The rise of big data and predictive analytics in human capital management has opened the floodgates to tools and processes to add scientific rigour to people management, transforming human resource practice
Factory workers at the Western Electric Company, based just outside 1920s Chicago, were found to be more motivated and productive because of social factors rather than monetary incentives and good working conditions.
These factors included choosing their own co-workers, working as a group, being treated as "special" and having a sympathetic supervisor.
Fast forward almost 100 years after the Hawthorne Studies, as the experiments above were known, and the art of managing people is making another significant leap towards becoming a science.
The rise of big data and predictive analytics in human capital management has opened the floodgates on tools and processes to add scientific rigour to people management.
With the backdrop of tectonic shifts in the nature of work as well as increased volatility in the business landscape, the era of People Analytics, or Human Resource (HR) Analytics, has arrived. Whether we like it or not.
ADOPTING PEOPLE ANALYTICS
A study last year conducted by PricewaterhouseCoopers (PwC), a consultancy, found that 86 per cent of business leaders thought that creating or maturing their people analytics function over the next one to three years was a strategic priority, but only 46 per cent of them had such a dedicated function. This gap is forecast to close quickly in the coming years.
There are three fundamental enablers for closing this gap as pointed out in the Harvard Business Review.
Velocity: The first enabler is the velocity of data. In the time taken for you to read this sentence, more data has passed through the Internet than all the data stored on the Internet less than 20 years ago.
This speed has already become a baseline expectation of business functions. More than half of the leaders studied by PwC demanded data on a business event within an hour of occurrence. In light of this, the annual cycle of employee engagement surveys starts to look extremely antiquated, hence other tools are emerging to deliver high-frequency feedback for leaders to calibrate their management style in real time.
Volume: The second enabler is the volume of data that is being transferred. Right now, the cost of data storage and processing has been falling exponentially: Wikibon, a technology and business systems community, estimates that the cost of flash storage will fall 98 per cent over the period from 2015 to 2020.
In tandem, the volume of data that is being created every day is 5 billion gigabytes and growing. These trends make it easier than ever to warehouse huge repositories of people data, which hold the potential of yielding never-before-considered insight on managing people and teams.
Variety: The last major enabler is the variety of data collected. The multiple sources of data allow companies to mitigate the omitted variable bias (when a model leaves out important factors in its analysis) when using traditional HR data.
GPS data from mobile phones, near-field communication chips in employee ID tags, facial recognition, social media sentiment tracking, information from wearables and other data sources have made up what British technology pioneer Kevin Ashton has coined the "Internet of Things" at the workplace.
Deloitte, an accounting firm, has experimented with a wearable gadget that tracks the movement and conversations of every employee, with their consent, to draw conclusions about the behaviour of their best performers and gain granular understanding of the productivity and speech patterns of the best managers.
EVOLVING NATURE OF WORK
The evolving nature of HR technology operates a feedback loop for analytics to inform and influence behaviour. Mr Josh Bersin, a thought leader in the people analytics space, pointed out that HR applications have become "consumerised", functioning as tools for employees first, not HR.
These enable them to better manage others, learn and develop, and steer their own careers.
Microsoft's US$26 billion (S$35.3 billion) acquisition of LinkedIn is the most recent data point affirming this trend.
With more than 2.1 billion smartphone users on the planet spending half of their 5.6 hours per day on the Internet accessing content on those phones, mobile technology has become as ubiquitous as the primary technology interface we use.
The Sidekick system, developed by the Commonwealth Bank of Australia, functions as a mobile HR management system and has been downloaded by more than 10,000 employees. Within a year, it has reportedly reduced payslip requests by 46 per cent, and time-approval requests from hourly workers by 35 per cent. A by-product of this is powerful new information for the HR team to help make employees' work lives better.
Meanwhile, even the concept of "the employee" has been evolving. Uber's legal battle in California heralded the need to redefine what it means to work for a company. Companies such as Upwork, Fiverr, 99Designs, Eden McCallum and locally, Grab, are blurring the classification of talent as a corporate asset.
Moving further down this path may make the ability to build a supply chain of "just-in-time" talent just as important as developing talent organically within a company.
Crunchbase, a funding platform, found that venture-capital investment in the "on-demand economy" rose from less than US$500 million in 30 companies in 2010, to more than US$1.5 billion in 117 companies by 2013.
None of these disruptive technologies could have adequately prepared companies for a "black swan" type Brexit, nor the complex risk of a Donald Trump presidency.
Professor Richard Foster at Yale University shows that the average lifespan of an S&P 500 company in the 1920s was 67 years, while in 2012, it was only 15 years. It may be that companies need vastly superior analytics just to cope with increased business volatility.
Standing in the way are still two major impediments to the immediate adoption of people analytics in companies.
First, data silos and incompatible information management systems make meaningful analysis intractable in some cases. This is such a massive problem that the market for enterprise resource planning software (which promises to maintain common standards for data collection and analysis across an organisation) is expected to reach US$41.69 billion by 2020, registering an annual growth rate of 7.2 per cent from 2014-2020.
Second, the analytical capabilities of HR professionals are found lacking - while 63 per cent of chief HR officers surveyed reported using data to provide decision- support insight, only 20 per cent of non-HR leaders agreed.
It will not be long before these tides of change wash onto our shores. SkillsFuture policies may help to make analytical know-how more liquid, increasing the overall stock of data science expertise within HR functions.
Rapidly evolving enterprise software and numerous integrations programmed with an ecosystem of mobile apps may provide the silver bullet that resolves data silos and broadens analytical possibilities.
The final, and perhaps trickiest, change needed lies in the minds of business leaders and HR professionals. By embracing the potential of people analytics, perhaps strategic human capital management can finally be unlocked.
•The writer is CEO and co-founder of EngageRocket.co, a start-up dedicated to improved leadership development and employee engagement through the use of data.
A version of this article appeared in the print edition of The Straits Times on July 27, 2016, with the headline 'Human analytics and the future of work'. Print Edition | Subscribe
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