Business Intelligence – Transforming Data Into Business Acumen
04 Oct 2005
You granted merit raises to your employees this year. Can you measure your ROI on that expenditure? Did it resolve the turnover issue at your underperforming manufacturing facility? Did it help retain the people and skills required to meet your company’s five-year growth plan?
How Business Intelligence Supports Strategic HR Decision-making
- Provides accurate, meaningful and actionable information
- Introduces modeling capabilities based on real data to make projections about the changing dynamics of a company’s workforce in advance of, during and after policy, regulatory and other changes
- Delivers the methodologies, tools and analyses to understand the business impact of workplace trends, decisions and policies
- Identifies and links performance drivers and critical workforce trends that better inform the strategy for end-to-end business solutions
More than ever before, human resource professionals are being called upon to answer these kinds of complex questions that are tied to a company’s overall business plan. In order to provide strategically sound answers, they need the critical information provided by the right technology processes and analytical tools. They must be able to access and analyze data from all of the HR functional areas and employ appropriate methodologies to interpret the data, draw meaningful conclusions and make fact-based decisions.
Fortunately, today’s advanced technology systems can assimilate essential data and transform that data into the business acumen that supports the broader enterprise business plan. Companies may have this expertise in house, or they may turn to HR outsourcers and consultants who have the data, technology and knowledge capabilities to provide solutions.
From Disparate Data To Integrated Information
Many companies struggle with the problem of disparate data that is housed in separate HR systems, making it difficult to extricate and even harder to interpret.
Michael Tindall explains, “The first step is to extract and combine data from the various vertical HR functions, such as benefits, payroll and staffing. This integrated information can then be examined using appropriate metrics and analytics to produce business intelligence (BI) – the useful information on which HR professionals can base strategic decisions.
Tindall continues, “For example, using these methodologies, we can discover what is really driving the cost of a company’s benefits – the plan design or a hiring freeze that was instituted to control near-term expense and has created an older workforce over time. Or we can determine if increased hiring is due to growth and skill upgrades or unwanted turnover.
“Additionally, BI incorporates insight into statutory and regulatory compliance issues that are front of mind because of Sarbanes-Oxley, not only for U.S. based organizations but for globally positioned companies as well,” Tindall concludes.
By accessing HR data horizontally across functional areas, companies can establish an informational baseline. That, in turn, allows them to measure the results of HR programs and practices, and identify critical insights about their workforce. They can examine trends over time and build a base for modeling and conducting what-if projections for the future.
Delivering Business Intelligence To a Global Organization
BI is an especially critical area – and challenge – for global organizations, giving the complexities of managing a culturally and geographically diverse workforce. As Tindall explains, “An organization should start with a clear understanding of what it needs to measure and why, and take an inventory of the systems that house the base data. Often, a capital investment is necessary to obtain the requisite tools and infrastructure. Additionally, the company must possess the skills to understand the analytics and implement the changes it may decide to make as a result of this new business intelligence.”
Roselyn Feinsod, Principal in Towers Perrin’s consulting practice, adds, “Intangibles are equally important in the delivery and use of BI. Effective measurement requires buy-in and commitment from the HR team to use the intelligence to redefine the ways decisions are made.
Feinsod also suggests, “It’s best for companies to start with a few key business challenges that are significant to overall results. Although a long-term vision is essential, it’s better implement in stages.”
Benchmarking Increases the Value of Business Intelligence
BI’s value is greatly enhanced when comparisons can be made to industry norms and benchmarks. According to Feinsod, “As HR outsourcing has matured, more benchmarking information is becoming available. Proprietary databases are being developed that can be used in combination with benchmarking data maintained by third-party vendors, industry groups and government.
“By comparing typical ranges for workforce metrics in the marketplace, HR can set appropriate targets for the measures that are critical to achieving objectives. For example, a company can consider labor supply, compensation, healthcare and payroll tax norms to understand what will drive its future profitability and productivity, to evaluate the impact of changing workforce demographics or to consider where to expand call center operations geographically.”
Tindall agrees, “By providing HR and line users with access to external information sources relative to their industry, they are not only are better able to understand their own company’s patterns and trends, but how those trends compare with others in the market.”
Linking Workforce Value To Financial Performance
Business intelligence is an important input in measuring the value of a company’s workforce because it helps link people data and programs to financial performance. Sophisticated analytics now can measure how HR systems and programs affect employee behavior and how that, in turn, influences customer behavior – and ultimately drives financial results. These analytics are increasingly important in understanding the impact employees have on customers and the business, and the kinds of changes HR has to make in practices or programs to more effectively align behavior to results.
Feinsod explains, “Companies need to know the demographic and skills profile of their workforce in order to optimize the value of that workforce. That is increasingly the job of a strategic HR function. And, companies must be able to link workforce measurement and the role of the HR function to their business goals. That allows them to evaluate whether HR is doing the right things to help the company grow.
“Using current employee data and projections about future workforce trends, we’re helping clients model the people implications of their business plans. This ensures they understand their key workforce drivers and can make informed decisions on their future workforce needs. HR can develop targeted workforce strategies to help ensure that it can attract, engage and retain the right people, in the right locations, at the right cost, to support business goals.
Feinsod notes, “We recently helped a global banking organization model its total projected labor costs to make decisions about where non-customer-facing employees should be located. In another instance, we helped a leading information services provider understand current and future staffing trends to better align its reward programs.”
Feinsod shares the best practices in workforce management identified by Towers Perrin. These include workforce planning; understanding attraction, retention and engagement; relevant total rewards strategy, performance management and career development. “Leading companies create institutional capability in these areas. By leveraging a combination of excellent processes and technology, they take control of their future workforce today and position themselves to be ready to deliver on their strategy.”