Ventana Research Analyst Perspectives

Data from human capital management systems has delivered significant value to organizations for decades. The value continuum has included ensuring compliance with workforce-related laws and regulations around the globe; optimizing human resources’ processes (when combined with various other elements such as change management); maintaining a historical record of key employee activities and transactions; tracking cost trendlines such as those related to recruiting, compensation and benefits; feeding payroll systems from time and attendance platforms; and providing visibility into learning and development needs. This, of course, is just a sampling, but truth be told, the capability to maintain and report on this type of information — while broadly beneficial to every organization — doesn’t pass what I refer to as my “ascension test.” In other words, merely doing a better or even great job of tracking and reporting on these and many other types of people data is not likely to allow an organization to ascend the ranks within its industry sector.

What’s missing from the equation is the type of high-value analyses that connects dots that are not intuitively connected, leads to key insights that are not routinely surfaced, and provides implications or guidance (partially or fully served up by the system) around specific HCM policies, practices, programs and strategic initiatives that should be reevaluated or changed to align with the broader business context, inside and outside of the organization. And if such required actions are consequential, do they relate to the entire enterprise or certain segments of the workforce, as defined in a myriad of ways — by compensation level, business unit, geography, demographic group, etc.

As an example, let’s take the ultra-important function of paying people correctly or enabling them to efficiently enroll in benefits programs. No one would question how important these activities are, nor the difference between having all the data that’s needed in a reliable manner and format, but how many organizations have ascended the ranks of a vertical market by ensuring maximum data completeness and reliability and even the flawless execution of all relevant back-office HR processes? Notwithstanding the fact that employees would likely leave in droves and the organization’s reputation as an employer of choice would be seriously damaged if people were frequently not paid correctly, none come to mind at the moment. I view reliable people data as a critically important corporate asset, but to move up in industry rankings, more impactful data — the type that delivers strategic (versus operational) value — will likely be the path.

By way of contrast, and in case you haven’t surmised by now, my view is that there are innumerable ways HCM systems can and do deliver strategic value to organizations — the type of game-changing value that can catapult an organization ahead of its competitors.

Speaking of value, let’s start with a concept I created years ago: employee value indicators. I defined employee value indicators as all the tangible ways an employee delivers value to the organization, whether within the confines of their job/role or not. Of the latter ilk, we’re talking about such value-creating items as referring job candidates who become top workers, mentoring a bunch of early career associates so they can be more successful more quickly, or funneling great ideas to the operations team or sales leads to the sales organization. In my view, all HCM systems should track this type of information; moreover, any organization that reduces the value of a worker to a number such as a performance rating deserves a failing grade. I have also seen reductions in workforce or post-mergers and acquisition staff consolidations determined solely by performance ratings. Whether it’s a single data point or a performance rating trendline, it’s a poor display of professional management at a potentially game changing moment in my view. It’s also practices like this that caused so many M&A’s to underperform or fail over the years. For more on this, here’s my Analyst Perspective, HR Technology in M&As: The Tipping Point Has Arrived.

Other examples of high-impact people data opportunities — or missed opportunities —include tracking what I refer to as latent competencies, or competencies one is proficient in but are otherwise invisible because they are outside the confines of one’s job or role. Consider the case of a mid-market pharmaceutical company I had as a consulting client, Management wanted to transition from being a manufacturer of product to basically the sales arm of the major drug companies. Huge implications to deal with, including needing many more employees with B2B sales skills. The company had to either invest untold sums in replacing and hiring to meet the new skills demands or start by inventorying who among current workers has ever demonstrated the requisite skills, even at other companies. Beginning with that step saved significant time and money and ensured a successful transition to the new core business strategy. Another example is monitoring a key employee, as defined as any worker whose departure would be noticeably or materially disruptive to the organization. When defined this way, it could be the only associate left with extensive knowledge of a legacy system that’s had millions of dollars invested in it over time.

One final example of a high-impact or high-value HR/people data opportunity is a worker’s career goals. Yes, plenty of organizations track this in HCM systems, but is it maintained over time as the goals change? When an employee knows an employer or manager is cognizant of his or her career goals, especially when those goals change over time, it certainly has a positive impact on employee engagement, retention, productivity and the overall employee experience. This is data that delivers real strategic value.

Many of these examples, and several others that are comparable in value potential, unfortunately are missed in HCM systems and by the organizations deploying them. Two reasons come to mind: Lack of confidence in data quality, including the ability to track and accurately maintain data reliability over time; and, in many cases, the data items outlined are not core to a particular, standard HR process or automating that process so data management or governance can be thin at best. The good news, however, is that we might be on the crest of this changing for the (much) better. As HR and business leaders have become increasingly focused on delivering a superior employee experience and on elevating organizational agility, neither of which are core HR processes per se, supporting these missions with appropriate and very reliable data will become more of a priority and, eventually, commonplace in HCM systems. Of course, the key here is data quality and reliability and the multipronged approach needed to achieve this, including effective training and clearly defined and syndicated accountabilities related to data ownership. I am optimistic, however, as highlighted in the assertion from the 2021 HCM Market Agenda that by 2024, two-thirds of organizations will experience improved data quality from investments when they are tied to such strategic goals as organizational agility. Elevating organizational agility happens to be one of the main ways to pass my ascension test.

The parting recommendation here is that organizations should not overlook the opportunity to track, reliably maintain and make visible any and all valuable people data, whether attached to core HR processes or not. Get all requisite pieces in place to ensure data quality. Several examples were outlined here that could translate into significant value creation and competitive advantage for organizations, but there are so many others. Use the ascension test if that helps.