What Every HR Leader Needs to Know About AI and People Analytics: Dr. Fermin Diez

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I think we need to embrace technology. Gen AI being the latest one. So a lot of what I've made in my last, say 10 to 15 years in HR has been about how do we get more people up this sort of continuum of how much impact HR can have. Most analytics and most organizations still have two main varieties.

One variety is track turnover. And the other variety is track engagement. What the business really wants to know is how turnover affects business outcomes.

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Joining us today is Dr. Fermin Diez. He's a globally recognized leader, an author, a professor, as well as a HR influencer. Welcome Fermin, and I look forward to our conversation. So I've known you for almost 10 years, I would say. It's almost a decade. So I think I know you very well, but for those listening in who may not be familiar with your work, could you briefly describe, your journey, the background and also what is interesting is what keeps you or your passion in HR for the last three decades.

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I've had a career that encompasses consulting. I've also been a HR head myself. So I've led the HR here in Asia for a couple of organizations as well as in Latin America. I led the consulting team for Towers in Latin America and for Mercer here in Asia. I've also been an academic and I started being an academic close to 15 years ago.

I actually had started teaching back when I was living in Puerto Rico in the late 80s, early 90s. But I took a big hiatus. And then when I got here to Singapore, I started teaching again at SMU. And has been at least I'm actually getting my 10 year award, but I think my 10 year award is four years late.

years [: 00:03:00

And what keeps me going is the frustration of the no change. I think the profession should be much further than it is. I think we need to embrace the fact that we are both a people business, but also a business business. I think we need to get better at numbers. I think we need to get better analytics.

have. And I do that in many [: 00:04:00

But I also do workshops for corporates. I write, now I write blogs, I've written three books, I give talks. So, but it's all around the same idea of how do we get the HR profession to really take its place when we want to be seated at the table and be strategic business partners? Okay. What does it take and how are we going to get there?

So that's what moves me.

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You look at HR differently, shape sort of your perspective in specifically talent management or maybe even broader, just HR in general.

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One is analytics and tech, and I put them together. I find that too many HR folks, are still scared of numbers and they're scared of technology and they go around saying where I'm a people person and they do that with pride. And what I say is, you know, I am a psychologist.

That is my background. My training is in psychology. I had to become a numbers person. I had to become an analytics person. I had to become HR tech person because that is where the profession needs to go. And so I wanna make sure people come along and they see the same things that I see and they can make the same kind of impact that I think we need to make.

I know about, so people can [: 00:06:00

rn, I told you with Towers in: 1984

There's only been one major change in 40 years of doing compensation. Now, every other part of HR has changed. We've seen change in what you do, for instance, in engagement surveys and we've gotten more analytical the way you've done it, and we're now incorporating AI the way you're doing it.

doing compensation in Excel, [: 00:07:00

The only thing that I've seen change is flex benefits. And that happened in the 90s. The last 25, 30 years, we have seen zero change in compensation. And as we move towards the future of work, we're still stuck. And the other one is the strategic role of HR. And this is my other frustration. And that's why that's the other topic I picked.

And then I'll tell you about a new one that I'm interested in but that's another topic that I find that HR folks are still seeing that the role ends with turnover and engagement scores. I think it's important to understand turnover and engagement scores, but as means to an end, not as an end unto themselves.

gement. But we don't measure [: 00:08:00

The latest topic I'm interested in is one that I'm going to start writing about very soon. So you're going to get this first before anybody else is the role that HR should have at the board level of companies, because I think that's perhaps where it starts that we should have more sort of responsibility from the board about HR topics when you get HR leaders that only go to boards to talk about engagement, for instance, and turnover rates and not about risk and not about the implementation of business strategy, that's already a problem. And when you don't have enough HR knowledge or what goes for HR knowledge is assumed to be enough at boards, I also think that's a problem.

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I've always [: 00:09:00

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I'm a very curious person. So curiosity keeps me going. Being a professor also keeps me going because in a way you have to keep ahead of your students and that's a big motivation and I get a big sort of pat in the back myself. I pat myself in the back every time I know that I'm ahead of my students and say technology and things like that.

y, you know what you told me [: 00:10:00

Now I know what you were talking about. Now it makes sense. That kind of thing keeps me going. And then there's that elusive, but very important element of discipline. I work at it most days. I'm preparing for the next marathon is in five weeks time. This will be my third marathon.

covid. So, really in the year: 2020

in the case of talking to HR [: 00:11:00

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I was in the same conference as you. And we've gotten a question from the crowd saying, Oh, you know, it's a multi generational workforce. How do you encourage the older generations to adopt technology, to embrace AI.

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It's just a matter of wanting to do it.

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What makes people experts is not how young they are. What makes people experts is how much time and effort they put into it.

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And you have written a book The Fundamentals of HR Analytics. Could you share with our listeners. What is one of your favorite experience or memory or personal experience on a people analytic piece that you've done, especially in your in house roles and the impact it has created for the organization.

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So that's specifically what we were there to do. What would make from an HR point of view, each branch more profitable. The head of HR had her own set of ideas of what she thought wanted to work or would work and what she wanted us to look at. And she had two in particular. One was diversity.

ple from different profiles, [: 00:14:00

The second was that she wanted to implement a larger bonus scheme because she also felt that the more variable pay the more it was going to work. What we found was something completely different when we did all of the analysis. We found that MBTI made absolutely zero difference to anything that she was talking about. We also found that the size of the bonus also made a zero difference.

er was actually key, but not [: 00:15:00

Anything less than 13 percent was less profitable. Anything more than 15 percent was also less profitable. And she had a shocking discovery that overtime was profitable. She had forbidden overtime. And what we found is that actually up until about eight hours of overtime per month was less profitable, but beyond eight, up until about 16 hours of overtime per month, will actually would make the branch more profitable.

What she had started to do was replace overtime with part timers. So we also discovered something that she didn't know, which was that the amount of full timers to part timers also made a difference in that there was a sweet spot between, say. Forget the exact numbers, but let's just call it between 40 and 60%.

ofitable. And so part of the [: 00:16:00

She was so upset with us, so very upset with us. But in the end, my job was to show the data, not to make her look good unfortunately.

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Yeah, she wanted us to prove that her policies were right. And so this one is memorable more because this is the danger that assumptions that we make about. Say bigger bonus pools or no overtime or more part timers are cheaper that making these assumptions we think are going to help the business or that lowering turnover also helps the business.

It turned out that none of those could stand up to data.

It

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If you don't mind. MBTI one, how did you do that analysis? So you compared diversity?

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w who you should marry. It's [: 00:18:00

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And we found that there was no correlation whatsoever. Branches with and without MBTI variety had no correlation with profitability.

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What do you think is misconception about HR analytics that still exists today?

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They kind of look at HR and they go, really? I'm not sure. So one of the things that I think is important about data is to show whether these assumptions that we continue to make actually are true. And they must be true in our company. Not that there's one article that we read once, whenever, that said that maybe there is a correlation, it's not enough. To me, that's the most important part. The other most important part, I think of analytics, once you take that step is to not just link analytics to things HR cares about. Let me also phrase this. Most analytics and most organizations still have two main varieties.

er affects business outcomes [: 00:20:00

When you go talk to the business about turnover and retention and engagement, they always think of this as the KPIs that HR has. Their KPIs are usually some variation of dollars and cents. People analytics becomes really useful when we can help the business understand how they can improve their dollars and cents by implementing better training, better recruiting, better compensation and so forth.

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on? These are things that we [: 00:21:00

But having said that, while we have fun doing all this analysis we don't get to do that for all of our clients, right? There's still,

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What do you think are some of the main barriers and what can we do about it?

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ngagement survey and what we [: 00:22:00

So the first one is mindset. If we think that engagement is the end in itself, then the answers are easy. The second, I think, is more structural. When you provide data to your client, it's usually some sort of file that they can have with all the names protected for all the right reasons, which means that the data is not in the HRIS.

But most of what still goes for analytics in the dashboard variety of analytics it's straight from the HRIS and some people who have either Success Factors or Workday or that type of tool, they will perhaps have the analytics module or prism or whatever but it's data that comes straight from the HRIS.

kind of things I'm going to [: 00:23:00

So, at most, what they do is try to figure out if there is a correlation between engagement and turnover. And that's it. My very first time that I did analytics. Back to projects that I like was I learned this from a guy that did analytics for us at my time at Mercer in Latin America, and we worked with a retailer in Brazil.

what I was able to do is link their employee engagement data with their customer satisfaction data. And they gave me access to their customer satisfaction numbers. And so what we did basically was an ANOVA of their, Okay, for those of you that don't understand, I don't know what ANOVA means. What we did is we try to figure out which elements of the customer survey were linked to which elements of the employee engagement survey.

And we [: 00:24:00

inking it to things that the [: 00:25:00

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ero accidents. That level of [: 00:26:00

And they never cared. And they never cared because they said, as long as I don't lose my really good people if I lose some of the ones that are just average performers, that's okay. I'll replace them with other average performers that the company's performance will not suffer. But if I lose one of the good ones to replace a good one with another good one is very difficult.

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What area of HR do you would like to see AI solutions for? There are typically no answers. So what do you think from your perspective, could be some of the most accessible AI applications or some low hanging fruits that HR can start with.

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One of the questions I get asked most often when I go talk to about audiences about Gen AI and HR is where to start. What can I do with it? So there's different views out there. And one of the views, of course, is that there is some magic AI tool that, that solves for every problem.

HR perspective. One is as an [: 00:28:00

And it can help in many ways, you know, the writing of emails is one perhaps you can start using different tools for different purposes. That's what I've started to do when I write I still use chat GPT for when I want to write formally as for me, the author, because I have already taught it how to write like me.

I have fed it enough of my writing so that it knows how to write, so I can specifically say I want you to write this as for me and the professor. However, when I want to write something a bit lighter more like the blogs, I find that there are others that can do an even better job of writing.

ctually does better research [: 00:29:00

So there's different things that you can do. You can basically write presentations in PowerPoint. And there are tools that can help you do that. So that's one aspect, and I think every HR person should really get involved in using these tools and not just get stuck on the one tool for writing. That would be akin to when computers first came out, personal computers came out, you only bought the Word package, and that's it.

You only use that as a more sophisticated typewriter when you are not taking the power of everything. So that's one. The second level to understand is then how can we improve processes within HR? So how can you use AI tools for recruiting, for onboarding, for pay, for training, for and then there's two big options.

and why so many HR functions [: 00:30:00

Go and experiment on process related things. Build a chatbot for employee communications, build a chatbot for onboarding.

say, your Outlook with your [: 00:31:00

Will I have enough knowledge to build? Are my HR people techie enough to build a model? Can that be done? Will you know where to get the data? Will you know how to communicate and will you know how to integrate? There are many tools, but the issue with the tools is that, I'm on several mailing lists and I'm, of course, doing research on this permanently.

se that can do this or that. [: 00:32:00

Or you can go the route of tools that are being built to do things. One of the ones I'm familiar with is called Squirrel. When people want to put skills based pay in place, there is no data available. And so this is a product that allows you to basically stroll job portals and get from the job portals how much different skills are paid for.

that level of specificity to [: 00:33:00

And you'll end up somewhere between those two. The advantage of having companies like EngageRocket.. build AI into platforms is that you can then, from an HR point of view, get the benefit of AI without having to either build, nor buy, just basically continue, or maybe get the enhanced level of service from your current providers, and that may be where the answer is going to be.

gh AI. And in fact, when you [: 00:34:00

That means from an HR perspective, whether we like it or not, that CEOs are already thinking, how many jobs can we cut through the implementation of AI? So, we go around talking about, oh, it's not here to replace you, it's here to augment you, but the reality is that CEOs are thinking, it is here to replace at least some of the people.

And from an HR perspective, we need to get ahead of this. We need to be the change management agents.

I wrote recently about the fact that we talk about strategic future workforce planning and we are the human resources function. The reality is that as we plan for how the work will be done in the future, we need to plan for the fact that some of it will be done by full time employees.

nd some of them will be done [: 00:35:00

And this, I know it sounds like blasphemy, but if we only think human resources and people, we may be missing a big productivity gain. So maybe the future of human resources is resources or not chief people officers, but chief productivity officers. This, I think it's where the future is headed with all of the AI and we need to get ahead of it.

It will happen with or without us. So we better get on this bus sooner rather than later. And you see, there I am again, trying to convince people to come on this bus with me. I think that's where the world is headed.

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We will still need experts, so it's going to be interesting to see how that's going to work from an HR point of view, but you won't need as many people. Same with customer service. You won't need as many people.

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it'd be great if we do this. [: 00:37:00

A lot of times, HR is also thinking, okay. Trying to get people to adopt AI or, introducing anything new in general is a change management. What do you think are some of the key ingredients to good change management programs? I want to say data for sure is one.

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e we put something out there [: 00:38:00

And also in the hearing what employees have to say about it and feedback from there. From experience as well, the rumor mill and every change management process will take over. And the best way to manage that is to feed the rumor mill yourself. And the way to feed the rumor mill yourself, by the way, is to continuously communicate in all your channels.

ess to basically fill in the [: 00:39:00

And eventually they had to sell the investment. There was another example in Korea. Again, I won't mention who was involved, but it was a Western bank. They bought a Korean bank and they didn't communicate why they wanted to change some of the HR processes. And one of the HR processes they wanted to change right away was the way they did pay for performance, which in Korea is not as customary as it is in the West.

cultural, corporate culture [: 00:41:00

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e company now represents the [: 00:42:00

You don't want to create a sub world of the full timers are different than the part timers. or I'm a real employee and you're not. That in itself will create a whole host of new challenges. One of the things I write about is pay is going to be a new challenge. How will you pay people?

Right now, we pay them differently. I'll give you a key example that creates the wrong culture, but we probably need to fix. The full time employees all have variable pay based on some corporate KPI, but the part time employees don't. So how is it that we're now both working towards the same goal if the way we're paid is not aligned?

ire much more flexibility in [: 00:43:00

Part of the time? None of the time? It will not become a benefit, actually. I always talk about my youngest daughter, who is my example of what a true digital nomad is like. My daughter, since COVID, has decided that she doesn't want to live in any one place. She Airbnbs. She spends three to six months in any one place.

ves Paris, third stint, since: 2021

Too many of HR are still thinking that the way to do it is force people into the office to build culture. We're gonna have to figure out how we build culture with people who are not here. Another aspect I think is going to be super important and how the future will happen is how do we then craft messaging around what's acceptable, what's not acceptable from a behavior point of view, how do we make leaders successful by leading remotely. If people are from completely different cultures and embedded in cultures, meaning different countries, and they're working in different countries, not just because everybody's in a different country, but in the same city. Now everybody's in a different country, living in their own country.

e blend the old and the new? [: 00:45:00

And another one that is very important is the generational gaps. How do we get people to blend in? Back to the earlier story, being the older one who is the expert in Gen AI shouldn't be that unusual. At the same time, learning from a younger person about something or other that they know better than I do should also not be unusual.

So, how do we create that? How to then build this workplace of the future, which is going to be a very different type of workplace in terms of how we pay and the type of employees we have and what we expect out of careers and HR will need to transform the way we think about everything we do.

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Permanent, gig, part time, whatever it is. Yet at the same time, needing to unify everybody into a single culture. What would be one piece of advice you will give to HR practitioners in striving to build towards the workplace of the future.

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for breakfast. Those things [: 00:47:00

Not everybody will look the same. You cannot continue to implement one size fits all type of programs. You're going to have to create flexibility. That flexibility will translate into your ability to attract and retain all of these different types of people that you need, but at the same time, there needs to be a unifying theme.

e. I love the way Steve Jobs [: 00:48:00

The HR world needs to start coming up with ways in which we're going to build this sort of purpose driven organizations and not just profit driven organizations.

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l book from Tom Peters about [: 00:50:00

And that's a book that I keep quoting over and over. It helps understand motivation in ways that none of the theories of motivation in the past have helped. Another book that has marked me is a book by Daniel Pink called Drive, that changed completely my mind about how pay works and how pay doesn't work.

And why I pay for performance as the only way to pay people is not the way to do it. These are the ones that I think over the years have changed how I approach HR. And maybe it's one every ten years that does that.

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You can also learn more about the show and join our community at engagerocket.co/HRimpact We'll see you at the next episode.