Demonstrating HR's Business Value Without HR Analytics

Editor’s Note: This is the fifth and final article in our Jack Bucalo series “Making HR a True Business Partner.” Join HR Exchange Network to receive our newsletter and access all of our content, including articles, columns, videos, reports and more.

The 2016 Deloitte Global Human Capital survey indicated that only 32% of the respondents were ready to implement HR analytics, despite the fact that 77% felt they were very important.  This large gap reflects the fact that, in part, since the Great Recession, HR budgets have been very tight as many companies struggled to return to profitability.  In turn, it has been difficult for most HR functions to justify the large amount of expense typically needed to fund an HR Analytics function.

The use of HR analytics is in its infancy, even though many advances have been made in a relatively short period of time.  Today, most current applications of HR analytics are used to improve the effectiveness and/or efficiency of its various administrative duties in such areas of talent management, recruiting, hiring costs, turnover reduction, and so on.  In doing so, Chief HR Officers (CHRO) are hoping to demonstrate HR's business value to the CEO and line executives in an effort to be considered as an equal business partner and get a seat at the C-Suite table.  However, even when the right metrics are selected, are measured correctly and lead to actionable items, they can typically have only an indirect impact on a company's profitability and strategic growth.  In addition, this administrative approach has the distinct disadvantage of keeping HR off in its own administrative world - away from the financial, operating and strategic realities of the company's business.

Therefore, the question becomes:  how can HR operate without the use of HR analytics and still demonstrate HR's ability to add business value to the company that will have a direct impact on achieving its financial, operating and strategic business objectives?

The answer to this critical question, first and foremost, lies in the desire of the CHRO or HR Leader to be a business person FIRST and an HR person SECOND.  The first step is to have a meeting with your CFO to understand the company's key financial objectives for the current fiscal year.  Second, meet with the COO or Division Head to understand the key operating objectives for the current fiscal year.   Thirdly, meet with the CEO or COO to clarify the overall business strategy for the company and each of its major divisions or groups.  With the above information, the CHRO is ready to connect his/her HR resources to the company's business objectives - financially, operationally and strategically while recognizing that some staff and budget resources will likely have to be realigned to do so. 

To illustrate how HR can provide this business value, here are some examples of typical financial, operating and strategic business objectives that utilize some innovative HR services to help the CEO and line executives to achieve them.

Financial Objectives

1.  To improve earnings per share from "X" to "Y" $/share.

      o  With Finance, implement a Cost Control/Productivity Improvement Workshop to identify potential profit improvement opportunities.

      o  With Engineering and Marketing, implement a Product Innovation Workshop to identify product innovations which can gain market share, reduce product cost and/or use more efficient technology.

2.  To increase cash flow by "Z" $.

      o  With Inventory and Manufacturing, implement an Inventory Reduction Workshop to identify items that can be eliminated, reduced or replaced by less expensive ones.

      o  Train Sales personnel how to collect outstanding receivables to bring in more cash.

Operating Objectives

1.  To reduce the time-to-market of new product "Y" by 25% to exceed current industry standards.

      o  With Engineering and Marketing, implement several task forces to reengineer and streamline the entire design and launch cycle, while synchronizing with key quality and manufacturing checkpoints.

      o  Retrain management personnel on the key changes before implementation.

      o  Implement a Project Management Workshop to help ensure that the reengineering project and subsequent product development projects are achieved on time.

2.  To improve the company's customer service image to exceed industry standards within two years.

      o  With Customer Service (CS), survey outside and company experts to catalog the key service principles and requirements needed to drive the new image campaign.

      o  With CS management, survey appropriate top management executives to determine the industry CS service requirements for the next two to four years.

      o  Develop the new service principles and requirements, and acquire  top management approval.

      o  Assess the skill levels of CS personnel to meet the new service principles and requirements.

      o  Recruit and hire all critical CS management and technical personnel as needed.

      o  Train appropriate CS personnel on the new service principles, including any shift to generating new sales revenue from each customer service interaction.

      o  Establish on-going Innovation workshops designed to continually improve customer service.

Strategic Objectives

1.  To develop about 30 business unit presidents who will possess the necessary general management skills while operating a $50 million per annum or larger business within two years.

      o  With a business school, develop an Executive General Management seminar that covers Strategic Market/Product Planning, Financial Management, Product Development, Customer Retention and Leadership.

      o  Ensure that all candidates have an annual Personalized Development Plan that emphasizes their developmental needs beyond the seminar subject content which is approved by the CEO.

      o  Review the compensation package (salary, bonus and stock) for each candidate at least annually.

2.  To increase sales revenue by 20% through the acquisition of a new business which utilizes an important new technology that is not currently present in the company.

      o  With Sales, update the Sales Incentive Plan to recognize the technology and its profit impact.

      o  Assess the competency level of all Sales personnel in the new technology and retrain as needed.

      o  Assess existing recruiting sources in the new technology and identify new ones.

In the above examples, many of them would require a different skill set than typically exists in an HR organization's Learning and Development (L&D) staff.  The L&D department would need to shift its emphasis AWAY from training managers in various interpersonal skills and basic leadership skills, and TOWARD the key aspects of the company's business.  This can be accomplished by utilizing internal company personnel who have the necessary operational backgrounds to work alongside personnel with a L&D background.

By implementing some of these or similar examples, the CHRO or HR Leader can help HR move away from its exclusively traditional administrative role and into the company's operational mainstream.  When that occurs over time, the CEO and line executives will begin to view the CHRO or HR Leader as an equal business partner and a full-fledged member of the top management team because they have earned that status.

In the end, each CHRO or HR Leader will have to determine if he/she wants to accept the difficult challenge of transforming the HR organization into an administrative/operational role in an effort to connect with the company's business objectives and strategic goals, rather than remaining exclusively in its administrative role and being considered by the CEO and line executives as an administrative afterthought.  In doing so, the CHRO or HR Leader will be viewed by them as a peer business person who brings added business value to the company, while also fulfilling its traditional administrative duties.