No Ordinary Disruption - Labour Market Challenges in the Digital Age

I've been reflecting on the the 'new work order' in preparation for the Economist's Talent Management summit next week.  As part of this, I've been reading McKinsey's new book, No Ordinary Disruption, and today, got to talk to one of the book's authors, Richard Dobbs, Director of the McKinsey Global Institute (their research arm.)

MGI look at various long-term trends and you, like me, may have seen some of their previous reports on the labour market, social collaboration, technology and other areas.  However their clients wanted to know how these fit together.  And basically there are 4 forces, each one larger than what we’ve ever seen:

• A shifting locus towards the East (taking HSBC with it of course)
• The acceleration in the scope, scale and economic impact of technology
• A dramatically aging global population, growing less fast than in the past
• Flows of capital, people and information (increasingly South South.)

Sometimes the forces build together, sometimes they pull apart - leading to increased complexity and additional challenges.

Executives typically have a sense that the world is changing, but don't understand enough about how the change is working so we need to reset our intuition about the world going forward.  People don't reset enough.  The current changes are a bit like the British Industrial Revolution but ten times as fast, and 300 times the scale.

For example, Richard talks about Tianjin in China, which most Westerners have never heard of (I hadn't, despite spending 3 weeks in China last year) and compares its economy to that of Stockholm (but how will it compare by 2025?)

Resetting Intuition

I was pleased that even though McKinsey is well known for being very data based (and you can certainly see this focus in the book) the firm still sees a role for intuition.  To me, this is particularly important given the complex mix of forces suggested in the book.  I also think extrapolating data into the future is increasingly dangerous to do.  And in fact, the book notes that the 4 forces can "play havoc with forecasts and pro forma plans", but of course that's exactly what MGI has had to do.

Richard also described a balanced approach to using data and intuition:

"However data or analytically driven, many executives still reply on intuition.  And numbers never prove it 100%.  That can mean that executives leave a decision a bit or plan make it later.  The point is are they happy to make a decision on the basis of the data that they're getting?  It's a bit like what we think house prices are going to do.  Data underpins it in a way we're not even conscious of.  Over the last few years, asset prices have appreciated, driven by interest rates and global GDP.  We've got used to it.  So I won't make a good decision if I don't get a forecast, or by suppressing my intuition."

The idea of needing to rest this intuition recognises that our intuition which still underpins much of our decision making has been formed by "a set of experiences and ideas about how things worked and are supposed to work."

The difficulty is that this acts a bit like recency bias and the anchoring effect in psychology, or inertia in physics.  "However we identify it, there is a powerful human tendency to want the future to look much like the recent past."

So "if we look at the world through a rearview mirror and make decisions on the basis of intuition built on our experience we could well be wrong.  In the new world, executives, policy makers, and individuals all need to scrutinise their intuitions from first principles and boldly rest them if necessary."

I'm not quite sure about the suggestion that intuition anchors people to the current state - surely it depends on what people pay attention to?  And although I think Richard used the Tom Watson quote about there being room for 4 computers in his session at LSE this week, there are also plenty of examples of forecasts being well over the top, for example ones suggesting that we’d all be flying around with personal jet packs by now.  

However the book does provide a couple of good examples of anchoring, for example companies allocating the same resources that they had done in the previous year, even when things change drastically, for example in the global recession.

My remaining worry is that 'boldly resetting' is likely to be a bit harder to do than the words might suggest.  So I think the book is probably right in referring to executives needing to develop the capabilities to rest their own intuition.

Skills Challenges to meet the 4 Forces

Given that I've been blogging about digital, we focused mostly on the trend / force around technology:

"HRDs are seeing the impact of cloud systems like Workday.  They're not taking 5 to 10% out of their transaction costs but by a factor of 2 or 3 times as they move towards self service vs forms and people.  It's a strategic issue because it costs less and people get better service.   Employees find it more convenient. 

But as technology disrupts more jobs and people have to refocus.  How prepared is HR to help in that journey?"

That led us onto a conversation about employment and skills.  As noted earlier, global labour market growth is due to start falling, and finding talent in skilled positions will become yet harder.  However as robots and computers take on a growing role in performing activities, and undertaking knowledge work, less lower value roles will be needed.

This means that by 2020 "businesses could be short of 85 million workers with college degrees or vocational training; at the same time, 95 million lower-skilled workers could be unemployed."


Part of the solution to this problem is about better use of online talent platforms (see McKinsey's new research report on this.)

However there needs to be more action too, including better links between business and education.  I mentioned an earlier McKinsey labour market report I'd seen which described how South Korea (where Richard has just returned from) transformed their whole eduction approach to provide the skills that country needs.  But this is harder in a Western democracy like the UK.

Richard didn't have a complete solution to this but suggested that whilst the UK isn't as bad as other places, we need to do more to develop STEM skills, particularly in numeracy, computer programming and confidence in technology.

"I find it extraordinary that people can give up maths at 16 and go to university with just a maths GCSE.  But the coding in schools curriculum is great - every policy maker around the world I've mentioned it to has asked 'why aren't we doing that?'"

We talked about three other needs supporting this as well:

1.  Much more external focus.  Many execs are very internally focused.  That may have made sense during the last few years, to drive performance and productivity. But now they're still not spending enough time with customers, understanding the disruptions.  They need to go round Silcon Valley and meet the disruptors. 

2.   Ability to make companies agile.  It's difficult to get actions exactly right so you need to be able to respond.  It's amazing to see how some companies respond - for example long debates about cannibalisation. 

3.   Attitudes.  It's easy to see the four forces as a perfect storm where everything is negative.  but some of the changes will be very exciting, for example taking a billion people out of poverty, creating a consuming class of another billion people, creating a cancer drug that be tailored to your genome and so on.  We think the winners will be disproportionally the optimists.

I finished by asking about income inequality which I had noticed Richard had described in a session at LSE earlier in the week but didn't seem to come through that strongly in the book. 

Partly because of the impacts on employment that I described above, inequality is going to grow further too.  Some cohorts of the population have done badly from the changes.  In fact Richard suggested that because of automation, de-unionisation, immigration and trade or offshoring, male school leavers have seen salaries decline since 1995.

Well inequality isn't in the book because McKinsey are still working on their first research report on it but Richard agreed with me that the impact will be important to society and to businesses too.  If we're struggling for skills that last thing we want is more people with-holding their discretionary effort too.

I'll be posting on some of the additional challenges of operating in this complex, digital environment, over the next few days and weeks.

In the meantime, thanks to Richard for his time and insights - I do think the book presents a compelling outline of the need to reset.

• Consulting   Research  Speaking  Training  Writing
• Strategy  - Talent - Engagement  - Change and OD 
• Contact me to create more value for your business
• jon [dot] ingham [at] strategic [dash] hcm [dot] com

Humanising HR using Digital Technology - Employee Recognition

I provide more information on creating value HR technology on Workstars blog in my next new post there:

"The Future of HR Technology - Enabling not Controlling  

These new technologies include social collaboration systems, mobile apps, wearables, augmented and virtual reality, games and simulations. Some of the key benefits of these new enabling systems including fun, transparency, collaboration and analytics.

A great example of the new type of HR technology and of the sort of culture which supports it is social recognition. Traditional recognition was very transactional or value for money focused, usually involving limited amounts of recognition and perhaps once a year recognition ceremonies with awards being given to just a small number of employees. More recently this developed into a broader, adding value focus in which managers were responsible for recognising members of their own teams and the focus of recognition became a bit more strategic. 

This shift has now progressed even further with new-style social recognition systems allowing everyone in an organisation to freely express their appreciation of one another and to understand what it is about what they do which other people value. Managers can participate in this process of appreciation but the more fundamental focus is employee to employee, human to human."

More details are on the Workstars blog.

The basic point is that digital technology can help humanise organisations and their HR approaches, putting the H back into HR, by enabling people, freeing them up, to provide more of their potential contribution.

So for example, rather than making people follow automated processes which are designed purely to meet business needs, and then worry about their engagement, it provides people with compelling technology which enables them to do more, and be more engaged in the process.

Social recognition, like Workstars, is a great example of this technology, so do check out their site!

Workstars is a sponsor of my Strategic HCM blog and so you’ll be reading more about them here over the rest of the year.  But in brief:

Workstars' mission is to make your business a better place to work, and crucially, get your business working better. 

Workstars are innovating beyond the very tired, self serving $47 billion reward industry. We are focussed on the future, and the future of employee recognition is social.

A true cloud based business that wraps people services around the market leading employee recognition application, where every line of code is shared by every client, very large or very small.

The first global SME and Enterprise provider to master a free to launch model. Our significant application investment continues to expand our business. We work with HR and when it comes to employee recognition, we are a plug and play innovator.

Workstars bring enterprise level infrastructure and thinking, designed to make managers great and boost engagement across any business.

Also see:

• The benefits of employee voice at work

• The art and science of workplace communication

Enterprise 2.0, Social Business and Digital HR

As I posted yesterday, I think we need to define digital business / digital HR quite carefully, or it risks just becoming a catch-all term for broader transformation, which I think is a shame, as you then miss the specific aspects which digital is about.

I guess one of the most easily confused topics which end up being merged into digital is enterprise 2.0 / social business - often because it's the same people who are concerned with the different aspects, and because of their obvious similarities i.e. that they're both 'not not about the technology.'

For example it's interesting to see the Enterprise 2.0 Summit morphing into Enterprise Digital:

'We have been thinking about the scope of the Enterprise 2.0 SUMMIT for quite some time. For a while now our beloved expert community has been telling us that “Social” has moved on, the “Enterprise 2.0” term is “dead” and that our conference heading doesn’t match the general “zeitgeist” of the current business landscape. 

While the term “social” is called “dead” – the digital transformation of work is in full motion. As part of the bigger picture of developing the “next-generation enterprise model” the re-modeling of work certainly cannot be treated singular – as it needs to fit into a new system of an open culture and a business model based on a networked ecosystem.' 

Now I wouldn't personally say that social is dead - far from it (and I hate the expression anyway) - but again, it depends upon what you mean.  The graphic above is my representation.

Social is one big trend, and a particularly significant one in HR, but one that was never really picked up in Enterprise 2.0 circles and is only now really being developed within HR and the rest of business.  The focus of this is about developing relationships rather than just people, or social capital rather than just human capital, and doing this through everything we have at our disposal within HR, as well as aligned fields, eg workplace design.

Digital is a largely independent shift, more focused on the way we do things, and using the creating value technologies which I referred to yesterday to improve the alignment, productivity, engagement and learning of employees.  This probably has the most relevance outside HR, particularly in terms of connecting employees and customers (although the HR aspects are still important.)

Enterprise 2.0 is (not was) the intersection between the two - the use of digital technologies to achieve social outcomes.

Now as we all know, Enterprise 2.0 never managed to live up to the hype. Altimeter's findings that only 36% of collaboration networks have many people using them absolutely echoes what I see happening in organisations.

However, it doesn't need to be this way - I know from my own experience working in an OD role on a big digital project that enterprise 2.0 systems can be effective, if they're introduced and managed in the right way - i.e. as OD, not as IT (a topic I tried to promote at many Enterprise 2.0 conferences, including the ones in the US, whilst these were still in fashion.)

So is social / enterprise 2.0 really dead?  Only if it's seen as the little bit in the middle of the venn diagramme i.e. the implementation of stand-alone enterprise 2.0 systems without social objectives.  But if it's seen as the connecting point of two critical trends - social relationships, and digital (both still very much alive) then it's still at a very early point in its evolution.

But social and digital can also be implemented separately and independently, and we shouldn't confuse one with the other, even if they're often going to be implemented as part of the same change.

• Consulting   Research  Speaking  Training  Writing
• Strategy  - Talent - Engagement - Change and OD 
• Contact me to create more value for your business
• jon [dot] ingham [at] strategic [dash] hcm [dot] com

Digital HR

There's an interesting article in HR Magazine today suggesting that organisations are at risk from a digital delusion which is about seeing "digital as a synonym for technology and therefore about HR systems."

I think the point is a good an important one - 'digital' is hard to understand.  I agree it's not just about technology, but then if it's not, what is it about?

Well I'm going to be blogging on this later on today, but it's worth emphasising that one thing it's not is HR systems!

A few years ago I blogged here about different levels of HR technology based upon the value triangle I use as the basis for a lot of my consulting and training.

Whereas value for money technology focuses on data for HR (HR systems!) and added value systems looks at information and automation for managers, creating value engages and enables employees:

"In creating value, value comes from the organisation’s employees, rather than how these people can be managed to meet existing business needs.  Technology can create value by pointing to particular potentially valuable capabilities, but it is more likely to have this impact by helping employees to increase the value they can provide. 

This is why I’m so interested in social and mobile technologies – they get beyond HR’s system of record and the line manager focused talent management system to actually increase employee contribution.  So for example, a social performance management system can help employees get feedback from the people they work with, to share the reviews with these people and to participate in a review of a whole team.  It helps them take ownership of their own review and hence is likely to have more impact on their performance.  Of course, social technologies aren’t the only way of doing this – for example, I was involved in a self rostering system for train operating company staff a good ten year ago which had much of the same effect.  

You can identify opportunities for creating value from technology by focusing on the people in the organisation – their engagement, capabilities and other aspects of their human and social capital – and thinking about how these capabilities can be extended. 

This is why I’ve been commenting on the need to focus on people and behaviours, not on technologies or tools."

This is the basic insight we need to hold in mind in understanding digital business and digital HR.  Digital business / HR is about technology for people and teams, not to improve management or HR data.  And because it's for people and teams, it immediately becomes more complex than any other areas of technology we'll be more used to, eg HR systems.

The tendency then, as the article suggests, is to assume that digital is about everything we're seeing in today's business world eg fast pace, omi channel, flat / flexible structures etc (from the article) - which of course it can be.  But broadening the definition out this far renders the term to be largely meaningless and reduces the chance that organisations will do anything about it.

So we still need a way of thinking about digital which isn't just about the technology but also doesn't incorporate the whole world of business.


More later...

• Consulting   Research  Speaking  Training  Writing
• Strategy  - Talent - Engagement - Change and OD 
• Contact me to create more value for your business
• jon [dot] ingham [at] strategic [dash] hcm [dot] com

Culture - the solution or part of the problem?

You'll have heard the same adages - culture eats strategy for breakfast, culture is the new black etc.  And you'll have probably seen some of the recent cases of tech firms promoting the power of their own cultures, eg Netflix, Buffer, Airbnb etc.

And today, the CIPD's Peter Cheese has been suggesting that HR needs to help business leaders understand what their culture is:

Cheese added he was heartened that an increasing number of corporate leaders do seem to now be developing a better understanding of the importance of culture. “I spent a lot of time trying to talk to banks in the early 2000s about culture. They said ‘this is very interesting but we don’t have a problem'. Now we are in a different phase of thinking that recognises you can't change behaviour by writing more rules. We have got to really understand why people do the things they do.”  

“I would point the finger at HR too. We should be the function that understands the corporate culture and helps to educate the business and provide the levers to change it.” Speaking on the financial crisis, Cheese said: “We were not equipped to confront management and say ‘this is what’s going on in your organisation and it’s got to change'. HR has a massive role to play in this.”

I think it's interesting because to me, a focus on culture is often part of the problem rather than an aspect of the solution.

It's something I've changed my mind upon.  When I started in HR and change management consulting I used to find the concept of culture very useful because we hadn't previously had anything to address the most important elements of an organisation, or what Peter refers to as "the hardest parts of the iceberg below the water – the things that are much less visible.” 

These days I generally just find that the concept has been so overused, misused and abused, it tends to do more damage to our understanding of what is needed than it does good.

So when my clients talk about culture I always try to get them to explain what they're really talking about - either through Schein's onion, Johnson & Scholes' cultural web, McKinsey's 7S, the Dennison model, Dave Gray's culture map etc, identifying the the elements of these models which will give us the greatest leverage.  Is it the way power is distributed, or the organisation structures, or the values, or what?  Often of course it's a combination of these, but that still provides more clarity than referring to a more amorphous concept of culture where different people can often be using the same work but are often thinking about very different things.

I often point people at the HCM value chain in which all three steps in the chain can be seen as aspects of culture, but because of their different positions in the chain, have a different impact in the organisation.

Things like the organisation's values are inputs - they don't change anything in the business by themselves but they allow activities to be conducted in the right way.  Activities include communication, recognition and other processes, practices and systems.  These are shaped by the inputs and lead onto the outcomes.  The outcomes, including competencies or behaviours, which I often dissect into human, organisation and social capital, are the most important deliverables of what we in HR do.

In one sense, culture refers to all of the above.  But the one element in the system which probably is probably most central to what people mean when they talk about culture is social capital, is about the connections, relationships and conversations people have within the organisation.  That's why so much of my work focuses on helping organisations create this category of outcomes these days.

To me, it's by unpicking what people are really talking about within this system which offers the best hope of truly understanding what an organisations culture is now, and also how they hope to influence the way this grows.

Unpicking the value chain also provides the best way of measuring the important elements of culture, meaning that you don't need to go for a fishing trip in organisational big data.

Photo credit: Brian Chesky - Airbnb

• Consulting   Research  Speaking  Training  Writing
• Strategy  - Talent - Engagement - Change and OD 
• Contact me to create more value for your business
• jon [dot] ingham [at] strategic [dash] hcm [dot] com

Workstars, Recognition and Employee Voice

I've had my next post published on Workstars new site, this time on the Benefits of Employee Voice at Work.   Employee voice is about “ensuring that everyone working in an organisation is able to talk or write about what they see as important” and is a vital enabler for business performance.

Here are my three top reasons for why, and how we should encourage every employee to add their voice to an organisation:

1. People who have found their voice can be more focused about their work.

2. The capability of employees can be further enhanced by effective HR and management processes, many of which depend on, or can be enhanced by, employee voice.

3. Employee voice does not just help develop individual employee capability, but also the employees’ engagement, and retention within the organisation.

You'll find more details on these points, and the other seven reasons, over at Workstars blog.

You can find my previous post on Social Recognition - the Art and Science of Workplace Communication over there as well.

Workstars is a sponsor of my Strategic HCM blog and so you’ll be reading more about them here over the rest of the year.  But in brief:

Workstars' mission is to make your business a better place to work, and crucially, get your business working better.

Workstars are innovating beyond the very tired, self serving $47 billion reward industry. We are focussed on the future, and the future of employee recognition is social.

A true cloud based business that wraps people services around the market leading employee recognition application, where every line of code is shared by every client, very large or very small.

The first global SME and Enterprise provider to master a free to launch model. Our significant application investment continues to expand our business. We work with HR and when it comes to employee recognition, we are a plug and play innovator.

Workstars bring enterprise level infrastructure and thinking, designed to make managers great and boost engagement across any business.

Global Talent Acquisition Strategy

You may be interested in some of my thoughts on the evolution of recruitment in this guide from HRZone and Jobatar:

"Talent acquisition has developed from the previous field of recruiting based upon a more strategic focus, and improved capabilities, which are often provided by technology. Developing a talent acquisition strategy starts with a clear focus on the type of people who need to be acquired, and builds best fit processes and activities around this strategic clarity. This is particularly critical when working across a large organisation or on a global stage, since it will never be possible to control all activities centrally and it therefore becomes more important to clearly articulate the most vital aspects of an organisation’s approach..."

• Consulting   Research  Speaking  Training  Writing
• Strategy  - Talent - Engagement - Change and OD 
• Contact me to create more value for your business
• jon [dot] ingham [at] strategic [dash] hcm [dot] com

Preventative Skills Planning in Health & Social Care

I've had my second post for the UKCES published on their Gov.UK blog.

It's on employment and skills in Health and Social Care which may not be the most alluring of sectors (at least as far as search engine optimisation is concerned) but is certainly one of, if not the most important sector for the UK economy.  It will also of course be of core concern to many of this blog's readers.

The post is based upon the UKCES' latest Sector Labour Market Intelligence report focusing on health and social care.  I write about the sector's challenges in recruitment, development and retention as well as some necessary structural change.

But actually there are a whole range of other challenges I could have written about - workforce planning for example.  This is also going to be more critical, but also more challenging.  Structural changes are one cause of complexity.  For example, there needs to be an increased focus on preventative health and enablement - helping people to manage their own care to a greater degree, supported by electronic health records.  This could lead to other occupations such as life and fitness coaches becoming increasingly important to the sector.  I would also suggest that support roles such as workforce planning managers will also be key to the sector’s future!

However another factor is the nature of the supply of workers, with 80% of employees in the sector being women, many working part-time, and often having a range of options open to them over their training, careers and retirement decisions.  Potential changes to national policies and regulations relating to wages and training structures adds further complexity to these forecasts.  The report also suggests that employers find it difficult to provide time for training and this requirement should be factored into workforce planning too.

Whatever happens, developing skills for the future will not be easy but the UKCES’ report should help move the sector not just to a more preventative approach to health and social care, but also to a less reactive and more preventative style of employment and skills planning too.

• The UKCES' report
• My UKCES post on Health and Social Care
• My earlier post on the Energy sector
• Steven Toft (Flip Chart Rick)'s post on the UKCES' Growth Through People report

• Consulting   Research  Speaking  Training  Writing
• Strategy  - Talent - Engagement - Change and OD 
• Contact me to create more value for your business
• jon [dot] ingham [at] strategic [dash] hcm [dot] com

Evidence based management and the dangers in surveys

I was a bit over critical of KPMG's evidence based HR report yesterday but it really did remind me of the sort of surveys reviewed on 'Bad PR':

• “Getting a new job is so hard, you’ll need professional help!” says recruitment company

• “Spending time in the bathroom together could save your marriage!” says bathroom retailer

• “Women who diet via other methods are boring!” says diet drink company

• "Big data and analytics are in" says big technology oriented consultancy?

There are a couple of common tricks of the trade in these kinds of surveys.  One is picking the people who will give you the required answers.**  

The second is asking questions in a way that will get you the most useful responses.  At its most artful this is about nudging people towards a more desired output, for example by making 'yes' support your particular objective ("yes, I want to remain part of the UE", not "no, I want to remain part of the UK")

At it's most crass, it's about asking forced response questions which lever people into providing answers they don't mean.  Management Today had a great article on this earlier in the year:

"How do companies such as OnePoll obtain such consistently scandalous, clickbait-friendly results? One favourite technique is the forced choice. For example, questions such as, ‘Who do you prefer to work for, men or women?’ where the only answers possible are ‘men’ or ‘women’. The logical responses - ‘I don't discriminate’ or ‘I don't know’ are not options — and respondents are forced to choose in order to claim their precious 10p reward.  

A leading question in the same survey asks, ‘If you prefer to work for a man, why do you think women make bad bosses?’ with answers including ‘no time of the month’ and ‘easier to reason with’. Therefore whatever the survey result, the PR firm has a juicy headline to get their client's name into the papers followed by ridiculous, fabricated, pre-determined justifications for the nonsense headline. This is precisely how the Daily Mail's headline: ‘Men are the best bosses: Women at the top are just too moody (and it's women themselves who say so)’ was made. The story also featured in The Guardian, The BBC, on Five Live, The Wright Stuff and Loose Women. The somewhat less headline-worthy truth of the matter was never given a chance. That clearly wasn't the objective of the recruitment agency that funded the sexist survey."

A master in this type of research is Heathrow Airport, whose 'independent' 'community group' Back Heathrow generates some of the most biased research around.

Their latest resident survey asks 'if you knew that Heathrow would definitely close without expansion, are you in favour or against it expanding?'  It's a compulsory question and respondents are forced into being in favour or expansion or of Heathrow closing* - despite there being no prospect of this at all since Boris island was kicked out of consideration.  But the question doesn't even bother asking 'would you be' but simply asks 'are' as if the closure of Heathrow post a decision to expand Gatwick is already a done deal.  You can immediately see the type of headline they're hoping to feed the Daily Mail from this.

Of course you can go even further and say that anyone responding to your survey is a supporter regardless of whether they respond positively or not (as seems to have happened in regard to Heathrow's survey in at least some cases too.)

It's not the worst kind of corporate misbehaviour we've experienced over the last few decades but it doesn't do anyone other than the Daily Mail any favours and adds to the need to be very cautious about the validity of research based evidence.

* = (or that they don't know what they think)

** = I'm not criticising KPMG's report for either of these 'tricks' - as I wrote yesterday I think they just over-extrapolated from the research findings.  But then, I think we have to recognise that although Jonathan Ferrar from IBM, SAS, the Information Services Director at Unilever, John Boudreau, Anthony Hesketh etc all know their stuff, they will also provide a certain type of response.  

• Consulting   Research  Speaking  Training  Writing
• Strategy  - Talent - Engagement  - Change and OD 
• Contact me to create more value for your business
• jon [dot] ingham [at] strategic [dash] hcm [dot] com

Economist / KMPG Evidence Based HR

One of the topics I expect to come up at the Economist's Talent Management 2015 summit in a couple of weeks time is evidence based HR, so I've been taking a look through their recent research for KPMG on this topic, which is defined as using the best available evidence to support people-related decision making.

Now I'm a big fan of the Economist's research and know from my experience working as a researcher for one of their sponsored studies how strongly the group upholds its editorial principles in dealing with its clients so I know we can trust the survey results.

However, I am still surprised by, and would argue against some of the report's conclusions.  Actually, as a more general point, I do find it interesting that it's particularly in regard to reports on data, evidence and analytics where I tend to find myself most critical about the use of data and analytics within the research!  (For example, the worst research report I've ever read in terms conclusions being extrapolated from the data was this one on big data conducted by the CIPD for Oracle.)

Take a look at this:

"Although more than half of all survey respondents (55%) remain skeptical about the potential of evidence-based HR to make a real difference to the HR function, the overwhelming majority of these skeptical executives (82%) plan to increase their use of Big Data and advanced analytics in the short term. We can deduce from these two findings that the obstacles to the successful implementation of these tools are considered to be substantial. 

One stumbling block may be the credibility of the HR function. Less than half of non-HR executives (49 percent) agree that HR leaders are able to demonstrate tangible correlations between people management initiatives and business outcomes. In other words, the skepticism is not about big data but about HR practitioners’ ability to use it effectively."

Where exactly is the evidence for this deduction and for these 'other words?'

I think part of the problem with this research is that it is so heavily branded by KPMG - featuring lots of their more general comments before we get into the formal research conducted by the Economist.  It also probably doesn't help that although the research focuses on evidence and includes comments from leading academics, KPMG's interest is obviously more focused on big data and analytics and much of my criticism relates to prioritising focus on these.

Prioritising data and analytics?

KPMG suggest that "for the first time in 30 years, HR has a massive opportunity to demonstrate the value it adds to the delivery of business objectives.  Now, more than at any other time, the technology is available to access data from many sources and provide predictive insights that will positively impact the delivery of business strategy."

I'd suggest the points in the comment are broadly true but I don't think it's data and technology which should be allowed to drive organisational approaches to analytics and even less, to evidence based HR.

For example, I think this sort of comment from David Crumbly at Coca-Cola is highly damaging: "Mr. Crumley believes that companies need to get the basics right – clean and standardized data, and then the resources, culture and technology to make full use of it – before prioritizing predictive analytics over less ambitious, but still important, investigations. “Many companies want to jump straight to the sexy stuff,” he says. “They try predictive analytics, but they can’t even run a headcount report for their company. They try to run before they can walk. First of all, you need trust in the data; without that trust, you can’t create senior management belief and sponsorship.”

To me, this is completely the wrong advice and is the main reason why so many organisations seem to think it will take them five to seven years before they can start to do predictive analytics.  It's simply not true (I know as I've helped clients do it.)

My concern also applies to one of the chief case studies in the report - McDonalds use of their HR system People Stuff to identify hat having at least one employee over 60 dramatically improves customer satisfaction, on average by 20% and boosts performance in a fast food outlet.

"A 2009 study conducted by Lancaster University Management School, which examined the performance of more than 400 McDonald’s restaurants across the U.K., found that employees aged 60 and over deliver a significant business boost for the company.The study revealed that levels of customer satisfaction were on average 20% higher in restaurants that employ at least one worker of that age profile. 'An older population segment was attracted into the stores, and the older workers changed team dynamics for the better,' says Paul Sparrow of Lancaster University. 'We were able to demonstrate the financial uplift.' 

This clear connection between people data and business performance is the sort of discovery to make senior executives sit up and take notice. Professor Sparrow notes that this nugget emerged as a by-product of other research. Although not obviating the need to focus on a clear objective at the outset of any evidence analysis, the magic of evidence-based inquiry is that sometimes a jewel will be unearthed when looking for something else entirely."

Magic?  Jewel?  Or just snake oil and fool's gold?  The problem with this sort of approach is that there's no strategic basis for assuming that employees over 60 cause customer satisfaction.  They may be correlated together, they may even be predictive, but there may be some completely different variables which actually cause both more applications from older workers and higher levels of customer satisfaction within the same outlet.

So actually, despite all my criticism of the report, I do largely agree with KPMG's evidence based HR methodology shown in the diagramme at the top of this post.  And with Jenn Mann of SAS too: "Data mining has little purpose unless the right questions are asked before embarking on the process. “You mustn’t just analyze data for data’s sake.You have to think about the real business challenges that you want to try to answer with your people data,” she says. “That also means asking the business leaders outside HR what they want to gain.”

Identifying a business challenge is the right starting point for analytics and evidence based HR - not data or technology.

Using data and analytics rather than gut instinct?

I also reject the report's suggestion that data and analytics will mean we don't now have to live in a world of suspect validity.  Life in organisations and particularly in HR is just too complex for this.  Data, evidence and analytics all help, but they're not going to mean that we're living in a machine.  HR's not the same as medicine or even consumer profiling - we're operating within a system rather than upon a system and we need to recognise that there's a whole different set of dynamics that come along with this.

And actually, although the report pushes against gut instinct which it suggests is frequently the dominant decision-making mode ("This is not about gut feel and intuition of the past – this is about using data that drives decision making, and links people data with business outcomes" and "The use of evidence will lead to more effective decisions than those based on pure gut instinct") the report uses the words 'belief' or 'believe' - rather than the word 'know' - 24 times.

Please note I'm not actually arguing against using gut instinct - after all I'm using this myself. It's just that my gut instinct is different to KPMG's.  My gut instinct is that we'll always need gut instinct.  Oh, and at least I'm open in saying that I am using gut instinct rather than trying to dress this up as something which comes from big data.

Summary

All of this means that although I don't disagree with KPMG's suggestion that we all need data scientists to work with the HR function I think Paul Sparrow's point that an advanced social science background ("They need to know when to trust evidence, how to differentiate between good and and bad research.") is much more important.

I'm also not convinced that "HR functions need to be reconfigured so that HR and management work together within an operating model that promotes evidence based people management.  As much thought should go into designing the components of the operating model that will allow for the use and consumption of the evidence as is given to the actual generation of evidence."

I do agree about the importance of designing information flows, visualisation, decision making, roles, responsibilities and capabilities - but that's different to the overall organisation model.  To me, this puts the cart before the horse.  An HR function's operating, or organisation, model needs to to built upon what an HR function needs to do, not just on collecting evidence in order to do what it needs to do.  And no HR function is going go get far just by using and consuming evidence.  Also there is certainly no evidence offered within the report to support KPMG's conclusion that we need to change the HR structure.

The same applies to the dramatic summary statement that evidence based HR is "the unstoppable force." (That's despite acknowledging the significant stumbling blocks which .  But there's an "inescapable logic" dictating it apparently.)

"The HR mindset of the past, negatively regarded by some interviewees, will soon inevitably erode and reconfigure itself along very different lines."  Data?  Evidence?  No, just one belief about the future (and I leave it to you to decide whether there's any bias to the statement perhaps linked to the services that KPMG may be trying to sell you*.)

I'll be blogging with more thoughts on data, analytics and intuition over the next few weeks so if you're interested in the topic, look out for these posts too.

* By the way, I'm not trying to sell you projects on data and analytics as I tend to consult around more well-rounded approaches to decision making that allow for, and try to optimise, gut intuition based processes too.  You'll see that bias in my commentary too.

Also see my posts on measurement, analytics and evidence
In particular: Analytics, analytics, analytics, not the future of HR

• Consulting   Research  Speaking  Training  Writing
• Strategy  - Talent - Engagement  - Change and OD 
• Contact me to create more value for your business
• jon [dot] ingham [at] strategic [dash] hcm [dot] com