Human Resources Analytics: How to turn organizational data into corporate strength and success
By Rupert Morrison
We are constantly reminded that people are an organization’s most valuable resource, and yet it is one of the most mismanaged. The problem is pervasive, eroding performance at many levels. At an individual level, too many employees are unclear about what their roles in the organization really are. At a higher level, too many organizations are still struggling to understand where their people are and what they are doing, let alone realizing their plans and aspirations for the future. To add to this mix, the people function often finds itself at the bottom of the pile when it comes to budgeting priority and investment. So how can organizations turn this around? The answer lies in organizational data (OD) and analytics.
Function Over Form: Agents of Change
To appreciate the business value and opportunity of organizational data we need to understand why businesses are struggling to build effective organizations. Firstly, the practice of organization design and business transformation is often shortsighted and superficial. Businesses are overly concerned with form over function. There is an obsession with organizational structures rather than the work that structure needs to do or the skills that structure needs in order to deliver. Secondly, organizations find it difficult to track the delivery and evolution of an organization design. Transformation projects are left to evolve rather than being led, resulting in superficial change instead of an impactful transformation to the way work is being done within an organization.
There is a huge opportunity for businesses to use their organizational data to gain competitive advantage. As companies look to become more agile, organizational data and analytics will play a key role in accelerating business transformation in today’s fast-moving market. In this article, I will walk through the transformation journey and the role organization data will play in delivering greater business impact.
There is a huge opportunity for businesses to use their organizational data to gain competitive advantage.
Reporting Lines – It’s What Lies Beneath that Counts
The idea of treating an organization as a system is not novel, but the thinking is rarely applied in practice. Too often people start with what the organizational structure looks like, and then never get beyond thinking about reporting lines and how they could change. People are the central unit in organizational data, but they are connected to a range of information. For example, people fulfill roles, which follow processes and require specific competencies or skills in order to hit objectives and organizational goals. Only by fragmenting the organization into its core components can we then start to focus on how and where the real organizational change is needed (see Figure 1).
Figure 1: The core components of an organization’s system and how they are linked to each other.
To understand the role that organizational data plays in linking the organizational system together, think of people as a unit of analysis that are connected to many components. Each component of the system (roles, processes, etc.) contains its own cluster of information and data, and each component will be affected if one of them changes. For example, if you change a process, that will affect a role that a person or a group of people are performing.
Making the Complex Simple: Breaking Down the Organizational System
To help understand the many-to-many connections within organizational data it is helpful to think of each component as a set of hierarchies. The obvious example is where people are represented in a hierarchical org chart. The real value, though, lies in breaking down each component into a hierarchy to help categorize them into logical chunks of information. For example, processes can be broken down into a number of levels to detail work that needs to be done (see Figure 2).
Figure 2: An example of how value chain and support processes can be broken down into hierarchies.
Creating these hierarchies across the organization then allows you to connect the relationships people have to other organizational elements. An example of this relationship can be seen in an accountability matrix (Figure 3). Here you bring together your process hierarchy and people or role hierarchy to assign accountabilities, providing clarity of what’s required for each activity and role. Doing so will uncover which competencies are most in demand and where the greatest skill gaps are. Ultimately, this will help you in prioritizing and designing your workforce training and recruitment plan.
Figure 3: Accountability Matrix gives practitioners visibility of the impact on structure, headcount, costs and skills of multiple organizational scenarios.
Faster Insights for Faster Change: Visualizing Organizational Data
To understand the complex many-to-many links and connections of the organizational system, data must be visualized in an intuitive way. If people can see what’s going on in the “as-is” and where they’re going with the “to-be,” then it’s easier to get them engaged in making organizational changes real.
In practice, this is easier said than done. Time and time again I hear practitioners say their data is too bad to get good insights from analytics. The irony is that human resources (HR) and OD teams possess not only some of the most valuable data to the business, but some of the most complete. Think about payroll, human capital management (HCM) and enterprise resource planning (ERP) – each one has valuable people data and that’s just for starters before we’ve gone hunting for process or performance data. Even if the data sits in a spreadsheet, bad data is better than no data. The trick is twofold – first, simply start using the data and start engaging people through visualization tools and dashboards. The moment you play back data that’s wrong to business owners they will correct it to make sure it’s useful and reflecting the true picture. Second, use gamification to help people keep their data up to date. For example, visualize data completeness so managers of different business functions can compete on where they are in a journey of data completeness and cleanliness.
Engaging in Change: Beyond Org Charts, PowerPoint & Spreadsheets
Organizations are fluid and constantly evolving. This means visualizations and analytics need to reflect that. Interactive images that can tell a story within seconds are much more powerful than static rows of data in a spreadsheet. Compare the two images in Figure 4: spreadsheet vs. sunburst visualization. Although both package the same data, such as reporting lines, engagement index, depth and spans of control, the latter communicates the information better. Visualization makes the complex simple. By accelerating the process of getting ad hoc insights from data, visualization can facilitate faster and better decisions in every step of the OD process – be it objective setting, rightsizing or workforce planning.
Figure 4: Spreadsheet vs. Sunburst colored by engagement generated from OrgVue. The power of visualization in accelerating insights from organizational data.
One of the biggest traps in OD is when people only think of it as an exercise of moving org charts around a PowerPoint slide. With interactive visuals, you can view all the elements of organizations at once and model the impact of changes in different future scenarios. Since OD projects are rife with budget overruns, process disruptions and risks of losing good employees, having a nimble data visualization tool that lets you track headcounts, performance against plans and forecasts is hugely valuable. It will accelerate the implementation of changes and improve their odds of success.
Planning for the Future: Modeling the Impact of Change
Understanding and analyzing the organization as a system sets the platform for value-adding analysis, especially when doing scenario modeling in both macro and micro-design. For example, by having a clear map of how the organization is linked, you can easily trace the impact of improving the efficiency of a given activity and see who would be impacted and what would the full-time equivalent reduction be. The ultimate outcome of treating an organization as a system is this powerful ability to explore the impacts of various actions when modeling the “to-be” organization.
Investing in the right skills and technology to make the most of organizational data and analytics should be an important focus area for 2016. At the end of last year, Ernst & Young showed that the mergers and acquisitions market is at its strongest in six years, with six in 10 companies pursuing acquisitions. This implies that transformation exercises are becoming the norm, and organizations must treat them as an ongoing process rather than a one-off project. With this outlook, functions that hold organizational data will be responsible to drive the end-to-end transformation of their business and increase their odds of success.
Rupert Morrison is CEO of Concentra analytics and the author of “Data-Driven Organization Design: Sustaining the Competitive Edge Through Organizational Analytics.”