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How a Decision Science Influences HR Measurement

When HR measures are carefully aligned with powerful, logical frameworks, human capital
measurement systems not only track the effectiveness of talent policies and practices, they
actually teach the logical connections, because organization leaders use the measurement
systems to make decisions. This is precisely what occurs in other business disciplines. For
example, the power of a consistent, rigorous logic, combined with measures, is what makes
financial tools such as economic value added (EVA) and net present value (NPV) so useful.
They elegantly combine both numbers and logic, and help business leaders become better at
making decisions about financial resources.

Business leaders and employees routinely are expected to understand the logic that explains how
decisions about money and customers connect to organization success. Even those outside the
finance profession understand principles of cash flow and return on investment. Even those
outside the marketing profession understand principles of market segmentation and product life
cycle. In the same way, human capital measurement systems can enhance how well users
understand the logic that connects organization success to decisions about their own talent, and
the talent of those whom they lead or work with.

The greatest opportunity is in improving those decisions that are made outside of the HR
function. Just as with decisions about financial and customer resources, talent decisions reside
with executives, managers, supervisors, and employees who are making decisions that impact
talent, including their own talent, as well as those they are responsible for or interact with. Even
in core HR processes, such as succession planning, performance management, staffing, and
leadership development, improvements in effectiveness rely much more on improving the
competency and engagement of non-HR leaders than on anything that HR typically controls
directly.

Why use the term science? Because the most successful professions rely on decision systems that
follow scientific principles and that have a strong capacity to incorporate new scientific
knowledge quickly into practical applications. Disciplines such as finance, marketing, and
operations provide leaders with frameworks that show how those resources affect strategic
success, and the frameworks themselves reflect findings from universities, research centers, and
scholarly journals. Their decision models and their measurement systems are compatible with the
scholarly science that supports them. Yet, with talent and human resources, the frameworks used
by leaders in organizations often bear distressingly little similarity to the scholarly research in
human resources and human behavior at work. For examples, see the work of Sara Rynes and
colleagues.1
For measures to support a true decision science, they must do more than just incorporate facts
and numbers. More specifically, a decision science for talent draws upon and informs scientific
study related to people in organizations. There is a vast array of research about human behavior
at work, labor markets, and how organizations can better compete with and for talent and how it
is organized. Disciplines such as psychology, economics, sociology, organization theory, game
theory, and even operations management and human physiology all contain potent research
frameworks and findings based on the scientific method. A scientific approach reveals how
decisions and decision-based measures can bring the insights of these fields to bear on the
practical issues confronting organization leaders and employees. You will learn how to use these
research findings as you master the HR measurement techniques described in this book.

Boudreau and Ramstad noted five important elements in a mature decision science: a logical
decision framework; management systems integration; shared mental models; a focus on
optimization; and data, measurement, and analysis. In this book, we focus on two of these:
logical decision frameworks and the data, analysis, and measures supporting them. So, let's
define what we mean by a decision framework and how measures integrate with it.

Decision Frameworks
A decision framework provides the logical connections between decisions about a resource (for
example, financial capital, customers, or talent) and the strategic success of the organization.
This is true in HR, as we show in subsequent chapters that describe such connections in various
domains of HR. It is also true in other more familiar decision sciences such as finance and
marketing. It is instructive to compare HR to these other disciplines. Figure 1-1 shows how a
decision framework for talent and HR, which Boudreau and Ramstad called "talentship," has a
parallel structure to decision frameworks for finance and marketing.
Figure 1-1 Finance, Marketing, and Talentship Decision Frameworks.

Finance is a decision science for the resource of money, marketing is the decision science for the
resource of customers, and talentship is the decision science for the resource of talent. In all three
decision sciences, the elements combine to show how one factor interacts with others to produce
value.

To illustrate the logic of such a framework, consider marketing as an example. Investments in


marketing produce a product, promotion, price, and placement mix, which creates responses in
certain customer segments, which in turn creates changes in the lifetime pro fits from those
customers. Similarly, with regard to talent decisions, efficiency describes the connection between
investments in people and the talent-related programs and practices they produce (such as cost
per training hour). Effectivenessdescribes the connection between the programs/practices and the
changes in the talent quality or organizational characteristics (such as whether trainees increase
their skill or their interactions with others in the organization). Impact describes the connection
between the changes in talent/organization elements and the strategic success of the organization
(such as whether increased skill actually enhances the organizational processes or initiatives that
are most vital to strategic success). The chapters in this book show how to measure not just HR
efficiency, but also elements of effectiveness and impact. In addition, each chapter provides a
logical framework for the measures, to enhance decision making and organizational change.
Data, Measurement, and Analysis
In a well-developed decision science, the measures and data are deployed through management
systems, they are used by leaders who understand the principles, and they are supported by
professionals who add insight and expertise. In stark contrast, HR data, information, and
measurement face a paradox today. There is increasing sophistication in technology, data
availability, and the capacity to report and disseminate HR information, but investments in HR
data systems, scorecards, and integrated enterprise resource systems fail to create the strategic
insights needed to drive organizational effectiveness. HR measures exist mostly in areas where
the accounting systems require information to control labor costs or to monitor functional
activity. Efficiency gets a lot of attention, but effectiveness and impact are often unmeasured. In
short, many organizations are "hitting a wall" in HR measurement.

Connecting Measures and Organization Effectiveness2


Hitting the "Wall" in HR Measurement
Type "HR measurement" into a search engine and you will get more than 900,000 results.
Scorecards, summits, dashboards, data mines, data warehouses, and audits abound. The array of
HR measurement technologies is daunting. The paradox is that even when HR measurement
systems are well implemented, organizations typically hit a "wall." Despite ever more
comprehensive databases, and ever more sophisticated HR data analysis and reporting, HR
measures only rarely drive true strategic change.3

Figure 1-2 shows how, over time, the HR profession has become more elegant and sophisticated,
yet the trend line doesn't seem to be leading to the desired result. Victory is typically declared
when business leaders are induced or held accountable for HR measures. HR organizations often
point proudly to the fact that bonuses for top leaders depend in part on the results of an HR
"scorecard." For example, incentive systems might make bonuses for business-unit managers
contingent on reducing turnover, raising average engagement scores, or placing their employees
into the required distribution of 70 percent in the middle, 10 percent at the bottom, and 20
percent in the top.
Figure 1-2 Hitting the "Wall" in HR Measurement.

Yet, having business-leader incentives based on HR measures is not the same as creating
organization change. To have impact, HR measures must create a true strategic difference in the
organization. Many organizations are frustrated because they seem to be doing all the
measurement things "right," but there is a large gap between the expectations for the
measurement systems and their true effects. HR measurement systems have much to learn from
measurement systems in more mature professions such as finance and marketing. In these
professions, measures are only one part of the system for creating organizational change through
better decisions.

Many HR measures originate from a desire to "justify" the investments in HR processes or


programs. Typically, HR seeks to develop measures to increase the respect for (and potentially
the investment in) the HR function and its services and activities. Contrast this with financial
measurement. Although it is certainly important to measure how the accounting or finance
department operates, the majority of fin ancial measures are not concerned with how finance and
accounting services are delivered. Financial measures typically focus on the outcomesthe
quality of decisions that affect financial resources. In contrast, most HR measures today focus on
how the HR function is using and deploying its resources, and whether those resources are used
efficiently. To the extent that the HR organization is ultimately accountable for improving talent
decisions throughout the organization, HR professionals require a more holistic perspective on
how measurements can drive strategic change.

Correcting these limitations requires keeping in mind the basic principle expressed at the
beginning of this chapter: Human capital metrics are valuable to the extent that they improve
decisions about talent and how it is organized. That means that we must embed HR measures
within a complete framework for creating organizational change through enhanced decisions. We
describe that framework next.

The "LAMP" Framework


We believe that a paradigm extension toward a talent decision science is key to getting to the
other side of the wall. Incremental improvements in the traditional measurement approaches will
not address the challenges. HR measurement can move beyond the wall using what we call the
LAMP model, shown in Figure 1-3. The letters in LAMP stand for logic, analytics,
measures, and process, four critical components of a measurement system that drives strategic
change and organizational effectiveness. Measures represent only one component of this system.
Although they are essential, without the other three components, the measures and data are
destined to remain isolated from the true purpose of HR measurement systems.

Figure 1-3 Lighting the "LAMP."


The LAMP metaphor refers to a story that reflects today's HR measurement dilemma:

One evening while strolling, a man encountered an inebriated person diligently searching
the sidewalk below a street lamp.
"Did you lose something?" he asked.
"My car keys. I've been looking for them for an hour," the person replied.
The man quickly scanned the area, spotting nothing. "Are you sure you lost them here?"
"No, I lost them in that dark alley over there."
"If you lost your keys in the dark alley, why don't you search over there?"
"Because this is where the light is."
In many ways, talent and organization measurement systems are like the person looking for his
or her keys where the light is, not where they are most likely to be found. Advancements in
information technology often provide technical capabilities that far surpass the ability of the
decision science and processes to use them properly. So, it is not uncommon to find
organizations that have invested significant resources constructing elegant search and
presentation technology around measures of efficiency, or measures that largely emanate from
the accounting system.

The paradox is that genuine insights probably exist in areas where there are not standard
accounting measures. The significant growth in HR outsourcing, where efficiency is often the
primary value proposition and IT technology is the primary tool, has exacerbated these
issues.4 Even imperfect measures aimed at the right areas may be more illuminating than very
elegant measures aimed in the wrong places.

Returning to our story about the person looking for his or her keys under the street lamp, it's been
said that "Even a weak penlight in the alley where the keys are is better than a very bright
streetlight where the keys are not."

Figure 1-3 shows that HR measurement systems are only as valuable as the decisions they
improve and the organizational effectiveness to which they contribute. That is, such systems are
valuable to the extent that they are a force for strategic change. Let's examine how the four
components of the LAMP framework define a more complete measurement system. We present
the elements in the following order: logic, measures, analytics, and finally, process.

Logic: What Are the Vital Connections?


Without a proper logic, it is impossible to know where to look for insights. The logic element of
any measurement system provides the "story" behind the connections between the numbers and
the effects and outcomes. The chapters in this book provide logical models that help to organize
the measurements, and show how they can articulate useful decision frameworks. Examples
include the elements of turnover costs, the conditions that determine the value of enhanced
selection, and the connections that link employee health and vital organizational outcomes.
Missing or faulty logic is often the reason why well-meaning HR professionals generate
measurement systems that are technically sound, but make little sense to those who must use
them. With well-grounded logic, it is much easier to help leaders outside the HR profession
understand and use the measurement systems to enhance their decisions.

For example, recall Figure 1-1, which shows how finance organizes its measures of return on
equity to reflect the logic that equity is used to purchase assets, which are used to generate sales,
which, in turn, produce profits. The logically derived measures include leverage (assets divided
by equity), asset productivity (sales divided by assets), and margin (profits divided by sales).
You can directly calculate return on equity simply by dividing profits by equity, but that would
obscure the logical connection points that are vital to make decisions about equity, assets, and
sales effectively. The power of the framework is to embed the measures within a logic that
enhances decisions.

In the field of human resources, there are many logical frameworks, including salary structures,
workforce-planning models, and even labor contracts. All are useful, but they are not sufficient
to connect decisions about investments in HR programs to strategic outcomes. In contrast, some
authors have proposed a "service-value-profit" framework for the customer-facing process. This
framework calls attention to the connections between HR and management practices, which, in
turn, affect employee attitudes, engagement, and turnover; which, in turn, affect the experiences
of customers. This, in turn, affects customer-buying behavior, which, in turn, affects sales,
which, in turn, affects profits. Perhaps the most well-known application of this framework was at
Sears, which showed quantitative relationships among these factors and used them to change the
behavior of store managers.5

Measures: Getting the Numbers Right


The measures part of the LAMP model has received the greatest attention in HR. As discussed in
subsequent chapters, virtually every area of HR has many different measures. Much time and
attention is paid to enhancing the quality of HR measures, based on criteria such as timeliness,
completeness, reliability, and consistency. These are certainly important standards, but lacking a
context, they can be pursued well beyond their optimum levels or they can be applied to areas
where they have little consequence.
Consider the measurement of employee turnover. There is much debate about the appropriate
formulas to use in estimating turnover and its costs, or the precision and frequency with which
employee turnover should be calculated. Today's turnover-reporting systems can calculate
turnover rates for virtually any employee group and business unit. Armed with such systems,
managers "slice and dice" the data in a wide variety of ways (ethnicity, skills, performance, and
so on), each manager pursuing his or her own pet theory about turnover and why it matters. Are
those theories any good? If not, better measures won't help. That's why the logic element of the
LAMP model must support good measurement.

Precision alone is not a panacea. There are many ways to make HR measures more reliable and
precise. An exclusive focus on measurement quality can produce a brighter light shining where
the keys are not! Measures require investment, which should be directed where it has the greatest
return, not just where improvement is most feasible. Organizations routinely pay greater
attention to some elements of their materials inventory more than others. Indeed, a well-known
principle is the "80-20 rule" that suggests that 80 percent of the important variation in inventory
costs or quality is often driven by 20 percent of the inventory items. Thus, although
organizations indeed track 100 percent of their inventory items, they measure the vital 20 percent
with greater precision, more frequently, and with greater accountability for key decision makers.

Why not approach HR measurement in the same way? Employee turnover is not equally
important everywhere. Where turnover costs are very high, or where turnover represents a
significant risk to the revenues or critical resources of the organization (such as when departing
employees take clients with them or when they possess unique knowledge that cannot be re-
created easily), it makes sense to track turnover very closely and with greater precision.
However, this does not mean simply reporting turnover rates more frequently. It means that the
turnover measurements in these situations should focus precisely on what matters. If turnover is
a risk due to the loss of key capabilities, turnover rates should be stratified to distinguish those
with such skills from others. If turnover is a risk due to losses of clients with departing
employees, turnover rates should not focus on skill differences, but instead should be stratified
according to the risks of client loss.

Lacking a common logic about how turnover affects business or strategic success, well-meaning
managers draw conclusions that might be misguided or dangerous. This is why every chapter of
this book describes measures, as well as the logic that helps explain how the measures work
together. For example, Chapter 4, "The High Cost of Employee Separations," deals with
turnover.
Analytics: Finding Answers in the Data
Even a very rigorous logic with good measures can flounder if the analysis is incorrect. For
example, some theories suggest that employees with positive attitudes convey those attitudes to
customers who, in turn, have more positive experiences and purchase more. Suppose an
organization has data showing that customer attitudes and purchases are higher in locations with
better employee attitudes? Does that mean that improving employee attitudes
will improve customer attitudes? Many organizations have invested significant resources in
programs to improve frontline-employee attitudes based precisely on this sort of evidence of
association (correlation).

The problem is that this conclusion may be wrong, and such investments misguided. A
correlation between employee and customer attitudes does not prove that one causes the other,
nor does it prove that improving one will improve the other. Such a correlation also happens
when customer attitudes actually cause employee attitudes. This can happen because stores with
more loyal and committed customers are more pleasant places to work. The correlation can also
result from a third, unmeasured factor. Perhaps stores in certain locations attract customers who
buy more merchandise or services and are more enthusiastic. Employees in those locations like
working with such customers, and are more satisfied. Store location turns out to cause both store
performance and employee satisfaction. The point is that a high correlation between employee
attitudes and customer purchases could be due to any or all of these effects. Sound analytics can
reveal which way the causal arrow actually is pointing.

Analytics is about drawing the right conclusions from data. It includes statistics and research
design, and then goes beyond them to include skill in identifying and articulating key issues,
gathering and using appropriate data within and outside the HR function, setting the appropriate
balance between statistical rigor and practical relevance, and building analytical competencies
throughout the organization. Analytics transforms HR logic and measures into rigorous, relevant
insights.

Analytics often connect the logical framework to the "science" related to talent and organization,
which is an important element of a mature decision science. Frequently, the most appropriate and
advanced analytics are found in scientific studies that are published in professional journals. In
this book, we draw upon that scientific knowledge to build the analytical frameworks in each
chapter.

Analytical principles span virtually every area of HR measurement. In Chapter 2, we describe


general analytical principles that form the foundation of good measurement. We also provide a
set of economic concepts that form the analytical basis for asking the right questions to connect
organizational phenomena such as employee turnover and employee quality to business
outcomes. In addition to these general frameworks, each chapter contains analytics relevant
specifically to the topic of that chapter.

Advanced analytics are often the domain of specialists in statistics, psychology, economics, and
other disciplines. In fact, HR organizations often draw upon experts in these fields, and upon
internal analytical groups in areas such as marketing and consumer research, to help augment
their own analytical capability. Although this can be very useful, it is our strong belief that
familiarity with analytical principles is increasingly essential for all HR professionals and for
those who aspire to use HR data well.

Process: Making Insights Motivating and Actionable


The final element of the LAMP framework is process. Measurement affects decisions and
behaviors, and those occur within a complex web of social structures, knowledge frameworks,
and organizational cultural norms. Therefore, effective measurement systems must fit within a
change-management process that reflects principles of learning and knowledge transfer. HR
measures and the logic that supports them are part of an influence process.

The initial step in effective measurement is to get managers to accept that HR analysis is possible
and informative. The way to make that happen is not necessarily to present the most
sophisticated analysis. The best approach may be to present relatively simple measures and
analyses that match the mental models that managers already use. Calculating turnover costs can
reveal millions of dollars that can be saved with turnover reductions, as discussed in Chapter 4.
Several leaders outside of HR have told us that a turnover-cost analysis was their first realization
that talent and organization decisions had tangible effects on the economic and accounting
processes they were familiar with.

Of course, measuring only the cost of turnover is insufficient for good decision making. For
example, overzealous attempts to cut turnover costs can compromise candidate quality in ways
that far outweigh the cost savings. Managers can reduce the number of candidates who must be
interviewed by lowering their selection standards. The lower the standards, the more candidates
will "pass" the interview, and the fewer interviews that must be conducted to fill a certain
number of vacancies. Of course, lowering standards can create problems that far outweigh the
cost savings from doing fewer interviews! Still, the process element of the LAMP framework
reminds us that often best way to start a change process may be first to assess turnover costs, to
create initial awareness that the same analytical logic used for financial, technological, and
marketing investments can apply to human resources. Then the door is open to more
sophisticated analyses beyond the costs.

Education is also a core element of any change process. The return-on-investment (ROI) formula
from finance is actually a potent tool for educating leaders in the key components of financial
decisions. In the same way, we believe that HR measurements increasingly will be used to
educate constituents and will become embedded within the organization's learning and
knowledge frameworks.

In the chapters that follow, we suggest where the HR measures we describe can be connected to
existing organizational frameworks and systems that offer the greatest opportunity for using
measures to get attention and enhance decisions. For example, the accounting and finance
systems in organizations currently pay a great deal of attention to escalating health-care costs.
The cost measures discussed in Chapter 5, "Employee Health, Wellness, and Welfare," can offer
additional insights and more precision to such discussions. Moreover, starting by embedding
these basic ideas and measures into the existing health-care-cost discussion, HR leaders can gain
credibility to be able to extend the discussion to include additional logical connections between
employee health and other organizational outcomes, such as learning, performance, and profits.
What began as a budget exercise becomes a more nuanced discussion about the optimal
investments in employee health, and how those investments pay off.

You will see the LAMP framework emerge in many of the chapters in this book, to help you
organize not only the measures, but also your approach to making those measures matter. Our
next section illustrates how some alternative measurement frameworks can help us understand
the benefits and limitations of several of today's most popular approaches to HR measurement.

Today's HR Measurement Approaches


Table 1-1 shows four key categories and examples of today's HR measurements. The last two
columns of Table 1-1 describe the primary appeal of each category of measures, and the "tough
questions" that reveal potential limitations or assumptions of each method.
Table 1-1. HR Measurement Alternatives

Measurement Example Measures Primary Appeal Tough Questions


Approach

Efficiency of Cost per hire, time to fill, Explicit cost-value Wouldn't


HRM operations training costs. calculations. outsourcing cut costs
even more?
Ratio of HR staff to total Logic of cost savings is
employees. easy to relate to Do these cost
accounting. savings come at the
price of workforce
Standardization makes value?
benchmarking
comparisons easier. Why should our
costs be the same as
the industry's?

HR activity and Human capital HR practices are What is the logic


"best-practice" benchmarks. associated with familiar connecting these
indexes financial outcomes. activities with such
Human capital index. huge financial
Data from many effects?
organizations lends
credibility. Will the practices
that worked in other
Suggests there may be organizations
practices or necessarily work in
combinations that ours?
generally raise profits,
sales, etc. ... Does having these
practices mean they
are implemented
well?

HR dashboard or How the organization or Vast array of HR Can this scorecard


Measurement Example Measures Primary Appeal Tough Questions
Approach

HR scorecard HR function meets goals measures can be prove a connection


of "customers, financial categorized. between people and
markets, operational strategic outcomes?
The "balanced
excellence, and learning."
scorecard" concept is Which numbers and
known to business drill-downs are most
leaders. critical to our
success?
Software allows users to
customize analysis.

Causal chain Models link employee Useful logic linking Is this the best path
attitudes to service employee variables to from talent to
behavior to customer financial outcomes. profits?
responses to profit.
Valuable for organizing How do our HR
and analyzing diverse practices work
data elements. together?

What logic can we


use to find more
connections like
this?

Source: John W. Boudreau and Peter M. Ramstad, "Strategic HRM Measurement in the 21st
Century: From Justifying HR to Strategic Talent Leadership." In HRM in the 21st Century,
Marshall Goldsmith, Robert P. Gandossy, & Marc S. Efron (eds.), 7990. New York: John
Wiley, 2003.
HRM Operations...Measuring Efficiency
The first row of Table 1-1 describes measures focused on "efficiency" (see also Figure 1-1).
These measures are usually expressed in terms of "input-output" ratios, such as the time to fill
vacancies, turnover rates, turnover costs, and compensation budgets compared to total
expenses.7 These approaches are compelling because they connect HR processes to accounting
outcomes (dollars), and because they can show that HR operations achieve visible cost
reductions, particularly when compared to other organizations. They are frequently a significant
motivator for HR outsourcing. Many applications of Six Sigma to HR tend to focus on such
measures to detect opportunities to improve costs or speed. One of the major limitations of these
types of measures, however, is that they are not really HR measures at allinstead, they are
efficiency ratios that can be used to monitor overhead costs in nearly any staff function. As a
result, efficiency-focused systems can omit the value of talent. Fixa ting on cost reduction alone
can lead to the rejection of more expensive decision options that are the better value. Efficiency-
based measures alone, no matter how "financially" compelling, cannot reflect the value of talent.
Finally, they focus almost exclusively on the HR function, and not on the decisions made
elsewhere within the organization.

Measuring Effectiveness...Demonstrating the Effects of HR Practices


The next row of Table 1-1, "HR activity and 'best-practice' indexes," directly measures the
association between the reported existence of HR activities, such as merit pay, teams, valid
selection, training, and so on, and changes in financial outcomes, such as profits and shareholder-
value creation.8 Some results show strikingly strong associations between certain HR activities
and financial outcomes, which has been used to justify investments in those activities. However,
most existing research cannot prove that investing in HR activities causes superior financial
outcomes.9 Another limitation of such measures is that they use one description of HR practices
to represent an entire organization, when in reality HR practices vary significantly across
divisions, geographic locations, and so forth. This may partly explain why managers in the same
organization might inconsistently report the frequency of use of human resource management
(HRM) activities.10 Also, such systems typically only measure the existence of HRM activities or
practices, but not their effects. Even when an actual relationship exists, simply duplicating
others' best practices may fail to differentiate the organization's competitive position. The best
the organization can hope to achieve is to become a perfect copy of someone else.

These limitations can be seen by an analogy to advertising. It is quite likely that studies would
show an association between financial performance and the presence of television-advertising
activity, perhaps even that advertising activity rises before financial outcomes rise. This would
suggest that among organizations that compete where advertising matters, advertising decisions
relate to financial outcomes. Would it also mean that every organization should advertise on
television? Obviously not.

Thus, these approaches shed some valuable light on the important question of whether HR
activities relate to financial outcomes, and they have made important contributions to HRM
research. However, even their strongest advocates agree that they do not measure the
connections that explain why HRM practices might associate with financial outcomes, and they
do not reflect other key elements of strategic success. They leave unanswered whether and how
groups of employees significantly affect key processes and outcomes.

HR Scorecards
The third row of Table 1-1 describes HR "scorecards" or "dashboards," inspired by Kaplan and
Norton,11who proposed adding measures of "customer" (such as customer satisfaction, market
share, and so on), "internal processes" (such as cycle time, quality, and cost), and "learning and
growth" (systems, organization procedures, and people that contribute to competitive advantage)
to traditional financial measures. HR scorecards include measures aligned and arranged into each
of the four perspectives. Such approaches tie HR measures to a compelling business concept and,
in principle, can articulate links between HR measures and strategic or financial outcomes.

Today's scorecards or "dashboards," built on data warehouses, allow users to "drill down" using
a potentially huge array of variables customized to unique personal preferences. For example,
HR training costs conceivably can be broken down by location, course, and diversity category,
and then linked to attitudes, performance, and turnover. Although impressive, in the hands of the
unsophisticated, such approaches risk creating information overload, or even worse, a false
certainty about the connection between talent and strategic success. As Walker and MacDonald
observed in describing the GTE/Verizon scorecard, "The measures taken in isolation can be
misleading." They describe one GTE/Verizon call center where, "when HR reviewed the call
center results from the HR Scorecard...the HR metrics showed a very low cost per hire, a very
quick cycle time to fill jobs, and an average employee separation rate ... the staffing metrics
showed a high efficiency and cost control." However, the call center accomplished this by
"changing talent pools and reducing the investments in selection methods [that] kept costs low
while bringing in applicants who were ready to start quickly but were harder to train and keep ...a
bad tradeoff." GTE/Verizon was fortunate to have HR analysts who discovered this flaw in logic,
but the example shows that even the best scorecards and drill-down technology alone do not
necessarily provide the logical framework users need to make the best talent decisions.
HR scorecards are also often limited by relegating HR to measuring only the "learning and
growth" category, or by applying the four categories only to the HR function, calculating HR-
function "financials" (for example, HR program budgets), "customers" (for example, HR client-
satisfaction surveys), "operational efficiency" (for example, the yield rates of recruitment
sources), and "learning and growth" (for example, the qualifications of HR professionals). Both
lead to measurement systems with weak (if any) links to organizational outcomes.

Conclusion
HR measures must improve important decisions about talent and how it is organized. This
chapter has shown how this simple premise leads to a very different approach to HR
measurement than is typically followed today, and how it produces several decision-science-
based frameworks to help guide HR measurement activities toward greater strategic impact. We
have introduced not only the general principle that decision-based measurement is vital to
strategic impact, but also the LAMP framework, as a useful logical system for understanding
how measurements drive decisions, organization effectiveness, and strategic success. LAMP also
provides a diagnostic framework that can be used to examine existing measurement systems for
their potential to create these results. We return to the LAMP framework frequently in this book.

We also return frequently to the ideas of measuring efficiency, effectiveness, and impact, the
three anchor points of the talentship decision framework of Boudreau and Ramstad. Throughout
the book, you will see the power and effectiveness of measures in each of these areas, but also
the importance of avoiding becoming fixated on any one of them. Like the well-developed
disciplines of finance and marketing, it is important to focus on synergy between the different
elements of the measurement and decision frameworks, not fixate exclusively on any single
component of them.

We show how to think of your HR measurement systems as teaching rather than telling. We also
describe the opportunities you will have to take discussions that might normally be driven
exclusively by accounting logic and HR cost-cutting, and elevate them with more complete
frameworks that are better grounded in the science behind human behavior at work. The
challenge will be to embed those frameworks in the key decision processes that already exist in
organizations.
The Evolution of HR Analytics: Are We There Yet?

Most large global organisations now utilise sophisticated HR Information Systems, such as
Workday or SuccessFactors. As a result, the HR profession is now in the exciting position of
being able to leverage data to inform strategic workforce decisions in a way that has not
previously been possible. HR Analytics capabilities are still under-developed in most
organisations, and there is a fair way to go before the full and powerful potential of HR analytics
is harnessed.
With many of the compliance and process aspects of HR now located in low-cost shared services
centres, HR Generalists, Business Partners and specialists are now in a position to draw on data
insights and add more value. Importantly, HR analytics also enables the allocation of HR time to
talent issues that have the highest impact, rather than spending time on projects and activities that
deliver less value.
Were now seeing companies work through the initial challenges involved in figuring out how to
best use the systems and data that enable HR analytics. There is a very real risk of information
overload, and also of poor presentation of data, vis-a-vis actually connecting talent metrics to the
stakeholders business priorities or decisions.
Research conducted by the Harvard Business Review indicates that to enable faster and more
effective decision-making, your analytics must be:
1. Relevant: HR analysts need to apply data to the business issue (a top-down approach), rather
than using an unnecessary amount of resources for bottom-up data mining.
2. Valid: The quality of data is important, along with the way business leaders are educated
about the credibility of talent metrics.
3. Compelling: Of the hundreds of HR leaders I speak with each year, one of the most common
goals of analytics is to tell a better story through the data. HR cant just present raw numbers
and expect the recipient to identify the correct message. Analysts need to understand the
audience, create a plot of related storylines, and deliver conclusions that tie together the
principal facts.
4. Transformative: Ultimately, actionable analytics should change a leaders behaviour. As a
result of talent data, a leader must be able to change his or her thinking and make better,
faster decisions. 1

Which Companies are Leading the Way in HR Analytics?


The companies we know of that are most successful at HR analytics are the ones that have
prioritised their HR challenges in order of strategic importance, and use the data to inform their
decisions on how best to address these challenges.
Many large companies have created a number crunching, data reporting team in their low-cost
shared services centres. Once a slick data delivery team is functioning well, the HR Analytics
experts, strategic HR specialists or COE specialists can order reports tailored to their
requirements. If there is a large HR Analytics team, they will do much of the analytical and
insight work themselves, and then present it to the HR leaders or broader business. The large
banks, telecommunications and IT companies are leading the way in this space, as are some
FMCG companies, who have always been heavily data-driven from a marketing perspective.
Google, not surprisingly, is a world leader in HR and workforce analytics. To give you an idea of
where things are headed, one-third of Googles HR team comprises data scientists. Laszlo Bock,
SVP People Operations at Google, described the structure of his HR team in a YouTube
interview last year: We very deliberately set a goal of having an HR department using a three-
thirds model. One-third of the people come from traditional HR backgrounds. Theyre
outstanding HR Generalists and outstanding Compensation and Benefits folks.
The second third come out of strategy-consulting firms. We dont really pursue folks from the
HR consultancies as much, because we are looking for two things: great problem-solving
skillsthe ability to take a really messy problem, disaggregate it, and drive to data-driven
answersand really deep business sense, a deep understanding of how business actually works
in the different functions. What we have found is that when you put those two together, the HR
folks learn a tremendous amount about business and problem-solving from the consultants, and
the consultants get very quickly up to speed on the pattern recognition you need to be successful
on the people side.
The last third of people have advanced degrees in various analytic fields, so PhDs and Masters
degrees in operations, physics, statistics, psychology and org psych, and what they do is let us
run all kinds of interesting experiments and raise the bar on everything we do. 2
So the Google HR model is highly strategic and very focused on problem-solving to drive
organisational performance, all backed up by compelling data.

What Are Some of the More Advanced Data-Driven HR Insights Being Made?
We recently spoke with Gina Wood, Senior Advisor Business Analytics, at Deloitte, and she
shared the following data-driven HR insights that she is seeing from the more advanced
implementations:

1. Likelihood of individual employees leaving company - predictive based on specific variables.


2. Cost of acquisition vs. length of stay with firm - the lower the acquisition cost and the longer
an employee is with an organisation, the lower the likelihood the person will leave -
corollary, higher likelihood the person has a lower productivity rate.
3. Talking the diversity talk, but not walking the diversity walk - after a focussed programme of
creating more roles to encourage diversity, organisations still have disappointing rates of
participation. Solution - go to the schools and universities to encourage minority group
participation in relevant courses.
4. Level of Employee Engagement - extent to which people are involved in different projects,
identify with the corporate image/brand, believe in the future of the organisation, align with
the strategy, etc. Reflects likelihood of retention.
5. Ineffective interviews - after third or fourth interview, subsequent interviews to determine the
quality of the candidate have no impact on either performance or retention.
6. Higher education degree is not always a good predictor of performance - industry specific -
individuals with experience can be creative in ways other than those with formal training.
Certificates, for example, do not lead to better outcomes in projects or project management,
in particular for large-scale systems implementation projects.
7. Compensation should not be bunched around the mean - high performers are more likely to
depart if out-performing the middle and not compensated for this (which can take forms
other than just financial). 3

Other insights include: which learning and development programmes have been most successful?
Do successful team managers have certain common competencies and attributes (success
profiling)? How do you give someone a pay rise or a promotion in a way that maximises
happiness? What is the optimal mix of compensation for certain role types cash? Shares?
Bonuses or more flexible working arrangements? Which HR programmes and investment yields
the greatest productivity?
Were seeing HR analytics becoming more prevalent in informing remuneration, benefits, Short-
Term Incentives, Long-Term Incentives and recognition programmes. It is also a crucial tool in
strategic workforce planning, and its fascinating to see HR Analytics challenge traditional
paradigms, such as whether or not qualifications and grades are a predictor of success.

The Global Talent Pool for HR Analytics Experts


There is only a small talent pool of true HR analytics specialists globally at present, but it is an
evolving profession. Many specialists come from accounting, finance, statistics or quantitative
research backgrounds. The challenge is finding the unique blend of analytical and technical
skills, combined with top communication skills and business acumen. Many of the global
consulting firms are now successfully providing HR analytics as part of their talent consulting
offering. Eventually companies that are large enough will develop their own in-house capability,
perhaps as part of their broader data analytics/IT teams.
Data analytics is a combination of understanding the business objectives - across all business
functions - and the ability to look at data and create insight from that data within the context of
the business objectives. It is critical to formulate the right question first, then look at the data and
understand or determine how the data can help answer that question. The HR leaders who can
embrace analytics and leverage the data to improve organisational capability, performance and
profitability will benefit the most in the long term because this is a big part of the future of HR.

HR metrics examples in recruitment

1. Time to hire (avg time per hire)


An important metric for recruitment is the time to hire. This shows the efficiency of the
recruitment process and provides insight into the difficulty of filling a certain job position.

2. Cost per hire (total cost of hiring/the number of new hires)


Like the time to hire, the cost per hire metric shows how much it costs the company to hire new
employees. This also serves as an indicator of the efficiency of the recruitment process.

3. Early turnover (percentage of recruits leaving in the first year)


This is arguably the most important metric to determine hiring success in a company.
This early leaver metric indicates whether there is a mismatch between the person and the
company or between the person and his/her position. Early turnover is also very expensive. It
usually takes 6 to 12 months before employees have fully learned the ropes and reach their
Optimum Productivity Level. According to a 2014 Oxford Economicsreport, the lost output
cost over this period averages 30,000 ($43,700) for new hires.

4. Time till promotion (avg time in months until internal promotion)


This rather straightforward metric is useful in explaining why your high potentials leave.
HR metrics examples related to revenue

5. Revenue per employee (revenue/total number of employees)


This metric shows the efficiency of the organization as a whole. The revenue per employee
metric is an indicator of the quality of hired employees. Check this Business insider article to
view how the top 12 tech companies in the world score on this metric.

6. Performance and potential (the 9-box grid)


The 9-box grid appears when measuring and mapping both an individuals performance and
potential in three levels. This model shows which employees are underperformers, valued
specialists, emerging potentials or top talents. This metrics is great for differentiating between,
for example, wanted and unwanted turnover.

To read more about performance metrics, check out this comprehensive list with performance
metrics, including Net Promoter Score, management by objectives, number of errors, 360-
degree feedback, forced ranking, etc.

7. Billable hours per employee


This is the most concrete example of a performance measure, and it is especially relevant in
professional service firms (e.g. law and consultancy firms). Relating this kind of performance to
employee engagement or other input metrics makes for an interesting analysis. Benchmarking
this metrics between different departments and managers/partners can also provide valuable
insights.

8. Engagement rating
An engaged workforce is a productive workforce. Engagement might be the most important
soft HR outcome. People who like their job and who are proud of their company are generally
more engaged, even if the work environment is stressful and pressure is high. Engaged
employees perform better and are more likely to perceive stress as an exciting challenge, not as a
burden. Additionally, team engagement is an important metric for a team managers success.

Other HR metrics examples

9. Cost of HR per employee (e.g. $ 600)


This metric shows the cost efficiency of HR expressed in dollars.

10. Ratio of HR professionals to employees (e.g. 1:60)


Another measure that shows HRs cost efficiency. An organization with fully developed
analytical capabilities should be able to have a smaller number of HR professionals do more.

11. Ratio of HR business partners per employee (e.g. 1:80)


A similar metric to the previous one. Again, a set of highly developed analytics capabilities will
enable HR to measure and predict the impact of HR policies. This will enable HR to be more
efficient and reduce the number of business partners.

12. Turnover (number of leavers/total population in the organization)


This metric shows how many workers leave the company in a given year. When combined with,
for instance, a performance metric, the turnover metric can track the difference in attrition in
high and low performers. Preferably you would like to see low performers leave and high
performers stay. This metric also provides HR business partners with a great amount of
information about the departments and functions in which employees feel at home, and where in
the organization they do not want to work. Additionally, attrition could be a key metric in
measuring a managers success.

13. Effectiveness of HR software


This is a more complex metric. Effectiveness of, for instance, learning and development software
are measured in the number of active users, average time on the platform, session length, total
time on platform per user per month, screen flow, and software retention. These metrics enable
HR to determine what works for the employees and what does not.

14. Absenteeism (absence percentage)


Like turnover, absenteeism is also a strong indicator of dissatisfaction and a predictor of
turnover. This metric can give information to prevent this kind of leave, as long-term absence
can be very costly. Again, differences between individual managers and departments are very
interesting indicators of (potential) problems and bottlenecks.

As you can see there are a lot of different examples of HR metrics. While some metrics are
easier to implement than others, all of them provide insights into the workforce and HR.
Combining these insights will prove vital for making substantiated decisions with proven impact.

So, what are HR metrics exactly?

Before you start to work with HR metrics, its important to make sure you understand how
metrics can work for you. What are HR metrics?

Human Resource metrics are measurements that help you to track key areas in HR data. The
most important areas are listed below. In this list of HR metrics we included the key HR metrics
examples associated with those areas.

1. Organizational performance
o Turnover percentages
o % of regretted loss
o Statistics on why personnel is leaving
o Absence percentages and behavior
o Recruitment (time to fill, number of applicants, recruitment cost)
2. HR operations
o HR efficiency (e.g. time to resolving HR self-service tickets)
o HR effectiveness (e.g. perception of HR service quality)
3. Process optimization
Process optimization helps to analyze how we do what we do in Human Resource
Management. The HR metrics and analytics in this area focus on changes of HR
efficiency and effectiveness over time. These HR metrics and analytics are then used to
re-engineer and reinvent what is happening in HR. This helps to optimize the Human
Resource delivery process.

The latter is next level for a lot of organizations as this area is barely prevalent in most
organizations. It therefore represents the highest level of HR metrics and analytics.

11 Key HR metrics
1. Absence rate
Unscheduled absence rate (Absence days/FTE) is a key HR to measure absenteeism. It tracks the
percentage of workers who are absent in a given period. This metric also provides a benchmark
over time: absence levels can differ from month to month, but over longer periods of time you
want the rates to be relatively low and stable. Growing absence rates indicate a worsening work
climate and increased stress levels. An absence rate of about 1 to 2% is normal (because
everybody gets sick a few days a year).

2. Absence rate per manager


By dividing the number of absence days in a team or department by the total FTE (full-time
equivalent) in this team or department, HR can easily identify problem areas within the
company. When certain divisions or managers structurally struggle with high absence levels,
they may be doing something wrong and their performance is likely to suffer. By enabling HR to
intervene before problems get out of hand, this metric can serve a diagnostic and preventive
purpose.

3. Overtime expense
People dont mind working overtime every now and again. However, when overtime goes
through the roof, you can expect your absence rates to follow. Excessive overtime, especially for
longer periods of time (e.g. audit season for accountancy firms), also drives turnover.
Consistently high levels of overtime can be fixed relatively easy by hiring additional employees.

4. Employee Productivity Index


Traditionally, employees work from 9 to 5, yet more and more people are working from home.
Companies are increasingly letting the traditional mentality go. This means that performance can
no longer be measured by looking at who shows up. Nowadays, it doesnt really matter how
many hours you worked in a day. What matters is what you actually achieved. A productivity
index tracks this. Nonetheless, it does provide the challenge of how productivity is defined. This
will differ between organizations and functions and requires careful consideration.

Key HR metrics on Learning and Development

Learning and development is becoming increasingly important. A lack of development


opportunities is the #1 reason young talent leaves your company. As such, effective training will
lead to a more productive workforce. This is why training effectiveness is a key HR metric.

5. Training expenses per employee


A common metric is training expenses per employee. This metric is helpful in tracking
development costs. It also helps HR to make smarter investments in developing personnel. HR is
coming around to the fact that day-long training courses are both expensive and inadequate in
providing the continuous learning experience sought by employees. Investing the available
budget in continuous learning experiences will lead to a much more effective training program
for employees.

6. Training effectiveness index


To measure the effectiveness of training, you need to measure what people learned. This is
tricky. You cannot just measure an employees performance before and after a training. This is
because people generally apply for training when they feel they are underperforming. People
who perform below their average for one month are more likely to return to their average
performance the next month. This phenomenon is called regression to the mean. This would
give an unbalanced view of training effectiveness.

When testing for effectiveness, it is better to set training goals and check whether employees
have reached those goals when the training is over. Companies can also track baseline
productivity and look into the impact of training over a longer period of time. Effective training
is expected to help the employee become better in his/her job and thus raises his/her average
performance level. In other words: after effective training, you would expect the Employee
Productivity Index to increase.

7. Training efficiency
Training effectiveness is important. However, measuring the efficiency of training will help you
make the most of your money.
Training efficiency = training expenses per employee / training effectiveness.

Employee satisfaction with development On one hand, training helps people to become better
at their jobs. On the other hand, training is used to reward and connect people with their
organization. This is why employee satisfaction coupled with available development
opportunities is crucial. In addition, people will only learn when they enjoy what they do. When
employees are unhappy with the companys new and amazing Learning Management Solution,
they wont use the system and thus wont learn.

Key HR metrics on Retention


Since the war on talent started, companies have been increasingly concerned about retaining
their employees. Thats why HR should stay on top of the most important retention metrics.

8. Employee happiness
Employee happiness (also measured as employee satisfaction) is more often recognized as a
valuable HR metric. Happy employees are productive employees, they are committed to the
organization and dont mind working overtime when necessary. Employee happiness is related to
commitment to the organization, and commitment to the job. Low employee happiness in certain
parts of the organization can be an indicator of conflict or work stress.

9. Voluntary turnover rate


We already mentioned turnover when we talked about learning and development. For a lot of
companies, voluntary turnover is a key HR metric. Turnover is final; most people never come
back. People often quit their managers, not their jobs. With that in mind, turnover is another
metric that will help you identify potential problem areas within the organization.

10. Turnover rates of talent


Now, not all turnover is bad. Preferably, the people who do not fit within the company leave.
This is good turnover, but when your key talent leaves, turnover becomes a big problem. This is
why you should track the turnover of both your high potentials and your low potentials. Turnover
of your high potentials should be low. An important cause for high turnover amongst high
potentials is a lack of career opportunity within the company.

11. Retention rate per manager


We love our manager metrics. Some managers do an amazing job engaging and connecting with
their employees. Still, we all know managers who are not so good at it. Retention rates per
manager or division is a metric that helps you identify ineffective managers. Once you have
identified these managers, you can provide them with additional support and train them to
become more effective managers.

Of course, retention rates will differ between people with different jobs. However, when similar
teams in similar geographical locations show very different retention rates it indicates that there
is something rotten in the state of Denmark.

Metrics offer many possibilities. If you havent done it already, take a look at our previous blog
on 14 HR Metrics. The metrics we listed enable you to track key HR areas, measure efficiency
and track effectiveness. In the near future, we will post a blog about recruitment metrics. If you
are interested in connecting these metrics through analytics, you should look into connecting
business performance with engagement.

To read about performance metrics, check out this blog with 21 performance metrics, including
the 9-grid, number of errors, Net Promoter Score, forced ranking, revenue per employee, etc.

Invest in your most valuable asset with HR analytics


HR analytics enable organizations to use their wealth of employee data to make better decisions
about their workforces and improve operational performance. From attracting top talent, to
accurately forecasting future staffing needs or improving employee satisfaction, HR analytics
tools empower organizations to align HR metrics with strategic business goals.

Analytics solutions can help you:


Prioritize and target applicants who are most qualified for a specific position.
Forecast workforce requirements and determine how to best fill open positions.
Link workforce utilization to strategic and financial goals for improved business performance.
Identify the factors that lead to greater employee satisfaction and productivity.
Discover the underlying reasons for employee attrition and identify high-value employees at risk
of leaving.
Establish effective training and career development initiatives.

Descriptive, Predictive, and Prescriptive Analytics Explained

With the flood of data available to businesses regarding their supply chain these days, companies
are turning to analytics solutions to extract meaning from the huge volumes of data to help
improve decision making

Companies that are attempting to optimize their S&OP efforts need capabilities to analyze
historical data, forecast what might happen in the future. The promise of doing it right and
becoming a data driven organization is great. Huge ROIs can be enjoyed as evidenced by
companies that have optimized their supply chain, lowered operating costs, increased revenues,
or improved their customer service and product mix.

Looking at all the analytic options can be a daunting task. However, luckily these analytic
options can be categorized at a high level into three distinct types. No one type of analytic is
better than another, and in fact, they co-exist with, and complement each other. In order for a
business have a holistic view of the market and how a company competes efficiently within that
market requires a robust analytic environment which includes:

1. Descriptive Analytics, which use data aggregation and data mining to provide insight
into the past and answer: What has happened?
2. Predictive Analytics, which use statistical models and forecasts techniques to understand
the future and answer: What could happen?
3. Prescriptive Analytics, which use optimization and simulation algorithms to advice on
possible outcomes and answer: What should we do?

Descriptive Analytics: Insight into the past

Descriptive analysis or statistics does exactly what the name implies they Describe, or
summarize raw data and make it something that is interpretable by humans. They are analytics
that describe the past. The past refers to any point of time that an event has occurred, whether it
is one minute ago, or one year ago. Descriptive analytics are useful because they allow us to
learn from past behaviors, and understand how they might influence future outcomes.

The vast majority of the statistics we use fall into this category. (Think basic arithmetic like
sums, averages, percent changes). Usually, the underlying data is a count, or aggregate of a
filtered column of data to which basic math is applied. For all practical purposes, there are an
infinite number of these statistics. Descriptive statistics are useful to show things like, total stock
in inventory, average dollars spent per customer and Year over year change in sales. Common
examples of descriptive analytics are reports that provide historical insights regarding the
companys production, financials, operations, sales, finance, inventory and customers.

Use Descriptive Analytics when you need to understand at an aggregate level what is going on in
your company, and when you want to summarize and describe different aspects of your business.

Predictive Analytics: Understanding the future

Predictive analytics has its roots in the ability to Predict what might happen. These analytics
are about understanding the future. Predictive analytics provides companies with actionable
insights based on data. Predictive analytics provide estimates about the likelihood of a future
outcome. It is important to remember that no statistical algorithm can predict the future with
100% certainty. Companies use these statistics to forecast what might happen in the future. This
is because the foundation of predictive analytics is based on probabilities.

These statistics try to take the data that you have, and fill in the missing data with best guesses.
They combine historical data found in ERP, CRM, HR and POS systems to identify patterns in
the data and apply statistical models and algorithms to capture relationships between various data
sets. Companies use Predictive statistics and analytics anytime they want to look into the future.
Predictive analytics can be used throughout the organization, from forecasting customer behavior
and purchasing patterns to identifying trends in sales activities. They also help forecast demand
for inputs from the supply chain, operations and inventory.

One common application most people are familiar with is the use of predictive analytics to
produce a credit score. These scores are used by financial services to determine the probability of
customers making future credit payments on time. Typical business uses include, understanding
how sales might close at the end of the year, predicting what items customers will purchase
together, or forecasting inventory levels based upon a myriad of variables.

Use Predictive Analytics any time you need to know something about the future, or fill in the
information that you do not have.

Prescriptive Analytics: Advise on possible outcomes

The relatively new field of prescriptive analytics allows users to prescribe a number of
different possible actions to and guide them towards a solution. In a nut-shell, these analytics are
all about providing advice. Prescriptive analytics attempt to quantify the effect of future
decisions in order to advise on possible outcomes before the decisions are actually made. At their
best, prescriptive analytics predicts not only what will happen, but also why it will happen
providing recommendations regarding actions that will take advantage of the predictions.

These analytics go beyond descriptive and predictive analytics by recommending one or more
possible courses of action. Essentially they predict multiple futures and allow companies to
assess a number of possible outcomes based upon their actions. Prescriptive analytics use a
combination of techniques and tools such as business rules, algorithms, machine learning and
computational modelling procedures. These techniques are applied against input from many
different data sets including historical and transactional data, real-time data feeds, and big data.

Prescriptive analytics are relatively complex to administer, and most companies are not yet using
them in their daily course of business. When implemented correctly, they can have a large
impact on how businesses make decisions, and on the companys bottom line. Larger companies
are successfully using prescriptive analytics to optimize production, scheduling and inventory
in the supply chain to make sure that are delivering the right products at the right time and
optimizing the customer experience.

Use Prescriptive Analytics anytime you need to provide users with advice on what action to take.

Intuitive Thinking v/s Analytical Thinking

The business person is usually trained to do "analytical thinking"; analyzing the past to predict

the future, in order to produce "reliability". The training of a designer is to create something that

is not replicable from the past, and while his creation has to answer a design brief, it is mostly

something he loves, infused with his own aesthetics. The logic used by each of them is very
different.
Designers complain usually that they feel, when working in business, they are designing in

"hostile" territory. For example, one way to encourage designers, is to make their task

challenging and to ask more of them; in terms of finding solutions to multiple complicated

problems. They thrive and enjoy all complicated challenging work, when they

have generous amounts of freedom. They do understand (and often require), well

defined constraints and boundaries. what they don't appreciate, or even comprehend to some
extent, are the obligations and imposed necessities to align with old systems and regulations.

These restrictions would be the surest way to stifle their creativity and hinder the process of

innovation. The favored approach of designers when creating something new, is to dismantle the

reasons this product has to exist at all, then they attempt to rebuild it from scratch, if only in their

mind. This approach is not considered by business people to be an optimal use of time nor
resources; when something is not broken why fix it, goes the saying...

This is where Design Thinking, combining the best of analytical thinking with intuitive
thinking into a hybrid, can be the solution and produces both creativity and longevity.

The "messiness" of creative thinking

Creative intuitive thinking is messy, iterative, circular, all over the place. Analytical business

thinking is linear; from A to B, it could zigzag to E and D, but not by too much... Every time the

thinking leaves the straight lines, there is the worry of loosing time and "turning in circles". The

creative thinking lives in the circles, whenever it takes straight lines the designer starts to worry
about his/her level of creativity...

Until I enrolled in the MBA program and got to work with professionals from a variety of sectors

and industries, I had not experienced in depth, the vast differences in these two ways of thinking.

As architects we are taught and trained to exercise both approaches, but I have not had until then
the opportunity to study from close distance, the need for lateral thinking.
I got very interested by the topic and read all I could find about it. Afterward I started observing

closely, the different attitudes to problem solving, whether they were generated by intuitive

thinking or by analytical thinking. Sometimes the different approaches managed to complement

each others beautifully, and magic would happen, but also unfortunately they oftentimes
prohibited creativity, by generating misunderstandings and divergence.

For instance every time right brain thinking creatives were asked to find a solution to a problem,

they would favor taking the untrodden route and come up with new novel ways of seeing things,

with loads of different ideas about ways to proceed. Left brain thinking people would get puzzled

at this approach and not even understand, what they considered, a senseless "waste" of time.

They could not empathize (even when trying hard enough) with the intrinsic desire, that spurred
intuitive thinkers to do things in novel ways, different than what had been done before.

In my opinion these differences are rooted in what each "category" considers their "mission" or

added value to be, on a given project, and on a larger scale, within an organization. Redefining

this "mission" while aligning it with Design Thinking, should go a long way in bridging these
two separate approaches.

I just read about Zappos' decision to adopt "Holocracy" , to the tune of great financial and human

costs. While Holocracy (seems to) adopts on purpose a "not yet transparent" approach, it appears,

from the articles written about it, to follow to a certain degree, the same thought movement these
3 TED talks examine.

In my opinion, it is about letting go of the "silos" mentality, encouraging curiosity and exchanges

between different disciplines, and learning about how each person's role affects the rest of the

organization. It is also about enhancing the need to be closer to reality on the ground, making

sure decision processes are more fluid and inclusive, and people can move with ease between
roles.
This is pretty much how small creative agencies had mostly operated for a long time. The

challenge seems to be in finding ways to scale this system, while accompanying growth, without
creating too many layers of management.

Design Thinking is much easier to apply to business thinking, when managers and decision
makers are not too far removed from the reality on the ground.

The domain of human resources management has evolved over the last two decades and the

foraying in of technology has reshaped the domain considerably. Lets focus on one element of
the human resources, namely, human resource information systems (HRIS).

Human resource information systems (HRIS), are, well-defined software programs that allow
HR professionals to store and organize vast amount of data pertaining to employee information.

There are different types of HRIS that every organization makes use of in order to carry out their
daily tasks of managing employees. So what are these different types of HRIS? Heres a look:

I. Operational HRIS

Operational HRIS is of immense help to the manager. It provides the manager with all the

required data to support routine and repetitive human resource decisions. Many operational level

human resource systems collect and report human resource data. These systems usually include

information about the organizations employees and position and also about governmental
regulations. Two major sub-divisions under operational HRIS comprise the following:

1. Employee Information Systems

Employee information systems is a major part of operational HRIS. Organizations need to keep a

track of an employees records and details pertaining to all kinds of personal and professional
details including name, address, sex, minority status, citizenship, education, past professional
experiences and much more.

2. Position Control Systems

The concept of position control systems is introduced in an organization in order to identify each

position within the organization; the job title within which the position is classified; and the

employee currently assigned to the position. Referring to the position control systems, a HR
manager can identify the details about and unfilled position.

3. Performance Management Information Systems

Performance Management Information Systems include performance appraisal data and

productivity information data. This system is frequently used as an evidence in employee

grievance matters. Careful documentation of employee performance and of how the performance

was measured and reported in critical to acceptance of appraisal information in grievance

hearing. Performance management systems can lead to a number of decisions beyond merely the
decisions to retain, promote, transfer or terminate an employee.

II. Tactical HRIS

Tactical human resource information systems provide managers with support for decisions that

emphasize the allocation of resources. Within the domain of HR, these include recruitment

decisions, job analysis, and design decisions, training and development and also employee
compensation plans. Tactical HRIS also has a few subparts that are explained below:

1. Job Analysis and Design Information System


The inputs to the job analysis and design information system, include data form supervisors and

workers and affirmative action guidelines. Inputs also comprise information from external
sources to the firm, such as labour unions, competitors and government agencies.

2. Recruiting Information Systems

In order to direct the recruiting function, the organization needs to develop a proper recruiting

plan. The plan is designed in order to address gaps such as vacant positions to be filled and skills

required for the employees for these positions. If this plan is to be executed, a proper recruiting
information system is pretty much required, so that everything is executed with proper ease.

3. Compensation and Benefits Information Systems

This particular information systems may support a variety of tactical HR decisions, especially

when it comes to compensation and benefits systems. Compensation and benefits plan an
important role in the overall productivity of the organization.

4. Employee Training and Development systems

Another major aspect where HRIS is extensively implemented is the domain of employee

training and development. The training must be directed at those individuals who are not only
interested but also capable of benefiting from it.

III. Strategic HRIS

Strategic HRIS focuses on supporting labour negotiations, workforce planning, and certain

specialized human resources software. The main purpose of this is to have an overall good idea

about labour resources and workforce planning. Major types of strategic HRIS comprise the
following:
1. Information Systems Supporting Workforce Planning

Organization that are involved in long-term strategic planning, such as those planning to expand

into new market areas, construct factories or offices in new locations, or add new products, will

need information about the quantity and quality of the available workforce to achieve their goals.
Information systems that support workforce planning serve this purpose.

2. Specialized Human Resource Information Systems Software

There has been a great deal of software that has been designed for the proper functioning of the
human resources. Software that is specifically designed for the human resource management

function can be divided into two basic categories: comprehensive human resource information

systems software and limited-function packages that support one or a few human resource
activities.

IV. Comprehensive HRIS

The computerization of HRIS has resulted in an integrated database of human resource files.,

employee files, position, skills inventory files, affirmative action files, job analysis and design

files, occupational health and safety files, and many other human resource files are constructed in

a coordinated manner using database management systems software so that application programs
can produce reports from any or all of the files.

HRIS was introduced so that the overall human resources domain is able to function in a much

easier and simpler way. Today, also most all organizations across the globe has started
implementing HRIS and are benefiting from its use to a great extent.

Analytical Frameworks are important:


1. LAMP Framework
2. HCM: 21 Model

Please read about these.

LAMP Framework in HR analytics