The Economics of HR from a People Analytics Person's Perspective
I peruse my LinkedIn newsfeed a few times a day. Two posts over the past weekend caught my eye. The first post talks about how, in the modern organization, HR is forced to quantify ROI for all its initiatives, how it’s impossible in most cases to do, and how sometimes businesses should make it simple and invest in their people. The second post is on Mercer’s recent survey of CHROs and how 41% wished they had greater depth in HR data analytics and insights when they started their role.
Usually, I skim through both posts and move on with my life. However, given how contradictory the perspectives are, my brain immediately jumped to the question: how can both perspectives exist in the market simultaneously? Which one is more valid to the everyday HR person? Do we keep chanting, “Investing in people is the right thing to do,” or do we look to do something different?
After sitting on this all weekend, I think there is a narrative on the shifting paradigm and expectations of HR that we may be staring at and not seeing. So, please humor me as I share a different narrative on the business's increasing demand for HR to quantify things:
No one is out to get HR
We live in a world where logic and positive intentions prevail. This leads me to believe that an executive or business owner rarely wakes up with a solid desire to mess with their employees. They must know that people make up a large part of their operations and are critical to keeping their businesses running and revenue-generating. So, inherently, this is not about company vs. employees or executive team vs. HR.
Economic pressures exist
Every business operates under economic pressure. While how each business generates revenue may be different, at the end of the day, every business has to be self-sustaining financially. As a part of the business—and having rallied to be “at the table” for the last decade—HR is not precluded from the economic pressures a business faces. This means that in the current environment, where the cost to borrow and finance has significantly increased, like all other functions, HR must also determine how they can help their organizations conserve cash and brace for whatever economic rollercoaster ride 2024 may bring.
Limited resources = ruthless prioritization
No business exists with unlimited resources. Some may have more than others, but no one has complete access to capital. So, in a world where resources are limited, and requests for resources often exceed availability, some form of prioritization must be put in place to ensure resources are allocated to the request that will aid the business the most. Executives are masters of ruthless prioritization. I had a CEO say to me once: I always ask my team what the one thing they are focused on is because if they are focused on accomplishing more than one thing at any given point in time, I consider them distracted.
Numbers are fair
In a world where executives must ruthlessly prioritize requests on a daily, if not hourly, basis across multiple functions/business lines that may or may not have anything in common, they need a way to be fair and objective about their decisions. Often, numbers and quantifiable things fill that need. Numbers can be brought down to common denominators, and equations and units of measure (i.e., dollars) can be applied across different functions with nothing in common. Numbers bring commonality to all the requests across executives’ desks, preventing the proverbial apples vs. oranges dilemma.
HR is late to the party
Nothing is being asked of HR today as a function that has not been asked of functions such as Marketing or IT over the past few decades (remember all the Digital CMO conversations, the rise of the CRM systems, the Digital IT transformations, and the rise of the cloud ERP?). Somehow, we have dodged all previous attempts to bring numbers and ROI to business operations, and now that most organizational functions have found a way to quantify their efforts and programs, we are one of the last ones to be tapped to convert what we are doing in the organization into how much it contributes to the organization.
We need a rewire
The crux of the problem isn’t necessarily businesses asking HR to quantify their requests and provide ROI on proposed initiatives. The problem is that HR practitioners were not historically trained to do this, and the HR function in most organizations today was never designed to do this. It wasn’t until the mid-2010s that data, analytics, and data analysis became a part of HR program curriculums in higher ed. On a typical HR functional org chart, you can trace how a benefits change gets processed through different HR teams in the operating model, but nowhere on there will you be able to tell how/where in HR the effectiveness of that transaction is measured, or where/how continuous improvement initiatives are determined. It’s not anyone’s fault; the world is initially moving at a different pace and direction than HR anticipated. It might mean HR as a function needs a rewire because what got us here will not take us to the future.
Decision is yours
At the risk of oversimplifying, I see two options presented to HR in the current situation:
Continue to tell business leaders “it’s the right thing to do” while refusing to quantify ROI, and hope that there are resources available to support workforce welfare
Gear shift and join the rest of the organization by proactively measuring and quantifying HR programs and initiatives. Get resources that will yield positive value for the business
Your move, HR.