4 People Analytics Operating Models To Implement
The people analytics market in Japan is anticipated to more than triple to an impressive 9.5 billion by 2025. Similar trends can be observed worldwide, with the global people analytics market projected to reach 7.7 billion US dollars by 2031.
Organizations are increasingly investing in building people analytics teams. Insights222 reports that 65% of organizations have grown their people analytics teams in the previous 12 months. However, the challenge lies in determining the optimal team structure to drive impact, defining their appropriate position within the organization, and establishing effective collaboration with HR.
This article will discuss four people analytics operating models organizations can consider leveraging value from their people analytics investment.
Contents
What is an operating model?
Model 1: The centralized expertise hub
Model 2: The hub and spoke model
Model 3: The front-back model
Model 4: The federated model
Choosing the right operating model: 5 questions to answer
What is an operating model?
An operating model is a visual depiction of how an organization or function delivers value. It serves as the strategic framework outlining the desired capabilities, processes, structure, and resources required to execute work. Often referred to as “target operating models,” these depict the organization’s future state aligned with its strategy.
Unlike organograms or depictions of departments, roles, and workflows, the operating model provides a bigger-picture perspective. It illustrates how different capabilities within the organization collaborate to achieve goals.
A target operating model can be likened to the architect’s blueprint of a new shopping mall. The blueprint shows the mall’s structure, individual store layouts, parking areas, and dining establishments. It also details the water and plumbing systems, power sources, and routing for the internet connectivity cables.
Each store also has its unique layout, specifying the placement of counters needed, installation of displays, and kitchen arrangements for the restaurants.
This end-to-end blueprint is the target operating model that encapsulates the mall’s logical design and functionality. This blueprint is similar to how organizational departments or teams are designed to meet the organization’s needs.
Not having a well-defined and clearly communicated operating model has significant risks. These can lead to various unfavorable outcomes, including:
- Inefficiencies
- Duplication of work
- Inconsistent experience and;
- Poor decision-making.
What is a people analytics operating model?
When it comes to people analytics, the operating model depicts how the people analytics capability can be designed to meet the needs of the business. Every organization is unique, and multiple operating model options are available, each with benefits and limitations. During the design process, organizations must make informed decisions to select the most suitable model based on their goals, required capabilities, and necessary skills to execute.
Designing a suitable people analytics operating model is key to harnessing the power of people and talent analytics. We discussed what people and talent analytics can do for an organization with Reimund Nienaber, HR thought leader and HR consulting director at a talent analytics platform EDLIGO. You can watch the full interview below:
It is important to note that within the broader organizational operating model, there are specific “operating models,” such as the HR operating model. These different models should align with decisions made at higher levels. Similarly, the people analytics model operates within the context of the HR operating model.
Let’s take a look at four operating model options for your people analytics capability.
Model 1: The centralized expertise hub
In this model, people analytics acts as a centralized hub of expertise within HR and serves the rest of the organization as a service provider. Business units are seen as clients, and work is divided between recurring business-as-usual activities and specifically scoped projects.
Business-as-usual includes activities such as monthly reports, data consolidation, and governance. Projects could consist of testing specific hypotheses regarding topics such as turnover or working collaboratively with other teams. For example, finance integrates people and financial data.
HR works with the people analytics team and leverages the knowledge, skills, and products as part of their offering to the business. In some organizations, the People Analytics team reports to the HR Technology Executive or the CHRO.
Example:
Friendly Foods is a logistics business focusing on fleet management. They have a centralized people analytics team that reports to the Head of HR.
People analytics works with the HR Business Partners to provide services to the business. The team also has end-to-end decision-making rights on platforms and tools utilized for the entire business. They also create standards of practice for all people analytics practices.
The benefits The limitations – Drives standardization and consistency of people analytics application
– Drives efficiency and continuous improvement– Lacks business context and localization of issues
– Hub can lack resources to meet the needs of a diverse business, making its services relevant to some but not to all
Model 2: The hub and spoke model
The hub and spoke model involves a central expertise hub and connected spokes across various business lines. In this model, each business unit has its own people analytics team. However, they are all connected to a central hub that oversees governance, shared platforms, standards, and master data that forms part of the Group HR function.
The individual spokes align the people analytics offering to the specific needs of their respective departments. Additionally, the spokes ensure the implementation of groupwide initiatives and the alignment of department-specific solutions with the hub’s standards.
Depending on reporting lines, the people analytics teams within the various departments may either report to the local HR team with a dotted line to the hub or vice versa. People analytics exist as part of the HR team in this model, with the hub team reporting to the HR Technology Executive or the CHRO.
Example:
Comfort Insurance is a retail business that sells funeral policies to the middle-income market. The people analytics team is organized according to a small hub responsible for platforms, data management, and infrastructure.
The business operates regionally, and each region has a small people analytics team that is responsible for operational reporting, business projects, and business enablement. The team has a dual reporting line, yet the hub team sets the tone for the overall function and acts as a governing body.
The benefits The limitations – Closely integrated with the departmental HR teams
– Solutions are provided in the context of a specific departmental need or business
– The model offers some flexibility to the spokes to tailor and localize solutions– Prioritization between the hub and the spokes in terms of key projects or initiatives
– Spokes must continuously balance demands from the hub with the needs of the local business
Model 3: The front-back model
The front-back model divides people analytics into a client-facing front office with dedicated product or service lines and a back office with shared capabilities.
For example, the front office encompasses various services such as data visualization, operational reporting, special projects, and business enablement. On the other hand, the back office is responsible for data storage, cleaning, and technology infrastructure. To better serve the business, the front office leverages the back office capabilities to deliver specific services.
An alternative to the front-back design could be organizing the front office according to business units or specific clients. In this design, the front office has more autonomy to leverage the back office when required while localizing people analytics solutions for their business.
In this model, HR partners in business need to work with the front office to understand how best to integrate people analytics solutions to the needs of the business. The people analytics team usually reports centrally in this model. However, there is an option to have the front office teams report to the business unit HR executive.
Example:
Healing Hands is a non-profit organization dedicated to providing mental health services. Its operations encompass four business units: Digital education, on-site clinics, partner networks, and government relations.
The shared people analytics back office is responsible for managing all IT platforms, tools, and infrastructure. In each business unit, a people analytics partner is responsible for gathering business requirements, special projects, and facilitating business growth. These teams adapt in size and maturity to meet specific business needs.
The back office works closely with the front office to efficiently utilize shared capabilities while delivering personalized services based on identified needs.
The benefits The limitations – Balances localization of solutions with standardization and consistency
– Allows for different levels of maturity in different parts of the business
– The model can replicate success quickly while running various experiments and pilots across different business areas– Misalignment between the front and back office leads to duplication
– The back office can be inundated with too many requests and is not able to meet the needs of the front office
– Without oversight, front-office teams often go “rogue” and design their own solutions independent of the back-office. This can be costly and create duplication of work, platforms, and infrastructure
Model 4: The federated model
The federated model decentralizes people analytics teams, allowing them to operate independently within different lines of business. Alignment between these business lines is achieved through communities of practice, with a small central team serving as coordinators and facilitators.
Decisions on shared platforms and architecture are made through consensus. However, business units have full autonomy to explore other options that better suit their specific business needs. This model can still be situated within a bigger HR operating model, but the relationship will be “loose”. Most federations will have full autonomy to design their people analytics capability as they see fit.
This model may not be ideal for initiating a people analytics function. However, it proves highly effective once the business becomes complex, with diverse needs and operational approaches across different lines of business. For instance, a global conglomerate with multiple subsidiaries could benefit from adopting this model, assigning dedicated teams to each subsidiary.
Example:
Grundfield Investments is a holding company with 15 subsidiaries operating in the media industry. Each company covers different sectors, including recording, publishing, online media, and radio. Each subsidiary is equipped with its own dedicated people analytics team that takes full responsibility for this function. Although the teams operate independently, they have limited day-to-day interaction with each other.
The benefits The limitations – Autonomy within business units leads to faster execution and decision-making
– Increased localization allows for very close alignment with business
– The model allows for close integration within the business unit HR teams and alignment to local strategy– The model can be costly to implement as duplication will occur between different teams
– Reaching consensus on requirements across different business units can be slow and tedious
– Model requires significant amount of oversight to ensure shared standards and governance are adhered to
These models can be utilized as a starting point to decide how to organize the people analytics capability for success. Depending on the needs of the business, some models will be a better fit.
Choosing the right operating model: 5 questions to answer
Before choosing which operating model is the best fit for your organization, there are key questions to ask to help you in your decision:
1. Scope of people analytics
What problem is people analytics aiming to solve?
Various models may be applicable based on how analytics is defined in relation to the business and people strategy. A narrow, consistent, and specific scope is typically associated with a centralized hub and front-back design. On the other hand, a hub-and-spoke and federated model can incorporate a broader and more diverse scope.
“Analytics can show organizations how to identify, talk about different patterns, trends, and correlations with employee data. Through those insights, they can make more informed decisions regarding talent acquisition, development, performance management, and employee engagement.”
Reimund Nienaber, EDLIGO Consulting Director
2. Proximity to business
How closely integrated into business does people analytics need to be?
Federated models are closely integrated into the business, while a centralized hub operates at a greater distance and relies on the interpretation of services by other parties. Hub-and-spoke and front-back designs aim to strike a balance between proximity to the business and expertise. However, they present challenges in terms of managing priority and resource allocation.
Besides building an operating model, businesses need to decide where people analytics should sit within the organization – is it going to be within the HR or part of an overall Analytics Center of Excellence (CoE)?
3. Stakeholder Identification
Who will benefit most from people analytics?
Centralized hubs primarily focus on a narrow group of stakeholders with similar needs. On the other hand, Federated designs cater to diverse stakeholders with vastly different needs.
The hub-and-spoke model addresses the requirements of a diverse audience with varying needs, while a front-back model allows for some degree of differentiation. It is important to note that in this model, the more consistent the needs are, the higher the efficiency.
4. Current maturity of analytics
What is the current level of maturity of analytics in the business?
Federated and front-back models are more effective when there is an existing analytics understanding and maturity in the organization. If people analytics is not well grasped in the business, the centralized or hub and spoke designs offer a better alternative. These designs allow expertise to be incubated collectively before being implemented throughout the business.
5. Access to resources
How extensive is the investment in people analytics?
The centralized hub and hub-and-spoke model prioritize efficiency and, when effectively managed, can offer cost-effectiveness. These models are designed to share resources, allowing for leveraging investments at a lower price point.
On the other hand, federated models require substantial investment to implement and maintain. This model intentionally duplicates functions where it makes sense to do so. As such, it can become cost-intensive over time, as multiple investments are needed to ensure optimal functionality.
Wrapping up
To effectively leverage value from people analytics investments, it is crucial to have a well-aligned operating model. Without the right operating model, organizations may face challenges in creating data-driven cultures that contribute to their success.
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