Raging Debates in HR Analytics

By Laurie Bassi, McBassi & Company

14 PEOPLE & STRATEGY

HR analytics holds the promise of both elevating the status of the HR profession and serving
as a source of competitive advantage for organizations that put it to good use. Our realization
of this promise hinges on our individual and collective ability to master the art and the science
of HR analytics. That, in turn, will happen much more quickly if we can achieve clarity—even
consensus—on a number of issues where neither clarity nor consensus currently exists.

M
y hope is that explicitly naming, Refining and improving the benchmarking of This is partly due to fundamental method-
categorizing and examining some HR metrics remained a primary area of focus ological issues; it’s easier to identify
of the most important (but often throughout much of the 1980s and 1990s. linkages with larger sample sizes of indi-
unnamed) debates will help speed the process This benchmarking focus, while helpful in vidual employees than with smaller sample
of achieving consensus. informing HR professionals about how their sizes of groups responsible for organiza-
organization’s HR metrics stacked up to com- tional outcomes. And it’s partly due to some
In this article, Section 1 briefly reviews the parable or best-in-class organizations, of the myths and limiting mindsets that have
evolution of HR analytics. Section 2 positions provided little by way of actionable business impeded progress.
and comments on what I see as the major intelligence on how to gain competitive
debates within HR analytics, which I catego- advantage through people. It also contributed In sum, while it has become much easier to
rize as: what, why, who and when. Section 3 to an often unhealthy belief by HR profes- answer questions about the drivers of indi-
speculates on the value that HR analytics can sionals in simple one-size-fits-all solutions: vidual-level outcomes, less progress has been
produce in the future. something to the effect of, “If we can just look made on answering important questions
more like our competitors on some standard about the drivers of organization-level out-
HR metrics, then we have done our jobs.”
The Evolution of comes. Too often, vendors fill this void by
using clever marketing and shoddy science
HR Analytics During the past decade, this has begun to
change. Advances in the software used to
that confuse the drivers of individual perfor-
mance with the drivers of organizational
automate transactional aspects of the man- performance.
According to a 2004 Workforce Management
agement and development of people have
(formerly Personnel Journal) article, “In
expanded the landscape of possibilities. Not
1978—in this publication—Jac Fitz-enz pro-
posed a radical, anti-establishment idea.
only have data on HR metrics become more Major Debates in
Human resources activities and their impact
readily available, they have become available
in forms that make it increasingly possible to
HR Analytics
on the bottom line could—and should—be link disparate data sources together. So as the
measured. The reaction was apathy, disagree- worlds of HR metrics and software have con- Not surprisingly, the evolution of HR Analyt-
ment and disbelief” (Caudron, 2004). verged, new horizons for creating business ics has shaped the debates that swirl around
intelligence on the people side of the business it. These debates—some of which are explic-
For the past three decades Fitz-enz has, along are arising. Many HR professionals, however, it and open, others of which are muted but
with a growing band of kindred spirits, cam- wonder why they should go to the trouble of real—can be classified into the categories of
paigned tirelessly to improve the state of HR going down this path because they are already who, what, where, when, why and how.
measurement and to help both HR profes- way too busy handling what is already on
sionals and senior executives understand its their plate—an issue that is discussed in the
importance. following paragraphs.
The “What” Debate
A good starting point is the debate asking,
These efforts started out at the nuts and bolts Questions that had previously required “What is HR analytics, and what can and
level—creating definitions for basic HR met- tedious, manual calculations to answer, can should it be used for?”
rics such as compensation, staffing, hiring now be answered more easily and with rela-
and retention. This work laid the foundation tive precision. Examples include identifying The term “HR analytics” means different
for gathering comparable data across organi- the profile of candidates most likely to things to different people. To some, the term
zations, which in turn, enabled the accept a job offer, the probability that any only means a process for systematically
benchmarking of HR metrics. Over the years, given employee will leave, and the attributes reporting on an array of HR metrics—time
a number of scholars and practitioners of high-performing employees. But even as to hire, turnover, compensation, employee
expanded the benchmarking of HR metrics some linkage analysis has become easier, engagement. Often the reporting includes a
to include investments in training and devel- other types of analysis—especially that benchmarking component (e.g., how our
oping employees, as well as in a broad array which identifies the human drivers of busi- compensation compares to the broader mar-
of other HR policies and practices. ness results—has remained challenging. ket, or how we compare to organizations on ➤

Volume 34/Issue 2 — 2011 15

 have somehow become equated with organi-
zational performance in the minds of many
HR professionals, as well as their senior
executives, despite the fact that it’s now pos-
sible to link people factors directly to business
outcomes themselves. The focus on employee
engagement requires serious examination if
HR professionals are to become able and
respected practitioners of HR analytics (Bassi
and McMurrer, 2010).

In sum, HR analytics is an evidence-based

approach for making better decisions on the
people side of the business; it consists of an
array of tools and technologies, ranging from
simple reporting of HR metrics all the way
up to predictive modeling.

The “Why” Debate

Another basic debate swirls around, “Why
should we do HR analytics?”
a one-size-fits-all measure of employee of applications that constitute “talent analyt-
engagement). While this is definitely a com- ics,” their phrase for HR analytics, from Some well-known and highly regarded HR
ponent of HR analytics, in and of itself, it simplest “human-capital facts” to most practitioners argue that they have no need for
does not constitute HR analytics. sophisticated analytics that help optimize the HR analytics because their senior executives
“talent supply chain” (Davenport, et al., don’t require or expect it of them. This is not
At the other end of the spectrum are those 2010). an excuse for complacency. This misguided
who regard HR analytics in a much more point of view is the result of a fundamentally
rarified sense. To these people, the only activ- Perhaps most fundamentally, “what” HR incorrect understanding of the purpose of
ities and/or processes that constitute HR analytics is about is taking an evidence-based HR analytics. It results from a confusion of
analytics are those that involve “high-end” approach to management. According to Pfef- HR professionals’ ongoing quest to prove
predictive modeling (e.g., “what-if” scenarios fer and Sutton, “Evidence-based management HR’s worth, with their obligation to use the
that forecast the consequences of changing is based on the belief that facing the hard facts tools of their profession to help improve indi-
policies or conditions). This perspective, too, about what works and what doesn’t, under- vidual and organizational performance.
is limited. standing the dangerous half-truths that
constitute so much conventional wisdom Using HR analytics as a means of proving the
My view is that this particular aspect of the about management, and rejecting the total value of the HR function is misguided: It is a
“what” debate can be resolved by thinking in nonsense that too often passes for sound misuse of analytics that fails to create any
terms of “both/and” rather than “either/or.” advice will help organizations perform bet- lasting value for an organization. “From a
In a recent work, my co-authors and I defined ter” (Pfeffer and Sutton, 2006). practical perspective, it immediately calls into
HR analytics to be “the application of a question the credibility of any findings,
methodology and integrated process for Getting to this point will require moving insights, and recommendations that emerge.
improving the quality of people-related deci- beyond existing myths. Perhaps one of the In short, if executives believe the HR function
sions for the purpose of improving biggest myths in this regard has to do with is embarking on an analytics project to jus-
individual and/or organizational perfor- employee engagement. It is a construct that tify itself, its budgets, or its programs, the
mance” (Bassi, et al., 2010). the psychology profession that heavily domi- outcomes from the project will be viewed
nates HR was created to explain what with suspicion even if the analysis is done
Davenport, Harris and Shapiro help to pro- motivates individuals. But too often one-size- well. More substantively, such a perspective
vide clarity in this area by laying out the range fits-all measures of employee engagement fails to capitalize on the tremendous value
that can be created for an organization as a
whole from the effective application of HR
analytics” (Bassi, et al., 2010).
Perhaps most fundamentally, “what” HR analytics is The purpose of HR analytics is to improve
about is taking an evidence-based approach to individual and organizational performance.
So it needs to be done, even if the CEO doesn’t
management ... Getting to this point will require require it. Moreover, how could you expect
the CEO to require something that he or she
moving beyond existing myths. probably doesn’t know exists? Added side
benefits of HR analytics are that it can help

16 PEOPLE & STRATEGY

identify where not to be spending time, effort
and budget, thereby reducing HR workloads
and it can enhance the credibility of HR.
“Why should we do HR analytics?” ... In sum, the
reason for doing HR analytics is to improve individual
So what about the role of ROI analysis as a
component of HR analytics? Many practitio- and organizational performance—not to prove the
ners view ROI as the Holy Grail of HR
measurement. These people are often focused worth of HR.
on using analytics as a method of proving their
worth. Boudreau and Ramstad summarize the
problem clearly: “Understanding the returns it would also be a negative development for together disparate pieces of information, are
and investments in HR programs and prac- employees and firms, as the people side of the beginning to create ethical questions about
tices is useful, but the quest for ROI will not what is and is not appropriate in applying
business has historically not been a strength
provide the entire solution to the need for a HR analytics.
of either IT or finance. That’s why it’s impor-
decision science … Most ROI calculations fail
tant for HR to develop these skills and
to change decisions about the vital human For example, under what conditions, if any,
capabilities.
capital and organization resources. They are is it appropriate to use legally obtained
used primarily to demonstrate the value of HR records about an employee’s prescription
In sum, HR—not IT or finance—needs to
investments after the fact. ROI creates the drug usage in making decisions about that
take the lead on HR analytics. But doing so
wrong focus” (Boudreau and Ramstad, 2007). employee? What if doing so can help identify
will require that HR develop new capabilities
and capacities. employees or job applicants who have an
In sum, the reason for doing HR analytics is unusually high probability of becoming vio-
to improve individual and organizational lent in the workplace? By the way, I’m not
performance—not to prove the worth of HR. The “Where and When Debate” making this up; I actually had this conversa-
Finally, some debates ask the question, tion with a leading software company
working in this space. Are there circumstanc-
The “Who” Debate “When should we use HR analytics?”
es under which it is right to use that
Another important element of the debate is, information? How can the organizational
For example, some people worry about
“Who should or can do HR analytics?” benefits of this type of analytics be weighed
whether it is possible to create good global
The debate over ROI is closely related to the analytics in a world of various cultures, regu-
“who” debate. Who will be responsible for lations and standards. Others have begun to
raise early concerns about potential abuses of
measuring the financial impact of human
HR analytics as it becomes more powerful The “How” of
capital—the HR function or the office of the
CFO that has the best handle on available and widespread. HR Analytics
measures of business results? And who will A number of books provide valuable guid-
drive the future of HR analytics—the HR The first of these—whether it is possible to
ance on how to get star ted on, or
function or IT that typically owns the ana- create good global analytics—is, I believe, an
advance, HR analytics within an organiza-
lytic software and tools necessary for artifact of old thinking. Although it would be
tion. A few are especially noteworthy in
HR analytics? perfect if there were truly one-size-fits all this regard, including the following:
solutions, rarely do they exist in the real
world. HR analytics provides the tools to • HR Analytics Handbook (Bassi et.al.)
Well, it depends. It depends on the ability and provides succinct “how to” advice.
drive of HR functions to rise to the occasion break through the need for a single global
by developing the skill sets and organiza- solution; it provides the wherewithal to iden- • Investing in People (Cascio and
tify with precision and rigor both that which Boudreau) provides detailed
tional capability required to credibly lead HR
is common across various environments (be guidance for undertaking a wide
analytics. This does not require that HR
they geographic, regulatory, etc.) and that variety of HR analytics calculations.
develop full-fledged IT or finance capabilities.
But it does require that HR functions develop which is unique to a specific environment. • Analytics at Work (Davenport et al.)
sufficient analytic wherewithal—both from a provides broad-based guidance on
finance and IT perspective—to be able to In other words, using the absence of a perfect, how to create a more analytically
partner knowledgeably with and lead HR universal answer as a rationale for not doing oriented culture within an
HR analytics is tantamount to confessing organization.
analytics efforts on both of these fronts.
ignorance about the very capability that HR • The New HR Analytics (Fitz-Enz)
In the absence of the necessary IT and finan- analytics creates. It’s about finding good, cus- provides “how to” essays, case
cial acumen skill sets and organizational tomized (not mythical one-size-fits-all) studies and sample worksheets.
capability, HR functions will inevitably cede understanding, insights and answers. • The Business of Learning (Vance)
responsibility for analytics to both the IT and provides detailed guidance on how to
finance functions. This would be a negative Discussion about potential abuses of HR apply analytics and the logic of
development for those HR functions (or pro- analytics is only now beginning to emerge. economics to all aspects of the
fessionals) that aspire to have a strategic Rapid advances in software capability, training and development function.
impact on their organizations. And arguably, together with an increasing capacity to pull ➤

Volume 34/Issue 2 — 2011 17

 Need a simple against the individual costs that arise from
errors in prediction? Probably the best way
Achieving this win-win will require that we
move beyond the confused debates and dan-
solution to avoid unexpected ethical quandaries is to
tackle the issue head-on by establishing clear-
gerous half-truths that currently muddy the
HR analytics waters.

to solving ly written and widely circulated principles for

when HR analytics will and will not be used. Let us resolve to do so.

multi-country In sum, many applications exist for when HR *****

payroll?
analytics can help us get to better (but not
“perfect”) solutions. A useful mantra to keep I am grateful to Dan McMurrer, Jennifer
in mind is, “Let not the perfect become the Moss, Jonathan Sidhu and Mark Vickers for
enemy of the good.” Having said that, it is their thoughtful input and suggestions.
Run payroll in 100+ countries
important to be aware that as the power of
25+ languages HR analytics advances, so too, will the ethical References
dilemmas that it poses.
any currency Bassi, Laurie, Rob Carpenter, and Dan McMurrer. HR

The Future of
Analytics Handbook: Report of the State of Knowledge,
with one provider Reed Business, Amsterdam, November 2010, pages 11,

HR Analytics
13-14.

Bassi Laurie and Daniel McMurrer. “Does Engagement

Really Drive Results?” Talent Management Magazine,
HR analytics is an evidence-based approach March 2010, pages 42-48.
for improving individual and organizational
performance by making better decisions on Boudreau, John and Peter Ramstad. Beyond HR: The New
the people side of the business. Although it is Science of Human Capital, Harvard Business Press, 2007,
page 192.
not its purpose to prove the worth of HR,
analytics can certainly enhance the credibility Caudron, Shari. “Jac Fitz-enz, Metrics Maverick,”
of the function and the profession by improv- April, 2004, http://www.workforce.com/section/news/
ing the effectiveness of HR policies and feature/jac-fitz-enz-metrics-maverick/index.html
(accessed March 2, 2011).
practices and contributing to the competitive
advantage of organizations that develop it as Davenport, Thomas, Jeanne Harris, and Jeremy Shapiro.
a core competency. An added side-benefit is “Competing on Talent Analytics,” Harvard Business
that HR analytics can help expose where Review, October 2010, page 4.

effort, resource and budgets are not produc- Pfeffer Jeffrey and Robert Sutton. Hard Facts, Dangerous
ing their intended impacts, and in so doing Half-Truths and Total Nonsense: Profiting from Evidence
Today, global companies are realizing big benefits reduce the workload while improving the Based Management. Boston. Harvard Business Press.
effectiveness of HR. 2006, pages 12-13.
from centralizing payroll across boundaries:
• cost savings
• compliance As such, HR functions and professionals
• data accuracy
develop new skills and capabilities so that Laurie Bassi is the CEO of McBassi &
• reporting
they can effectively partner with and lead IT Company, a leader in the emerging
However, building a multi-country payroll solution and finance on HR analytics initiatives or risk decision-science of human capital
can be a very complex and challenging task. ceding this increasingly important and stra- management. Since she founded
tegic responsibility to them. McBassi in 2001, she has been working
Providing the industry’s most comprehensive
with clients to help them unleash
range of payroll solutions, NorthgateArinso’s
payroll solutions take care of managing all your Along the way, HR professionals will need to human capability within their organi-
payroll details in more than 100 countries in the address ethical dilemmas. Do this is proac- zations. She is also chair of the board
world, enabling you to focus on the more strategic tively by clearly delineating the principles for at Bassi Investments, Inc.—an invest-
elements of managing HR. deciding when HR analytics will and will not ment firm that invests in firms with
be used. superior human capital management
capabilities. Bassi is a prolific author,
To download a free whitepaper
“HR and Payroll Implementation Pitfalls”, Without a doubt, mastering the art and sci- with more than 80 published papers
visit ence of HR analytics takes effort. But it can and books. Her current books are
http://www.ngahr.com/payroll-pitfalls result in an elevation of the status of the pro- Good Company: Business Success in
fession and its practitioners by helping them the Worthiness Era (Berrett-Koehler,
to guide their organizations in finding the 2011) and HR Analytics: A Summary
sweet spot—the intersection between more of the State of Knowledge (Reed Busi-
profitable and more enlightened management ness, 2010). She holds a Ph.D. in
and development of people. Mastering this economics from Princeton University
effort would represent a win-win for employ- and a M.S. in Industrial Relations from
www.ngahr.com Cornell University.
ers and employees, and ultimately the society
in which we live and work.

18 PEOPLE & STRATEGY