Moneyball in HR with HR Analytics
What is Moneyball? Have you heard about the film called ‘Moneyball’? Moneyball is a movie that is not based on fiction but real-life scenarios. The movie is filmed based on the biography of Billy Beane, who was the General Manager of the Oakland Athletics baseball team.
Before going to the topic of Moneyball, you must understand how to make the right decisions. The decisions are considered as an art, not science because science is repeatable and art is not. The decision-makers should know how to make decisions despite the designation held.
Today, we don’t have celebrated artists like Ravi Varma or Van Gough, but we can find several physicists or engineers because science and engineering are repeatable. This repeatability comes from the evidence and the evidence can be collected by data. If there is no data, then decisions will happen only on hypothetical things and not based on evidence.
What is Moneyball?
As mentioned earlier, Moneyball is not fiction. It is an Oscar-nominated movie based on the original story of Billy Beane. As the manager of the baseball team, he used the theory of Moneyball to choose undervalued players and helped them to achieve the longest winning streak in Major League Baseball, i.e., 20 consecutive game wins.
Billy Beane hired the players for Oakland Athletics under a limited payroll budget and the team competed with larger baseball teams like Yankees. He believed that people are not aware of various key factors that influenced the outcome of the baseball game. In the process to prove his belief, he has established a concept known as SABRmetrics.
He performed a statistical analysis of data related to hundreds of players. Billy Beane had performed a complete data analysis on team batting average, runs batted in an over/game (RBI), and pitcher’s earned run average (ERA).
Is it based on an on-base percentage (OBP) or is it based on the characteristics of a player? These were the questions he was trying to solve while performing data analysis. By analyzing the traditional performance characteristics such as speed and athleticism, hitting ability, home runs, confidence, appearance, experience, prior roles, etc., he examined the abilities of each player to achieve their goals while playing the game. The two main factors that are considered during the analysis are consistency and above-average performance of the players.
What was the outcome of the analysis?
By analyzing various metrics, Billy Beane concluded as follows:
- Most of the players are overvalued and their payroll was very high because of the demand for star players.
- Not necessary to have star performers to achieve the goals, but it is mandatory to reach the goals with the team you have.
- Right response at the right time to change.
- New possibilities will be open with new options.
- Get onto the base to enjoy success.
Now, we will try to establish a connection between the experiments and findings of Billy Beane and the HR process of enterprises.
Moneyball in Talent Acquisition
Companies or enterprises are looking for game-changers in their respective industries. The questions that arise while searching for game-changers are how comfortable is the team in taking various responsibilities and what happens when the team couldn’t deliver the targets. Finding answers to these questions is not easy because of the unavailability of evidence.
Why evidence is not available? Generally, job responsibilities and performance are not measurable. HR life cycle analytics will help to analyze or measure who should be recruited, trained, and retained. While interviewing people, enterprises are searching for individuals who are the leaders. However, interviewers end up selecting candidates who match their frequency level.
What does evidence convey?
- According to Google, interviewing people is a waste of time. Almost 99.4% of the time is used to confirm the impression you received in the initial 10 seconds of the interview that the interview was useless. The organization will not get the best talent by interviewing a person and the success rate of the interviews is only 14%.
- One of the best predictors for talent is the evaluation of work samples, which is measurable data and offers 29% of predictability.
- The next predictor is the cognitive ability of the participant that helps to gauge their capability of executing the job, which adds up to 26% of predictability.
The most important point here is that it is not possible to measure the behavior of the interviewer because the result of the interview will be based on his/her temperament on that particular day. It is always better to predict the capability of the candidate by reviewing his/her one-year performance at the job rather than rejecting the candidate on the day of the interview itself.
In the above-mentioned scenario, the Money Ball in HR can play a key role in predicting the capability of the candidate based on an analytical study.
How is Moneyball helpful to the HR team? The Money Ball theory of Billy Beane will help the human resource team of a company/organization to do better in managing employees while keeping up the business efficiency intact. MoneyBall theory helps to identify the commitment, performance metrics, and cognitive ability of the candidates. If HR can analyze and identify these abilities of the candidates, then it is possible to build a strong team within the budget of the organization.
A Simple Analogy for HR
Here is an example that can be related to HR functions:
Do you know about the decathlon race? Decathlon is an athletics event that consists of a total of ten track and field races. These track and field events are held on two successive days and winner are announced based on their performance on these two days.
The performance of the athletes in the decathlon is not determined in terms of their performance in one event, but by taking the average of the performance of all the events. The winner of a decathlon race is not necessarily the winner of any of the individual race. To win a decathlon race, the player needs to be consistent in his/her performance.
Likewise, HR people have to behave like a decathlon athlete as they have to recruit people of various domains such as finance, IT, operations, HR, and so on. HR people have to take care of the recruitment of teams that consists of individuals from entry-level to senior-level positions. The HR responsibilities also include employee training, retention, measuring performance metrics, and many more.
What is the HR function in an enterprise?
The HR function is not limited to recruitment but comes with a broader sense because the HR team has to take care of a combination of recruitment, retention, rewards system, training and development, productivity, and so on. Usually, HR people describe them as specialists in any of these areas but having specializations do not help in achieving the organizational goals.
As of now, HR has been treated as a cost function but not as a profit function. If you think HR function is not adding value to the organization, then you have to align the HR goals with organizational goals. To align HR and organizational goals, analytics has to be used.
How do Analytics Solve HR Challenges
As you know, human resources functions are mostly people-oriented functions. However, many think that the contributions of HR are limited only to offer an appointment letter and onboarding. Is that reality? No, it is not. Strategic use of analytics in this domain will transform HR to another level by allowing them to contribute to the business from the bottom line.
Before analyzing from the bottom level, it is essential to know the preparedness of the organization and how important analytics is for the organization. When you analyze the challenges of HR, you will find that leadership strength, talent gaps, the number of required employees, filling the gaps at a managerial level, developing managerial skills, and talent needs are considered as future requirements. However, a resilient organization should have a plan for future requirements.
Why organizations are not prepared for future requirements? Because most organizations believe that enough data is not available to predict future requirements.
Similarly, the areas of high importance and preparedness for HR are improving the quality of new hires, employee engagement and retention of best employees. This can be done by performing a simple analysis as there will be enough data related to these areas. Organizations should know how to retain the best employees rather than using a hiring and firing attitude towards such employees. If the enterprise cannot retain the best employees, it will hamper the brand image. If HR is retaining bad employees who are not beneficial for the organization as well as the team, then it will be a disaster.
How is it possible to evaluate the employees based on their performance or any other metrics? Use HR analytics in your organization to measure the value of the employees in each area.
HR Analytics Fragments
There are different types of analytics such as recruitment analytics, engagement analytics, L&D (skill and knowledge analysis) analytics, retention analytics, and performance analytics.
All these areas are interconnected and help to fill the talent gaps. Each area of analytics plays a key role in retaining the resource beneficial for the organization. However, performance analytics is the cornerstone of HR analytics. Without analyzing the performance of a person, it is not possible to identify the right resource as performance analytics is qualitative.
Why performance analytics is important? It is because all other areas such as recruitment, engagement, and L & D are the results of performance analytics. Hence, performance has to be measured against measurable goals and actuals.
As of now, all the above-mentioned analytics areas are working in silos. How can we integrate all of them? Moneyball in HR analytics will help to integrate all these areas and decide how to take it forward.
HR Analytics Synergy
In Moneyball in HR, there are two main groups of analytics such as pre-recruitment analytics and post recruitment analytics. In pre-recruitment analytics, the metrics used is the quality of recruitment. How do we measure and improve recruitment quality? The quality of recruitment can be measured only through the performance of the resource.
If you have hired a resource who has been showcasing a bad performance, then you can do a pre-emptive intervention to analyze the quality of the resource. This pre-emptive intervention can be done through performance analytics. After performance analytics, the next steps that come under post recruitment analytics are retention analytics, engagement analytics and L & D analytics.
Reasons for Not Using Moneyball
Generally, organizations give various reasons for not using analytics. Most organizations will give the reasoning that the theory of analytics is good to learn but putting analytics into practice is difficult. The excuse for not using Moneyball in HR or HR analytics itself is in no way related to the availability of data. In reality, the culture and mindset of the organization play a major role in using the benefits of analytics. Organizations should know how to use HR analytics and where to use it.
The moment you use analytics to drive the actions, things will fall in place. For that, you should know why you want to perform analytics in your organization. Identify a business case and go ahead by applying analytics in any of the business cases identified by you.
Fragmented ownership is another reason that hinders the purpose of HR analytics. Why? Because recruitment analytics to L & D analytics are analyzing the data in silos without having a unified goal.
Big data in HR analytics is considered bad data, but converting big data into smart data that is small and actionable will help in aligning the business goals.
Analytics should consist of actions. If there are no actions, then it is considered not as analytics but as insights. If there is no ROI, then analytics doesn’t have a role to play in an organization. In short, analytics should drive productivity and profit, reduce cost, improve safety, decrease the time to do the job, etc. If analytics is not actionable, then it cannot be referred to as analytics.
Role of Moneyball in HR
Moneyball uses only two matrices, i.e. consistency and cost-effectiveness. How can we use it in HR? HR analytics is used to empower people, show them that they are doing the best, and improve their skills. Moneyball in HR considers only one metric, i.e. Employee Lifetime Value.
The employee lifetime value is calculated based on the service period of the employee, cost of retention and revenue expected from the employee. If any of these are missing, then there is no point in hiring that employee. Even if these three attributes are present, another important thing that has to be considered is voluntary churn.
Voluntary attrition is the most dangerous aspect as it affects the profitability of the company, especially when the individual plays a key role in the company. When an enterprise follows a system that solely depends on a single individual, the system is not going to flourish. But, if the system relies on a group of skilled people, then it can be considered a resilient organization.
Employee lifetime value is dependent on the performance of the people. Moneyball in HR will enable HR professionals to identify the consistent performers who are also economical and bring profit to the company.
In a Nutshell
HR analytics is an innovative way of representing the data associated with talent acquisition, placement, employee development, retention, and performance. This smart data allows HR professionals or hiring managers to make strategic and smart decisions based on the statistical analysis performed through HR analytics. HR analytics is a game-changing and tactical approach that is beneficial for enterprises to make talent-related decisions.
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