The move from gut-based to big data-based decision making in HR
Traditionally, decision-making in HR was largely based on gut feeling and instinct. Hiring decisions, compensation and benefit strategies etc. were simply based on what felt right. Tea and sympathy and a touchy-feely approach, rightly or wrongly was what the HR profession was largely known for.
But, over the last decade or so, all that has begun to change as HR has been swept along in the industrial wave of big data, made possible by the increasing availability of affordable computational power.
One of the best examples of this transformation from sentiment to data was by Xerox, the well-known manufacturer of photocopiers. They enlisted the help of Evolv, an analytics start-up in Silicon Valley, to bring some hard-data analysis into their hiring strategy. The eventual impact was immense and positive. By conducting numerous online, automated assessments with applicants, and tracking their subsequent performance they gathered a huge amount of data. After a brute force computational analysis of this data, they were remarkably able to come up with a set of data-backed attributes that make up the ideal worker.
What was particularly interesting was that many of these findings were counter-intuitive, (seemed to go against intuition and sentiment), the most surprising of which was the finding that operatives without call-centre experience performed equally as well as those with it. This data-based insight enabled them to widen their candidate pool beyond what an intuition-based hiring strategy would have suggested plausible.
They also made the unexpected discovery that creative personalities showed more loyalty than inquisitive ones, and that membership of more than one social network also positively correlated with loyalty. And when they applied these data-based, counter-intuitive findings to their hiring strategies and selection processes, they reduced their staff turnover rate by a massive 20%.
This is just the tip of the iceberg: most progressive companies are developing their HR big data capabilities, not least Google who probably lead the way on HR data analytics. They have cutting edge data-backed algorithms that can even predict when an employee may quit, and several years back, their now famous Project Oxygen (which assessed 10,000 observations from performance appraisals), resulted in the identification of ‘8 Behaviours for For Great Managers’. This first-of-its-kind data-derived ideal manager profile was applied to their management process, and led to a 75% improvement in management quality for wayward managers.
Mcdonalds are worth a mention too. After inviting Lancaster university Management School to study the performance of 400 of its restaurants, they discovered that outlets that employed staff over 60 years in age had on average 20% higher customer satisfaction levels. This is a great example of how modern, data-backed HR has helped to debunk a myth and a shake off the out-dated image of older workers having less to contribute than younger workers.
The move from gut based HR to big data is going to change the HR profession itself. It’s now no longer good enough to try and guess why you have high turnover, HR professionals need to be able to analyse stats, spot trends and correlations and give a data backed reason for it. Again, making a request for increased training spend because you think it will help is not going to cut the mustard any more, you’ll need to be able to do some predictive analysis of sorts to be able to demonstrate the likely numerical impact. In fact, research has shown that HR teams that rely on data-based decision making are, ‘4 times more likely to be respected by colleagues and leaders’. Some companies are using HR software to help with this.
This new world of data-based HR will spawn a new breed of HR professional, some of whom develop from within the profession itself and others will move across from more stats based functions. It’s a disruptive but exciting time to be a HR professional.
About the author
Kazim is the Director of thecareercafe.co.uk, a resource for start-ups and small business. It includes a blog containing career advice, and small business advice articles. Kazim also has writing published on recruiter.com and Time Magazine.
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