Raging Debates in HR AnalyticsBy Laurie Bassi, McBassi & Company

HR analytics holds the promise of both elevating the status of the HR profession and serving

as a source of competitive advantage for organizations that put it to good use. Our realization

of this promise hinges on our individual and collective ability to master the art and the science

of HR analytics. That, in turn, will happen much more quickiy if we can achieve clarity—even

consensus—on a number of issues where neither clarity nor consensus currently exists.

My hope is that explicitly naming,categorizing and examining someof the most important (but often

unnamed) debates will help speed the processof achieving consensus.

In this article. Section 1 briefly reviews theevolution of HR analytics. Section 2 positionsand comments on what I see as the majordebates within HR analytics, which I catego-rize as: what, why, who and when. Section 3speculates on the value that HR analytics canproduce in the future.

The Evolution ofHR AnalyticsAccording to a 2004 Workforce Management(formerly Personnel Journal) article, "In1978—in this publication—^Jac Fitz-enz pro-posed a radical, anti-establishment idea.Human resources activities and their impacton the bottom line could—and should—bemeasured. The reaction was apathy, disagree-ment and disbelief" (Caudron, 2004).

For the past three decades Fitz-enz has, alongwith a growing band of kindred spirits, cam-paigned tirelessly to improve the state of HRmeasurement and to help both HR profes-sionals and senior executives understand itsimportance.

These efforts started out at the nuts and boltslevel—creating definitions for basic HR met-rics such as compensation, staffing, hiringand retention. This work laid the foundationfor gathering comparable data across organi-zations, which in turn, enabled thebenchmarking of HR metrics. Over the years,a number of scholars and practitionersexpanded the benchmarking of HR metricsto include investments in training and devel-oping employees, as well as in a broad arrayof other HR policies and practices.

Refining and improving the benchmarking ofHR metrics remained a primary area of focusthroughout much of the 1980s and 1990s.This benchmarking focus, while helpful ininforming HR professionals about how theirorganization's HR metrics stacked up to com-parable or best-in-class organizations,provided little by way of actionable businessintelligence on how to gain competitiveadvantage through people. It also contributedto an often unhealthy belief by HR profes-sionals in simple one-size-fits-all solutions:something to the effect of, "If we can just lookmore like our competitors on some standardHR metrics, then we have done our jobs."

During the past decade, this has begun tochange. Advances in the software used toautomate transactional aspects of the man-agement and development of people haveexpanded the landscape of possibilities. Notonly have data on HR metrics become morereadily available, they have become availablein forms that make it increasingly possible tolink disparate data sources together. So as theworlds of HR metrics and software have con-verged, new horizons for creating businessintelligence on the people side of the businessare arising. Many HR professionals, however,wonder why they should go to the trouble ofgoing down this path because they are alreadyway too busy handling what is already ontheir plate—an issue that is discussed in thefollowing paragraphs.

Questions that had previously requiredtedious, manual calculations to answer, cannow be answered more easily and with rela-tive precision. Examples include identifyingthe profile of candidates most likely toaccept a job offer, the probability that anygiven employee will leave, and the attributesof high-performing employees. But even assome linkage analysis has become easier,other types of analysis—especially thatwhich identifies the human drivers of busi-ness results—has remained challenging.

This is partly due to fundamental method-ological issues; it's easier to identifylinkages with larger sample sizes of indi-vidual employees than with smaller samplesizes of groups responsible for organiza-tional outcomes. And it's partly due to someof the myths and limiting mindsets that haveimpeded progress.

In sum, while it has become much easier toanswer questions about the drivers of indi-vidual-level outcomes, less progress has beenmade on answering important questionsabout the drivers of organization-level out-comes. Too often, vendors fill this void byusing clever marketing and shoddy sciencethat confuse the drivers of individual perfor-mance with the drivers of organizationalperformance.

Major Debates inHR AnalyticsNot surprisingly, the evolution of HR Analyt-ics has shaped the debates that swirl aroundit. These debates—some of which are explic-it and open, others of which are muted butreal—can be classified into the categories ofwho, what, where, when, why and how.

The "What" DebateA good starting point is the debate asking,"What is HR analytics, and what can andshould it be used for?"

The term "HR analytics" means differentthings to different people. To some, the termonly means a process for systematicallyreporting on an array of HR metrics—timeto hire, turnover, compensation, employeeengagement. Often the reporting includes abenchmarking component (e.g., how ourcompensation compares to the broader mar-ket, or how we compare to organizations on >•

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a one-size-fits-all measure of employeeengagement). While this is definitely a com-ponent of HR analytics, in and of itself, itdoes not constitute HR analytics.

At the other end of the spectrum are thosewho regard HR analytics in a much morerarified sense. To these people, the only activ-ities and/or processes that constitute HRanalytics are those that involve "high-end"predictive modeling (e.g., "what-if" scenariosthat forecast the consequences of changingpolicies or conditions). This perspective, too,is limited.

My view is that this particular aspect of the"what" debate can be resolved by thinking interms of "both/and" rather than "either/or."In a recent work, my co-authors and I definedHR analytics to be "the application of amethodology and integrated process forimproving the quality of people-related deci-sions for the purpose of improvingindividual and/or organizational perfor-mance" (Bassi, et al., 2010).

Davenport, Harris and Shapiro help to pro-vide clarity in this area by laying out the range

of applications that constitute "talent analyt-ics," their phrase for HR analytics, fromsimplest "human-capital facts" to mostsophisticated analytics that help optimize the"talent supply chain" (Davenport, et al.,2010).

Perhaps most fundamentally, "what" HRanalytics is about is taking an evidence-basedapproach to management. According to Pfef-fer and Sutton, " Evidence-based managementis based on the belief that facing the hard factsabout what works and what doesn't, under-standing the dangerous half-truths thatconstitute so much conventional wisdomabout management, and rejecting the totalnonsense that too often passes for soundadvice will help organizations perform bet-ter" (Pfeffer and Sutton, 2006).

Getting to this point will require movingbeyond existing myths. Perhaps one of thebiggest myths in this regard has to do withemployee engagement. It is a construct thatthe psychology profession that heavily domi-nates HR was created to explain whatmotivates individuals. But too often one-size-fits-all measures of employee engagement

Perhaps most fundamentally, "what" HR analytics isabout is taking an evidence-based approach tomanagement... Getting to this point will requiremoving beyond existing myths.

have somehow become equated with organi-zational performance in the minds of manyHR professionals, as well as their seniorexecutives, despite the fact that it's now pos-sible to link people factors directly to businessoutcomes themselves. The focus on employeeengagement requires serious examination ifHR professionals are to become able andrespected practitioners of HR analytics (Bassiand McMurrer, 2010).

In sum, HR analytics is an evidence-basedapproach for making better decisions on thepeople side of the business; it consists of anarray of tools and technologies, ranging fromsimple reporting of HR metrics all the wayup to predictive modeling.

The "Why" DebateAnother basic debate swirls around, "Whyshould we do HR analytics?"

Some well-known and highly regarded HRpractitioners argue that they have no need forHR analytics because their senior executivesdon't require or expect it of them. This is notan excuse for complacency. This misguidedpoint of view is the result of a fundamentallyincorrect understanding of the purpose ofHR analytics. It results from a confusion ofHR professionals' ongoing quest to proveHR's worth, with their obligation to use thetools of their profession to help improve indi-vidual and organizational performance.

Using HR analytics as a means of proving thevalue of the HR function is misguided: It is amisuse of analytics that fails to create anylasting value for an organization. "From apractical perspective, it immediately calls intoquestion the credibility of any findings,insights, and recommendations that emerge.In short, if executives believe the HR functionis embarking on an analytics project to jus-tify itself, its budgets, or its programs, theoutcomes from the project will be viewedwith suspicion even if the analysis is donewell. More substantively, such a perspectivefails to capitalize on the tremendous valuethat can be created for an organization as awhole from the effective application of HRanalytics" (Bassi, et al., 2010).

The purpose of HR analytics is to improveindividual and organizational performance.So it needs to be done, even if the CEO doesn'trequire it. Moreover, how could you expectthe CFO to require something that he or sheprobably doesn't know exists? Added sidebenefits of HR analytics are that it can help

16 PEOPLE & STRATEGY

identify where not to be spending time, effortand budget, thereby reducing HR workloadsand it can enhance the credibility of HR.

So what about the role of ROI analysis as acomponent of HR analytics? Many practitio-ners view ROI as the Holy Grail of HRmeasurement. These people are often focusedon using analytics as a method of proving theirworth. Boudreau and Ramstad summarize theproblem clearly: "Understanding the returnsand investments in HR programs and prac-tices is useful, but the quest for ROI will notprovide the entire solution to the need for adecision science ... Most ROI calculations failto change decisions about the vital humancapital and organization resources. They areused primarily to demonstrate the value of HRinvestments after the fact. ROI creates thewrong focus" (Boudreau and Ramstad, 2007).

In sum, the reason for doing HR analytics isto improve individual and organizationalperformance—not to prove the worth of HR.

The "Who" DebateAnother important element of the debate is,"Who should or can do HR analytics?"

The debate over ROI is closely related to the"who" debate. Who will be responsible formeasuring the financial impact of humancapital—the HR function or the office of theCFO that has the best handle on availablemeasures of business results? And who willdrive the future of HR analytics—the HRfunction or IT that typically owns the ana-lytic software and tools necessary forHR analytics?

Well, it depends. It depends on the ability anddrive of HR functions to rise to the occasionby developing the skill sets and organiza-tional capability required to credibly lead HRanalytics. This does not require that HRdevelop full-fledged IT or finance capabilities.But it does require that HR functions developsufficient analytic wherewithal—both from afinance and IT perspective—to be able topartner knowledgeably with and lead HRanalytics efforts on both of these fronts.

In the absence of the necessary IT and finan-cial acumen skill sets and organizationalcapability, HR functions will inevitably cederesponsibility for analytics to both the IT andfinance functions. This would be a negativedevelopment for those HR functions (or pro-fessionals) that aspire to have a strategicimpact on their organizations. And arguably.

"Why should we do HR analytics?" ... In sum, thereason for doing HR analytics is to improve individualand organizational performance—not to prove theworth of HR.

it would also be a negative development foremployees and firms, as the people side of thebusiness has historically not been a strengthof either IT or finance. That's why it's impor-tant for HR to develop these skills andcapabilities.

In sum, HR—not IT or finance—needs totake the lead on HR analytics. But doing sowill require that HR develop new capabilitiesand capacities.

The "Where and When Debate"Finally, some debates ask the question,"When should we use HR analytics?"

For example, some people worry aboutwhether it is possible to create good globalanalytics in a world of various cultures, regu-lations and standards. Others have begun toraise early concerns about potential abuses ofHR analytics as it becomes more powerfuland widespread.

The first of these—whether it is possible tocreate good global analytics—is, I believe, anartifact of old thinking. Although it would beperfect if there were truly one-size-fits allsolutions, rarely do they exist in the realworld. HR analytics provides the tools tobreak through the need for a single globalsolution; it provides tbe wberewithal to iden-tify with precision and rigor both that whichis common across various environments (bethey geographic, regulatory, etc.) and thatwhich is unique to a specific environment.

In other words, using the absence of a perfect,universal answer as a rationale for not doingHR analytics is tantamount to confessingignorance about the very capability that HRanalytics creates. It's about finding good, cus-tomized (not mytbical one-size-fits-all)understanding, insights and answers.

Discussion about potential abuses of HRanalytics is only now beginning to emerge.Rapid advances in software capability,together with an increasing capacity to pull

together disparate pieces of information, arebeginning to create ethical questions aboutwhat is and is not appropriate in applyingHR analytics.

For example, under what conditions, if any,is it appropriate to use legally obtainedrecords about an employee's prescriptiondrug usage in making decisions about thatemployee? What if doing so can help identifyemployees or job applicants who have anunusually high probability of becoming vio-lent in the workplace? By the way, I'm notmaking this up; I actually had this conversa-tion with a leading software companyworking in this space. Are there circumstanc-es under which it is right to use thatinformation? How can the organizationalbenefits of this type of analytics be weigbed

The "How" ofHR AnalyticsA number of books provide valuable guid-ance on how to get started on, oradvance, HR analytics within an organiza-tion. A few are especially noteworthy inthis regard, including the following:

• HR Analytics Handbook (Bassi et.al.)provides succinct "how to" advice.

• Investing in People (Cascio andBoudreau) provides detailedguidance for undertaking a widevariety of HR analytics calculations.

• Analytics at Work (Davenport et al.)provides broad-based guidance onhow to create a more analyticallyoriented culture within anorganization.

• The New HR Analytics (Fitz-Enz)provides "how to" essays, casestudies and sample worksheets.

• The Business of Learning (Vance)provides detailed guidance on how toapply analytics and the logic ofeconomics to all aspects of thetraining and development function.

VOLUME 34/ISSUE 2 — 2011 17

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against the individual costs that arise fromerrors in prediction? Probably the best wayto avoid unexpected ethical quandaries is totackle the issue head-on by establishing clear-ly written and widely circulated principles forwhen HR analytics will and will not be used.

In sum, many applications exist for when HRanalytics can help us get to better (but not"perfect") solutions. A useful mantra to keepin mind is, "Let not the perfect become theenemy of the good." Having said that, it isimportant to be aware that as the power ofHR analytics advances, so too, will the ethicaldilemmas that it poses.

The Future ofHR AnalyticsHR analytics is an evidence-based approachfor improving individual and organizationalperformance by making better decisions onthe people side of the business. Although it isnot its purpose to prove the worth of HR,analytics can certainly enhance the credibilityof the function and the profession by improv-ing the effectiveness of HR policies andpractices and contributing to the competitiveadvantage of organizations that develop it asa core competency. An added side-benefit isthat HR analytics can help expose whereeffort, resource and budgets are not prodtic-ing their intended impacts, and in so doingreduce the workload while improving theeffectiveness of HR.

As such, HR functions and professionalsdevelop new skills and capabilities so thatthey can effectively partner with and lead ITand finance on HR analytics initiatives or riskceding this increasingly important and stra-tegic responsibility to them.

Along the way, HR professionals will need toaddress ethical dilemmas. Do this is proac-tively by clearly delineating the principles fordeciding when HR analytics will and will notbe used.

Without a doubt, mastering the art and sci-ence of HR analytics takes effort. But it canresult in an elevation of the status of the pro-fession and its practitioners by helping themto guide their organizations in finding thesweet spot—the intersection between moreprofitable and more enlightened managementand development of people. Mastering thiseffort would represent a win-win for employ-ers and employees, and ultimately the societyin which we live and work.

Achieving this win-win will require that wemove beyond the confused debates and dan-gerous half-truths that currently muddy theHR analytics waters.

Let us resolve to do so.

/ am grateful to Dan McMurrer, JenniferMoss, Jonathan Sidhu and Mark Wickers fortheir thoughtful input and suggestions.

ReferencesBassi, Laurie, Rob Carpenter, and Dan McMurrer. HRAnalytics Handbook: Report of the State of Knowledge,Reed Business, Amsterdam, November 2010, pages 11,13-14.

Bassi Laurie and Daniel McMurrer. "Does EngagementReally Drive Results?" Talent Management Magazine,March 2010, pages 42-48.

Boudreau, John and Peter Ramstad. Beyond HR: The NewScience of Human Capital, Harvard Business Press, 2007,page 192.

Caudron, Shari. "Jac Fitz-enz, Metrics Maverick,"April, 2004, http://www.workforce.com/section/news/feature/jac-fitz-enz-metrics-maverick/index.htnil(accessed March 2,2011).

Davenport, Thomas, Jeanne Harris, and Jeremy Shapiro."Competing on Talent Analytics," Harvard BusinessReview, October 20 10, page 4.

Pfeffer Jeffrey and Robert Sutton. Hard Facts, DangerousHalf-Truths and Total Nonsense: Profiting from EvidenceBased Management. Boston. Harvard Business Press.2006, pages 12-13.

Laurie Bassi is the CEO of McBassi &Company, a leader in the emergingdecision-science of human capitalmanagement. Since she foundedMcBassi in 2001, she has been workingwith clients to help them unleashhuman capability within their organi-zations. She is also chair of the boardat Bassi Investments, Inc.—an invest-ment firm that invests in firms withsuperior human capital managementcapabilities. Bassi is a prolific author,with more than 80 published papersand books. Her current books areGood Company: Business Success inthe Worthiness Era (Berrett-Koehler,2011) and HR Analytics: A Summaryof the State of Knotvledge (Reed Busi-ness, 2010). She holds a Ph.D. ineconomics from Princeton Universityand a M.S. in Industrial Relations fromCornell University.

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