Posted by  Lance Mercereau  Published on  17 Dec 2016
  • Metrics and KPIs
  • HR Strategy

"Without a taxonomy in place, it’s extremely difficult to leverage data to support informed, timely workforce decisions. With a standardized taxonomy, HR benefits from greater data quality, improved reporting accuracy and faster time to insight"

Over the past few months, Dr. Max Blumberg and I have interviewed a number of HR professionals on the data and analytic challenges they are facing today. Before I dive into the details of exactly what we’ve found, and why this matters to businesses, let me first start by providing some context.

First things first – What is a taxonomy?

A HR taxonomy enables the classification of multiple sources of people-related data in order to provide company-wide visibility of employees. 

Taxonomies are critical for HR professionals to effectively understand, organize and manage employees through their entire employment lifecycle and more. They not only provide users with greater control over data, but also with the ability to create and manage the relationships between data entities – a critical tool if more effective business knowledge is to be gained and generated.

One of the challenges in establishing a taxonomy is an inability of HR departments to agree on the consistent definitions of terms, such as job titles and skills, so they are applied uniformly across offices, lines of business and geographies.

Now, with a clear definition – let’s look to the results of the research

From speaking with an array of HR professionals, came a stark finding - a realization that businesses are being stifled by a lack of standard taxonomy. So ingrained is this for many that it’s not only hurting companies, it’s also paralyzing HR professionals in gauging the value of their employees.

Based on conversations, I estimate that circa 25% of all HR departments have a taxonomy in place, while fewer than 5% of these are using a company-wide HR taxonomy that delivers a consistent view of their people.

The question is why – and I believe there are several reasons:

  • A lack of clarity on the definition, purpose and benefit of taxonomies.
  • A lack of a professional standards body that has yet to work with HR leaders to develop a uniform taxonomy.
  • A relatively low rate of adoption for data analytics in HR (particularly when compared to departments such as marketing or procurement); as such, executives are yet to recognize the importance of taxonomies.
  • A lack of centralization leading to proprietary approaches and technologies, each developed by management consultancies and software firms – the result of which is a fragmented landscape where businesses and departments have their own version of taxonomy for their customers.

Why does all of this matter? 

Without a taxonomy in place, it’s extremely difficult to leverage data to support informed, timely workforce decisions. With a standardized taxonomy, HR benefits from greater data quality, improved reporting accuracy and faster time to insight – all of which enables HR professionals to raise their profile as strategic business advisors.

What steps can and are being taken toward taxonomy unification?

Much work is needed to transform the utilization of taxonomy – and given the severity of the situation, it’s not so surprising that numerous professional associations are trying to rectify this problem.  The CIPD's Valuing your Talent (Vyt) Framework helps business leaders, managers and investors better understand the value of their people and how their people management strategies drive business performance.

Central to VyT is defining key HR metrics, which can only come about by developing and using a standardized taxonomy that incorporates agreed definitions. In other words, the taxonomy is the link between effectively organizing data and providing standardized reporting and analysis to drive business outcomes.

Commentators say that the lack of skills and culture are inhibiting the take-up of analytics. I think this is true, to a degree. A limited understanding of the technology is also a problem. What is needed is more collaboration amongst the HR profession so all companies can exploit the immense benefits of data and analytics. 

2017 – A pivotal year for taxonomy?

I think 2017 will be the year of taxonomy – and in the coming months, I believe we will see more debate about the need for HR to focus on the infrastructure of data analytics, including a renewed interest in the important role of taxonomies. 

While taxonomy may not be the most alluring of HR tasks, it is none the less critical to successfully adopting and harnessing analytics in the HR realm. After all, when analytics are correctly integrated into a taxonomy, it can transform your understanding of, and ability, to engage employees. And few HR professionals could argue with just how essential these abilities are to them and their businesses.