How to Gain Competitive Advantage Through Workforce Analytics

​SEATTLE—As the business world becomes increasingly competitive, HR professionals must become more adept at workforce analytics to connect human capital and performance with their organizations' business strategies, experts told about 100 high-level HR professionals gathered at the SHRM Foundation Thought Leaders Retreat on Monday.

The old workforce measurements—cost per hire and days to fill, for example—may not create wealth for businesses in today's environment, according to Mark Huselid, Ph.D., professor of workforce analytics and director of the Center for Workforce Analytics at Northeastern University's D'Amore-McKim School of Business.

"The things that helped us win before won't necessarily help us win in the future," Huselid said. "There's hope. There's opportunity. But there's also a lot that needs to be done."

HR professionals must create a strategy for the workforce, and that means making tough decisions based on where change can have the most impact. For example, he said, most companies invest a disproportionate amount on training and development of their senior executives, where there is no measureable change. Those executives have already beat out the poor performers to get to their positions. However, investing in lower-level employees would have significantly greater impact, he said.

"Are some roles more important than others? If so, do we want to manage them differently?" he asked. "What jobs create wealth? Where do we invest in the workforce? Where do we disinvest in the workforce? Where are the opportunities?"

He warned that it's easy to become overwhelmed with data collection. More data isn't always a good thing. The key is to ask the right questions. In starting a metrics initiative, focus on what problem you're trying to solve, he advised.

"We need to let our strategy dictate the metrics we adopt. We've got to focus on the data that we need and not the data that we have."

HR professionals also should be aware that the measurement system that works for one company won't work for another.

"If we know and understand how value is created, we can come up with measures that give us the opportunity to create long-term value for shareholders," Huselid said. 

Alexis A. Fink, Ph.D., director of talent intelligence analytics at Intel, urged HR professionals to avoid being distracted by a "sexy" method or finding.

"What matters is really finding value, finding things that are really going to make a difference to your organization," she said.

When someone asks her for data, she asks them: "What are you going to do differently as a result of this information? For me, that 'what are you going to do differently' is the value of analytics. Other than that, it's just satisfying your curiosity," said Fink, who has a doctorate in organizational psychology.

Conversely, just reporting on things because someone asked you about them is not actually providing valuable information, she said. However, she uses those situations to steer the person in the right direction. She'll provide the information that was requested, but also offer additional information that she thinks is more compelling.

She said she and her team try to determine: "What's the question that they didn't know to ask?"

At Intel, she and her team use data to compare competing projects. The analytic function has evolved to the point where new project proposals are required to include data to justify the expenditure.

Fink offered seven key steps to data success:

1. Ask the right questions.
   
2. Identify the right method to answer the question.
   
3. Generate data to answer the question.
   
4. Analyze the data.
   
5. Develop insights based on the analysis.
   
6. Take action based on those insights.
   
7. Measure results to determine if your action was effective.
   

Insightful data is useless if action isn't taken as a result, she said.

Alec Levenson, an economist and senior research scientist at the Center for Effective Organizations at the University of Southern California's Marshall School of Business, said HR professionals too often focus only on individual capability, attitudes and motivation. But a more strategic approach is to ask what's actually driving performance in the system, he said.

Often, when companies have performance problems, the issues are related to job design. HR can better pinpoint those problems with a systems analysis, asking why jobs are structured the way they are, said Levenson, author of Strategic Analysis (Berrett-Koehler, 2015).

"There are thousands of things you could do on an individual level," he said. "But from a business strategy execution perspective, that's all noise. I'd rule everything out until you prove to me we should focus on it."

HR analytics is often justified by saying, "We're going look at a problem around people because we know it can impact business. That's not good enough for me," Levenson said. "Start with the business problem. What are we trying to accomplish with the organization and what is going to create competitive advantage in the marketplace?"

For more information, see the SHRM Foundation report, Use of Workforce Analytics for Competitive Advantage.