What is Data Literacy in HR?
Data-driven decision-making has become crucial across various organisational functions, ranging from marketing and sales to finance and operations. It serves as the lifeblood, guiding strategic decisions and choices and yielding transformative outcomes.
Our recent Insight222 “Upskilling the HR Profession: Building Data Literacy at Scale” research highlights that an astonishing 88% of CHROs perceive people data and analytics as an indispensable component of their HR strategy, underscoring the growing importance of employee data and people analytics in adding significant business value.
This all drills down to one point: upskilling HR for the success of the future of work is crucial.
Defining Data Literacy in HR
Data literacy in HR refers to the ability of HR professionals to understand, interpret, and utilise data effectively to inform their decisions and strategies. It encompasses proficiency in HR data gathering, analysis, and interpretation of HR reports, metrics and KPIs - transforming them into actionable insights and facilitating data-backed decision-making.
Data literacy is about more than just understanding data, however. It also involves communicating effectively with others about data-driven insights and their implications for the organisation. This includes the ability to create compelling HR data visualisation presentations that non-technical stakeholders can easily understand.
The Growing Importance of Data Literacy in HR
In her discussion with David Green, on the Digital HR Leaders podcast, Madhura Chakrabarti, Global Head of People Insights and Analytics at Syngenta provides remarkable insight into how data literacy has helped the HR function at Syngenta become a strategic partner:
"... it really helps HR professionals be part of strategic discussions because in one of the analyses we ran a year, year-and-a-half back, it was about understanding the predictors of sales performance, so what predicts better sales performance; but mostly, people-related predictors. And what we found was when we were presenting it to the business team, our HRBP sent us a separate message late saying this was the first time that we were part of a strategic sales discussion as HR.
So, if we want to do that more and more, we should be data fluent, and we are in a position where we offer unique insights based on the people data that we have access to."
Data literacy in HR is also critical as organisations undergo digital transformations. As organisations increasingly invest in advanced digital tools, including AI and machine learning to enhance their HR capability, it's paramount that HR professionals possess the necessary data literacy skills to utilise these tools effectively. This includes the understanding and interpretation of complex dashboards and HR data visualisations.
With such competencies, organisations can maximise the ROI of their technological investments and human resources. Therefore, equipped with data literacy skills, HR is better positioned to harness these tools' full potential and contribute significantly to the business's bottom line.
Data Analytics Skills for HR Professionals
A common misconception that drives the apprehension of HR professionals' upskilling themselves in data literacy is that to be data literate; they need to become data scientists and delve into HR data analysis topics such as regression and complex statistical formulas.
However, the truth is that HR professionals can be data literate without a PhD in statistics. Yes, they need to understand their HR metrics and key performance indicators (KPIs) and how they can integrate them to solve a business problem. At the same time, they need to confidently navigate and interpret data visualisations such as dashboards, including advanced ones utilising AI or machine learning. However, they do not need to understand how to build or code these data visualisations.
Insight222 research “Upskilling the HR Profession: Building Data Literacy at Scale” identifies five key skills crucial for fostering a data-driven culture in the HR department:
Making actionable recommendations from insights: HR professionals must convert data-driven insights into actionable strategies to drive meaningful organisational change.
Managing stakeholder relationships with business leaders: Effective communication and employee engagement and collaboration with business leaders ensure that data-backed insights are integrated into the decision-making process.
Consulting with business leaders to frame business questions and historical data to build hypotheses: By understanding the organisation's challenges, HR professionals can develop targeted hypotheses and leverage data to identify solutions.
Interpreting insights from data, reports, and dashboards: The ability to analyse and interpret HR data empowers HR professionals to extract valuable insights contributing to strategic data-backed decision-making.
Telling stories using data: HR professionals can effectively communicate their findings and influence decision-makers by presenting data-driven insights in a compelling narrative.
Fostering a Data-Driven Culture in HR
Needless to say, building a data-driven approach and-driven culture within HR is pivotal in embedding data literacy within the HR function. It involves creating an environment where data is valued and decisions are guided by evidence rather than intuition alone.
The Insight222 2021 People Analytics Trends report presents a model for building a data-driven HR analytics function, which consists of three recommendations:
Invest in the people analytics function.
Embed data-backed decision-making.
Focus on delivering value to the business.
The role of CHROs and HR Leadership is also paramount to achieve maximum success. When the CHRO and their direct reports actively role-model the use of people data and analytics, HR practitioners are 70% more likely to develop their data literacy skills and 79% more prone to use data insights in their day-to-day work. Conversely, when people analytics is not a core responsibility of HR leaders, this drops to 31% of companies.
Of course, to create a data-driven HR culture, there needs to be a critical emphasis on upskilling HR on the five skills mentioned in the previous section. However, the same research also highlighted the role of people analytics leaders in this upskilling and hiring process.
For maximum effectiveness, the responsibility of the HR functions' upskilling programs should ideally sit with people analytics leaders, with 60% of the companies surveyed confirming that their HR function is actively developing their data literacy skills to become more data-driven when people analytics takes the helm of upskilling initiatives. This is notably higher than the 31% where people analytics is not the core responsible function.
But again, it all boils down to the motivational design of the program. When creating or investing in an upskilling program, focusing on the end outcome rather than following the latest upskilling trend is essential.
Development programs can be costly, and maximising ROI is paramount. Therefore, you should be strategic in your approach rather than jumping on the upskilling bandwagon. The goal should be to enhance performance and drive strategic change instead of adding more HR tools to the toolkit.
As Anshul Sheopuri noted on the Digital HR Leaders podcast, "declaring what skills are strategic for the organisation" is a key step in fostering a thriving data-driven human resource culture and upskilling program. By identifying and focusing on these strategic skills, HR professionals can harness data's power and contribute meaningfully to the organisation's success.
Driving HR Transformation Through People Analytics
Upskilling HR professionals with data analytics skills and fostering a data-driven culture is no longer an option; it is imperative for driving HR transformation. And this transformation is more than just improving processes and operations.
It's about understanding how to leverage data-backed insights to make better decisions, create a human-centred workplace, less employee turnover and drive competitive advantages. It entails transforming the HR function into a strategic partner that influences corporate strategy.
Therefore, CHROs and other HR Leaders must model data-driven behaviour, invest in upskilling programs, and create a data-driven culture. With the right HR data insights at hand and empowered with the necessary skills to interpret it, better decisions that will positively impact the number of employees, business operations, and, ultimately, the organisation's bottom line will be made.
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