Analytics Is a Modern-Day Answer for HR

February 18, 2020

Analytics Is a Modern-Day Answer for HR

Stone-age humans relied on them. Socrates, Confucius and Newton did, too. The Vikings used them to invade Britain. Occam’s Razor is based on them. Franz Gall used them to develop phrenology. Harry Markowitz did as well for selecting stock portfolios; Billy Beane for baseball. 

We’re talking about analytics and we have been relying on them for millennia.

The Vikings used runes for battle strategy. Gall used bumps on a person’s head to determine intelligence. Beane used on-base and slugging percentages to select talent for the Oakland A’s.

Very different uses, yet all analytically derived. Sometimes it helped, sometimes it didn’t. Even with a less-than-perfect record, analytics are beyond commonplace. They drive business decisions, predict traffic flow, diagnose medical issues and even formulate livestock feeding schedules.

What are analytics and what can they do?

I learned from Dr. Dursun Delen, the founding editor of the Journal of Business Analytics, that “Analytics make people smarter and more confident in making decisions to solve complex problems. As opposed to relying on intuition, gut feelings and luck, analytics-driven decisions rely on data, facts and evidence; they provide the means toward consistently making optimal or near-optimal organizational decisions.”

Dr. Ron Landis, of Millan Chicago and the Raju Professor of Psychology at Illinois Institute of Technology, claims, “Traditional data analysis tends to have a focus on describing what happened, while analytics tends to focus more on what will happen.”

Dr. Cade Massey, host of Wharton MoneyBall on SiriusXM believes, “Analytics improve every phase of employee life—through more use of evidence as well as analytics, as opposed to just intuitive judgment. One of the great challenges—and opportunities—in this space is how you blend quantitative analysis with subjective opinion so we can take advantage of both.” 

We can agree that analytics is a set of decision-making tools relying on voluminous, high-quality data to better understand what’s next.

We are human because we have opposable thumbs and higher order cognitive processes that allow us to use tools. Tool creation and use allow us to engineer the world we see around us. 

What stone, fire and runes were to our ancestors, analytics is to us. 

Runes never made a decision; seers had to interpret them. A hammer is best used to hit the nail on the head, not your thumb. A finely tuned predictive algorithm that pinpoints HR levers driving business outcomes does not decide when nor how to execute an analytically driven strategy, a human has to interpret and make a decision. 

Analytics must be intertwined with human expertise.

Yet HR has been using analytics for years. 

HR is certainly claiming to be using analytics. Yet, when I take a peek behind the HR curtain, I typically find the same cast of characters I was first introduced to in graduate school in the '90s—characters focused on describing what has happened—not what is likely to happen. 

I am not alone in my view. New Vantage Partners found that 72 percent of organizations have not embraced a data culture and we all know that culture is humanly rooted. New Vantage concludes with a warning, “the great majority of spending on big data and AI goes for technology and its development. We hear little about initiatives devoted to changing human attitudes and behaviors around data. Unless the focus shifts to these types of activities, we are likely to see the same problem areas in the future that we’ve observed year after year.”

HR needs to step forward to predictive analytics.

Predictive analytics are beginning to revolutionize HR—from employee selection and development to C-Suite strategy. 

Instead of relying on correlational-based modeling (regression, structural equation modeling) that tries to describe existing (and known) data structures in the simplest way possible, we should be using decision-tree modeling. This type of modeling can precisely predict who will be an A+ player and who will fail, who we should invest in for leadership positions and who should remain an individual contributor, and what strategic HR levers we should be focusing on to drive critical business outcomes. 

Dr. Lina George, CHRO of Beth Israel Lahey Health, agrees. “Analytics are revolutionizing how we select and develop talent. While not perfect, analytics remove a great deal of guesswork and have provided us with a broader spectrum of employee characteristics to examine—characteristics that not only help boost organizations, but also the performance and well-being of individual employees.” 

One such characteristic is personality, which is often used to select individuals into specific jobs based upon fit. True predictive analytics, like decision-tree modeling, can provide precise fit more than 90 percent of the time, while older methods might describe 15 percent of performance (that leaves a lot of room for guesswork). 

You can take the same personality data for the people you hired, create models that precisely identify high potentials for leadership development and still maintain incredibly high levels of prediction (i.e., greater than 90-percent accuracy). We can select and develop A+ players with A+ models of predictive accuracy. 

 “Strategically deploying analytics towards talent can significantly boost employee involvement and morale, reduce turnover, strengthen culture and ultimately power the organization forward,” said George. “It has helped HR’s growth towards business partner as opposed to an administrative cost-center.”

One immediate step CHROs can take to find HR levers for business outcomes is to examine existing organizational HR data and link it with business outcomes. Predictive analytics can quickly rank order and quantify the HR drivers of business outcomes and further bolster HR’s position in strategic decision-making—complementing the CFO’s rise to strategic decision-maker in the 1980s. 

Keep the human element in analytics. 

There is no doubt analytics is changing HR—not only across traditional HR functions, but also the ever-evolving demands being tackled by CHROs. Yet, analytics is not going to be making our decisions for us anytime soon. You need to do what you do best when it comes to analytics: Be a Human. Integrate your HR expertise with analytics to not only positively impact employees, but your entire organization. 

In that human spirit, I hope you enjoyed my runes and phrenology tie-ins with analytics because a few centuries from now, bots might be getting a good laugh at our advanced analytics. But we are not there … yet.

The Authors: 

Craig Wallace is an organizational psychologist and currently the Department Head of Management in the College of Business at Clemson University.