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The 4 Big Bets Every HR Organization Should Be Making

Two months into 2016 is a good time to step back and assess whether HR leaders are making the right bets. Enough of the year is behind us to get an early feel for what to expect, yet there’s still time to course-correct.

Before we dive into potential investment areas, check out the World Economic Forum’s comprehensive report on the future of jobs. It looks at the forces disrupting business models and talent strategies through 2020.

Based on everything we’re reading and seeing, here are four big bets chief HR officers should be making in 2016 and beyond:

1. Build out your “people data” capability.

In the two years since I wrote this article on the need for CHROs to hire “scary” data people, many more organizations are focusing on the role data can play in delivering effective HR. Everything from how to source, select, hire, and onboard talent to how to performance manage, reward, and transition talent benefits from better data context, insights, and suggestions.

Additionally, as we capture data from every process powered by a human action (not just HR processes), we can learn a lot about efficiency and effectiveness gaps, enabling material improvements across the entire organization.

However, despite organizations focusing more attention on data-based HR decision-making in the past two years, 80% of HR practitioners say their company leaders still rely on “gut feelings” to make people-based decisions, and only 13% of companies are able to connect employee data throughout the talent lifecycle, according to a survey conducted in mid-2015 by the Human Capital Institute and Oracle.

With that said, we’re seeing early indications that organizations are taking more definitive action. One of the clearest indicators is the growing number of executive searches commissioned by large companies to fill the senior HR role running the data function. This position is often newly created, consolidating previously dispersed resources into a more capable team, and it often reports directly to the CHRO or head of HR operations.

At the largest employers, it’s expected that these executives will lead teams of 20 to 100 employees, focused on data reporting, analytics, and governance, as well as on making predictions and producing other advanced business insights.

While correctly staffing this data function is only a first step, it’s encouraging to see movement. It’s an area with tremendous potential to create competitive business advantage. For this reason, it’s a worthwhile bet for 2016.

2. Rethink performance and talent management.

About 70% of companies are reconsidering their performance management strategies, according to Bersin by Deloitte, and as of September 2015, more than 50 large companies were moving to no-rating systems, according to the NeuroLeadership Institute. (Both sets of research were cited in this Harvard Business Review article.)

CHROs will tell you that traditional performance management systems are broken for the following reasons:

  • An annual process is too infrequent to provide meaningful feedback in the real-time economy.
  • The lengthy measurement period leads to appraisal “recency bias”—that is, evaluators tend to focus on what’s happened recently.
  • A formal ratings-based process creates manager-subordinate power relationships that can discourage employee commitment and engagement.
  • More and more work is delivered through a network of employees and contributors, often from various functions, so relying so heavily on a manager to rate employees is potentially flawed in such cases.
  • Employees and managers find the formal process to be a frustrating waste of time.
  • Many organizations are still using performance management systems that aren’t intuitive, mobile-enabled, or fun to use.

Some of the sharpest CHROs are betting that better, more modern technology, more real-time feedback from more stakeholders, and generally more transparent processes will help.

The right cloud-based applications, designed for mobile devices and easy to use, will go a long way toward addressing a couple of the performance management pain points. One pain point will be tougher to alleviate—HR leaders need to moderate expectations that managing performance will be fun.

On the talent management front, leading HR organizations are augmenting the traditional “risk of flight” and contribution/potential ratings with data-based assessments of performance and risk of attrition. Additionally, trending and talent benchmarking across large data sets are easier than ever with dynamic visualizations that help managers see how their people are progressing year over year and relative to various peer groups or talent segments.

Some of the best cloud-based systems can also take talent and succession-planning data, as well as data on which employees are generous with their time in helping others, to make intelligent next-role recommendations and connect employees with mentors to help prepare them for that role.

3. Refocus “engagement.”

An early CEB definition of engagement describes an employee’s willingness to invest in discretionary effort with a persistent intent to stay with a company. Here are very specific reasons to focus on engagement in 2016:

  • It helps with retention and recruitment through employee referrals.
  • It improves productivity, particularly in a work environment that depends on collaboration to achieve business outcomes.
  • Engaged employees usually help to build customer loyalty and enlist “net promoters” for your brand.
  • Engagement supports an agile culture.

Among the biggest changes in workforce engagement in the past few years are the following:

  • The measurement interval has gotten much shorter and response time much faster. Companies have moved from yearly long-form employee surveys to mobile-enabled, one- to three-question surveys to measure employee engagement.
  • Text and unstructured data analytics allow even the largest companies to understand the water cooler conversation at scale to drive changes. By getting near real-time feedback on sentiment and reactions to key messages, company leaders can course-correct much faster than before.
  • The smartest HR leaders are rethinking engagement to include nonemployee workers, who make up nearly 50% of the workforce at some large companies. You may procure labor, but you engage talent.

4. Design consumer-grade user experiences.

For the first time, most consumers have access to better technology than the employees of some of the world’s most powerful companies. Talented employees who are digital natives are growing less tolerant of their dissonant technology experiences.

Smart CHROs recognize that modern, intuitive application user interfaces and person-centric end-to-end processes matter more than ever. The best processes leverage ubiquitous data to provide context and targeted messaging. Many CHROs are looking for ways to create quality experiences that will delight instead of frustrate employees.

Place Your Bets

There is no single best practice for all HR leaders, other than to align HR practices with the company’s business model (high growth, global, acquisitive, holding company, healthcare, and so on).

The most consistent technology trend we see is building momentum toward cloud technology adoption, even among the world’s largest corporations. The question for HR leaders and their IT partners is now typically when they’ll move to the cloud, not if.

The most successful CHROs hold their teams accountable for focusing on the transformational activities that can help their businesses win. While those focus areas will vary from company to company, we hope the above analysis provides a broader view and starts some productive conversations.

What are your big HR bets?