1

PREDICTIVE HR ANALYTICS

FROM A NORDIC PERSPECTIVE

A quantitative study regarding attitudes towards predictive HR Analytics, and

perceptions of Nordic HR professionals’ readiness to optimally utilize the tool.

A Master thesis project by students from Gothenburg University in

collaboration with IBM Svenska AB.

Nora Jaavall Hansen & Malin Magnusson

2016

Table of content

Predictive HR Analytics

The purpose of the study

Attitudes towards predictive HR Analytics

Perception of HR’s capability level

Perception of HR’s readiness

Concluding remarks & suggestions for Nordic HR functions

Prescriptive

Analytics What should happen?

Predictive Analytics What will happen?

Descriptive Analytics What happened?

Predictive HR Analytics The strong technological development and general digitalization is affecting how work is conducted today. This has strong implications for the practices of Human Resources (HR), which are more or less forced to keep up with this development. Today there is therefore an uprising trend of using analytical software systems, e.g. predictive HR Analytics, to collect and analyze employee data [1]. Whereas predictive HR Analytics already have gained a lot of acknowledgement in other countries, the awareness has just started to rise in the Nordic countries. In fact, predictive HR Analytics is expected to grow and be a standard function in the US within 10 years [2].The development of these tools has emerged due to the access of Big Data, which is the term used to describe huge datasets and the explosive amount of data transfer that have increased the last couple of years [3]. Predictive HR Analytics goes beyond the descriptive comparable analytics and it looks at meaningful variables important for the future of the organization [4]. Furthermore, it is a cognitive system that enables collaboration between computers and people, is easy to use and provides visual results in graphs, facts and figures.

What can it be used for?

Predictive HR Analytics can simplify HR practices such as recruitment and selection processes, for instance by unveiling certain favorable traits among the top performers in the organization, and thus point out the best candidates for a position regardless of gender, age or ethnicity [5]. Optimal utilization of the tool can also identify top performers who are considering leaving the organization. On this basis, the HR function easier can choose where to put their resources. Moreover, it can also map employee engagement and future needed competences – the list is long!

Why does HR need it?

Executors of HRM have received a lot of criticism for being a redundant function in the organization, and not showing their real contributions [6]. Especially HR’s strategic contribution connected to the overall business performance has been a target of discussion. Interestingly, scholars have found that the HR competence that is most influential on the financial competitiveness of the organization is their strategic contribution [7].Thus, it is essential for HR’s survival to take action and legitimize their own profession. Further, studies have shown that it is especially important for HR to have a good relation with line managers, who carry out HR’s strategies. Line managers generally have a low perception of the HR function's contribution, for instance, several studies have shown that line managers do not perceive the HR function as valuable as HR professionals do themselves [17].In addition, in a recent study, managers argued for the need for HR to be able to prove and demonstrate how they

add value in the organization with statistics or data [8].

What is the goal with predictive HR Analytics? The goal with predictive HR Analytics is to empower HR by improving their ground for decision making, using

driver analysis and industry leading statistical models. The software programs combine HR and business data in

order to provide HR with sufficient insights regarding strategic issues, and is argued to be necessary for HR to make their way into the boardrooms [9][10]. The use of predictive HR Analytics is expected to enhance HR’s storytelling and communication both horizontally and vertically in the organization, with a language that the other professional groups understand. This way HR can more easily claim their place at the decision-making table if not already there, and foremost have a bigger say [10]. A closer interaction and knowledge sharing with the other units of the business can also contribute to an increased alignment between the HR function and the overall business [11].

What is at risk? HR professionals’ analytical capabilities have been criticized and HR is said to lack the skills needed to perform HR Analytics [12]. In addition, if HR do not raise these skills before a plausible implementation, it is unlikely that the analytics will provide a transformational change for the profession.

The purpose of the study

The choice of topic for a Master Thesis is never easy. In our case, we wanted to dig into the link between HR and strategy in order to investigate one of our biggest questions that still remained after our time at the university:

- How can HR improve their contribution to the overall business performance?

We searched for inspiration on several blogs and forums online, and found many interesting comments regarding the use of statistical tools to measure and improve HR’s strategic contribution. Since the moment we first heard about predictive HR Analytics we were not in doubt – we just had to investigate this! We found that most of the debates regarding these tools were ongoing in countries such as the US and the Netherlands, but Nordic HR debaters had recently picked up the topic themselves. As a highly relevant, up and coming trend, it fulfilled all our criteria regarding choice of topic.

WHY investigate predictive HR Analytics?

The criticism towards HR the last decades has concerned HR’s inability to show their importance and contribution within the organization. To achieve legitimacy, it is therefore suggested that HR practitioners start using hard facts and figures in order to prove that their human strategies can enhance business performance [10]. However, scholars have questioned whether the HR function is in the possession of the capabilities required to execute the predictive analyses [13].This view is supported by several authors who also emphasize the challenges and lack of adequate knowledge to benefit from the analytical measures [14]. In order to get an optimal utilization of predictive HR Analytics, it is important that the Nordic HR professionals are ready both regarding their willingness, as in their attitudes, and their ability, as in their capabilities to make use of the analytics [15]. Implementation of new technical solutions without being ready can have negative consequences for the organization as a whole, but especially for HR’s strive for legitimacy since they will risk losing credibility if new expectations are not met [16].

Even though predictive HR Analytics is the buzzing word on the “street” of HR, there are few if any scientific articles on the topic. This clearly shows that it is an area in need for further investigation, in order to shed some light on an uprising trend about to hit this part of the world. Since predictive HR Analytics has come a long way to being established as a standard function in other countries, the assumption is that the same process might happen in the Nordic countries. We strongly believe that Nordic HR professionals will benefit from the spread of knowledge regarding this topic.

HOW was the study conducted?

The research was designed as an exploratory quantitative study. We established contact with IBM, one of the leading providers of technological solutions worldwide. The data material was collected with the use of a web-based survey. Target groups were HR professionals and line managers in all types of organizations in the Nordic countries Sweden, Norway, Denmark and Finland. Respondents were invited to join through a one pager with information about the survey, and were sampled conveniently. The final sample consisted of 104 respondents with a distribution of approximately 70 % HR professionals to 30 % line managers. The representation of countries where the participants were working was 61 % in Sweden, 25 % in Norway, 4 % in Denmark and 10 % in Finland. This distribution can be explained by our larger network in Sweden and Norway.

Attitudes towards predictive HR Analytics

To explore how Nordic organizations relate to the upcoming trend of using predictive HR Analytics, we measured the attitudes towards the tool among both HR professionals and line managers. Previous research regarding the introduction of new technological innovations has confirmed the link between individual and organizational attitudes and the desire to utilize a technological tool in the future [28]. While positive attitudes are expected to provide a smooth transition to a new system, negative attitudes might imply a need for more informational and convincing measures. A mapping of existing attitudes can therefore help to optimally allocate resources during an implementation of statistical tools.

Overall, our findings show that both HR professionals and line managers in Nordic organizations have positive attitudes towards predictive HR Analytics, and no significant differences were found between the two groups. However, the two groups seem to emphasize different areas of importance. In general, line managers emphasize items that relate to a business perspective, which implies that they acknowledge the added organizational value predictive HR Analytics might provide. The results are promising considering future implementations of the tool, as line managers’ support is found to be crucial. Moreover, both groups believe that predictive HR Analytics will become a standard function in Nordic organizations in the future.

Positive attitudes towards the tool among Nordic HR professionals might be an indicator of a desire

to change. The HR function has for a long time been in a stage where they have been criticized for not showing their contributions to the overall business [17] and predictive HR Analytics is expected to improve their strategic position in the organization [12]. For HR, this situation calls for action in order to solve the tension and claim their rightful role in the company. The positive attitudes among Nordic HR professionals might be an attempt to do just so!

Line managers do also share the same positive attitudes as HR professionals, which can be an indicator that line managers see a need for HR to improve their base for decision making. For instance, a higher percentage of line managers than HR professionals rated that predictive HR Analytics should be prioritized the next three years, which implies a certain pressure for change also from this group.

EARLY ADOPTERS VS. LAGGARDS

Positive attitudes can help accelerate adoption of new technology. When organizations decide to actively take the first step and adopt a new innovation, they can achieve benefits by acting as early adopters. In this manner, the adoption is a consequence of a voluntary decision with the intention to enhance the organization’s competitive position, and thus create a competitive advantage [18] [19]. Organizations can also feel pressured to adopt new technology due to a desire and need to gain legitimacy [27].In this case, an organization may be forced to change to catch up with their competitors that have already acted as early adopters. When someone has already taken the first step, the potential competitive advantage will no longer be possible to achieve [20]. A consequence of the slow reaction could therefore be that the adoption of the new technology, which often requires substantial money, time and resources, will not be as profitable as it could have been for a prime mover [20].

4% 13%

36%

38%

9%

HR

Strongly Disagree

Disagree

Neither Agree norDisagree

Agree to some extent

Agree

Strongly Agree

4% 11%

25%

31%

29%

LINE MANAGERS

Strongly Disagree

Disagree

Neither Agree norDisagree

Agree to some extent

Agree

Strongly Agree

17%

31% 32%

16%

3% 1%

HR

Strongly Disagree

Disagree

Neither Agree norDisagree

Agree to some extent

Agree

Strongly Agree

28%

18% 29%

21%

4%

LINE MANAGERS

Strongly Disagree

Disagree

Neither Agree nor Disagree

Agree to some extent

Agree

Strongly Agree

The graphs provide an example of how line managers put more

emphasis on the organizational value that predictive HR

Analytics might provide, compared to HR professionals. Even

though both groups seem to agree that the use of the tool will

provide significant return on investment (ROI), there are a

greater proportion of line managers (29 %) that strongly agree

with the statement compared to HR professionals (9 %).

The graphs illustrate how the respondents in some cases

question the necessity of the tool. A high percentage of both

HR professionals and line managers disagree that predictive HR

Analytics are worth the money. However, it is noteworthy to

register the high amount of respondents from both groups who

neither agreed nor disagreed with this-statement.

.

… line managers had a higher percentage that answered the

different statements with Neither Agree nor Disagree which

might imply that they do not have sufficient knowledge

regarding the tool and its application areas.

OVERALL ..

STATEMENT:

Predictive HR Analytics will provide significant return on

investment over the long term.

STATEMENT: Predictive HR Analytics is worth the money!

Attitudes towards predictive HR Analytics cont.

On the IT Architect perspective HR professionals rated their awareness of the IT landscape as higher than the line

managers did. However, almost 70 % of the line managers agreed to some extent with statements claiming that the HR

professionals have IT Architect capabilities. On the Software perspective 30 % of the line managers rated that they do not

know if HR has the system they need to perform accurate tests in addition to 26 % of the HR professionals.

Perception of HR’s capability level

An optimal use of predictive HR Analytics will require a new mixture of capabilities and a shift of focus within the HR department itself. It is therefore important for the HR function to rethink their actions, in order to contribute to the overall business goals as a strategic partner [21] [22]. Six different capability perspectives, derived from a capability framework [23], were in explored from both HR professionals’ and line managers’ view. These capabilities are required of HR to possess in order to make successful use of the-analytical-tool. Crucial is that a mixture of all of these perspectives is in balance.

Our findings show that Nordic HR professionals seem to have a high perception of their own capabilities compared to line managers, and significant differences between the two groups were found. This is in accordance with previous studies regarding line managers’ view of HR professionals [17]. In order for a successful transformation of the HR function towards a strategic partner, it is crucial that the HR professionals have a good relationship with line managers [22]. Thus, in the current situation, it could be difficult for Nordic HR professionals to show their strategic-contribution. A remarkable finding was the high amount of line managers that neither agreed nor disagreed with the statements. This implies that the line managers are not aware of how HR adds value to the organization, and shows a general lack of knowledge regarding Nordic HR professionals’ capabilities. This is in accordance with previous research

regarding HR’s inability to report what they are doing in the organization [6] [17].

Overall, Nordic HR professionals have a very high perception of their own capability level. This might imply that Nordic HR functions are satisfied with their old working routines and do not strive for changing their procedures [24]. However, it is possible that the HR professionals actually do have the capabilities necessary to optimally utilize predictive HR Analytics in order to gain a strategic role as they claim. In that case, they are unable to communicate their contribution out to the line managers [17]. According to previous research, the chance for HR to end up at the decision-making table increases when they can provide sufficient data [13] [10]

[25].We argue that predictive HR Analytics can provide the HR function with numbers and figures necessary to show the line managers how they add value.

The BUSINESS Perspective – do the HR professionals have the required knowledge and capabilities to understand the specific business they exist in and make actionable practices derived from it? The HUMAN RESOURCES Perspective- does the HR department have sufficient knowledge of core HR capabilities and do they act according to HR strategies and processes? The STORYTELLER Perspective – do the HR professionals market their importance in the organization and do they present results, practices, strategies in an understandable way? The DATA SCIENTIST Perspective – does HR have the required capabilities to provide accurate data and manage to accomplish statistical tests? The IT ARCHITECT Perspective- does the HR department have awareness of the IT landscape and where they could find qualified data in order to be more efficient? The SOFTWARE Perspective- does the HR department currently have the systems they need in order to perform predictive HR Analytics?

Based on the HR capability wheel framework by Coolen & Ijsselstein, 2015

.

2 4

1

14

2

50

55

30

42

LM

HR

Business Perspective (N=104)

Numbers in %

Strongly Disagree Disagree Neither Agree nor Disagree Agree Strongly AgreeThe graph above shows that over 90 % of the HR professionals agree with statements claiming that Nordic HR professionals acquire business perspective capabilities. Even though a high amount of the line managers perceive that HR professionals have Business perspective capabilities, a significant difference between the groups were found. In addition, 14 % answered that they neither agreed nor disagreed with the statements, indicating that some line managers are not aware of HR’s capabilities.

2 2 12

2

55

47

29

51

LM

HR

HR Perspective (N=104) Numbers in %

Strongly Disagree Disagree Neither Agree nor Disagree Agree Strongly Agree

None of the participating HR professionals disagreed or strongly disagreed with statements claiming that HR professionals acquire Human Resources capabilities. Moreover, more than 50 % answered that they strongly agree with the statements which indicates that they perceive this capability as very high. A significant difference was found between the groups. Still, line managers mostly rated that they do believe the HR professionals have this capability.

5

1

23

13

18

4

41

67

16

15

LM

HR

Storyteller Perspective (N=104)

Numbers in %

Strongly Disagree Disagree Neither Agree nor Disagree Agree Strongly Agree

13 % of the HR professionals and over 1/5th

of all line managers disagreed with statements claiming that Nordic HR functions market their importance in the organization. Remarkable is that 5 % of the line managers strongly disagree with these statements. However, over 4/5

th

of all HR professionals agreed to some extent with statements claiming that they do have Storyteller capabilities. A significant difference was found between the two groups.

4

2

18

15

30

9

37

62

11

12

LM

HR

Data Scientist Perspective (N=104)

Numbers in %

Strongly Disagree Disagree Neither Agree nor Disagree Agree Strongly Agree

Not even half of the line managers agree to statements claiming that the HR professionals in Nordic organizations have capabilities

needed to perform statistical tests. Furthermore, 30 % of the line managers answered that they neither agree nor disagree to the

statements, indicating that the do not know if the Nordic HR professionals acquire this capability.

Perception of HR’s readiness towards predictive HR Analytics

The level of readiness for change can have tremendous impact on a new technology’s success or failure. Organizational readiness can be defined as both the willingness and ability for action [15]. It is important that the organizational members have a shared dissatisfaction with the current situation, and thus have a common desire to change [16][15]. In this case, both HR professionals and line managers should see a need for the introduction of predictive HR Analytics in order to assure a successful implementation. It is also important that both groups believe that the organization possess the capabilities necessary. In situations where individuals and/or organizations are not ready before the change occurs, it can cause high risks for failure. It can also lead to high risks especially for the initiators of the change, in many cases HR professionals, as they are at stake of losing credibility [16]. Thus, to explore whether or not HR professionals in the Nordic countries are ready to optimally utilize predictive HR Analytics, we compared the participants’ perceptions of HR’s willingness, as in their attitudes, and their ability, as in their capability level.

Our findings show that there is a difference between line managers’ and HR professionals’ perceptions of HR’s readiness towards predictive HR Analytics. HR professionals have a very high perception of their level of capabilities necessary for optimally utilizing predictive HR Analytics as well as positive attitudes towards the tool. Thus, HR professionals seem to have the perception that they would be ready to optimally utilize predictive HR Analytics if it were to be implemented. However, even though line managers also have positive attitudes towards the tool, they have a much lower perception

of HR’s capability level.

3,4

3,5

3,6

3,7

3,8

3,9

4

4,1

HR professionals Line Managers

Perception of HR professionals’ readiness

Attitudes Capability level

We argue that Nordic line managers’ positive attitudes indicate a high organizational willingness for change. However, their perception of the organizational abilities regarding predictive HR Analytics is low. Even though the shared positive attitudes among both groups can help to speed up the process towards a potential implementation, the perceived low capability level might slow down the whole process of implementing the tool. The different mind sets of the two groups may cause difficulties during a potential implementation, for instance as the fact-based numbers provided from the tool might not be applicable if line

managers do not trust that they were produced correctly [15].

Based on our investigation and findings from the current study, we believe that predictive HR Analytics will start spreading among Nordic organizations due to competitive pressure. At the moment, the practice is characterized as modern and efficient, and might have the chances of getting established

as a standard function in the future. It is therefore crucial that Nordic HR professionals grasp the opportunity. Interestingly, more than 60 % of the line managers stated that their expectations towards the HR functions will increase if predictive HR Analytics were to be implemented.

This means that HR is in high risk of losing credibility if the new expectations from line managers are not met [26]

Another consequence is that other departments might take control over the analysis if HR fails to get involved, which can cause the human capital knowledge to get lost in the process.[12]

Concluding remarks & suggestions

for Nordic HR functions

This study has investigated to what extent the Nordic HR professionals are perceived to be ready for

optimally utilizing predictive HR Analytics in order to gain a strategic role. Thus, both HR professionals’

and line managers’ attitudes were explored, as well as their perceptions of HR professionals’ capability

level. In this manner, it was possible to get an insight in Nordic HR professionals’ willingness and ability

to optimally utilze the tool, hence also draw conclusions regarding their perceived readiness.

Due to high level of positive attitudes, we conclude that:

Predictive HR Analytics will start spreading between Nordic organizations the next years.

Nordic HR professionals as a professional group are in a stage where they are exerting pressure on their organizations in order to legitimize their own profession.

Competitive pressure will increase as soon as predictive HR Analytics starts implementing in Nordic organizations and as the trend becomes more visible.

Due to differences in perceptions of capabilities, we conclude that:

HR professionals do perceive themselves as ready to optimally utilize the tool to a high extent.

Line managers agree that HR professionals are ready to some extent. However, line managers’ perception of HR’s readiness is at a much lower level.

It is possible that HR professionals actually have the capabilities necessary, but they fail to communicate this out to the line managers. Thus, HR lacks storyteller capabilities.

Overall, the shared perception is that Nordic HR professionals are partly ready for predictive HR Analytics, but it requires certain preparations to be done in order for optimal use.

Our suggestions are… … that HR professionals in the Nordic countries should push their own transformation towards

becoming a strategic partner. Even though HR is perceived by line managers as not ready to claim their strategic role, they can get ready by utilizing predictive HR Analytics.

… that HR emphasize how they market their importance and how they communicate it out to the rest of the organization. Since HR is perceived to have low capabilities regarding storytelling and analytical competences, it is important that HR step up their game in order to show their value for the whole organization, but also in order to legitimize their own profession.

We argue… …that the introduction of numbers and figures can increase HR’s confidence and hence

empower HR in a simple and credible manner.

…that when HR is capable of showing how they add value to the overall business, we believe that it will improve the perception of all HR’s capabilities in general!

IBM is a leading provider of software solutions worldwide, and is rapidly

expanding its predictive HR Analytical platform Kenexa Talent Insights in

the Nordic countries. Kenexa Talent Insights is a cognitive tool tailored

for the HR function and it is built upon the Watson Analytics technology.

For more information please visit:

www.ibm.com

or contact:

Anna Carlsson

Sales Leader, Smarter Workforce Nordics

anna.carlsson@se.ibm.com

+46 707932915

The authors of this Master thesis project and report are Nora

Jaavall Hansen and Malin Magnusson, who recently graduated

from the programme Strategic HRM and labour relations at

Gothenburg University.

We are now looking for new opportunities within Sweden and

Norway!

In case of any further questions do not hesitate to contact us!

Malin Magnusson:

magnusson.malin4@gmail.com

+46 760312931

Nora Jaavall Hansen:

nora.jaavall.hansen@gmail.com

+47 48048844

If you want to learn more about predictive HR Analytics you can find our

full Master Thesis here:

https://gupea.ub.gu.se

The title:

Ready or Not? A quantitative study regarding HR

professionals’ readiness towards

predictive HR Analytics from a Nordic

perspective.

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