Evidence-Based Human Resources: The Next Generation of Human Capital Analytics
by Christpher Woock & John Gibbons
The Conference Board
from The Conference Board
In today’s knowledge economy human capital is no longer a means of competitiveness – it’s now the means of competitiveness. And now, ironically, after years of struggling for a strategic role, Human Resources executives are finding themselves increasingly responsible for – and held accountable for - driving business results.
This new role serves as a mandate for Human Resources executives to make their case – to clearly demonstrate how human capital strategies impact the business. While this approach may appear obvious, it isn’t.
According to research by The Conference Board, only 75% of companies measure anything in their HR departments while fewer than 25% indicate that they have anyone on their HR staff who can define, measure, and track HR metrics that are aligned to business strategies. A mere 12% indicated they use HR metrics to drive their company’s overall strategies.
In the fall of 2006 The Conference Board committed to improving this situation by launching a member-based Research Working Group, centered on bringing an evidence-based approach to Human Capital Analytics. The response from our members was overwhelming. In total 42 companies committed to joining in the year-long research exploration of evidence-based approaches to HR. At our invitation, many companies chose to pair a HR leader with a leader from another business function (including Finance, Operations, and R&D).
For our Research Working Group participants, Evidence-Based HR is an effective catalyst for forming strategic alliances with other business functions, and positions them to contribute to the formulation of the business strategies.While the interest is there, it would be misleading to construe this as proof that all these companies are doing Evidence-Based HR. This is not yet the case; but there are a few companies making inroads. These companies are beginning to make their own links between their HR practices and performance; a handful have begun testing hypotheses regarding their own HR practices; a few have even turned to the academic literature for guidance in designing their programs.
Through the course of the past 18 months we have, along with our Research Working Group members, identified the essential elements of applying an evidence-based approach to the practice of Human Resources:
Evidence-Based HR focuses on the business strategy:
Evidence-based practitioners start with the business’s key financial and operational measures, and use a rigorous approach to identify their human capital strategies that drive these key outcomes.
Evidence-Based HR applies a high standard for “evidence”:
The evidence-based approach is a rigorous approach, with the goal of identifying causal relationships. In addition, in order to sustain an evidence-based approach our members believe it is equally important to recognize that this approach changes the way practitioners think, the way they look at information, the way they solve problems, and the way they evaluate their solutions. As a result, an evidence based approach will change how HR professionals use their existing tools.For most HR professionals, the evidence-based approach represents a fundamental shift in their business roles. It provides them with an opportunity to become strategic partners in the business, but it also presents some daunting tasks. Fortunately, our experiences indicate that many traditional HR practitioners are willing to learn the new skills necessary to be evidence-based.
In December we published the first publication from the Evidence Based Human Resources project:
Evidence-Based Human Resources: A Primer and Summary of Current Literature.
Tracing back to the work of Jac Fitz-enz we show how HR measurement has evolved from identifying the basic measures of HR to today’s more sophisticated techniques which place these HR measures alongside a company’s financial or operational measures. Technology has certainly played a significant role in the measurement and use of HR metrics, as did the profession’s drive to “get a seat at the table.”
We also highlight some of the significant work in the academic literature, which lends a body of evidence for the practitioner to use when making decisions. Summarizing research from management, organizational psychology, and economics, we capture the quality of the available evidence. As practitioners move away from casual observations and begin demanding empirical evidence to support an idea, there will be mutual benefits to cross-discipline cooperation between economists, sociologists, industrial psychologists, and others.
We conclude by making the case that the value of the evidence-based approach lies in its ability to drive business performance. That is the ultimate responsibility of the business’s strategic partners. The time has come for senior HR leaders to be a strategic partner in the business. The evidence-based approach gives them the knowledge and discipline to be a successful strategic partner.
If you would like a copy of our research, and your organization is a member of The Conference Board, please feel welcome to go to the link below and download a PDF copy of the report at no charge. If your company isn’t a member of The Conference Board, but you’re interested in receiving a copy of the report, please contact us at our e-mail addresses below.
Research AssociateManagement Excellence
The Conference Board
Research AdvisorManagement Excellence
The Conference Board