5 reasons HR Analytics should not be located in HR

11/11/2014 at 09:23 11 comments

Simple organizational structure

If you were to build an HR analytics department where would you put it in your organization? The obvious answer may at first be to put it in HR. But at second glance this may not be the right place. Maybe even the wrong place.

I believe there are five good reasons why HR Analytics (or Workforce Analytics or HR Data or whatever it may be called) should indeed not be placed within the HR department.

  1. It will lose its strategic potential. It is common knowledge that HR Analytics has far greater potential if it is directed towards strategic issues rather than operational and tactical ones.  To put HR analytics in HR will create two problems. The first is that I often see HR Analytics focus on improving HR processes only. Nothing wrong with showing the link between engagement and employee turnover rates, it is just not very strategic. Nothing wrong with improving the training programs with analytics – it is just not very strategic. Tactical at best but most often operational. The strategic mindset is often not present. The second reason is that HR is mainly strategic when it is working outside of HR’s own silo and instead fronting the business and the front line. Some even argue that it is not HR’s role to be stategic. Putting HR Analytics deep inside some (often random) HR function makes the decision making process far removed from the business – and hence strategic – side of matters.
  2. HR does not have the capabilities – and will not be able to attract the right ones. I have argued that to succeed with any kind of analytics you will need to attract a number of different capabilities to take charge of your analytics effort. These capabilities, competencies and skills include i) being excellent  at statistics and numbers, ii) strong data management skills, iii)) captivating storytelling skills, iv) visualization skills, v) strong psychological skills to understand terms such as bias and heuristics, and vi) the ability to truly understand the business. Very few in HR master these and fewer yet have a strong team which complement each other enough to be able to build the right team. Likely they will fall short on data management skills, visualization skills, statistics and understanding the business. And worse, those people are not looking at HR job ads. Trust me.
  3. HR does not have ownership of all the relevant data. Many of the data which HR has ownership of (recruitment data, performance data, engagement data etc.) needs to be combined with data which reside in other parts of the organization such as finance (payroll), IT, legal and most importantly all the customer related data. These may also just be basic things such as master data. Many times HR Analytics people do want to work on strategic matters but need data which they are not allowed access to for internal reasons. In my experience these are often customer and profit data. If HR Analytics resides in a function outside of HR these data may be more available.
  4. Efficiency gains. Purely from an economic and efficiency point of view, it does not make sense to have several small teams scattered around the organization trying essentially to do the same thing; namely to do analytics. Instead pull the people together, let them build on each other’s experience and competencies, save money and efficiency by having one big analytics department instead of one in HR, marketing, IT, business units and where else they may be.
  5. Credibility issues. If HR has not been using data well in the past but instead has created and submitted poor business plans made more by gut feel than by use of good data, and if HR has produced endless of meaningless data reports on absenteeism, employees turnover, sick-days and percentage of women in workforce with questionable data quality, and if HR generally argues by what feels right rather than what is right, then the quality of the analytics work will be called into question just simply because it comes from HR.  HR does not have the credibility to work and argue with data. It may require someone from finance or business intelligence to produce and conclude the HR analytics for it to be taken serious.

If you take this perspective where should you then place the HR Analytics people? One approach would be to create a central business intelligence unit where all the company’s analytics will take place. Another approach is to create one or more center of excellence so much of the BI capability can be decentralized to the business units. And there are many other ways.

But maybe HR Analytics should not be placed in HR.

Entry filed under: Analytics. Tags: , , , .

Beware: HR Analytics leads to overconfidence 5 reasons why HR Analytics must sit in HR

11 Comments Add your own

  • 1. Bert de Jong (@HumanClouds)  |  11/11/2014 at 12:44

    Totally agree. I’ve never quite understood why HR would claim analytics, in my opinion analytics relate tot the entire business, not just HR. I therefore think business analytics is the appropriate name for the field, and it deserves its own mandate and should operate independently from any other department.

    Reply
    • 2. Morten Kamp Andersen  |  11/11/2014 at 12:47

      Hi Bert,
      I am still in two minds about this and I am trying to get input. Do you have any practial experiences where HR Analytics have worked outside of HR. Would be really interested.
      Thanks for the comment and interaction. Appreciate.

      Reply
  • 3. Charles  |  11/11/2014 at 14:50

    Morten,

    Appreciate your insightful thoughts on this and I should point out we are positioned squarely in the dedicated HR Analytics camp as I respond. I agree with most points you have made in the short term but I think we are already seeing CHRO roles rightfully moving up the chain in strategic value. And as you have likely seen, job postings for HR Analytics roles within the CHRO departments specifically have at least doubled or tripled in number based on my exposure.

    But there are also some things that inherent about HR data which I do not think should be managed by departments with no HR compliance training either. It’s not that sensitive data isn’t a problem in other areas of business, but more and more PII has major global data privacy implications and I have seen first hand IT departments mishandle HR data through shared drives, email, etc. For example, IT isn’t going to understand by nature that ethnicity, leave or dependent (if they recognize it in the first place) should not be disseminated anywhere outside HR it is a huge legal risk (perhaps mainly in US).

    Secondly, the laws that govern the above change very quickly these days and by country so for large global organizations it’s an uphill battle already controlling the length of time for which organizations are allowed to retain certain data by field. HR is the only department I know even remotely tracking that anywhere I have been- they are at least the major stakeholder.

    Lastly, putting HR into another unit separates the people who know the context of the data from the measurement. Two things result from those situations I have seen personally: 1) the reports are not used or used to very minimal extent because they don’t add a lot of value or 2) the scope of reporting suffers heavily because when there is one big budget for “Analytics” your position here is exactly why I think many companies do and will continue to allocate only a very small fraction of that money to mining workforce data which of course also limits its usefulness. However, I think there are already business cases out there proving some major savings at least in regained productivity costs.

    It surely depends on the relationship between IT and HR as well and some companies may be able to manage it this way but I have not seen it done well at a large majority of organizations yet. So, I think this is certainly open different delivery models but as an absolute statement I do not agree.

    Just for discussion, would removing the Finance department from the Finance Analytics reporting be the same in your view?

    Reply
    • 4. Morten Kamp Andersen  |  12/11/2014 at 10:39

      Hi Charles,

      Thanks for a great reply. I really appreciate your response.

      For full disclosure I should mention, that my next post, which is due early next week, is called “5 reasons why HR Analytics must be located in HR”. Because to be frank I see good reasons for and against. In theory the arguments to place is firmly in HR are overwhelming although for small to mid-size companies it is problematic to have one person doing analytics in HR, one in finance, one in a business unit and one in marketing. In reality, I agree with all your points above.

      When I have chosen to question the organisation of HR analytics it is because I see too many HR Analytics people being too narrow-minded about what should be analysed. It is too HR centric. It doesn’t need to be that way, but I have seen it too often. So many the solution is to take it out of HR.

      My aim was to provoke a debate. Your view is greatly appreciated. Thanks for participating.

      Morten

      Reply
  • 5. Olly  |  12/11/2014 at 14:19

    Morten,

    Really good article and an angle I believe could be the way forward for Workforce Analytics to get the profile and impact it is deserves, alongside deliver wider organisational benefits.

    Having spent 10 years in management consultancy preaching to organisations on Workforce Analytics, I am now heading up a global workforce analytics team (that sits firmly in HR).
    I agree re the points you make on HR ‘s historical credibility & the wider HR function’s capability restricts its ability to gain business traction and remain the challenge to delivery holistic leading edge analytics rather than basic MI/reporting. Both of these are not quick fixes – and the other corporate functions will either overtake or continue to move ahead of HR, unless a more combined approach is taken (i.e. COE for Analytics). The habitual challenge of HRBP capability has been around for the last 15 years – and I don’t believe HR are significantly further ahead on this challenge!

    Additionally your point on leveraging wider data sources is critical, and one HR are not good at from my experience. My team are actively doing this (e.g. Sales data, NPS data, Financials, Social Media etc.) which we can access relatively easily but it is piecemeal without the governance across functions or technology to support it. I believe HR are actually in the most privileged position in terms of data security and sharing – due to data confidentially of people data. This is the one area we hold the upper ground on with other corporate functions, and therefore have more control than we often think – and that could be the opportunity to shape the future direction of true analytics (i.e. enterprise wide) within the organisation.

    I fully agree with Charles above re: you need the right skill set and context to interpret HR data – so the set up of any corporate wide COE I don’t believe would deliver huge efficiency savings in terms of heads (as you would need specialists), but the governance, shared objectives and removal of “functional” reporting complexity (or dare I say politics) could all help deliver huge benefit. Having said that I don’t see any organisations taking this risk at this stage…..

    Olly

    Reply
    • 6. Morten Kamp Andersen  |  13/11/2014 at 11:17

      Hi Olly

      Thanks a lot for sharing your experience. It is interesting to hear your perspective considering you sit in HR.

      I am interested to hear if you have had any internal discussions about the place where HR Analytics should sit and why it was decided to be placed there. I guess it makes so much inherent sense that it may be done without considering alternatives. Or?

      I agree with the issue of HRBP. Many times they are the ones who must go out and explain it to the line-managers and sometimes also the leaders of leaders. If they are not fully up to speed (which they rarely are) then it is an issue. I was recently conducting a training seminar for HRBP on HR data. Simple stuff really – reading accounts, simple statistics, the difference between facts and information. The level of basic knowledge in this multi-national bank was very low for many of them.

      Thanks for contributing.
      Morten

      Reply
  • 7. Charles  |  12/11/2014 at 15:55

    Olly, also great points… you covered something I had left out the nature of data being wide versus tall in HR…I think that is also a key differentiator- the tools for analyzing wide, slow changing data vary from those required to analyze “tall” fast growing data like sales data, ledger data, shipping, IT, etc. Also, happy to hear of your position and opinion which validates the core business model that we pursue.

    Morten you also raise a good point… you reference small and mid-size firms. Our market is specifically around 1k to 10k employees for exactly the point you raise… most of those size firms cannot afford to have specialized functional Analytics roles and that is where we try to offer a semi-standardized starter core global HR solution which is stand alone for these kinds of firms. I do believe without some kind of framework solution the firms in this space will not be able to keep pace of larger firms which will more often have the means and specialization to build from the ground up…in many cases the hardware alone is cost-prohibitive for this market.

    Olly it sounds like you are probably on one on the larger side of this scale in terms of revenue and/or headcount?

    Reply
  • 8. William  |  12/11/2014 at 23:42

    Morten, thank you for starting a very good discussion on the topic of HR Analytics. The baggage of HR past definitely weighs on HR potential for the future. I have seen quite a number of organizations successfully implement analytics within HR. For me, it comes down to the CHRO and his/her vision for the team. As you and others indicated, the team has to be more aligned with the business and deliver the same level of insight as those coming from marketing, operations and finance. In about half of the situations, it started with a new CHRO setting out this new vision. Therefore, I see it more about leadership than specifically the function itself. From what I understand of Google’s People Analytics team, they have a central team within People Operations (they don’t call it HR) with a member of the team dedicated to each business and even sub-functions within People Operations (e.g., talent acquisition, compensation). Therefore, they operate like a shared service group to everyone while being housed within People Operations. I look forward to your next post to see the 5 reasons why to house HR analytics within HR.

    Reply
    • 9. Morten Kamp Andersen  |  13/11/2014 at 20:11

      Hi William,
      You are right. Google is a great example of a successfull implementation within HR. I also agree that the quality of the CHRO is imparative. In most cases however, that is exactly where the problem lies. But they don’t see that themselves.
      Thanks for participating.
      Best

      Reply
  • […] In my last blog post I gave five reasons why HR Analytics should not be located in HR.  The five reasons I gave were: 1) It will lose its strategic potential, 2) HR does not have the capabilities – and will not be able to attract the right ones, 3) HR does not have ownership of all the relevant data, 4) Efficiency gains from pooling all relevant capabilities together and 5) HR is not credible enough to work with analytics. […]

    Reply
  • 11. Lyndon  |  01/12/2014 at 17:02

    Actually glad to hear about upcoming topic on the case ‘for’.

    I don’t disagree with the bulk of what has been shared above with respect to HR track record on metrics and analytics from my own experience.

    Having said that, i am very much in the camp of ‘that doesn’t excuse or absolve HR from its responsibility in this area’. The catch with analytics being anywhere outside the respective staff business areas ( finance, hr, supply chain etc) is that you lose the ‘context’ of what the numbers mean and often what are the critical contextual questions to ask.

    HR analytics does require background steeped in HR, IT , and statistics/statistical analysis and their interaction. Thats what makes HR analytics -HR analytics.

    Just my opinion …

    Reply

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