What's the role for 'big data' in your reward strategy?
It’s easy to get the impression that yours is the only company not doing anything with ‘big data’. Yet if we dig a little we find that the percentage of companies getting to grips with HR analytics is still pretty small.
Penguin Random House group HR director Neil Morrison, author of the Change-Effect blog, did some simple maths and found that when you discount SMEs with less than 250 employees and public sector employees (the majority of whom have no integrated employee data management systems, or holistic analytical capability), you are left with only one in five people employed by an organisation large enough to have the scale required to run predictive analytics.
Likewise, Bersin Associates looked at the top 500 listed US companies and found that only one in six were actually engaged in true analytics, with more than half not doing any proactive HR reporting – just waiting for ad-hoc business requests for information.
So if the majority of companies don’t have the scale to run true analytics, and research shows that most of those capable aren’t doing it yet, do we need to bother with this at all?
Making the case for ‘small data’
While ‘big data’ and predictive analytics are still rarely practiced in HR, there is a clear trend that businesses increasingly expect HR to understand and interpret the data we DO have.
A long-term concern of HR is that we have a credibility gap with the rest of the business and can’t get a seat at the management top table. An easy way to gain credibility is to be able to know and show what you are talking about and how it supports the business goals. Other function leaders are bringing their relevant information to the top table and so should HR.
If HR is ever going to engage with ‘big data’ and predictive analytics then it first needs to get comfortable with the data it already has and how to proactively review and report on it.
Starting the journey
Start small: consider the key issues for the business and target measures that will help give insight into those.
If you are not sure where to start then follow the money. Reward is a good area of HR to start with as it intersects with talent, engagement, even L&D and, as it deals directly with business spend, it is easy to communicate a cash impact to the business. What would change for you, and your business, if you knew the answers to these questions?
Leaky bucket – How much money is spent through the year between pay reviews on ad-hoc, out-of-cycle increases? Most businesses spend more than they realise in between their carefully managed annual reviews.
Underappreciated – How do the salaries of your high-performers sit against the market? When was their last significant increase? Employees that feel undervalued will leave, so are you backing your top people?
Past glories – Do you have any low- or mid-performers paid highly against the market? It’s easy for high pay to be self-perpetuating with standard pay rises for all. Do you need to red-circle any employees living on past glories?
Service penalty – How does employees' pay against the market compare by length of service? Are you paying long-servers more simply for having been around a long time, or are new hires coming in well above their peers?
10%ers – How many employees have increased their pay by more than 10% in a year? These could be your stars of the future.
Starting your data journey now is about building for the future. Your confidence in gathering and interpreting HR’s ‘small data’ will grow, and you can introduce your senior management to the idea that HR can come to the table discussing cash impact on the business.
Adam Nuckley is a reward consultant at reward and benefits specialist Innecto Reward Consulting