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The Power of Purpose for a Successful Candidate Relationship Management Strategy

Forbes contributor Amy Phillip posed an important question in 2017 about candidate relationship management: Has neglect become the new normal? In this economy, where every company is being pushed[...]

January 28, 2019

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HR Analytics: Moneyball For MSPs


From eyesore to icon

The Eiffel Tower recently celebrated its 126th birthday. Originally conceived as the gateway to the 1889 Exposition Universelle, or World’s Fair, it stood as a monument to commemorate the 100th anniversary of the storming of the Bastille. Although it endures today as an iconic part of our global consciousness, most people don’t realize that it was an eyesore to Parisians at the time. The French novelist Guy de Maupassant, as the tale goes, openly despised the tower yet ate lunch every afternoon in its restaurant. When asked why, he responded that it was the only spot in the city where he couldn’t see it.

His story is an interesting metaphor for the views held by workforce industry professionals on HR analytics and “big data.” They’ve become popular buzzwords among organizational leaders who are focused on innovation. Data-driven HR functions are heralded by Laszlo Bock, Google’s senior vice president of people operations, in his vaunted business book, “Work Rules!” Like the Eiffel Tower, people analytics and big data are symbols of modern science. And a lot of HR leaders, hiring managers and recruiting professionals look on them as ugly, complex structures blighting their once pristine environments. So, as de Maupassant, they find ways of hiding within this architecture to avoid seeing it.

As HR guru Tim Sackett explains: “That’s the problem with Talent Acquisition everywhere. We don’t truly listen to what all the data is telling us. We gather all of the information. We get assessment scores, we get personality and cognitive measures, we do in-depth background screening, we perform behavioral-based interviews, we check the candidates’ professional references, we stalk their Facebook page, we check informal references the candidate doesn’t know about, we do just about anything to get as much knowledge as we can on a candidate.” And then what happens?

“We make a decision based on a gut feel.”

The encouraging news is that talent acquisition leaders are beginning to embrace big data and the meaningful contributions it will make in their worlds. Let’s dive deeper into people analytics and how it can become a boon to staffing professionals and the MSPs they support, instead of an eyesore.

Moneyball for MSPs and hiring leaders

People analytics, or HR analytics, represents a new way of making more precise workforce decisions in a manner that replaces hunches and gut instinct with evidence and data-driven predictors. In other words, this sort of big data allows hiring managers and recruiters to make determinations about talent selection, placement, development and even separation using meaningful criteria -- information that has been correlated statistically with outcomes that can be proven and repeated. Less relevant criteria get pushed aside, along with the margin for error.

One famous example of people analytics’ success comes from the Oakland Athletics baseball team, popularized in the film “Moneyball.”

Still, not much research has surfaced on how analytics have impacted key HR and recruiting metrics. Our friends at Software Advice sought to remedy that in their most recent report, “Improve on Key Performance Indicators With HR Analytics Software.” They found that 37 percent of small businesses are now beginning to use HR analytics to help make more informed hiring decisions. And of all users polled across the board, those firms that rely on people analytics rate their performance indicators as “good” to “very good.”

In the most common scenario, Software Advice writes, “HR analytics is used to improve a company’s bottom line. This occurs either by ensuring there are enough employees to bring in maximum revenue, or that new hires have similar skills and attributes to the company’s most successful current staff.” Equally important, it can also “aggregate data and identify trends.”

The data collected by Software Advice show that companies using HR analytics outperform those that don’t. Through these platforms, research demonstrates that all mission-critical KPIs improve:

  • Time to hire
  • Cost per hire
  • Employee retention
  • Completed employee trainings
  • Employee productivity
  • Employee diversity
  • Competitive compensation
  • Competitive benefits

As Software Advice illustrates: “For instance, when it comes to the common recruiting metric of time to hire, those respondents using HR analytics software report significantly better performance than non-software users: a combined 86 percent report ‘good’ or ‘very good’ performance, while only 58 percent of non-software users report the same.”

HR Analytics Software Users - Performance on common KPIs

HR_Analytics_Software_Users

Non-HR Analytics Software Users - Performance on comone KPIs

Non-HR_Analytics_Software_Users

A wise investment in the future of talent

The investment is more economical than people believe, and HR analytics software helps smaller businesses save critical funds by making smarter hiring decisions, which bolsters their return on investment. Additionally, “most systems in the HR software space are now cloud-based -- and this deployment method is considerably less expensive than traditional, on-premise deployment when it comes to upfront costs.”

How HR analytics helps staffing curators benefit hiring managers and MSPs

To show how people analytics can strengthen the recruiting process for talent acquisition specialists, consider an example based on Software Advice’s studies. In this case, let’s say an MSP is looking to fill a requisition for a senior data analyst in a management role.

  • The majority of analytics systems allow users to create reports for evaluating employee performance. The recruiting professional analyzes the data using performance review information on current managers and determines which traits and skill sets the most successful managers possess: e.g., strong communication skills, background in math and statistics, proficiency in the required applications (Excel, STATISTICA, TRACtion, Minitab, et al.) a background in Google Analytics, and others.
  • The recruiter checks for those characteristics in candidates and eliminates the ones who perform the weakest when their prior experience is compared against these criteria.
  • Using compensation data from other managers at the company -- based on their years of experience, level of education, skill sets, etc. -- the recruiter determines a competitive salary for the open position.
  • The talent acquisition specialist then compares this rate to the candidates’ compensation requirements. If a candidate falls well outside the pay rate range for the position, the recruiter eliminates that individual from consideration. As this quantitative vetting process continues, the recruiter can easily narrow down the best talent for the role, at the best rate.

Best practices for using people analytics

Software Advice discovered that low adoption rates for HR analytics software could stem from misconceptions about the definition: “As it turns out, only 55 percent of respondents are able to identify the correct definition. The other 45 percent, combined, choose a definition that falls short. Therefore, the low adoption rate of HR analytics software may be partially due to ignorance of what can be accomplished with such systems.”

In the purest sense, HR analytics entails statistically modeling worker data. And here are the ways staffing curators can start off on the right foot when moving to a data-driven recruiting approach for their MSPs.

  • Track and record your data. Without information being collected, there’s nothing to analyze. The rule of thumb is that the more data gathered, the better. Most companies already have some sort of system that captures, records and reports on their talent, particularly as part of an MSP program: Human Resource Information Systems (HRIS), vendor management systems (VMS), applicant tracking systems (ATS), and even internal databases. At minimum, most staffing professionals grab data during onboarding, including date of hire, assignment length, pay rate, department location, job title and more. Going beyond these metrics can increase the strength of the analytics. One suggestion is to issue surveys that uncover the professional ambitions, motivations, work cultures, interests and career goals of the workers. Recording that data can prove instrumental in determining a match between top talent and ideal business cultures.
  • Aggregate the data. By integrating the HR analytics solution with other databases and software in play, or even just importing the data from other systems, talent acquisition professionals gain greater insights about their people. When all the data are centralized and consolidated, it’s easier to identify crucial details related to performance management, pay, optimal hiring sources and other information valuable to MSPs and hiring managers.
  • Prioritize the metrics. Analytics platforms emphasize reporting capabilities, and they are robust. Unfortunately, the wealth of options can overwhelm. They also require time to learn and interpret. It’s imperative that talent acquisition professionals ease themselves into the software. The best way to begin is to prioritize the metrics that matter most to the staffing organization and the MSPs it serves. The experts interviewed by Software Advice recommend running a few reports on the most vital metrics, such as time-to-hire or turnover, to become familiar with the systems.
  • Use the data to make informed business decisions -- for you and your MSP clients. Once you’ve mastered the basics of the system, determined the key metrics and understood the reporting capabilities, it’s time to put the data into action. “For example,” Software Advice notes, “data on how many employees were hired and left in a given quarter, along with revenue and budget information, can be used to determine how many new employees to hire in the next quarter and how much to pay them.” The possibilities are limitless. And, more importantly, the quality of talent and service you provide to MSPs will rise to new heights.

Transforming your structure into a monument

Given the attention the industry has spent on shifting talent functions from administrative to strategic, one would think HR analytics would be embraced by every staffing and recruiting leader. The reality, however, is that less than half of global companies use analytics to make talent-related decisions. Like the Eiffel Tower 126 years ago, this sort of big data seems to represent an imposing structure that casts its large, abstract shadow over a once familiar landscape.

Richard Straub writes in Harvard Business Review that our “industrial-age management mindset is becoming an impediment to our fully realizing the promise of the digital revolution’s technologies. Our accustomed modes of thinking are straitjackets constraining the human energy and creativity these tools could unleash.”

The benefits delivered by people analytics are unparalleled. And while it might seem alien and overwhelming now, in the not-too-distant future, big data will emerge as a monument enshrined in the collective conscious of the staffing industry.

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