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The Competitive Advantage of Data Driven HR

In recent years, data analytics has completely transformed the work style of several departments, namely marketing and operations. Terms and words these departments have started using were completely unknown a few years ago. Now they are the dominant way of working when e.g. executing campaigns or replenishing stock. 

In 2015, data analytics started penetrating HR as well. We could hear mentions of the very first implementations of predictive analytics at industry conferences as well as see the first tailor-made solutions for the HR market. 2015 was the year when HR analytics got on the radar of top-level executives.

Why the sudden interest? 2015 saw two major innovations that appeared almost simultaneously: new technologies in data management and storage and so called Data Science. This brand new science has proven to have the means to answer important HR questions such as: What are the parameters that best predict a job candidate’s performance? Which of our training modules actually work? The most advanced data-science applications are even able to predict the future, e.g. employee future performance, frequency of illness or attrition.

Using analytics has several commercial impacts (cost cuts, higher efficiency in the supply chain process, etc.) and one truly revolutionary one: it allows us to make higher quality decisions. All companies have their established myths about what is the best approach to their clients, what works and what doesn’t, what behavior should be rewarded and what not. These myths have been created during the course of time, sharing interesting stories, jokes and best practices. These myths have one thing in common - they are mere assumptions created by managers in order to able to make decisions. Another thing they have in common is that a large portion of them is simply false. Unfortunately, nobody is able to tell them apart.

Data analytics is able to turn these myths into hypotheses which can be then thoroughly tested. It is not an easy process as you need to consolidate data, sort it out, make changes in the experimental design and analyze and evaluate the outcomes. Data analytics allows us to make decisions based on evidence. If we succeed, our debates will profoundly change. They will be shorter and more constructive. There will be less space left for arguing.

HR departments which have started using data analytics are called Data Driven HR (if the whole organization uses data analytics, we can also talk about Data Driven Organizations). Having HR analytics will soon become a strong competitive advantage since it brings better employees (recruitment), better-functioning organizations (decisions) and cost cuts (operations). All this just because companies will start using data they already have but do not know how to use.

Author:  Michal Osuský, Decision Science, KPMG Česká republika