Evidence-based HR, simply put, refers to using data, analysis and research to understand the connection between people management practices and business outcomes such as profitability, customer satisfaction and quality.
However, while the growth of evidencebased HR is gaining momentum, our KPMG report conducted with the Economist Intelligence Unit (EIU) ‘Evidenced-based HR – The bridge between your people and delivering business strategy’ reveals this new era of evidence-based people management is by no means guaranteed.
Talent issues are firmly on the C-suite agenda – organizations across the globe are struggling with issues such as regulators, customer requirements, talent and the demands of the workforce. Now, more than at any other time in the past, HR has an opportunity to leverage technology and data in order to demonstrate its ability to deliver against these issues. For the first time ever you can draw a line of sight between HR activity and business insight.
And while our report backs this up and indicates there have been some gains in the perception of HR’s ability to deliver strategic value since KPMG’s 2012 report, ‘Rethinking HR in a Changing World’ (15– 23 per cent), it presents some interesting findings, namely that over half (55 percent) of executives are still skeptical about its potential to make a real difference. Yet, an overwhelming majority of these skeptical executives (82 percent) expect their organization to either begin or increase the use of Big Data and advanced analytics over the next three years.
‘Organizations need to understand the roadblocks to evidenced based HR and manage these. Data analytics will no longer be just ‘nice-to-have’. We must be ready for it or risk losing out on unique opportunities for our People and business agendas’, says Madalina Racovitan, People Services Leader in Romania.
Corporate culture, lack of skills and quality of data are considered major roadblocks in transitioning to an evidence-based HR approach.
Another key obstacle in the development of evidenced-based HR may be the credibility of the HR function. The report shows that only 49% of the executives agree that HR leaders are able to demonstrate tangible correlations between people management initiatives and business outcomes. So the perceived issue is not the data but the ability of HR to use it effectively.
‘The business is giving us in HR, once again, a signal that we need to move out of our old HR model, and data analytics may just be the opportunity that HR can use to prove that it deserves its place at the boardroom table. Whether this means more training for the HR teams, or hiring new skills into the HR functions, we need to be ready to change’, says Madalina.
Whatever the obstacles and whatever the resistance, the growth of evidence-based HR will gain momentum. Organizations
who have embraced an evidence-based approach are and will continue to lead the way.
Some industries seem to be more open to putting evidenced-based HR into practice. Our report shows that nearly two-thirds of respondents in the IT and technology sector expect the increasing use of data-driven insights in their HR function to boost profitability by more than 10 percent in the next three years, which is substantially higher than any other sector expects.
But it’s not just about the HR function. CEOs need to embrace and lead this change while at the same time demanding more accountability from their HR leaders on how they are integrating data into their people management strategies to avoid losing ground.
It starts with three critical success factors:
1. Get Comfortable with Data
This means moving beyond basic HR KPIs to data that can deliver predictive insights about the role of people in your business. To do this well, data scientists should work within the HR function. Indeed, a number of our clients are recruiting data scientists as well as working out how to make the transition from analytical insight to action.
2. Refine Your Organizational and Industry Knowledge
You have to develop both your industry and company knowledge. HR is not a generic thing, nor is it industry agnostic. You must apply what you know from an HR perspective to your industry and to the specific needs of your company. You should also know how to frame the questions that will direct your analytical efforts.
3.Reconfigure the HR Department
HR needs to be reconfigured so that HR and management work together within a model that promotes evidence-based people management. As much thought should go into designing the components of an evidence-based operating model:
- Information flows: Who sees what, when and where?
- Visualization: How to portray data and insights in a way that leads to action?
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Decision-making: Where, how frequently and under what governance are things decided collaboratively? Specifically,
decisions that are required or implied by predictive insights as opposed to ‘rear view mirror’ insights.
- Responsibilities and critical people management roles: Who is accountable for what?
- Capabilities: What skills are needed to enable and implement evidence-based decision-making? How can HR evaluate the best research within the organization and combine with external management and social science thinking to determine which research is pointing to something really important?
Becoming evidence-based requires an effort of will and a sufficiently changed mental model that will surely be a challenge for many companies. We are, however, seeing a move amongst early adopters towards embracing big data and becoming more evidence-based. It’s not quite widespread yet but it is just a matter of time.
Read the full survey report and learn more about how evidenced-based HR can put your organization ahead at www.kpmg.com/HarryRoss.
