John Wannamaker, founder of one of the world’s first department stores, famously said “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

An astute businessman, he innovated in many areas such as allowing customers to return goods if they were dissatisfied, creating written guarantees, and even inventing the price tag so customers could see what an item cost without having to ask.

Yet despite his clear genius for business, he was utterly unable to crack the code on where and how to spend his marketing dollars. This problem bedeviled business leaders and their marketing executives for decades. That without a clear line of sight between spend and outcome, competing for marketing budgets was a constant struggle.
It’s very much the same challenge that HR leaders face today.

We know that investing in an improved employee experience ultimately leads to meaningful improvements in things like engagement, retention, reduced hiring costs, productivity, and so on. Yet competing for the budget to actually implement the necessary programs can be extremely challenging.

How much is really needed to improve employee experience? When should it be spent? Why is this particular program going to have a bigger impact on the bottom line than, say, spending more money on infrastructure, sales tools, headcount, and so on?

CEOs and CFOs need to be comfortable that any dollar spent on an HR program is not better spent on something else. Proving that the HR spend is the right investment remains a real challenge. A gap often exists between the language of HR and the language of the business spreadsheet.

In the case of marketing, the advent of digital marketing and the explosion of analytic technology has enabled marketing leaders to clearly and directly demonstrate the return on investment for the dollars they get.
It has closed that gap between their world and that of their budgetary stakeholders and gave them both a common language.

It’s time for HR leaders to have access to the same set of metrics and tools that their marketing peers use to drive budgetary discussions.

The problem isn’t, after all, that we don’t all understand that engaged employees who are invested in the company’s success and work well together aren’t the key to a successful business. Rather, it’s quantifying the extent to which those things affect the business that can be a challenge.

Worse, even if there’s agreement all around that investment needs to be made, how do HR leaders determine what areas to spend money on? Where will they have the biggest impact?

Thankfully, the emerging power of people analytic technologies is helping embattled HR professionals not only identify where to allocate their existing budget but also giving them the tools to demonstrate clearly and directly what the impact is going to be.

Such tools often use machine learning and AI to evaluate employee data and look for trends and drivers of behavior allowing HR leaders to answer basic questions such as: do employees with certain characteristics stay in the business longer? Are they productive faster? Where are we spending the most money on hiring, and is it working?

Most interestingly, people analytic tools can enable HR leaders to look forward, to help predict the outcome of changes in everything from office location to benefits spending. Based on what the software sees as key drivers of behavior, people analytic tools can move from simply descriptive to predictive responses, from describing the state of mind of the employees to predicting what it might be in the future.

This opens the door to start to connect the dots between proposed changes in HR spending and outcomes that affect the employees and by extension, outcomes that affect the business.

I’ll look at this in more detail in an upcoming blog, but the advent of people analytic tools, either stand-alone or built into your HCM stack, now mean HR leaders have access to the same level of analytics that transformed the relationship between business leaders and marketing leaders in the past.

And that means no more guessing. Rather, HR leaders will be able to argue from a position of data-driven authority and more effectively bridge the language gap between themselves and their budget holders.