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Statistical Modeling will Save HR

May 14, 2016

By Stephen B. Jeong, Ph.D.

Summary

This article aims to inform HR (Human Resources), OD (Organizational Development), and other professionals on the changes in measurement, analysis, and modeling technology that will transform the way in which organizations gather, track, analyze, and act to create interventions in the future and how these changes will impact the value that they bring to organizations.

David Landes, a professor emeritus of economics at Harvard University and retired professor of history at George Washington University wrote The Wealth and Poverty of Nations, and Dynasties in 1998. In it, he talks about the role of technology in determining the economic status of three major world regions – Europe, the Middle East, and East Asia. Professor Landes believes that the way in which a society encourages and supports the development and use of technology determines the power and influence it achieves as well as its sustainability. In reading his ideas about how Europe was able to gain political and economic power by taking advantage of technology developed in other parts of the world, I couldn’t help but draw a parallel to current organizations and how those willing to take advantage of some of the measurement and statistical modeling technology will, similarly, gain a major competitive advantage in the years to come.

For the past several decades and even as far back as the 1920s, sophisticated statistical modeling techniques that can make predict and establish causal relationships were formulated and discussed among those on the cutting-edge. With the advent of the personal computers, these modeling techniques were made available in more recent decades. These modeling techniques vary in their name depending on the field but in psychology, they are commonly referred to as Structural Equation Modeling (SEM), Multi-level Modeling (MLM), and Hierarchical Linear Modeling (HLM) techniques.

What is amazing about these techniques is that they are able to transform organizational data and make extremely accurate diagnostics and, more importantly, inferences about what changes “caused” what. This means that organizations can now spend a quarter of a million dollars and see exactly what impact that has had on the bottom-line.

A recent article published by McKinsey, entitled “Putting big data and advanced analytics to work,” appears to indicate that organizations are finally coming around to seeing the value in using advanced analytics to gain advantage. What is disheartening is that a large majority of the organizations still rely solely on a century-old statistical technique called regression, a fancy name for correlation. For those who have taken a statistics course might be familiar with the phrase “correlation does not equal causation.” Unfortunately, many organizations still rely on descriptive statistics (i.e., means or averages) or basic inferential statistics like regression to inform important organizational decision-making.

My prediction for the next two decades, on par with Dr. Landes, is that those organizations, and specifically, those HR and OD professionals who become early adopters of the above-stated statistical modeling techniques available today, will be the ones who will be acknowledged, recognized, and rewarded. Those who shy away from these immeasurably valuable tools will simply be left wondering what happened…

Stephen Jeong currently serves as Managing Partner of Waypoint People Solutions — a management consultancy specializing in executive and management selection. As a psychometrician and industrial-organizational psychologist, Jeong also advises public and private entities on ways to improve organizational performance by leveraging organizational data. He has worked with Google, Applied Materials, Monster Worldwide, and Recreational Equipment Inc. (REI) to optimize their people functioning. For more information, call 925-212-7596 or email us.

Dr. Jeong received his MA and PhD from the Ohio State University’s Industrial-Organizational (I/O) Psychology Program — known as one of the founding and leading institutions with a 90-year history in I/O psychology.

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