing, the fact that you have the tools doesn’t mean a whole lot.”

Analytics pioneer Fitzenz admits that, in HR, “there is a relatively small group who want to be strategic and a large group who do not want to be strategic. Those that do are looking for the tools.”

Also, sometimes technology doesn’t measure up to the analytical capabilities of humans. “There is some technology that at least superficially looks pretty attractive,” says Bruce T. Johnson, director of Human Capital Solutions Practice at PricewaterhouseCoopers (PwC) in New York. “The issues have to do with fitting the business process around the use of the technology.”

Vendors are recognizing that analytics must prove their value if they are to become mainstream. “A fool with a tool is still a fool,” concedes Cincinnati-based Doug Reed, vice president of human capital management at SAP America Inc.

Vendors, clearly, are the driving force in the emergence of analytics. But through focus groups, surveys, user groups and early implementations, users are offering input.

Time Is Right

Given the complexity of the challenge and the lack of analytical expertise of mainstream HR, should practitioners look for these capabilities when selecting HR software? Many industry advisers think so. But, says Bloom, “how much of a factor they should be is another question.” She suspects that while analytical tools are on companies’ software selection checklist, many HR practitioners lack the will or the capability to use them. “They’re on the checklist because the market buzz has put them there. The HR community has decided it better be into metrics.”

HR offices may be accepting analytics for the same reasons they adopted Microsoft Windows instead of MS-DOS, color monitors instead of black-and-white terminals, personal computers instead of mainframes, or—for that matter—software instead of manila folders and paper: Someone told them to do it.

But vendors see analytics as a coming trend, whether HR is ready for it or not.

On a practical level, the analytical tools don’t add a great deal to the software cost, vendors say. Often they are simply a part of the package. Jan Cotroneo, director of HR product marketing for Lawson Software, adds that training costs also need not be extensive. “Little or no training is needed except to connect through a web browser and navigate through a menu-driven solution. An HR expert can use them relatively quickly.”

With Lawson’s Workforce Analytics service, the analysis is delivered. “This is a very self-evident presentation of menus with charts and graphs predelivered,” Cotroneo explains. Users get involved during setup to explain their business needs.

For example, one Lawson customer—Premier Inc. of Oak Brook, Ill.—is adopting the Baldrige Criteria for Performance Excellence, issued by the National Institute of Standards and Technology. “I’ve been very much focused on metrics over the past, but the metrics that I’ve been able to acquire do take a lot of energy to put together and in some respects they haven’t always been consistent,” says David Halleck, vice president of total rewards at Premier. “Lawson Workforce Analytics allows me to focus on the end result, not on the process of getting the data, submitting the data and then analyzing the data.”

But Cotroneo concedes that some training is necessary for HR to use these tools well. “The biggest learning curve is understanding the measures—how they are calculated, what is the purpose for the measure and how does it relate to other measures,” she explains. And, of course, users have to coordinate tools with business practices. Vendors provide training, but consulting firms such as Deloitte Consulting of New York have the expertise to guide HR in understanding analytic measures, relating the metrics to actual business performances and aligning business and strategic objectives.

Bloom worries, nevertheless, that much of what seems new is simply the same-old-same-old. Benchmark data is simply administrivia, she says. The data may have new names such as “cost-to-hire” and “time-to-hire,” but it doesn’t mean anything unless HR truly understands it and uses it as part of a business process, she says.

Meanwhile, both business trends and technology trends seem to be nudging HR into analysis, observers note. “There is definitely a need for companies to get away from managing candidates to trying to predict the future,” says consultant Jeremy Eskanazi, managing principal at Riviera Advisors Inc. in Long Beach, Calif. Companies that identify trends and find new ways to hire talent have an edge over those who simply compile stacks of resumes.

In the past, recruiting applications would automate clerical activities, but did not analyze business processes, such as predicting and planning for possible attrition, explains Scott E. Burton, DDI vice president of strategic marketing.

“I do believe that the trend is toward trying to bring the relevant information to bear at the point of decision,” says Kadiri’s Simovsky. · “This has been the goal for quite a long time. Technology may finally be at a point where this can be a reality.” HR itself may not have been aware of such a goal, for the most part. However, top management, consultants and vendors have wanted to convert raw data (such as number of candidates) into strategic information (such as “How many candidates do we have compared with our projected attrition?”)

The industry is reaching a point where “it’s not about running a report, it’s about getting the information pushed to you, ensuring that you’re performing well on an ongoing basis,” SAP’s Reed says.

PwC’s Johnson likewise sees HR dealing more with content, not just raw information. “We have a concept called embedded analytics,” he explains. “If I have a screen in front of me to make compensation or hiring decisions, I don’t want just the fields there to enter my decision. I want on the same page the information I need to make that decision—how much we pay you, the history of performance, the history of raises, the histories of other people in your group, the mix of fixed and variable compensation,” he says. “Then I can make a good decision.”

The technology and business wheels are turning, and the providers have their eyes on HR. Business trends are moving HR into analysis, and technology is providing tools and making them accessible.

“If an HR professional believes it is time to make a difference, and if they are serious about becoming part of the executive leadership team, then analytical capabilities are an absolute essential component and capability,” Spectrum’s Spoor says.

Jim Meade, Ph.D., is an author and an HR software consultant in Boone, N.C. E-mail him at words@apptechnc.net.

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