Human Resource management is evolving over the decades from a transactional department managing benefits, payroll, compliance and hiring administration (Personnel department) to a strategic business function with the primary responsibilities of talent management and culture.
It is an exciting time to be in HR amidst all of these rapid changes.
In my research I found references stating that first human resources department was established by The National Cash Register Company in 1901 following a bitter strike. It was named the Personnel Department because its role was largely compliance-based, and focused on record keeping, workplace safety, wage management, and employee grievances.
Today we still debatably still see many transactional components in the HR but the profession is radically changing as it embraces outsourcing, technology and HR analytics.
Outsourcing
Emergence of PEO’s (Professional Employer Organizations) have allowed non-strategic functions (payroll, benefits, workers comp) to be managed by outside specialty firms that can deliver great results at lower costs than managing it internally.
Technology
HR strategic advances are rapidly evolving due to the adoption of technology platforms for recruiting, onboarding and talent management.
HR Analytics
This is where everything comes together and where HR is going to show its greatest future impact. Consider the way that Google has their HR function organized. Google’s HR division — or People Operations, as the company calls it — is based on a “three-thirds” hiring model.
- Traditional HR backgrounds
- Strategy/management consulting
- Analytics/Statistics
As mentioned in a Knowledge@Wharton interview, Lazlo Bock – Senior VP of People Operations at Google, says:
“each brings something different to the party.” The traditional HR people, he said, understand Google, have great intuition and can deal well with problematic situations. The consultants understand business in general, and can take a complex problem, structure it and break it down for analysis. And the academics “actually force us to prove that all this stuff we’re [claiming] actually works.”
For 30 years, “HR as a profession has been saying we need a seat at the table, only to be told that [we] need to understand the business first,” said Bock. But they need to demonstrate more than just “an understanding of an income statement…. If I say performance management should work a certain way, or that we should stop doing a certain kind of recruitment, that takes more than just understanding the business. That takes analytics.”
Analytics is HR’s seat at the table. Coming to management with data driven insights will earn them a place in developing strategy because their analytics will be centered on the most important factor of any business – its talent.
In the Knowledge@Wharton article Bock lists several analytically driven decisions that delivered the following results:
- Reducing hiring times from six to nine months to 45 days by discovering that four interviews was sufficient to predict with 86% confidence that the employee was a good fit.
- Improving their talent selection criteria by discovering that top performers from any school outperformed candidates from major Ivy League universities. The key was eliminating the bias recruiters had for the schools and degrees of the candidate. As bock states:
“we were really biased toward people with fancy degrees…. If you attend Harvard versus being number one at SUNY Binghamton, who does better?”
- Proving that good managers can have a positive impact on bad performers by doing an analytical study where he would have less effective employees partnered with less effective managers switch teams to now work with managers in the top quartile. As the Knowledge@Wharton article states
Bock was able to assess whether bad performers working for bad managers improved when they went to work for good ones, and vice versa. He compiled evidence that showed that “the actions that a manager takes actually have measurable, real consequences in terms of performance…. It was a beautiful, beautiful finding,” said Bock.
An understandable reaction to this may be that this type of analytical work can be done by company with major resources like Google but it will not work for my small or mid-sized company.
Bock advises HR practitioners to “hire somebody with a quant background and a semester or two of MBA-level statistics. That’s all you need … someone to be able to tell random variation from actual, cause-driven variation.”
He suggested HR professionals think of a problem that both matters to the business and is interesting to them, and examine performance differences between different categories of people. Then they could set up test situations. “Take two more groups — it doesn’t matter if they’re five-person groups or 500-person groups … and say, ‘We’re going to treat them differently, and let’s see what happens.’”
Bock observed: “All of our clients, all the people we work with and partner with, they all think they’re really good at ‘people stuff.’ Because our [human] intuition is to think, ‘I’m a keen judge of character; I of course, make fair decisions; I’m completely unbiased.’ And we all make unfair decisions. We’re all biased. So, whenever you can qualify what you’re saying with these experiments is a way to get there and improve your credibility.”
Analytics is the future of HR and the key for them to bring real change to their organizations, drive culture and give their organizations sustainable talent advantages in the market.
It is an exciting time to be in HR.
