Skip to main content

The Importance of Data in HR Strategy

A critique that was once levelled at HR practitioners and HR as a business discipline is that compared to other hard business disciplines, such as finance and logistics, it was not quantifiable.  The value of HR to an organisation was measured by the HR team’s output rather than the actual dollar value (versus cost) of those same outputs to the overall company bottom-line.

Enter the early 2000-teen’s and the explosion of data-driven HR.  Yes, amongst HR practitioners there are still pockets of resistance to using data in HR practice but the tide may be against them.  In such a highly turbulent business environment (particularly since the beginning of the COVID-19 pandemic), business leaders demand that every dollar be accounted for and by extension, every business activity be measurable in financial terms.  If the costs are not outweighed by the returns, then it doesn’t stack-up and does not make business sense and every other cliché out there.

Data has seen HR lose its status as a ‘soft’ business discipline that was not taken seriously by some business leaders.  Now HR holds a place alongside finance, logistics, accounting and the like.  HR leaders can now sit at the executive table as equals and show their counterparts, this is what we have done and this is how much it has added in real dollars to the value of the business.  HR practitioners who have not moved with the times and ignore data do so at their peril.  They risk being left behind compared to their counterparts who can and do use data in their lexicon when working alongside their clients and business leaders.

This might seem all very good, but the small-medium size business owner might say “I have 20 staff or may even just 3 staff, how is this relevant to me?”  Whether SME leaders realise it or not, to some extent they have already been using or if not understood the value of HR data, at least on an unconscious, instinctual level.  Imagine you are the owner and operator of a local vehicle mechanic-repairs garage.  You want to hire an apprentice mechanic.  One of the first questions that come to mind is, how much will it cost to hire an apprentice?  But your train of thought should not end there.  You follow-up question might be, how much will the return be on hiring an apprentice and over what period, 1 year, 2 year, after 4 years?  What is my return-on-investment of hiring an apprentice compared to an experienced mechanic?  Without data, you may be just blindly guessing or going by your instinct.  But it doesn’t end there, data doesn’t just help determine if a certain HR strategy should be pursued (apprentice versus experienced mechanic in this case), but what HR strategies should be continued, modified, or discontinued completely.  Those monthly performance-feedback meetings you do with each employee and employee-of-the-month gift vouchers you award to ‘high performers,’ how do you know if they are really making any difference?  What outcome are you hoping to gain from pursuing these initiatives, in dollar terms, versus how much you are outlaying in costs and time (remember even time may be quantifiable)?

These are all valid questions but do you the SME owner have sound answers based on data or an answer based on gutfeel?  Worse still, have you consigned measurement altogether to the too-hard basket?  Of course, the process of gathering data, analysing it and drawing conclusions from it to guide business decisions is not an easy task that can be done when you have five minutes to “spare” (that elusive thing SME owners have never encountered before).  The more sophisticated you make the process, the more accurate your results and the better informed your decisions will be, but the more laborious the task will be.  That is the basic trade-off, but running a business is easy said “no one ever!”

For large size businesses with dedicated HR Teams (and resources at their disposal), if you are not yet employing data in your HR operations, flip a coin instead next time you are trying to decide if you should approve that fandangle leadership program HR is proposing, otherwise, start gathering data now!

For SME’s without HR resources, look to external HR Providers to assist you in implementing a HR measuring system or support your HR activities with data.  If you want to go it alone, however, start small and let the process grow in sophistication over time.  Like in our example before with the mechanic garage, look at past records you may have of the performance outcomes and the turn-over rate of your previous apprentices compared to your experienced hires.  Start recording this information going forward if your records are not reliable.  No matter your current business circumstances, it’s never too late or too difficult to start to use some data.

For more information on the above, please contact us on 1300 887 458 and speak with one  of our HR Consultants. If you are interested in learning more about our HR services, including HR OutsourcingHR ConsultingHR Advisory Services, contact us at enquiries@liquidhr.com.au.