One of the key functions of any board is to make sure the human resources (HR) of the organisation is put to good use. To enable the board to effectively execute this task they need information on how human resource activities are impacting on business performance. This task is made even more difficult by the fact that most of the Board HR Committees are chaired by people with no HR experience. This is not a major challenge as long as the committee members are provided with the right information to enable them to make informed decisions.
The major challenge facing organisations today is that the human resource
function is one of the most under-reported functions in most organisations. As
a result, most of the scandals bedevilling organisations tend to start in the
human resources department. Most board members have no idea what happens in
human resources. In most cases they only wake up after some form of scandal in
the human resources department. This should not happen if the board is supplied
with the key indicators from the human resources.
Most of the reports supplied to boards have tended to be narratives not
supported by any factual information in most cases. Trends are changing.
Human resource management and reporting needs to be data driven. I know a few
progressive organisations that have started well on this journey. Those that
have started have moved from opinion driven reporting systems to data driven
systems. The only challenge with where they are is that even as they are moving
into data driven areas, the information is still descriptive in nature with no
major insights coming from the data.
I would like to classify the level of reporting at board level into four
categories. Level one is opinion driven (primitive stage), level two is the
descriptive stage, level three is predictive stage and level four is the
prescriptive stage.
At level one, the information provided is mainly opinion driven. Reports at
this stage are narrative and full of the opinions provided by the human
resources department staff on a number of issues. The assumption at this stage
is that the people in human resources know what they are doing and they will
act in the best interest of the company. We know this is not normally correct
as most senior managers, not only in HR, but in other departments, make
decisions driven by their own personal interests. There are chances that the
board may make serious human resources errors if they base their reports on the
above.
In stage two, you mainly find descriptive reports. Typical Board reports cover
things like the number of people on sick leave, number of people on leave,
headcount and number of disciplinary cases handled, number of people trained,
etc. This is all good but no insights are driven from such reporting. It is
almost like information for noting when it is supposed to assist the board to
make decision. To enhance the reports at this stage, there is need to go deeper
than just providing the figures. For example, instead of reporting on number of
people on sick leave, annual leave, study leave, you could try to indicate the
cost the company is incurring because this is paid leave. You could also add
the costs of covering up for the individuals on leave and loss of productivity.
Every data you find in the human resources department can be turned into
insights that would help the board make better decisions. On staff costs,
instead of reporting staff costs to revenue on a global level you need to break
staff costs to revenue by level and also executive staff costs as a percentage
of the overall wage bill. If you have industry benchmarks for the same
indicators it’s even better.
The predictive analytics stage brings even better insight for business and not
for human resources. While the data comes from the human resources department,
the impact is always measured in business performance. Many companies are
struggling, for example, at workforce planning. They neither know how many
employees (establishment provision) they need for a particular period nor at
what cost. If they do, many of these companies guess these figures and usually
discover later, for example, that they are over or under staffed. Many of the
retrenchment exercises that we are seeing could have been avoided if companies
had done proper workforce planning using statistical models. Still in the
predictive stage, the human resources department can predict the employees who
are likely to be top performers before they are hired and the Board would be
delighted to have such information, especially for senior and critical roles in
the organisation.
Flight Risk Calculator, a human resources function, can predict which employees
are likely to leave the organisation and when. This will enable the
organisation to arrest the situation before the competent employees leave.
Flight risk can also be calculated for new employees as they enter the
organisation. I have given a few examples, but there are so many areas where
predictive analytics (using statistical models) can be used to add value to the
business.
There are many other HR solutions based on your company’s data that you can
start implementing. Leading international companies such as Google have spent
years methodically building Human Resources Management Systems which have
subsequently paved way to their incredible success.
Companies of different sizes operating in different industries can benefit from
extensive data analysis. If you have not given any thought to building a
comprehensive database for your company, it is high time you do. Subjective
(guess work) decision making is dangerous. Many companies are struggling
because of it. Leading companies in the world have embraced a data driven
approach to human resources management because of its immense benefits. It is
high time Zimbabwean companies adopt evidence based management.
The prescriptive stage is the pinnacle of human resources reporting. At this
stage you can tell which human resources policies or interventions will bring
immense value to the business before they are implemented.
Memory Nguwi is an Occupational Psychologist, Data Scientist, Speaker, & Managing Consultant- Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. https://www.linkedin.com/in/memorynguwi/ Phone +263 4 481946-48/481950/2900276/2900966 or email: mnguwi@ipcconsultants.com or visit our website at www.ipcconsultants.com