CIOs are no stranger to the HR department. In the past three years alone, some 70 per cent of HR functions say they have increased their use of mobile or web platforms and nearly half say they now use cloud services within their core operations.

Yet, for the most part, recent technology investments within HR departments seem to have been focused more on efficiency gains (i.e. cost savings) than the pursuit of greater effectiveness. Self-service models improve service efficiency and allow HR professionals to refocus on less transactional activities; online development and training programs have reduced the cost of classroom activities; global IT systems and connectivity have enabled the off-shoring of repeatable processes.

According to Hugh Mitchell, Chief Human Resources Officer at energy giant Royal Dutch Shell, technology has been key in reducing the HR function’s cost base. “From about 2007 to 2011, we took some 40 per cent from the cost base of HR, predominantly on the back of technology,” he noted in a recent KPMG report, adding that technology has “been a big efficiency play”.

HR 2.0

But while efficiency will continue to be a key focus on the HR agenda, a growing number of people leaders are starting to consider how they might leverage data analytics to deliver more effective HR services to their organisation and – in turn – drive greater value out of the function.

In a recent research study conducted by KPMG International and the Economist Intelligence Unit [1], we found that almost a third of respondents plan to invest in data analytics over the next three years – more than any other investment area.

 We believe that the incorporation of analytics into the HR function will mark a new era in the relationship between HR and the business. Analytics will allow HR to collect clearer information on its ‘talent supply chain’ and will provide hard quantitative evidence to support HR decision making. In other words, data analytics gives HR departments the long-overdue chance to become more empirical, thereby gaining much-needed credibility at the highest levels of the business.

Delivering insight, not just facts

However, the real challenge for both HR and IT leaders will be in elevating their data analytics capabilities to a point where they create real and valuable insight for the business. Currently, most of the analytics underway within HR departments does little more than provide a record of the function’s activities – a purely historic exercise. In some cases, the more advanced and mature users of analytics have progressed to a point where HR is able to consider measures around workforce sentiment; essentially holding a mirror up to the organisation. 

But the real ‘holy grail’ for data and analytics technology in HR will come when HR departments are able to demonstrate the return on the human capital employed within the organisation. It’s the ultimate killer metric; benchmarking people in terms of the revenue and profitability associated with their efforts. This will be what truly helps secure HR a place at the strategic top table as well-designed, predictive workforce analytics moves up the CEO agenda to be on par with balance sheet and P&L statements.

Strong partnership needed

But getting the HR department to this point will take significant effort and time. First, HR will need to develop its abilities to operate in a data-centric environment. Skills will be hard to find within the existing HR workforce – statistical analysis has traditionally not been a core competency for HR professionals.

HR and IT will also need to work closely together to understand how people-related data can be transformed into intelligent insight efficiently, effectively and in a way that maintains the privacy of individuals. New processes will also need to be developed to ensure the information is disseminated (or accessible) across the organisation, not just within the four walls of the HR department.

We believe that the integration of data analytics into the HR function is a first – and critically important – step in catalysing HR transformation. It will develop greater confidence, leadership and credibility in the HR function, as well as closer partnerships within the company. As a whole, the function can move towards a ‘whole-business’ perspective that is aligned to the needs of the entire company.

Ultimately, we believe that – by enabling the HR department to take a more evidence based role focusing on the people agenda within the organisation – technology presents a rare opportunity for HR to become the value-driving centre of excellence demanded by today’s executive teams.

[1] Rethinking Human Resources in a Changing World, KPMG International, 2012