How can we ensure that both HR and line managers effectively adopt workforce analytics? We believe that both groups of managers will need to develop skills in the design and use of workforce analytics. Some of these competencies will need to be resident in the firm’s IT function, including data acquisition and management, data storage and auditing, data access for analytics team, data analysis, and data visualization, and communication. But many new skills will be needed to help the leadership team capitalize on the opportunities afforded by workforce analytics.
In The HR Scorecard, we focused on the competencies needed in HR leaders to design and execute effective workforce analytics systems. We termed this competency “strategic HR performance management,” which we subdivided into four dimensions:
- Critical causal thinking. As its core, designing and implementing an effective workforce management system requires managers to think strategically about “what causes what” in their organizations. Because there is often a long lag between investments in talent and the reflection of these investment in firm performance, it is especially important to be able to show the causal path that reflects how improvement in talent and employee behavior affect important organizational outcomes.
- Understanding the principles of good measurement. A second capability has to do with the ability to clearly define what we mean by each dimension of “performance” and the subsequent ability to develop metrics for those constructs. Not all metrics are created equal, and there can be substantial differences in the reliability and validity of workforce measures. Good metrics will not only exhibit reliability but also provide an adequate representation of the underlying construct that they are intended to assess.
- Estimating causal relationships. Once you have developed a series of hypotheses about “what causes what” in your firm and have developed reliable and valid measures of workforce success, you are ready to begin to connect your workforce measures (independent variables) to unit- or organizational-level outcomes (dependent measures). These measures can be either quantitative or qualitative, but in either case the statistical tools can help managers “connect the dots” between an investment in talent and subsequent job performance. In most organizations there are two broad levels of this competency: the ability to conduct the analyses (needed by relatively few employees); and the ability to understand and act on the implications of the results (needed by many more managers).
- Communicating HR strategic performance results to senior line managers. Finally, we have argued that measures are answers to questions, and these questions should be focused on the processes through which talent helps to execute strategy. Measures need to be communicated and well understood to drive effective decision-making. Many new tools are available to HR executives to facilitate this process, and the ability to leverage these tools is reflected in the final component of strategic HR performance management.