Data Analytics and its Role in Human Resource … · Data Analytics and its Role in Human Resource...

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[271] Data Analytics and its Role in Human Resource Management Sweta Anand 1 and Utsav Kar 2 1,2 Research Associate, ICFAI Foundation for Higher Education (IFHE) INTRODUCTION “If you want to build the business, build the people”, says Brownie Wise, Innovator of the Tupperware party plan. Indeed, human resource is the most crucial resource of an organisation and its efficient management can be the key to success. Human resource management is the process of managing people at work. The industrial revolution laid the foundation of human resource management. The scientific management practices combined with the sophisticated art of managing people at work has defined the ground rules of human resource management. In the twenty first century organisations are highly technologically driven. This technical advancement has reduced the world into a global village with customers having highly customised demands for products and services. This demand calls for an ever ready work force which understands customers’ needs perfectly. This brings diversity, innovative work culture, flexible organisational structures, flexible working hours and various other changes at the work place (Brenda L. Dietrich, 2014). The people at workplace have become complex to manage on account of their diversity. However, keeping the employees happy is a pre-requisite for any organisation to survive and to excel. Understanding the workforce would be the first step in such a setting. Any decision made by the top management has the potentiality to make an impact on the satisfaction level and the performance level of the employees. It becomes crucial to have meaningful insights into the world of the human resource. Data about the needs, expectations, satisfaction level, and other metrics associated with human resource can be highly helpful. Thus, the need of a technology that generates information based on these data aids in the process of informed decision making. Data can be generated by the employees, customers, vendors, regulators and the competitors. Data analytics is a technology that generates information out of the data that is generated. Hence, data analytics is a powerful weapon that has the potentiality to give greater insights into the business environment (Edwards, 2016). The area where analytics are used in HR are broadly classified into Demographic, structural, tenure. It is ILLEGAL to copy, print or save any content of this pdf, in part or in full, on any retrieval system, without the EXPRESS WRITTEN PERMISSION of the copyright-holder

Transcript of Data Analytics and its Role in Human Resource … · Data Analytics and its Role in Human Resource...

[271]

Data Analytics and its Role in Human Resource Management

Sweta Anand1 and Utsav Kar2

1,2Research Associate, ICFAI Foundation for Higher Education (IFHE)

INTRODUCTION

“If you want to build the business, build the people”, says Brownie Wise, Innovator of the Tupperware party plan. Indeed, human resource is the most crucial resource of an organisation and its efficient management can be the key to success. Human resource management is the process of managing people at work. The industrial revolution laid the foundation of human resource management. The scientific management practices combined with the sophisticated art of managing people at work has defined the ground rules of human resource management. In the twenty first century organisations are highly technologically driven. This technical advancement has reduced the world into a global village with customers having highly customised demands for products and services. This demand calls for an ever ready work force which understands customers’ needs perfectly. This brings diversity, innovative work culture, flexible organisational structures, flexible working hours and various other changes at the work place (Brenda L. Dietrich, 2014).

The people at workplace have become complex to manage on account of their diversity. However, keeping the employees happy is a pre-requisite for any organisation to survive and to excel. Understanding the workforce would be the first step in such a setting. Any decision made by the top management has the potentiality to make an impact on the satisfaction level and the performance level of the employees. It becomes crucial to have meaningful insights into the world of the human resource. Data about the needs, expectations, satisfaction level, and other metrics associated with human resource can be highly helpful. Thus, the need of a technology that generates information based on these data aids in the process of informed decision making. Data can be generated by the employees, customers, vendors, regulators and the competitors. Data analytics is a technology that generates information out of the data that is generated. Hence, data analytics is a powerful weapon that has the potentiality to give greater insights into the business environment (Edwards, 2016). The area where analytics are used in HR are broadly classified into Demographic, structural, tenure.

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UNDERSTANDING DATA ANALYTICS

Analytics makes use of the enormous amount of data which is generated in the course of running of a business organisation. It makes use of the knowledge of engineering, quantitative techniques, computer technology to assimilate, analyse and make relevant suggestions in the task of decision making. The right set of information derived from the chunks of data has the potentiality of turning into a strategic asset for an organisation (Fitz-enz, 2014). Decision making based on such set of information can turn to be the winning edge for an organisation.

Fig. 1: The Below Chart Classifies Broadly (Demographic, Structural, Tenure)

Source: Jac Fitz-Enz, The New Hr analytics: Predicting the economic value of your company’s Human capital investements

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Fig. 2

Source:https://infogram-thumbs-1024.s3.amazonaws.com/92cc3288-f2e4-45bd-8cc1-79fc09d0aaa9.jpg

Big data is a big chunks of data which is so huge that it cannot be stored, processed or analysed in a single database. The data is so comprehensive that it has the ability to give a fine grained analysis to any situation at hand. Thus, it has the ability to predict the behaviour and the effects with greater degree of accuracy (Parag Kulkarni, 2016). Human Resource Information System (HRIS) also generates big chunks of data. These data when processed properly has the ability to deliver quality insights into the human resource behaviour. Predictive HR Analytics helps to predict the future pattern of behaviour of the human resources based on analysis of data. Data generated from attendance report, skills possessed, joining dates, educational qualifications, selection or non-selection criterion for the job, emails, social media interactions, internet search history, demographics data, compensation related data, working hours, etc. add to the chunks of data related to the human resource of an organisation. Apart from these, data related to the skills and competencies possessed, number of hours delved into the work, targets achieved, performance appraisal data, compensation data, training and development data, preferred learning methodology and its effectiveness rate, grievances, disciplinary actions, attitude, corporate citizenship extent, dispute resolution roles played, etc. are some of the functional data associated with human resource management. Traditionally data generated through such HR activities were gathered in separate software but progressively these data are now integrated and stored in a centralised database. Analytics makes use of this unstructured data and applies statistical tools of data analysis to generate data to be used in informed decision making.

Analytics in the field of human resource management, is increasingly gaining ground as a necessity to manage the workforce of twenty-first century. It makes use the people related data to facilitate in the task of decision making.

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Fig. 3

Source: https://www.inostix.com/blog/wp-content/uploads/2014/05/figure-2-+-3-schmarzo.png

This three are the three pillars on which HR performs analytics and create metrics for better performance of the entire organization. Talent analytics is playing a wider role in both IT and non IT company for a optimized solutions.

Fig. 4

Source: https://hbr.org/2010/10/competing-on-talent-analytics

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THE BENEFITS OF ANALYTICS

Recruitment Analytics: helps to find the right candidate with the right skill set with the potentiality of staying longer with the organisation. Identifying the most well suited platform for finding the right kind of talent is aided by recruitment analytics. Some of the benefits that can be reaped by deploying analytics based recruitment include:

Finding the right candidate,

Refining the source,

Analysing overall recruitment experience,

Help in profile tuning,

Identifying best candidate sources,

Analysing the market trends.

Recruitment analytics is used by Wells Fargo & Company used psychometric and biometric data to turn more predictive in its recruitment process (Cook, 2015).

Performance Based Compensation Differential: This metrics helps to align compensation to the performance of the employees at work. A score of 1.3 means a high performer earns 30% more than an average performer. It enables in ease of comparison of payment across different business unit, time zones, group of employees, etc. A recent study by Pay Scale shows that performance based pay brings better return to companies than equal paying organisations (Low, 2016).

Predictive Analytics: Predictive analytics shows what will happen in the organisation rather than what has happened in the organisation. Sophisticated algorithms combined with historical data helps to generate meaningful insights into the future of the organisation. Example the cost of voluntary turnover is 1.6 times the annual salary base for employee than manager can adopt tactics of bonus increase, career progression agreements, etc to take actions to prevent employees from quitting.

Training Analytics: Design, deployment and analysis of each investment being made is assessed and measured before any training programs. can also be well addressed by utilising the tools that are statistically preferred and most efficient tools for learning various level of skills and expertise (Scholz, 2017).

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Fig. 5

Source: http://searchhrsoftware.techtarget.com/feature/People-analytics-software-drives-need- for-HRIS-skills

IBM is in favour of precision rather than doing guess work. As per 2013 SAS study on 1,200 organisations in the year 2018 approximately 6400 organisations with 100 staffs will opt for big data analytics. Big data is aimed to gain the competitive edge by the organisations to excel in an highly competitive market. Statisticians, analyst and human resource managers work in tandem to unleash the power of analytics. Important statistics and metrics are released by the team enabling in efficient decision making. Some of the important benefits generated by the data analyst in the field of human resource management revolve around:

Better Decisions in Hiring People: As per Career Builder survey of 2013 conducted on 6000 HR professionals, around 27% of them agreed that a bad decision on hiring costed them more than $50,000. A good data analytics tool can generate lots of information related to the candidates to holistically analyse and identify the right types of candidates, sources from where to hire them, talent, skills to seek for, etc. HR analytics reveal the right set of potential candidates to be hired via online recruitment portals, social media sites, etc.

Impart in Depth in Sight: The interactions of the employees with peers, customers, managers, subordinates are recorded. Analytics provides a valuable peek into the employees’ professional life. It enables in an all-round analysis of the employees giving a holistic image of their professional life.

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Well Planned Training Programmes: A training program that is well planned can deliver exactly what it aims for. However, a poorly planned training programme is more of an expense bringing less value addition to the organisation. As per Association for Talent Development (ATD) organisations spend on anaverage an excess amount of $1208 in training employees. Analytics help in identifying the areas which needs focus in organising training and development programmes. It not only checks the effectiveness of training programmes but also analyses its yield at workplace.

Better Retention of Employees: Analytics release data backed with facts and figures as to why employees stay in an organisation and why they decide to exit. A proper analysis of such information can enable organisations devise a strategy to make sure the employees stick with the organisations. It also helps in correcting any factors which are playing a negative role in employee retention.

Talent Management: Talent management would be the toughest challenge in next few years as the workforce is increasingly becoming diversified, multicultural with high attrition rates. Nurturing and retaining the talent in such a scenario becomes crucial and analytics can deliver the relevant data in managing this complex challenge.

Fig. 6

Source: Jac Fitz-Enz, The New Hr analytics: Predicting the economic value of your company’s Human capital investements

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THE CHALLENGES OF ANALYTICS

The lack of ability of the HR managers to understand analytics, compounded with a similar set of inability of the IT managers to understand the human resource often poses challenges in unearthing the benefits analytics.

Fig. 7: Percentage of Organization not using Workforce Analytics to Address Specific Human Capital Issues

Source: www-935.ibm.com/.../getting-smart-about-your-workforce_wp_final.pdf

With evolving technology there is a dynamic shift in how the organisations manage the landscape of talent at workplace. This talent management is actually the crux of success for the organisation. As human resource, the only living resource at workplace has the ability to make all other non living resource productive. In the present time this resource itself is going through sea of changes with changing demographic trends, there comes a generation of talent which is more technically competent, makes use of social media for boundary-less collaboration, has more changing needs and wants, etc. At the same time it coexist with a generation that is equipped with organisational knowledge base and experience and is on border of retirement. The human resource management at such a time has to act strategically to assure the winning edge (Bhattacharyya, 2017).

1. The amalgamation of the human resource opportunities and threats arising from foreign operations into the strategic decision-making functions:

The workforce opportunities are striking as:

Through sturdy improvements, the political intrigues that open trade across borders

By sudden and often unexpected changes in political relations between countries like relaxation in relations between the United States and Cuba; conflicts in Syria, changes in oil prices.

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The challenge for companies remains nimble to take advantage of the opportunities while avoiding the risks.

2. Making the Business Case for CSR: Corporate social responsibility fulfilment is one of the top challenges companies face when expanding into new markets. Business practices vary across the cultures, countries and geographical area. The organisation needs to give due considerations to the culture prevailing across the globe. Thus, giving due considerations to the local cultures and practices. The HR department needs to be in sync with the local culture, catering to the needs and requirements of the society in which it operates.

3. Evolving a New Set of Global Leaders: The challenge for HR is to educate managers on how to take advantage of the cultural differences while mitigating any friction. While cultural diversity brings it own set of challenges it also equips the organisation with new perspective nad values to deal with problems at hand.

4. Identifying Skills on a Local Level: Identification of the right candidates from a pool of applicants is a significant challenge and it gets even more prominent when it is to be done in a completely new market place.

Fig. 8

Source: https://media.licdn.com/mpr/mpr/shrinknp_800_800/AAEAAQAAAAAAAALHAAAAJGNiZDQ3YTQ4LWUwOTMtNGY2Ni05 NjI0LTkzYWMyZDg0YTA1Nw.png

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COMPANIES USING ANALYTICS IN THEIR HR OPERATIONS

OPOWER

Opower headquartered in Arlington, VA delivers enterprise software that helps utilities elevate the customer experience. (How We Use Data To Optimize Our Talent Acquisition Team [Opower], 2016). Dawn Mitchell, Opower’s director of talent acquisition stated “When Opower began deploying analytics to measure how we recruit and hire people, amazing things happened,” said This led Scott Walker, senior people analyst. To predict the number of recruiters required to execute the function of recruitment, Opower presented the company executives with three possible scenarios:

Firstly, To continue with its current team of seven recruiters at no additional cost, but risk missing its goal significantly for 30% of roles.

Secondly, invest $350K into a combination of tech sourcing sites, additional recruiters, recruiter bonus programs, and referral bonuses, and cut the risk of missing its goals to 15% of roles.

To invest $750K for hiring employment agencies services.

As Opower had concrete data to work with, it was able to reduce risk to an acceptable level, while minimizing its investment through the cost-effective $350K alternative. Opower decreased its average fill a vacant position from 93 days to 67 days through data-driven decision-making. Also, the recruitment goal was achieved with a total of 237 new hires.

SAP

SAP designed SAP® Success Factors® solutions, which is a HR analytics solution (SAP Success Factors). It is used to streamline and improve the experience of HR team, managers, and employees SAP SE is a European multinational software corporation that makes enterprise software to manage business operations and customer relations. The benefits included:

The company created tools that help HR team to detect, prevent, and eliminate bias in their talent decision-making processes, to guide enterprise HR team in reducing inequities at each stage of the employee lifecycle to address the diversity and inclusion challenges.

The solution translates into bottom-line benefits, promotes employee engagement, secures satisfied customers, and addresses critical skills shortages.

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The solution provides a complete understanding of the workforce does not end with a company’s full-time employee base. As contingent labour becomes a massive and critical part of the global workforce, job structure reframing and workforce insights need to be extended to cover this group as well.

ORACLE’S HR ANALYTICS IMPLEMENTATION IN PHARMACEUTICAL INDUSTRY

One of the global top ten pharmaceutical company, having over 100,000 employees across 140 countries reaped the benefit of analytics in HR. They are a global leader in pharmaceuticals, generics, vaccines, and consumer health products. The company’s HR department was having a difficult time understanding the factors influencing the retention of key employees. Employee performance was difficult to analyse and improve. Self-serving and ad-hoc reporting made the business too depend on the Information Technology department (Human Resource Analytics for Global Pharmaceutical, 2011). The pharmaceutical company implemented Oracle’s HR Analytics solution sourced from People soft.

Key project milestones included the loading of 3 years of historical data and implementing the client’s unique data security requirements.

In addition, sixteen out of the box reports were customized to use the client’s business terminology and the ETL process was performance tuned to ensure that data was updated frequently.

VISIER

Visier provides Workforce Intelligence solutions that its customers to maximize their business outcomes through their people. Visier headquartered in Vancouver is a market leader innovating in the field of applied big data cloud technology, For organizations that go down the path of trying to build their own analytics systems (using BI toolsets like Tableau or Qlik, or trying to integrate data into their transactional HR systems for more comprehensive reporting).Visier helps those companies that can act as a sort of ‘easy button’ for analytics–reducing the skill set needed to leverage analytics and to deliver insights in an intuitive way.. However, there are other approaches, which can make analytics easier to gain momentum with HR practitioners. They helps companies having access to data scientists or other analytics experts is critical to their success (Visier Delivers Industry First:, 2016)

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It provides workforce related intelligence solutions

It reduces the skill set needed to leverage analytics

It delivers insights in an intuitive way.

YELLO

Since some of the investment categories like freelance marketplace and chat bot offer a significant upside in terms of potential in global markets. Yello, is recruitment software services provider based in Chicago. It raised USD 31 million in this effort (Team, 2017).

It indicates that customers are engaged in continuous improvement and innovation practices in the management of its work force.

GENERALI GROUP

Oracle PaaS and SaaS technologies anchor a cloud-based human capital management (HCM) strategy that provides complete workforce insights on the full employee lifecycle for every HR stakeholder. This SaaS/ PaaS combination was particularly useful to Generali Group, one of the world’s leading insurers. To enhance Oracle SaaS applications such as Oracle HCM Cloud and Oracle Talent Management Cloud, Oracle offers a wide variety of scalable and secure platform services for a single, trusted system for performance management (Oracle Cloud Platform Service for Human Resources) Generali used Oracle PaaS technology to interface its Oracle HCM Cloud system with several on-premises information systems and to gain more flexibility.

The company chose Oracle Database Cloud Service, Oracle Java Cloud Service, and Oracle Integration Cloud Service to standardize and streamline the integration process.

THE CURRENT MARKET SCENARIO

Despite the tremendous ability of data analytics in understanding the past, present and future of the data associated with the human resource. However, a saddening figure as per a Forbes article only 4% of the organisation have the capability to conduct predictive analytics while 56% of the companies are only releasing mundane data associated with Operational Reporting. Only 14 % of organisations have done significant statistical analysis of its human resource related data.

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The organisations which invest in data analytics have been found to reap the benefit of such an investment. Their stock market return are 30% higher, recruiting activities are much more streamlined and impacting, leadership and succession planning are better aligned. The human resource department facilitates the organisation in informed decision making. Analytics has already proved its metal in supply chain management and marketing and now its up to human resource management to make an apt use of this powerful tool to make strategic decision making which is backed up with facts and figures.

1. The goal of Human Resources analytics is to provide an organization with insights for effectively managing employees. The data across the organisation is often created and stored in multiple places in multiple formats. The challenge is to identify an effective model to harness the data giving meaningful insights sought in the decision making process.

2. Diversity can be a very powerful thing for businesses. Studies have shown that diverse workforces are more innovative, perform better, and can help expand a company’s pool of prospective customers. Yet setting diversity goals and implementing policies is not enough. One of the most famous quotes in business management is, if you can’t measure it, you can’t improve it. This is certainly true in the case of ensuring diversity

3. As an example, one client–despite efforts to hire a more diverse workforce – found it was struggling to achieve its goals. With further insights, the company’s HR team discovered the underlying cause was a high turnover of diverse workers on three specific teams. They wouldn’t have been able to uncover this insight without analytics. In the past, the client said they would have looked at their organization’s overall diversity and increased goals for hiring more diverse candidates. The analytics let them focus specifically on where and how help was needed (such as working to retain specific workers at risk of resigning), creating a significant improvement–much more than they otherwise would have achieved.

4. Looking back over the last 10 years, the workforce and workplace have been massively disrupted. Jobs have gone from posts in newspapers, to online job boards, to today where recruiters contact you through your LinkedIn profile. Smart phones, outsourcing, contingent workers, the gig economy, and other social, economic, and technical changes are disrupting how we work. Even larger changes are on the horizon as we start to look at automation and its impact on the workforce. This challenges the very nature of the role of HR.

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5. A 2014 survey by Harvard Business Review Analytic Services of HR and other executives indicates that the use of predictive analytics is still sporadic. Only 9% of the companies surveyed agreed to the fact that they made predictions about their workforce based on analysis. While 40% of the respondents used the data reactively to inform critical workforce related decisions.

LOOKING FORWARD

Which companies are at the forefront of the analytics revolution? Smaller or younger companies are clearly less able to make large-scale investments. “There is a difference in how large multinationals, compared to smaller organizations, tackle analytics, given their large budgets, scale and demand for globalization,” says Professor Boudreau. “However, the fundamental goal remains the same for all organizations–focus on the important issues and generate actionable insights where they are most pivotal.” Indeed, it could also be argued that smaller companies, despite their limited financial muscle, are unencumbered by unwieldy corporate bureaucracy and can thus act more quickly and decisively. It may also be that smaller, more entrepreneurial companies are more likely to boast younger senior executives who tend to be more technologically savvy and instinctively drawn to data analysis.

As per Deloitte’s 2014 survey 78% of companies employing more than 1000 employees considered HR analytics as an urgent requirement. However, only 19% were equipped to handle analytics requirements of their organisation. The giants like, Shell has made it compulsory to digitise all human resource management practices, to help analytics in achieving better collaboration at workplace. IBM deploys analytics in managing its innovative work culture and change adoption at work place. These companies are the market leaders in their segments and understanding the criticality of analytics to manage the people at work place they deploy the technology for its best use.

CONCLUSION

Data is one of the biggest asset an organisation can possess. But not every organisation is well equipped to make a good use of this data. It is here that data analytics acts as a strategic weapon to help organisation align better with its objectives. The tools like predictive analytics modelling and big data equips organisation in-depth understanding of its human resources. The entire HR arena and business leaders are turning into evidence-based, and more analytical. Data is becoming more available with social media and market intelligence firm coming into

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picture. HR departments in various companies are coming with different models and algorithms to use those available data by using analytics algorithms and pattern recognition algorithms for recruitment purposes and in learning and development setting. As data is becoming more and centre of practise it is creating a demand for definite information and taking more informative decisions. This creates HR with continual challenges for applying analytics for metrics like workforce, compensation and benefits, training, performance and career management, recruitment etc. Though any big technology comes with its own set of problems however, the benefits that it candeliver if well used can outweigh the challenges. The companies which take well measured steps and makes smart use of technology like data analytics excel in their field leading the paths for others to follow.

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Publications India Pvt, [2] Brenda L. Dietrich, e. a. (2014). Analytics Across the Enterprise: How IBM Realizes Business Value

from Big Data and Analytics. IBM Press. [3] Cook, I. (2015, May 15). HR Zone. Retrieved from https://www.hrzone.com/perform/business/real-

examples-of-hr-analytics-in-action-and-data-scientists-in-hr [4] Edwards, D. M. (2016).Predictive HR Analytics: Mastering the HR Metric. Kogan Page Publishers.

Fitz-enz, J. (2014). Predictive Analytics for Human Resources. John Wiley & Sons. [5] How We Use Data To Optimize Our Talent Acquisition Team [Opower]. (2016, February 8).

Retrieved from https://hros.co/case-study-upload/2016/2/5/opower-how-we-use-data-to-optimize-our- talent-acquisition-team

[6] Human Resource Analytics for Global Pharmaceutical. (2011). Retrieved from http://cdn2.hubspot.net/hub/104260/file-16450941- pdf/docs/kpi_partners_casestudy_pharmaceutical.pdf?t=1431965181983

[7] Low, T. (2016, March 31). When Unequal Pay Is Actually Fair. Retrieved from https://hbr.org/2016/03/when-unequal-pay-is-actually-fair

[8] Oracle Cloud Platform Service for Human Resources. (n.d.). Retrieved from http://www.oracle.com/us/products/applications/human-capital-management/cloud-platform- services-for-hr-3092485.pdf

[9] ParagKulkarni, e. a. (2016). BIG DATA ANALYTICS.PHI Learning Pvt. Ltd. [10] SAP Success Factors. (n.d.). Retrieved from

https://www.successfactors.com/content/dam/successfactors/en_us/resources/brochures/tech [11] -genderequality-businessbeyondbias-ebook.pdf [12] Scholz, T. M. (2017). Big Data in Organizations and the Role of Human Resource Management: A

Complex Systems Theory-Based Conceptualization. Peter Lang. [13] Team, P.M. (2017, December 29). India HR Tech Startup 2017: Funding, Mergers & Acquisitions.

Retrieved from https://www.peoplematters.in/article/hr-technology/the-hr-marketplace-investor-sentiment17125??utm_source=peoplematters&utm_medium=interstitial&utm_campaign=learnings-of- the-day&utm_source=peoplematters&utm_medium=interstitial&utm_campaign=learnings-of-tVisier Delivers Industry First:. (2016, March 30). Retrieved from https://www.visier.com/press- release/visier-delivers-industry-first-enabling-companies-to-instantly-connect-their-workforce- to-business-results/

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