Predicting Business Success: 6 Stops on the Business Partner Road Map

Part 1

By Scott Mondore, Hannah Spell, Matt Betts and Shane Douthitt August 23, 2018
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This article is the first in a three-part series of excerpts from Predicting Business Success: Using Smarter Analytics to Drive Results (SHRM, 2018) by Scott Mondore, Hannah Spell, Matt Betts, and Shane Douthitt.

 

Part 1: 6 Steps to Becoming a Business Partner

Part 2: Avoiding Benchmark Myopia

Part 3: Using Assessments to Improve Business Impact

 

The Business Partner Road Map is a six-step process that can lead your HR strategy by connecting what you do as an HR leader directly to the business. It moves beyond conducting simple analysis and creates an environment of executive buy-in, cross-functional interaction and targeted initiative building. It also creates a culture of measurement and refocusing.

 

Step 1: Determine Critical Outcomes

An organization must first determine the top two to three most critical priorities that it anticipates will be accomplished through its employees. These usually spawn from the critical handful of metrics that the CEO has outlined for the organization (e.g., increasing productivity or customer satisfaction and decreasing turnover). 

The outcomes that matter most to your organization can be gleaned by reviewing strategic documents and plans. Key stakeholder interviews of the board, the CEO, the CFO, or other business leaders are also very helpful in the process. Once this information has been collected and summarized, the results must be narrowed down to two or three desired outcomes and then prioritized.

We advise that you not go after too many business outcomes at one time; rather, focus on the most critical ones. Focusing on too many outcomes leads to "analysis paralysis" or unfocused action.

 

Step 2: Create a Cross-Functional Data Team

Once the various owners of the critical business metrics have been identified, a cross-functional data team (CFDT) needs to be organized. This team should consist of measurement experts, the key lineup of business leaders or metric owners, and HR leadership. The measurement experts are needed to determine data requirements, scientifically link the necessary data sets, and conduct the requisite statistical analyses. This CFDT also facilitates and sponsors the linkage initiative. Therefore, having influential company leaders and decision-makers participate in this process is crucial.

Oftentimes, the data needed to build an HR strategy already exist. The key focus should then be pulling the data into one place to facilitate proper analysis. To keep things simple and in perspective, forming the CFDT does not have to be an overformalized process—it boils down to who owns the critical data (people data and business data) and how they can best provide it to you to enable smarter analytics.

 

Step 3: Assess Measures of Critical Outcomes

Once you have identified the critical outcomes, the next step is to determine how data are currently captured in the organization. Several characteristics of each outcome that is measured must be assessed, including the following:

  • The frequency of the measurement (e.g., monthly, quarterly, annually).
  • The level at which the key metrics are measured (e.g., by line of business, by work unit, at the store level, at the organization level).
  • The key organizational owner(s) of each of the outcome measures (e.g., the department or leader of the particular measurement). 

It is critical to understand each of these measurement characteristics before you make any linkages to employee data. The goal is to have apples-to-apples comparisons of the data.

 

Step 4: Objectively Analyze Key Data

Analyzing the data will require advanced statistical knowledge. Most large organizations employ statisticians or social scientists. Further, many HR organizations have built—or are in the process of building—analytics capabilities. This makes resourcing an analytics project much easier. If this type of internal resource does not exist in your organization, then hiring a consultant (or even a local statistics professor) or full-time statistician for this role is necessary. This critical step is where professionals statistically link the carefully collected data sets using various methodologies. 

Many business leaders are familiar with correlation and regression but not with a technique called structural equation modeling. For these types of data linkage analyses, correlation is not sufficient, regression is just adequate, and structural equation modeling is the most effective solution; it accounts for measurement error and allows us to infer cause-effect relationships. Structural equation modeling affords us the ability to accurately state, for example, that employee attitudes about teamwork are a driver of increased customer satisfaction. This implied cause-effect relationship is important for understanding how these different measures relate to each other as well as for calculating an expected ROI for the initiatives. 

The statistical component of this step sounds complicated, but it is really just a tool for accomplishing three things:

  • Understanding the relationship between employee initiatives, skills, behaviors, attitudes, and meaningful business outcomes.
  • Prioritizing types of interventions.
  • Calculating expected ROI. 

All this work allows you to identify organizational priorities and to determine appropriate levels of investment. The result of the data analyses is a list of key priorities, derived from the employee data that impacts the desired business outcomes. For example, the analyses may indicate that improving employee attitudes about career-development opportunities leads to increased employee productivity, customer satisfaction, and decreased impact and could be candidates for cost cutting.

 

Step 5: Build the Program and Execute

Once you have identified the critical priorities, the next step is to determine which types of interventions will have the desired effect. This is the action-planning stage where activities can be focused at the systemic (organization-wide) level, line-of-business level, or work-unit level. This stage encompasses the bulk of the work and investment associated with any people-related process. The big difference is that the investments the organization makes are focused on those employee processes, skills, attitudes, demographics and other characteristics that have been shown to directly impact the organization's desired business outcomes. The expected return can thus be used to guide the HR strategy. This stage is typically in an HR function's wheelhouse because there tends to be a great amount of experience in this department in building quality people programs and initiatives. 

A common trap at this stage is to look for the silver bullet of interventions. Best practices (another name for silver bullets) are great to guide action planning, but simply replicating a best practice will get an organization nowhere. Initiatives must be customized and placed in the unique context of each organization. We caution readers against falling into the best-practice trap of blindly replicating these practices without considering what is most appropriate within the context of your company—and what drive actual business outcomes. 


Step 6: Measure and Adjust/Reprioritize

The last step is to remeasure to assess progress and calculate actual ROI. Most business leaders understand the importance of goal setting and measurement. They also understand the importance of creating a culture of measurement and accountability. Similar to how other organizational decisions are made, slight adjustments to initiatives should be made along the way based on regular measurement results. However, making frequent, drastic changes to the strategic focus of the interventions is not advisable. In other words, pick your two or three priorities and build action plans around those priorities. Measure progress against those plans two or three more times, and then recalculate the data-set linkages and reprioritize. This analysis process should occur annually; an annual assessment of your HR strategy's overall effectiveness is also necessary, particularly when the annual budgeting cycle begins. 


Please visit the SHRMStore to order a copy of Predicting Business Success by Scott Mondore, Hannah Spell, Matt Betts, and Shane Douthitt.

 


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