Few organisations have made much progress in developing HR analytics capabilities, write Andy Charlwood, Mark Stuart, Ian Kirkpatrick and Mark T Lawrenc

Charlwood, Andy

Kirkpatrick, Ian

Lawrence, Mark T

Stuart, Mark

LSE Research Online

10/26/2016Why HR is set to fail the big data challengeblogs.lse.ac.uk /businessreview/2016/10/26/why-hr-is-set-to-fail-the-big-data-challenge/Image by Unsplash, under a CC0 licenceAnalytics has become a key issue in the HR world because increasing amounts of data about the peopleorganisations employ is being held on human resources information systems (HRIS). Potentially, this could be usedto make better data-driven decisions about HR and staffing strategy. For example, Maersk Drilling were able toidentify the critical role of leadership in their off-shore drilling teams; managers who received more positiveevaluations from their employees managed teams with lower levels of turnover and absenteeism, which resulted inbetter trained teams who operated their drilling rigs more efficiently with fewer accidents and maintenance time. Theanalysis led Maersk to focus more attention on selection, training and development of their key middle managerialtalent.Despite the potential suggested by this example, few organisations have made much progress in developingMaersk’s level of HR analytics capabilities. Our research suggests two key reasons. First, there is a lack ofunderstanding of analytical thinking on the part of the HR profession. Many HR professionals are motivated by aninterest in people, not data. Second, this lack of understanding is being compounded by the HR analytics industry,which is focused on offering complex products for data management, storage and reporting, which consume largeamounts of money and time to develop, without offering the capabilities to perform more than simple strategicanalyses. Government regulation may also play a role. Maersk are headquartered in Denmark; Danish companiesare required to report annually on how people contribute to value creation. This regulatory push could help to explainwhy they are one of the pioneers in the field.Organisations don’t need expensive software or data warehouses to get started on HR analytics, an Excelspreadsheet will do. However, in many organisations, HR analytics is seen as something that will happen once thedata warehouse has been built. Even after this happens, progress to the sort of analytics that asks the big strategicquestions about people and performance has been limited. Management information and business intelligenceprofessionals who operate the data warehouses do not necessarily have the skills or mind set to move from datamanagement, organisation and reporting to strategic analytics of the sort practised by Maersk, and they typicallyhave other priorities, servicing other areas of the business.1/3This matters because if HR professionals don’t know and understand their data, the credibility that data brings willreside with finance and operations management instead. It may also damage the quality of working life andemployee wellbeing, without delivering competitive advantage for organisations. MIT professor Zeynep Ton hasshown how the introduction of enterprise resource planning software led to many large retailers cutting back on theirin-store workforces to save costs. This increased insecurity and in-work poverty for many workers, a scenario wesee played out daily in headlines about zero-hours contracts. However, in the organisations Ton studied, cost-cuttingfailed to have the desired effect, because sales fell too as customer service declined.What can HR do to grasp the opportunities that analytics offers while avoiding the threat of marginalisation that itbrings? First, HR professionals need to develop an analytical mindset. What are the key business issues that peoplemanagement factors are likely to play a crucial role in? Is turnover making it hard for the business to grow? Wouldthe business benefit from offering more training in response to skill shortages? Is there unexplained variation in theperformance of different business units that might be down to people? Once the problem has been defined, it iseasier to start mobilising resources to use data to address the problem. The next step is to build an analytical model.This simply means going through a process of trying to think of the causal factors that underlie the problem beingaddressed. Then it is possible to identify the data needed to operationalise the model and answer the question.After this process of model building, HR professionals need to get to grips with the more mundane issues of datamanagement and governance. Does the data do a good enough job of measuring the thing it is supposed tomeasure? If it doesn’t, what changes need to be made to data governance to ensure that information is carefullyrecorded in the future? What data from other parts of the organisation are needed to add to the HR data to do theanalysis? Will the owners of this data co-operate? The next problem is one of analytical skills and capabilities. Mostorganisations do not have people with expertise in the statistical software packages, like R and Stata, necessary formore advanced strategic analysis. Collaborations with academics may be one route to acquiring this expertise,contracting in commercial research companies may be another.♣♣♣Notes:This blog post is based on the authors’ paper HR and analytics: why HR is set to fail the big data challenge, inHuman Resource Management Journal, Volume 26, Issue 1, January 2016, Pages 1–11The post gives the views of the author, not the position of LSE Business Review or the London School ofEconomics.Before commenting, please read our Comment Policy.Andy Charlwood is Professor of Human Resource Management at the University of Leeds. Hismain research interests are in the areas of job quality and well-being at work, employee voice andworking time. He is also interested HR analytics and the ways in which within organisationanalytics and data analysis are changing HRM. His research is interdisciplinary in its approach,drawing on ideas and methods from the sociology of work and employment, work psychology andlabour economics. If you want to know more about how HR analytics might work in yourorganisation, perhaps with a view to collaborating, he is always interested in learning more abouthow organisations are developing and utilising HR data, please get in touch. Email:a.charlwood@leeds.ac.uk2/3Mark Stuart is the Montague Burton Professor of Human Resource Management andEmployment Relations and Director of the Centre for Employment Relations Innovation andChange (CERIC) at the University of Leeds. His research interests include skills formation,organisational change and representation at work. He has published more than 130 books,monographs, chapters, articles and reports and led more than 40 externally funded projects.Previous external roles include the President of the British Universities Industrial RelationsAssociation (BUIRA), Editor-in-Chief of the BSA journal Work, Employment and Society, and Chairof the International Section of the (American) Labor and Employment Relations Association.Ian Kirkpatrick is the Monash Warwick Professor of Healthcare Improvement & ImplementationScience (Organisational Studies) at Warwick Business School. Ian joined Warwick in May 2016after previously working at Leeds University Business School, where he served as Director of theLeeds Social Science Institute. In this capacity he helped to establish the ESRC funded ConsumerData Research Centre and was a founder member of the Leeds Institute for Data Analytics. Hisresearch interests are in the management, organisation and performance of health services, bothin the UK and internationally. Ian has made use of a variety of routine and administrative datasources to profile the nature and effectiveness of management and governance in the UK NHSand other health systems (including Spain and Italy). Ian has published this work in leading journals. He alsorecently served as Chair of Framework 7 European COST Action, and sub-editor of the British SociologicalAssociation journal, Work, Employment and Society.Mark T Lawrence is an independent consultant focused on Strategic HR and Data-driven Transformation; he is also Director of Research and Development at Growth BusinessPortal, Ltd.  As a founding member of the CIPD’s HR Analytics Steering Group (and, formerly,supporting the Chief Learning Officer Magazine’s Business Intelligence Board and the HumanCapital Executive Research Group), Mark has held an interest in the use of data for people-relatedinsights for over 15 years. Mark has worked with companies including PwC, IBM and Marks andSpencer, and holds an MBA (corporate strategy and entrepreneurial management) from LeedsUniversity Business School.  Connect with Mark via LinkedIn, or Twitter (@MTLawrence).  Copyright © 2015 London School of Economics3/3

Why HR is set to fail the big data challenge

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