HR, Analytics, and HRO – No Walk in the Park

By Linda Merritt, HRO Research Analyst, NelsonHall

Business intelligence tools, consulting, and services have been around for years, including for HR. Increasingly, one can find analytic solutions from HRO service providers, including those whose business services extend far beyond HRO and those that are pure-play HRO vendors. Every so often I review analytics packages, success stories, and service offerings and each time I am impressed by what can be done with the right tools, technologies, consulting, and data.

One would think that analytic solutions that provide fact-based information to support HR recommendations and then track the business impact of HR interventions and programs would be an easy sell, but it is not.

There are always leaders and early adopters ready to use the most cutting-edge tools and with the internal capabilities to ensure that value is delivered. That group is now getting into advanced HR analytics, but that group is not large enough to sustain a robust market.

Savvy HRO vendors with advanced analytic solutions understand the issue of client readiness and maturity. If the foundations and fundamentals are put in place first, then a vendor can whet the client’s appetite for more useful and usable information. For example:

• Vendors in a consulting engagement for a specific problem should show how its advanced offering can be used along the way
• Vendors should be aware of clients that are dealing with anecdotal data and data silos and who are struggling to get consistent, accurate, and timely data on the workforce basics because this foundation can be built on to support the entry point for analytics
• Vendors providing HR outsourcing should teach its clients how to take full advantage of the metric capabilities, reporting, and data analysis that are already built into the services.

Too often, HR analytic solutions get too advanced too quickly for the average HRO client. HR is already drowning in data and the thought of getting more, even more sophisticated data is not necessarily a perceived plus. What would we do with it? Would we really use it? How will it fit in with all of our other sources of data, reporting, dashboards, etc.? Our standalone applications have built in reports and analytics, why do we need another system? Would it pay its own way as an investment from our limited budget (i.e., ROI)? Even for those with a strong interest, the data and capability to make it dance are often lacking.

As a long-time champion of the use of metrics and analytics in HR, I loving seeing the strength that the use of great data adds to the consulting and relationship skills of HR business partners. There is a whole lot of foundation work needed to prepare for getting full value out of HR analytic solutions. I hope HRO service providers will stay the course because better use of data is a critical part of becoming strategic HR business partners and succeeding in the age of human capital management.

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HRO and a Culture of Analytics

Recently, Bersin & Associates held a webinar on HR measurement and the need to create a culture of analytics to get to data-driven decision making. Bersin refers to four levels with HR metrics and workforce metrics as the basics. Integrated talent management metrics and business impact predictive metrics are the advanced levels.  Getting to the advanced levels is not easy to achieve and it will likely take several years for those with the vision and fortitude to make the journey.

Many HR vendors offer HR analytics tools including IBM. I spoke with several IBM’ers to learn more, including Steve Johnson in product management.  IBM’s Workforce Performance application is based on its Cognos platform. It is prebuilt with highly configurable HR analytic content from hire to retire with pre-packaged standard reports. It is available as a licensed product (on-premises or hosted) that has prebuilt connectors for SAP, PeopleSoft, and Oracle’s e-business suite. To ensure the application functions well at every level from basic to advanced, IBM has added SPSS predictive analytic software.

Designed to map to HR data from many sources, it brings in data internal to the client and from other applications from third party vendors — key in getting consolidated cross functional workforce information for HR’s many processes and subject matter areas.

IBM understands that HR analytics is a journey and measurement is in its own DNA. The application can be used from basic to advanced levels and extended from HR specialists -only to business unit HR partners and on to line managers as readiness matures. Reports vary by user type from pre-set dashboards and scorecards, to detailed operational reporting, and to ad hoc research by power users.

IBM starts from the viewpoint of business workforce questions HR needs to answer and advise such as: do we have the right mix of people to meet business objectives optimally, or what will our workforce age distribution in key jobs look like in 3 years, in 5 years?  After assessing client needs and interest, a discussion of the actual metrics follows and a starting point can be identified.

The Workforce Performance application is available directly from IBM. It is also available to IBM’s HRO clients and to other service providers who want to integrate advanced HR analytics capabilities into its service offerings. A typical client is in the 5K to 10k plus employee range and there is particular interest from high tech and global employers.

IBM has a user forum for its Cognos products and with the HR analytics users interested in learning more from IBM and each other, there may soon be a user group just for them.

Even the best tools and most capable service provider cannot make the whole journey, especially the cultural part, for a client. Do you have the strategy and roadmap for your HR analytics journey and do you have a HRO partner that will help you create a culture of analytics?

Linda Merritt, Research Analyst, HRO, NelsonHall

HR Business Intelligence – How does it tie into HRO?

HR organizations are largely on the path to improve the use of technology in managing administration, and service delivery and even workforce and talent management are coming along, according to the CedarCrestone 2010-2011 HR Systems Survey. The highest penetration rate is for administration technologies like core HR recordkeeping, payroll and benefits administration, at 90 percent. These are also top areas for HRO. Service delivery (47 percent), workforce management (45 percent) and talent management (43 percent) are not yet quite at the half-way point.

Business intelligence tools like data warehouse and reporting and presentation applications have reached 37 percent. Workforce optimization is lagging at 17 percent for tools that enhance and enable the use of talent analytics, and dynamic workforce planning that helps prepare for and align a workforce with changing business needs and strategies.

Workforce management addresses the here and now, and how many people, where and at what expense has been a big focus throughout the economic downturn. Sadly, the information was largely used (and needed) to determine where to cut costs and ensure the reductions were achieved. But in  normal times, workforce data is needed to meet and maintain current and near-term staffing levels.

With workforce management tools and data improving, some organizations are not sure where to go next with the tools or how to fully leverage them. With a vague plan, even at 37 percent penetration rate, business intelligence packages can end up being a pretty, expensive, underutilized investment.

As I wrote about in last week’s blog on building an integrated HR ecosystem, it is the connectivity of a comprehensive set of tools and technologies that can unleash the true strategic power of HR in enabling business growth. The ability to use the system to understand, discover and advise is also needed.

As HR uses greater levels of technology for administration and self-service, HR’s workforce needs are generally reduced. In the case of workforce optimization, leading practice indicates that specialized staffing for workforce reporting and workforce planning increases slightly. Large organizations in the study averaged 5.8 people in workforce planning and 4.8 in reporting, while leading users for workforce optimization tools averaged 7.8 and 5.3, respectively.  Oh, and in the leading practice companies HR was viewed as strategic (66 percent), more than in other large organizations (41 percent)!

This is such an important area for HR to truly achieve transformation. It is also important for HRO service providers to be able to move up the value chain and not be relegated to only being useful in building and running the back office administrative systems at lower operating cost – although that will always be a cornerstone of HRO.

Buyers, be sure the vendor you select can not only meet today’s needs but can continue to be your partner as you build out an integrated HR ecosystem. Providers, be ready to demonstrate that you are the partner that can help clients bridge the gap in building and using workforce optimization tools to create business results, including by making them easier to use and understand, and simplifying reporting and providing basic analytical services.

Linda Merritt, Research Director, HRO, NelsonHall

Hope for HR Analytics – HR is Inching Toward Measuring

The lengthy economic downturn has impacted many areas of HR, first with the mandate to do more with less. It has also given many HR organizations the opportunity to truly become more strategically connected enterprise-wide as business leaders look to HR for critical help in managing smaller workforces in constrained circumstances. That has created a pull for HR metrics and analytics. 

The June issue of HRO Today magazine has a CHRO roundtable, Charting the New HR Order, with five HR leaders discussing a range of topics including “the emergent culture of measurement” in HR.  According to Sunoco’s CHRO, Dennis Zeleny, “The bottom line: For HR departments that embrace it, measurement has made them more important strategically and operationally.”  And Roger Gaston, Avaya HR SVP, tied providing strategic counsel and the use of analytics pragmatically together saying, “And, given that we all now have fewer resources, you’ve actually got no choice.”

Unfortunately, there are still plenty of barriers to HR analytics becoming a broadly accepted and available HR competency and capability. To date, HRO has mainly played two progress-making roles in HR analytics. First, HRO naturally brings more accessible data around the outsourced function, and if reporting capabilities are included in core HR systems outsourcing, there is usually improved data and reporting generally available. True, much of the new capabilities are used for basic reporting of what has happened, but accurate and timely data is the foundation needed first to progress to more sophisticated analytics.

The second role HRO has played is perhaps unintended, but should not be discounted. HR managers have not always been comfortable with many metrics areas, but they are more than willing to work diligently to learn and improve in how to measure the performance of an HRO vendor. They quickly become apt and rapt students of SLAs!

This is not always an easy learning process to go through, but service level measures are becoming more consistently defined and understood.  I have seen HR teams involved in vendor management learn more about process, operations, the impact of demand and resource levels and the connection of process performance to pricing, user satisfaction and business impact. That practical learning can and has fueled the improved use of operational metrics in other HR areas, another foundation block in building measurement competency.

A third role HRO wants to play is in providing tools and services for advanced HR analytics. The business case can be a bit tough to make and tight budgets have too often stalled pending sales. The tools and HR capabilities to use them are also a barrier. Another of the roundtable participants, Sharon Taylor, Prudential HR SVP, said, “Some systems are so overly complicated that they are not as helpful as they might be.” And in the current business environment, HR will not want to risk end up with more little used “shelfware.”

Executives have renewed interest in talent management and selective recruiting, as they want to strategically and economically strengthen workforces in light of a continued bumpy economy. HRO vendors: make your case that HR analytics tools and services are an important and cost effective part of the solution.

Linda Merritt, Research Director, HRO, NelsonHall