MCBASSI & COMPANY

Why HR Analytics? A Look at the Numbers

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There’s a lot of buzz around HR analytics.  Advances in software, newly-available data sources, and how-to manuals have made it easier than ever to dive right into HR analytics.

This month, we thought we’d take a step back and ask “Why?”  Why should organizations care about this?  Why should executives be devoting more time to people matters than they’ve ever done before?  And why should HR professionals be learning the necessary new analytic skills?  Looking at a few numbers helps to answer those questions.

Let’s start with intangibles – organizational assets that are not physical in nature.  Intangibles include intellectual property, knowledge, reputation, etc.  These sorts of assets represent an ever-growing percentage of the average organization’s market value, increasing dramatically from 9 percent of market value in 1980 to 65 percent today.

And what do all forms of intangibles have in common?  They’re created by people.  A few decades ago, if you wanted to increase your company’s value, you focused on managing your physical assets – plants, equipment, etc.  Today, if you want to increase value, you need to manage your people – your human capital.

This, more than anything else, explains why analytics is now an essential HR competence.  Executives and boards of directors are always focused on company value.  Today, that means they need to be focused on their people.

Some companies recognized this earlier than others, and some companies have done a better job managing their people.  How have those companies fared?

Extraordinarily well.

A Boston Consulting Group study from 2012 found that companies appearing on the Fortune “100 Best Companies to Work For” list at least three times in a ten-year period cumulatively outperformed the market by an average of over seven percentage points per year for ten straight years.

And our own live portfolios, through which we’ve invested in a basket of companies that invest in their employees and/or embrace Good Company principles, have outperformed the market by an average of almost eight percentage points per year for twelve years running.

All told, the numbers certainly support the world’s current fascination with HR analytics – and suggest that focus will continue to intensify in the years to come.  Are you on board?

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