Mining the gold: gain competitive advantage through HR data analysis - HR Technology - first of two part series

HR Magazine,  Sept, 2003  by Beth Patterson,  Steve Lindsey

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First in a two-part series.

The human resources function has changed. Over the last decade, the role of the HR professional has migrated from an isolated back office and occasionally bureaucratic function to one that is viewed as a competitive advantage that helps organizations achieve strategic business objectives.

Technology has been a critical enabler of this transformation; however, most organizations do not realize the full potential of the benefits this technology offers. An immense amount of data is available within any organization, but often it is not being leveraged to identify potential areas in which companies could gain competitive advantage. There is gold in that data that has yet to be discovered. Effective analysis of HR data can give an organization that competitive edge.

Until the 1990s, executives typically viewed the HR function as a necessary administrative expense or as part of the cost of doing business. As technology evolved, it became a vehicle through which organizations could gain efficiencies, especially in those areas in which the volume of information and transactions were high. That made the HR function a perfect candidate for automation. As the economy began to expand in the mid- to late 1990s, workforce demographic shifts became obvious, and the war for talent became a hot topic in many board rooms. CEOs began to realize the value of a strategic HR organization.

But while some organizations have embraced the concept of a strategic HR function, others have not. The latter are losing competitive ground and eventually will be forced to re-evaluate their HR delivery models. The days of HR filling only the role of a transactional Taskmaster--submitting medical forms, updating contact information, realigning 401(k) investment allocations and filling staff openings--will soon disappear.

Technology has played a key role in enabling HR functions to become more strategic. The basic HR administrative and transactional responsibilities must still be done effectively. This demand has not changed for any organization; however, technological advances make such transactions less paper-intensive and provide the capability to shift transactional responsibilities and routine inquiries to employees and managers through self-service features, with routine transactional duties distributed throughout the organization to managers and employees, HR professionals are freed to contribute more strategically within the organization.

While the advantages of technology in the area of self-service capabilities are currently being explored by most organizations, many other organizations have not yet realized the competitive advantages of using the vast amount of data available to them within their current HR system.

Mining the gold in HR data and thereby gaining competitive advantage is the next step in HR's continuing evolution. Combining HR data with other business or environmental information allows organizational leaders to act more quickly and make better decisions, enabling them to achieve business objectives.

By marrying quality people information with key business data, decision-makers can gain a better understanding of business processes and drivers.

There are four key nuggets in which competitive advantage--or gold--can be unearthed through HR data mining. This month, we'll examine two of them: turnover analysis and employee development.

Turnover Analysis

Understanding turnover and its drivers can provide an organization with key information to manage staffing needs and proactively manage associated costs. Significant competitive advantage can be gained in the marketplace if an organization proactively manages and controls turnover.

The widespread focus on talent shortages in the late 1990s helped to put HR practices in the spotlight and to gain HR leaders a seat at the executive table. The low unemployment rate, in conjunction with the shifting demographics of the workforce--mass exodus of baby boomers, increase in minority representation--and the huge demand for technical skills forced C-level executives to educate themselves on the importance of culture as a key differentiator in the marketplace. Suddenly, an organization's culture and the HR practices supporting it became a focal point for investments and discussions in the executive suite.

While the availability of funds was a breath of fresh air for HR executives, the pressure to perform was never more intense. As the economic downturn began in 2001 and unemployment rates began to rise, the emphasis shifted away from investment in HR to more-efficient HR tractions. While the overall unemployment rates have risen, evidence shows that the war for talent is still raging for certain skill sets, such as nursing and systems engineering.

For example, our studies show that more than 85 percent of hospitals have nursing shortages. Why is there a shortage? The answers are disturbing for HR professionals in health care who are challenged each day to solve the problem. Significant contributing factors to the shortage of nurses include: