Is HR the Most Analytics-Driven

Function?
by
 Thomas H. Davenport

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I have argued over the past decade that the Human Resources (HR) function
has the potential to become one of the leaders in analytics. The key word, I
thought, was potential. Not anymore. A recent global survey on which I
collaborated with Oracle suggests that HR is right up there with the most
analytical functions in business — and even a bit ahead of a quantitatively-
oriented function like Finance. Many HR departments are making use of
advanced analytical methods like predictive and prescriptive models, and
even artificial intelligence.

This is a big change from a decade ago, when I began to study the use of
talent analytics. (Jeanne Harris, Jeremy Shapiro, and I published an article in
HBR on the subject in 2010). At that time, the only really sophisticated HR
analytics capability we uncovered was at Google and perhaps Harrah’s (now
Caesars). There was a fair amount of reporting going on, but not much
prediction. Few HR organizations even had a dedicated analytics person.
“HR analytics” typically meant a debate about how many employees the
organization had, or the best way to measure employee engagement.

Even before the new survey results came out, I suspected that things were
very different today. Most large companies have at least a small people,
talent, workforce, or HR analytics group. There are many conferences
devoted to the topic. It’s very common for organizations today to model
workforce growth, attrition, engagement, and other key variables.

The survey involved 1,510 respondents from 23 countries across five

continents. It included senior managers, directors, and VPs from from HR
(61%), the Finance function (28%), and general management (10%). I was
hired to help design, analyze, and report on the survey. All of the executives
were from companies with $100M in revenue or more. Detailed results
are here.

While it’s obvious that HR is moving in an analytical direction, I did not

expect the very high level of sophisticated analytical activity in the survey.
Here are some highlights:
  51% of HR respondents said that they
could perform predictive or prescriptive
analytics, whereas only 37% of Finance
respondents could undertake these more
advanced forms of analytics.
 89% agreed or agreed strongly that “My
HR function is highly skilled at using data
to determine future workforce plans
currently (e.g. talent needed),” and only
1% disagreed.
 94% agreed that “We are able to predict
the likelihood of turnover in critical roles
with a high degree of confidence
currently.”
 94% also agreed that, “We have accurate,
real-time insight into our employees’
career development goals currently.”
 When asked “Which of the following
analytics are you using?” “artificial
intelligence” received the highest
response, with 31%. When asked for
further detail on how respondents were
using AI, the most common responses were
“identifying at-risk talent through attrition
modeling,” “predicting high-performing
recruits,” and “sourcing best-fit candidates
with resume analysis.”

This level of self-assessed capability for HR analytics was high in almost

every geography and every specific question, but it was somewhat lower in
Asian, European, and Australian organizations. It was generally highest in
the U.S., the Middle East, and Latin America. Across industries, it was lowest
in the “hospitality, travel, and leisure” and “media and entertainment”
categories. Particularly high industries included financial services, energy
and utilities, professional services, and wholesale distribution.

Why is HR more comfortable with advanced analytics than Finance, which

has always been a function based on numbers? I have noted for years that
Finance organizations and the CFOs who lead them have found it difficult to
move past descriptive analytics and reporting — which they do very well — to
more advanced analytics. There are certainly exceptions to this rule, but it
helps explain why the growth of advanced analytics has been faster in HR.

But no function in a business stands alone with regard to data and analytics.
One reason that Oracle surveyed both HR and Finance executives is that
those two functions have an increasing need to collaborate. Workforce
expenditures are often among an organization’s highest costs, and a
company’s financial situation will dictate fluctuations in the size and makeup
of the workforce. The survey found high levels of collaboration and mutual
respect between HR and Finance, and a growing need for collaboration. For
example, 82% of respondents agreed or strongly agreed, and only 5%
disagreed, that “Integrating HR and Finance data is a top priority for us this
year.” However, several interviews conducted after the survey revealed that
there is still much opportunity for greater sharing of data and collaboration
on analytics.

Of course, not everything is rosy in the world of HR analytics. I was quite

interested to see that the function’s use of analytical tools surpasses the
ability to interpret and act on them. When respondents were asked about the
area of “most needed to develop or improve” analytical skills for HR, the
highest-ranking choice was “acting on data and analytics to solve issues.”
“Cultivating quantitative analysis and reasoning skills” and “advising
business leaders by telling a story with data” also ranked highly. My
experience is that these skills are equally lacking in other functions. Perhaps
it is another sign of HR’s analytical maturity that it is facing the same human
skill shortages that have long bedeviled analytics users across companies.

There’s No Such Thing as Big Data in HR

“Big data” has become such a universal phrase that every function of
business now feels compelled to outline how they are going to use it to
improve their operations. That’s also true for Human Resources (HR)
departments, which is where most of a company’s money is spent, and where
— we’d like to believe — the real value lies.

One of the reasons for the special attention being given to big data in HR is
that the department is always under pressure to be more analytic — which is
justified to some extent. Some wishful thinkers believe that the application of
big data techniques will somehow rid HR of the some of the attributes they
don’t like about it, such as the perception that they’re focusing on “soft”
issues and not detailing the return on HR-related investments.

As with most of “the next big thing” stories in business, big data is really
important in some areas, and not so important in others. As a literal
definition, HR does not actually have big data, or more precisely, almost
never does. Most companies have thousands of employees, not millions, and
the observations on those employees are still for the most part annual. In a
company of this size, there is almost no reason for HR to use the special
software and tools associated with big data.
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For most companies, the challenge in HR is simply to use data at all — the
reason being that the data associated with different tasks such as hiring and
performance management, often reside in different databases. Unless we can
get the data in those two databases to be compatible, there is no way to ask
even the most basic questions, such as which applicant attributes predict
who will be a good performer. In short, most companies — and that includes
a lot of big ones — don’t need fancy data scientists. They need database
managers to clean up the data. And they need simple software — sometimes
even Excel spreadsheets can do the analyses that most HR departments
need.

Another major difference in HR analytics is that the questions that really

matter have been under investigation longer than most other business topics.
What determines a good hire, for example, has been studied in almost the
same way since WWI. So the idea of bringing in exploratory techniques like
machine learning to analyze HR data in an attempt to come up with some big
insight we didn’t already know is pretty close to zero.

Consider Google’s very prominent efforts over the years to analyze their
people data with initiatives such as Project Oxygen, a multi-year research
project that was designed to try to figure out what makes a good manager —
a much more substantial effort than most any other company could pull off.
Most of the conclusions from that very intensive exercise were ones that
research discovered decades ago and which could have been found in
textbooks. That doesn’t mean it’s not a worthwhile exercise to test how those
standard assumptions of management play out in our own organizations, but
expecting to find big and new insights is simply a bad bet.

INSIGHT CENTER
 Putting Data to Work

Analytics are critical to companies’ performance.

The very nature of HR data imposes some unique limitations on analyses.

Companies operating in the European Union, for example, know that
employee data cannot be moved legally and easily across other national
borders. Multinational companies can’t legally examine employee data across
countries at the same time. In the U.S., analyses on employee data that could
reveal the possibility of adverse impact on protected groups — e.g., our
female employees in this unit are paid less than the males — triggers the
need for legal and then management responses that wouldn’t happen in
other parts of the business. HR has to be careful not to turn their data over to
other departments that don’t understand these limitations.

So, what should HR be doing with data, after we clean up our datasets?
Anytime we analyze data, it helps to start with the basics. First, just look at
the big picture — graphs plotting outcomes across the organization and then
over time: Where has turnover spiked, and when did it happen? Are there
places where there are consistent employee complaints? Second, look at
more of this data, more often. For example, the move to pulse surveys (short,
very quick, sometimes daily surveys) of employees that replace the annual
and ponderous morale surveys are a good idea. Smart companies like IBM
compile data that the employees themselves generate on company-sponsored
social media, for example, to monitor morale and identify workplace
concerns.

Finally, HR should be analyzing relationships among the data. Start by

asking how your hiring criteria relates to actual performance. This is
important not just because hiring is arguably the most important task an
organization does (partly because it happens so often), but also because we
are required to use criteria in hiring that do not have adverse impacts on
protected groups.

At the end of the day, everything starts with the quality of the data: If we
don’t think our performance appraisal scores are good measures of actual
performance, for example, then no analyses that try to predict who will be a
good employee will be worth doing.

Better People Analytics

by
 Paul Leonardi

Explore The Archive

“We have charts and graphs to back us up. So f*** off.” New hires in Google’s
people analytics department began receiving a laptop sticker with that
slogan a few years ago, when the group probably felt it needed to defend its
work. Back then people analytics—using statistical insights from employee
data to make talent management decisions—was still a provocative idea with
plenty of skeptics who feared it might lead companies to reduce individuals
 to numbers. HR collected data on workers, but the notion that it could be
actively mined to understand and manage them was novel—and suspect.

The Geeks Arrive In HR: People

Analytics Is Here


The old fashioned fuddy-duddy HR department is changing.

The Geeks have arrived.

Today, for the first time in the fifteen years I've been an analyst,
human resources departments are getting serious about analytics.
And I mean serious.

I was in a meeting several weeks ago in San Francisco and we had

eight PhD statisticians, engineers, and computer scientists
together, all working on people analytics for their companies.
These are serious mathematicians and data scientists trying to
apply data science to the people side of their businesses.

This last week I had another similar meeting and we had three of
the world's leading insurance companies, two large retailers, three
health care companies, and two manufacturing companies with
serious mathematicians and scientists assigned to HR.

What's going on?

As I recently discussed in the article "How People Management is
Replacing Talent Management?" there is a major shift taking place
in the market for people analytics. After years of talking about the
opportunity to apply data to people decisions, companies are now
stepping up and making the investment. And more exciting than
that, the serious math and data people are flocking to HR.
PROMOTED

A little history is in order.

The area of HR analytics, talent analytics, or as it is now called

"people analytics" has been around for a long time. As an analyst
(and former analytics product manager) I've been talking with
companies about how to measure learning and HR for a decade.
Back in 2005, after several frustrating years trying to figure out
how to measure training, I wrote a book called The Training
Measurement Book, which sets the stage for L&D teams to move
beyond the traditional Kirkpatrick measurement model. Today
learning organizations continue to try to analyze the impact and
effectiveness of training, but it no longer stands alone.

If you look back in time, ten years ago companies tried to build "HR
Analytics" systems (typicall called HR data warehouses) to help
companies look at simple metrics like "total headcount," "time to
hire" and "retention rate" and clean up their messy, often
inaccurate people data. Quite a few companies built these
databases, but they were primarily used to be a single system of
record across the many HR platforms in place.
In the 1990s vendors like PeopleSoft, Oracle, and NCR/Teradata
built analytics products to support this market. They didn't sell
very well, primarily because companies had such complex HR
systems they didn't have the budget or IT support to build the HR
data warehouse. (Some companies did do this, and they have been
benefiting from this for many years.)

About five years ago the book Moneyball came out, and we started
a global marketplace called "Big Data." Tools like Hadoop, R, and
other parallel data management tools became productized and
industries like marketing, advertising, and finance started to
analyze massive amounts of data. Much of this started at Facebook,
Google, LinkedIn and other internet companies who simply had to
analyze enormous amounts of data to run their businesses.

Along the way the term "Data Science" was invented, and today
there are hundreds of jobs for "Data Scientists." (Typically defines
as people who understand information management, Big Data tools,
statistics, and modeling - a rare breed.)

During the last ten years we watched the discussion with HR stay
very tactical, focused on operational reporting and simply fixing the
mess of incompatible HR systems we have. There were many HR
and learning analytics presentations and a few conferences, but
most of the focus was helping technical practitioners improve their
reporting systems. The idea of predictive analytics was little more
than ROI studies to look at whether a training program worked.
(Full disclosure, I was the head of product management for two
companies that built advanced learning analytics solutions in the
early 2000s.)

Suddenly around 2011, with the focus on Big Data, we sensed a

shift in the market. To understand how well predictive analytics
was taking hold, we started our early research on "Big Data in HR"
and developed a maturity model (it was published in the Fall of
2012). We discovered a world of "Haves" and "Have Nots." A small
number of companies were investing heavily in predictive people
analytics, but most were barely getting started.

The whole idea of our focus on "Big Data in HR" was to help HR
organizations realize that they, too, could enjoy the wave of interest
in Moneyball and BigData. HR is not as interesting a topic as
homeland security or cyberwarfare, but it's a big area of spending
(more than $4 trillion is spent on payroll around the world) so
there's a lot of opportunity in this huge data set. And the world of
"People Analytics" was born.

There is a deep history of data analysis in the HR profession,

starting with Frederick Taylor in the late 1800s. The article "The
Datafication of HR" describes this evolution, and I think everyone in
this space should read this article and get to know the history.
Today we are standing on the shoulders of some giants and very
innovative thinkers - they just didn't have computers to help.

Today, while the topic is hot, HR teams are just starting to get good
at analytics. The problem has not been the concept, but rather
the focus. We spent far too much time trying to measure HR and
L&D spending, and figure out which HR programs were adding
value. While that seems interesting HR managers, typically
business people just don't care. What they want is information that
helps them run the company better: "Get me the right people into
the job, make them productive and happy, and get them to help us
attract more customers and drive more revenue. I don't care if your
L&D program has a 200% ROI or not."

(Slideshare History of People Analytics: The Datafication of HR:

People Science is Here )

We now see this as a huge trend, so we launched a focused

research area on this topic. With the help of my partner Karen
O'Leonard and others on our team, we launched a series of industry
studies on what we called "Talent Analytics." Our biggest report,
entitled High-Impact Talent Analytics, established the first-ever
research-based maturity model for analytics. It showed that there
were a small set of companies (less than 5% of the market) that
were way ahead of the curve. These advanced companies were
looking at people-related data in a very strategic way, and they
were making far better decisions about who to hire, who to
promote, how much to pay people, and much more.

Since then, interest in this market has exploded. And I mean like an
atomic bomb. Everyone is now talking about it, and the whole
concept has changed.
A few weeks ago I had a meeting with five major Silicon Valley and
New York companies who are focused in this area, and the room
was filled with statistics PhDs, engineers (like me), and I/O
psychologist PhDs. Thus the title of this article:

The geeks have arrived, and we're all happier for it.

At this point, entering 2015, I believe "The Geeks have Arrived."

Statisticians, mathematicians, and engineers have entered the
people analytics space.

In this meeting I recently attended, the practitioners, who are

among the leaders in this space, were all experienced in bringing
together data, cleaning it up, and doing all types of analysis. Of
course their companies have various issues with data quality,
systems, and infrastructure - but they, as a group "get it." They
understand the potential, they understand the problem, and they
have the skills to get work done. And they are not just analyzing HR
issues, they are analyzing the business.

Today this new business function is called "People Analytics." And

over time, I believe it doesn't even belong within HR. While it
may reside in HR to begin with, over time this team takes
responsible for analysis of sales productivity, turnover, retention,
accidents, fraud, and even the people-issues that drive customer
retention and customer satisfaction.
  High tech companies now know why top engineers quit and
how to build compensation and work environments to get
people to stay.

 Financial services companies are now analyzing why certain

people commit fraud and what environmental or hiring issues
might contribute to such violations.

 Product companies are now analyzing the demographic,

educational, and experiential factors that correlate with high
performing sales people and why top sales people quit.

 Health care companies are looking at why certain hospitals or

departments have higher infection rates and what people
issues are behind these problems.

 Manufacturers and product companies are looking at the

patterns of email traffic and communications to understand
how high performing managers behave and what work styles
result in the highest levels of performance.

These are all real-world business problems, not HR

problems. The data which helps support these decisions includes
experience, demographics, age, family status, as well as training,
personality, intelligence, and dozens of other factors. More and
more this will include data on email communications, employee
sentiment, and ad-hoc feedback.

Many of the factors which contribute to fraud or turnover have

nothing to do with the people - they are environmental. Where is
the manager physically located? Who else is hiring in this location?
So People Analytics requires a look at external data, not just
internal data.

This is why this function eventually belongs outside of HR, it is

really a part of a company's bigger "business analytics" team.

Just for grins I did a Google Trends search on the terms HR

Analytics, Talent Analytics, and People Analytics, and look at what I
found. "People Analytics" is winning.

(History of Google searches for People Analytics, Talent

Analytics, and HR Analytics. The blue one is winning.)

As we talk about in our research, this is a huge market opportunity

for business - one that is just beginning. Vendors of all shapes and
sizes are starting to grow, and most of the large platform providers
now include predictive analytics tools embedded in their core HR
software. (Flight risk indicators are a good example - not
necessarily accurate yet, but the right idea.)

And exciting new companies are joining the marketplace. (Read

People Analytics Heats Up for more on all the vendor activity.) Not
only are the large ERP players involved, but serious software
entrepreneurs are joining the market. Last week I met with two
senior software executives (both from large search engine
companies and other companies they had sold) now entering the
market for HR engagement analytics and measurement systems. I
wont mention the company yet (it's not yet launched), but this is a
company that is likely to bring serious software engineering to the
people analytics market.
While most HR organizations are still struggling to clean up their
data and build their teams, the momentum is coming on strong.
And technical talent has now figured out that the old-fashioned
backwater HR department may be one of the most exciting places
to work.

We'll be doing a lot more research on this topic over the coming
years, but let me simply state clearly "The Geeks have Arrived:
People Analytics is Here."

Oct 15, 2014,05:36pm EDT

The Top 10 Disruptions In HR

Technology: Ignore Them At Your Peril
Josh BersinContributor

The HR technology landscape, which is now more than a $15 billion

market in software, is exploding with growth and innovation. We
are tracking more than 100 new startups in social and referral
recruiting, talent analytics, assessment science, online learning,
and mid-market core HR systems. New tools to help manage
employee communications, engagement, recognition, and
workplace wellness are also red hot.

Fueled by this new cycle of innovation, private equity and venture

capital firms are investing heavily in the space. The top 50 HR
technology investment deals this year were over $560 million and
the top 50 learning and educational tech deals were over $800
million (private equity research).
And these valuations are resulting in lots of acquisitions. Just
recently Skillsoft, one of the largest e-learning companies, acquired
one of the largest LMS companies, SumTotal Systems. Earlier this
year LinkedIn acquired Bright to aid in employment matching, and
two years ago IBM acquired Kenexa, to build out its talent software
offering. Anxious venture firms are looking for ways to get part of
this fast-growing market.

As money comes to HR technology, so do new ideas and smart

people. The result: we are seeing one of the most innovative times
ever in the HR technology market.

How do you keep up? In this article I highlight ten of the biggest
disruptions happening in the space, and give you guidance for your
technology roadmap or investments over the next year. (Click
here for the detailed report. (Click here to view the Slideshare
view of this article.)

1. Shift from Systems of Record to Employee Systems of

Engagement.
PROMOTED

Today the most important factor in HR software is no longer the

functional feature set, but rather the "degree of user engagement."
Can people just sit down and use it? Do they use it every day? Or do
they find it a drudgery and only use it when they have to?
There has been a total shift in the purpose of Human Resources
Software. Initially, perhaps 30 years ago, HR systems ran on
mainframes and were back office systems built to automate, store,
and manage employee data. They ran payroll, stored employee
data, and managed performance reviews, training administration,
vacation policy, and time and attendance. They were primarily used
by HR managers.

While such automation continues to be a huge market, today HR

has changed. Now HR systems are used by employees. They are all
“self-service,” meaning that we use them ourselves. So just like all
other enterprise software, their success is dependent on how easy
they are to use by employees, managers, and even job candidates.

Look at recruiting systems for example. Only a decade ago these

"applicant tracking systems" were electronic filing cabinets used to
store and index resumes. Today recruitment systems run
on mobile phones and you can apply for a job with one click, take
an interview via the phone's video camera, and take an online
assessment as you apply. The most attractive candidates aren’t
likely to write a resume, they'll probably upload their LinkedIn
profile. So we have to make recruitment software so easy to use it's
actually fun.

Internal HR Management Systems (HRMS) are also too complex,

creating a need for an army of consultants to build self-service
front-ends. We need to make it simple and easy for people to
update their status, find their benefits, locate other skilled people,
find and take courses, complete onboarding for a new job, locate
skilled professionals, assess candidates, and set or monitor goals.

These various processes, which were once “paper-based HR

practices” are now all online and they should be easy to do right in
the middle of our work. We don’t even want to “log into the HR
system” to do these things any more, they should be so integrated
into our lives that they can be done as part of our daily work.

So the HR systems of the future are now “systems of engagement.”

I like to think of them as “work management systems” now: they
may embed and automate HR practices, but rather than being
things we do once a year, they are applications we use every day
(or they should be).

Think about goal management. Do you want your teams to build goals once per year
and not even look at them until performance appraisal time comes (the HR approach)?
Or do you want the goal management system to be “agile” and “always in use,” helping
people manage their weekly, monthly, and quarterly objectives? Our research shows
that companies who manage goals quarterly generate 30% higher returns from that
process than companies who manage them annually. Why wouldn’t the HR system
facilitate this agile, continuous goal management process?

Think about learning. Do you want your employees to “log into the LMS” only when they
think about it to find a course? Or would you rather them always viewing new videos,
new instructional modules, and new learning opportunities every day or right in the
context of their work? Today we want employees learning to be “fully integrated with
work” – not someplace they “go when they have time.”

This tectonic shift – from “system of record” to “system of

engagement” is massive. It is radically disrupting IT and
dramatically changing the HR system world.
Many vendors are figuring this out:
Workday, Hirevue, CornerstoneOnDemand, PeopleFluent, Skillsoft,
and ADP have radically redesigned their user interfaces and invest
heavily in object-based design, embedded analytics, and ease of use
in every way. New companies like Betterworks (agile, gamified
goal setting based on OKR), SmallImprovements (simplified agile
performance management), Achievers and Globoforce (social
recognition) are developing applications that are just fun to use.

2. Mobile is everything: Build mobile Apps not just “mobile

Versions”

What we used to call “mobile” is now becoming “the internet.”

According to Kleiner Perkins research, there are now 5.2 billion

mobile devices and 1.6 billion smart phones, while only 789 million
laptops and 743 million desktop PCs. This means that your
employees, most of whom are more than likely to have a
smartphone, are 2-5 times more likely to access your HR
applications on their phone than they are on their PC.

This is not to say that web applications are going away – but rather
that the focus of new applications should now be “mobile first.”
Vendors have to look at usage mechanics, user interface, and
design of mobile apps. In a mobile device we “tap and swipe”
rather than “click and type” – so if your HR system is not designed
well for mobile, look carefully for a vendor that has made that
investment.
And mobile apps are just that: apps. They are small, interactive,
easy to use, single function systems. They look more like Snap Chat
and less like Outlook. They have red dots, simple swiping
mechanisms, lots of feedback, and are fast and efficient. A mobile
app should be usable within one or two clicks: many HR
applications take dozens of clicks just to get started.

Think about all the typical HR applications that work better on

mobile devices:

 Time and attendance: most hourly and consulting and service

workers are mobile. They need a rapid fire mobile app
multiple times a day.

 Online learning: what better time to learn than when standing

in line, sitting on a plane, or waiting at the doctor’s office?
Especially if it is certification or compliance training.

 Employee directory: in most cases we will phone someone

through a mobile device, shouldn’t the directory be there?
Single click, find someone, send an email, or give them a call.

 Goal setting and management: what if I have a great idea for a

project or goal over the weekend? Why can’t I update my
goals while I’m out and about?

 Employee communications: people are more likely to read a

newsletter or email on their phone during off hours. I want to
read company news in my Twitter feed or phone reader, not
have to browse through email.
  Job candidates: as we described earlier, more than half all job
responses start from a mobile advertisement and companies
tell us that their best candidates are those who apply from
their mobile devices. undefined

[/entity]

 Feedback and engagement: engagement and feedback

surveys, which are becoming more dynamic every day, can be
done on a phone in minutes. Adobe found that their employee
feedback increased by five-fold when they put their pulse
surveys into mobile. If I have something I want to say right
now about the work environment, can’t I just post it instead of
logging into a corporate HR system?

The trend toward mobile apps is only accelerating. With new

products now starting to offer “sensing” and “the internet of
things,” the mobile device will soon likely be the primary interface
to all HR related applications.

3. Analytics-driven, science based solutions. Data analysis is

now the solution, not the product.

We used to think of HR systems as giant file cabinets for people-

related data. Well they are – but they do much more. As our Talent
Analytics research shows, companies who go through the process
of “datafying” their HR organization[1] are seeing 2-3x better
results in quality of hire, leadership pipelines, and employee
turnover.
And in many ways, the whole value proposition of software itself is
shifting – the software itself is more and more like a commodity: it
is the data, decision-making, and analytics that drives value. I met
with one of the world's largest HR service providers last week and
they told me they can see a day in the future when "our services
will be free but you'll pay for the data."

Consider the following: typically companies spend 30-60% of their

revenue on payroll (people). This enormous expense goes into
salaries, benefits, training, facilities, travel, and many other areas.
If we want to improve profitability, customer service, revenue
generation, or product quality, shouldn’t we carefully analyze the
biggest expenses we have?

The HR analytics problem any companies have is simply one of

investment. While finance, marketing, and supply chain
organizations have been implementing analytics solutions for
decades, HR is now just starting to get serious. Our research shows
that only 4% of large organizations have any ability to “predict” or
“model” their workforce – but more than 90% can model and
predict budgets, financial results, and expenses. So the problem is
not only one of poor analytics skills in HR, but a historic problem of
lack of investment, poor data quality, and old fashioned HR
systems.

HR organizations now understand this need. I call it “The

Datafication of HR” – the beginning of a decade long transition
toward data-driven people decisions.
Articles, books, research, and conferences now educate us about
how the strategic information we have: people’s characteristics, job
experience, development, and assessment data. This data, coupled
with real-time work related data, gives the company amazing
opportunities to make science-based decisions about who to hire,
how to improve sales performance, how to improve patient
outcomes, how to reduce labor costs, and much more. Today’s HR
systems should not simply be “data analysis” applications but
rather “data driven” applications.

A new solution from Deloitte, for example, looks at real time labor
activity and uses analytics techniques to show companies how to
save what could amount to millions of dollars in payroll expense
without reducing any worker flexibility or productivity. Similar
solutions now let companies scientifically understand who their
leading recruiters are and how to source far better candidates
based on the success profile of existing employees. One vendor has
a “virtual educator” who looks at an employees’ online activities
and actually recommends training and learning based on their
patterns of activity.

What does this all mean for HR technology? It has profound

effects: today we buy HR tools because of their functionality and
ease of use: in the near future we will likely buy the tools because
of their “intelligence” and “analytics capability.”

Vendors that offer these “embedded analytics” solutions today

include Oracle, ADP, Workday, Ultimate, Saba, Skillsoft, Success
Factors, and others. If your software vendor is not providing you
out of the box analytics which “do the analytics for you” then you
should probably look elsewhere. Yes of course we always need good
analytics tools, but today the tools are available at very low cost –
intelligence is where the value will reside.

Finally, let’s remember that before long your HR vendors may be

selling you “data” in addition to the system. Today ADP offers a
vast database of benchmarks with their new talent management
software. Success Factors is doing the same. Before long you
should expect your HR systems and technology vendor to offer
benchmarking data with their systems – and this will help certain
well entrenched vendors disrupt their competitors.

4. The science of leadership, assessment, and psychology

evolves with Big Data

A large part of HR is dedicated to industrial and organizational

psychology. This industry, dominated by PhDs with backgrounds in
statistics, organizational development, and psychology, has brought
us many of the most powerful assessment solutions and leadership
development solutions in the world.

Nearly every major leadership development and assessment

company, including leaders like Korn Ferry/PDI, DDI, SHL, Wiley,
and many others, are now sitting on years of data about leadership,
sales skills, employee performance, and the power of personality.
Almost all these companies have been acquired, and they are now
in the hands of larger companies. Why the convergence? Because a
lot of these assessment and I/O science tools seem the same.
Buyers often cannot differentiate between the tools so the market
looks commodity-like. (We’re not saying that it is, but it “feels” that
way.)

Well just as disruption has taken place in core HR software, a set of

disruptive assessment solutions is emerging. New vendors are now
trying to build assessment solutions based on “real time big-data,”
rather than core psychological models. Many of these companies
may start with the Big Five personality traits (a public domain
personality model) but then quickly build tools to collect social
data, peer assessment data, and behavioral data which expand the
world of assessment. These new vendors are not only smart
psychologists, but they are also data scientists – so they may find
performance-driving characteristics we never thought about before.

Some of these companies include Evolv (just acquired

by Cornerstone), Good.co, IBM/Kenexa, Kaisen, Roundpegg, Jobfig,
Logi-Serve, Smarterer, and others. They are combining traditional
assessment with big data and “social sensing” to better understand
the relationship between skills, personality, and organizational
culture. While most of these companies are still relatively small,
they have the potential to disrupt the market for pre-hire and
leadership assessment, and give us ways to assess everyone in the
company using a combination of data, gamified tools, and social
information.

Given the tremendous focus on work-life balance and better work

environment, new tools that help us monitor employee engagement
and manage our health and work-life balance are emerging as well.
Tools which assess culture, fit, personality, and style are being
redesigned and are now an exciting new part of HR.

5. Sensing, crowdsourcing, and The Internet of Things.

Systems become more real-time.

As more and more people use internal HR applications, they

become more useful as employee sensing and communications
systems. And while most HR applications were designed for a top-
down organization, today’s companies operate in a flatter, peer-to-
peer manner. The result: HR systems now becoming real-time
communications systems.

Look at the Learning Management System, for example. Originally

designed to be a registration system for training with an online
course catalog, today these systems recommend training, connect
people to content, people to information, and people to people. We
see a flurry of new social skills matching and content matching
applications changing the way people learn. Rather than only take
what training you are assigned, why wouldn’t you also look at what
training is popular? What courses your mentors are taking? What
courses are most active today?

A second exploding category is employee feedback and

engagement tools. These systems, which used to be annual surveys,
are rapidly becoming real-time feedback, social sensing, and
analytics systems that can gauge and measure employee feedback
quickly. Companies
like BlackbookHR, tinyHR, CultureAmp, BetterCompany, and many
others now let employees offer feedback at work in real time,
giving leaders immediate information about work and management
issues.

Crowdsourcing or social systems are also transforming HR

practices. Just the concept of voting up or down for certain ideas
(once called an IdeaFactory) has huge power. HR can now
immediately get feedback or commentary on any new program,
organizational change, or new idea. HR systems that facilitate this
transparent sharing of information will likely become mainstream.

Social recognition is now big. Many vendors now offer points-based

recognition tools that let employees provide real-time “kudos” and
“rewards” to others in the company. These tools have a dramatic
impact on employee engagement, and engagement has become one
of he most important issue on the minds of business leaders.

And finally, as mobile device vendors unleash a new barrage of

mobile phones and other wearables, we have more location and
employee data available than ever before. One vendor's tools
monitors employee location and showed managers that engineers
who sit at larger lunch tables are more productive! We believe most
HR solutions should plan to accept and manage real-time data, real-
time feedback, and continuous social feeds to provide value to
people.

We believe that the “quantified self” will likely become the

“quantified employee” over the next few years. Read “The
Quantified Self becomes The Quantified Employee for more
information.
6. Radical changes to recruiting as social and referral based
recruiting becomes the norm.

The recruiting market has dramatically changed. Thanks to tools

like LinkedIn, Facebook, Indeed, Glassdoor, and many others, we
now source, attract, and recruit candidates through social and
referral recruiting. Recruiters look for candidates based on their
social profiles and new referral systems (Careerify, for example) let
us find candidates through the networks of our employees.

We now market to these individuals through candidate relationship

management systems and can track their activity and interest in
our brand. We monitor our brand through new sensing tools and
can now begin to build local employment brand based on
opportunities with a country.

New recruiting platforms (like

Workday, Careerify, Lever, SmartRecruiters, Cornerstone, Greenho
use, and Saba) now connect to this new world of social recruiting
applications, facilitating the transition from traditional “post and
pray” applicant tracking systems to highly interconnected
recruiting applications.

From a technology standpoint this means that recruiting

applications are now also networked, and most applicant tracking
systems (many of which are 7-9 years old) must be complimented
by referral recruiting tools, candidate relationship management
systems, candidate analytics systems, advertisement management
systems, video interviewing tools, mobile recruiting tools, and
employment data providers like BurningGlass.
The world of recruiting is now all about "managing the people
network," not just capturing and tracking resumes.

7. Dramatic changes to performance management and talent

mobility. Agile, transparent practices are a new area of
focus.

The old fashioned performance appraisal is under duress.

While most companies still have annual reviews, more than 80%
(Deloitte Human Capital Trends 2014) tell us they are not worth the
time people spend on them. Today companies want programs that
focus on real-time feedback, coaching, development, and agile
approaches to goal management. This means redesigning
performance management to be more agile, developmental, and
transparent.

A new breed of performance management tools now includes

features for regular check-ins, transparent sharing of goals, and
agile team management. While end of year reviews are still
important, new tools facilitate the regular process of coaching and
checking – and if they are hard to use, they won’t fit the bill. And
social recognition, a market which today exists as a separate set of
vendors, is now becoming integrated.

The talent review itself is changing. We used to sit in a locked room

and place people on a 9 box grid to decide who is a HIPO and who
should get the next developmental assignment. Our new research
shows that this information should be shared with people, and that
individuals should get direct feedback on their performance.
Dynamic talent pool management and tools that let managers and
HR teams find people based on experience, role, skills, and job
history are now becoming common. Many large organizations today
are struggling to build a new generation of talent mobility
practices, making it possible for younger employees to take “tours
of duty” and developmental assignments. HR systems must not only
measure performance, but they must help manage employee skills
and mobility as well.

Remember also that one of the most important practices in

management is development planning. Our research showed years
ago that of all the practices to consider in performance
management, development planning is among the most important.
While most HR systems bolted together their performance and
learning modules with some integration, today these systems are
much more tightly linked and employees can now browse for
development and use crowdsourcing to understand what
experiences or training they may need.

Because of the increase in talent mobility, onboarding is now

becoming a critical part of the talent process. When an employee
joins the company, changes roles, or is promoted to a new
assignment at a more senior level they need a whole set of things to
prepare them for the change. Vendors are beginning to understand
that “onboarding” and “mobility management” are similar
problems, and you should look for this kind of functionality in your
new systems.
8. Learning Management systems change and market
expands.

One of the oldest HR technologies is the learning management

system. Originally designed as classroom scheduling systems, this
market has grown and changed rapidly over the years. In the early
2000s these systems turned into “e-learning management systems”
and in the last four years many of the successful LMS vendors were
acquired.

Today the LMS market is over $2.5 billion in size and grew by over
21% this year, so it is the fastest growing major segment in HR
software. Why the growth? Corporate learning, content, and
collaboration have become fundamentally strategic to nearly every
company. Today every company needs to reskill technical staff,
onboard and train new employees, build deeper leadership
pipelines, and help people learn how to do their job better.

There is a rapid shift away from LMS as a “training administration

system” to the LMS as an “learning engagement platform.” New
LMS technologies now integrate learning with talent and
performance management, they include integrated content and
expertise management, and they often have integrated
collaboration, recommendation engines, and tools. Massive Open
Online Courses (MOOCs), for example, represent a whole new
source of learning – as does YouTube and a wide variety of new
content sources. Your LMS should incorporate this into an
employee’s experience. And the new technology called “Tin-Can”
will let you track any and all learning activity, including just
clicking on a website.

One of the other disruptive changes in the LMS market is the

emergence of “embedded learning” and “intelligent learning” as
keys to success. One vendor, for example, connects its LMS
technology to retail store management systems and can “pop
learning” right into the window of a retail employee when they
have a quiet time in their shift. Another vendor offers a direct link
to Salesforce and can automatically register employees in courses
and pop content into their window after they execute certain
transactions. Imagine a sales person, for example, who opens an
opportunity for a multi-million dollar deal but has not yet been
certified for “large account selling” – the system would
automatically register them and notify them that they must
complete the course before moving forward.

9. HRMS and Talent Management merge: ERP vendors

catching up.

What about the big issue of buying all your HR applications from a
single ERP vendor? With Oracle, SAP, Workday, SumTotal, Infor,
ADP, Ultimate, and other HRMS providers offering a range of talent
management applications, is it time to consolidate to a single
vendor solution?

Well in many ways consolidation has already occurred. All major

HRMS vendors offer recruitment, learning (with the exception of
Workday), performance management, talent management, and
analytics solutions along with their core HRMS and payroll
applications. So you can now select an HRMS or ERP provider
based on your infrastructure or broad existing investment and
expect much of your core functionality to come from that vendor.

Are all the ERP vendors the same? Not at all. Each vendor has its
own core strengths and a variety of new vendors now focus on the
mid-market. If you are a global company you must evaluate payroll
solutions as well as country-specific solutions and support. If you
are a mid-market company you should make sure the system is both
affordable and very easy to use.

Despite the consolidation, you will still end up with multiple vendor
solutions. Innovation in the areas of networked recruiting,
analytics, crowdsourcing, real time engagement management,
social recognition, and collaborative learning still continues. The
ERP vendors now offer credible, trusted solutions for most core
applications of HR and talent, but most of the innovation continues
to come from small providers.

While ERP providers have an impressive and broad array of

solutions, the pace of innovation in HR is accelerating. So while
buyers must obviously select one or only a few ERP providers, we
believe that the HR market will likely always have new disruptive
innovators.

You as a buyer should always be open to taking your existing ERP

vendor standards and opening it up to new small vendor solutions.
The “one vendor” idea has come and gone. In today’s cloud-based
technology environment, companies can easily integrate multiple
solutions so we should design and assume that there will be new
disruptive products to buy, and just make sure we are ready to
integrate them with our ERP investments.

10. Technology savvy vendors will likely outpace their peers

and "Acqui-Hiring" will continue.

The final disruption is the rapid change in technology itself.

Vendors with legacy products and architectures will likely find life
more difficult in the coming years. Cloud-based systems, flat user
interfaces, mobile apps, video, and advanced analytics are all now
standard technologies for startups. Vendors with expertise in these
new engineering and design paradigms will likely outpace their
peers.

Look, for example, how fast companies like Snapchat and Whatsapp
became billion dollar valuation companies. It wasn’t because these
companies had thousands of advanced features – in fact it was quite
the opposite. These development teams were able to harness new
mobile and cloud technology to create a highly engaging user
experience that makes communications or photo sharing easy. This
is not as simple as it sounds. They invested many hours of trial and
error to learn how to build highly engaging mobile applications,
eventually creating something transformational in our lives. HR
vendors have to do the same.

Winning vendors will build agile, highly expert teams. They will
likely release new features and interfaces every few months and
they will be able to rapidly adapt their products as technology, user
experience, and client demands change.
(The war for technical talent is raging: Vendors like Hiqlabs, which
just released an innovative new analytics solution for retention,
have attracted some of the top data scientists in Silicon Valley.
Workday "acqui-hired" their team from Identified, and Cornerstone
just "acqui-hired" theirs from Evolv.)

The rules for HR software are changing. Companies no longer buy

HR software solely based on features: they look for the total
employee and user experience. Vendors have to build deep skills in
design, mobile, analytics, cloud, integration, and modern
programming technologies.

And even more importantly, disruptive HR vendors know how to

attract and retain their teams. There is a huge market for the
leading software engineers, so they go to the well managed
companies. HR vendors will likely not be able to attract this type of
talent if they aren’t building exciting products and creating an
environment that drives high levels of customer value.
Engagement is not just a market for HR technology; it is also an
important strategy for the vendors themselves.

Bottom Line: Tomorrow’s HR solutions will likely be

radically different.

Bottom line: the days of selecting an HR vendor based on features

and checklists are coming to an end. Many vendors have similar HR
process features, and most of the strong product managers move
from company to company to share their skills. Winning vendors
will embrace these ten disruptions and deliver products that feel
like consumer apps yet have the data analysis, network integration,
and compelling user experiences of Apple, for example.

The incumbent, larger vendors will likely remain, and the winners
will continue to acquire smaller companies. Vendor sales forces will
probably compete as vigorously as ever, but buyers will start
looking at HR technology as a total “employee experience."

Implementation of HR technology will always be a challenge: but

other than change management and communications, the systems
are becoming easier and easier to use, making HR technology
“disappear” into the corporate infrastructure and become just “part
of doing business and coming to work.”

Vendors have many challenges to deal with over the next few years,
but the marketplace is filled with highly trained, motivated, smart
people and we believe HR technology can add ever more value each
day. This is a dynamic market filled with talented and committed
vendors, and we see the value of HR technology going up rapidly.
Perhaps for the first time since the original personnel database was
developed on a mainframe, we believe HR technology can become
one of a company’s most important tools for talent management,
strategic decision-making, and overall company success.

Quality of data. Talent analytics relies on techniques that are borrowed from domains or business
functions (such as marketing and finance) that tend to produce very large volumes of data.
However, small organizations may not have high-quality HR data and may lack the analytical
capabilities to adapt techniques designed for big data to areas where the volume of data is quite small
(Cappelli 2017). The result is that translating the findings into business outcomes can
be problematic.