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Bringing strategy and HR together 

First published in HRM Asia Online on 7 June 2013
By 2030, at least 20 percent of Singapore’s current resident workforce will be at or above retirement age, yet our fertility rate now is only sufficient to replace approximately 1.9 percent of the resident workforce. Curbs on employing foreign talent make the shortfall more difficult to close.

At the same time, statistics from the Ministry of Manpower (MOM) in Singapore indicate that job loyalty is decreasing as Gen Y, who was born into a developed, globalised environment, enters the workplace: in 2012, 55.2 percent of employees had spent less than five years in their current job.

All these mean that businesses are being left vulnerable to an unprecedented labour crunch and a loss of institutional knowledge.

Against this backdrop, there is an urgent need to advance the role of HR in the strategic planning process, beginning with the use of information.

HR has access to key metrics about an organisation’s workforce: staff turnover, training expenditure, promotion rates and others. However, the majority of HR teams do not fully utilise this data to support their business. Instead, they churn out reports tending towards the provision of generic, low-level solutions focused on fulfilling immediate business priorities. This was illustrated in a 2012 Economist Intelligence Unit survey commissioned by KPMG, where 85 percent of 418 global executives surveyed said that their HR team does not excel at providing insightful and predictive analytics.

Analytics are the missing link between basic data and the strategically targeted use of human capital. The present approach towards HR metrics focuses heavily on the present situation and delivering a historical perspective of HR’s operations.

But when properly applied, data analytics gives HR departments the long overdue chance to become more empirical, to provide hard evidence for their opinions. This helps the HR function gain much-needed credibility at the highest levels of the business. Predictive HR analytics allows insightful analysis of the use of human capital resources with core business objectives. For example, correlations and even causality may be found between bottom-line profitability and HR activities – which will both shape HR’s individual strategy and increase its significance in the organisation’s broader strategy.

HR faces a number of challenges in achieving this goal. Firstly, data quality and access may be inconsistent across the organisation, whether because of multiple disparate systems, a complex data architecture model or even inconsistent input. Secondly, HR may not have the capacity to carry out complex statistical analysis, and developing the required skillsets through internal training or external hiring will take resources and time.

Overcoming these challenges will require HR to take a broader approach in the way it gathers, collates and interprets information. On top of the basic database, HR will have to source internal information about business performance and external information about competitors, the industry and the economy as a whole. At the same time, existing data must be re-collated and organised, which may again require a significant expenditure of resources and time.

Fortunately, advances in technology have reduced costs and increased the accessibility of both data management systems and analytics tools. Together with the rapidly growing recognition of talent management as a strategic focus, this makes the business case for setting up a HR analytics system far more convincing than it has previously been, and organisations are showing that they are ready to embrace the move.

For example, the EIU survey found that data analytics was the most common area for Information Technology (IT) investment within the next three years. Many HR teams are also familiar with the application of technology in HR activities, further lowering the barrier to adoption.

Through the use of analytics, HR teams can make a significant contribution to their business’s competitive edge in today’s economy. This is especially important for firms in Singapore which must prepare to face unprecedented labour challenges.

Besides changing workforce demographics and an ageing population, MOM stats have also indicated that two-thirds of Singaporeans in 2030 (professionals, managers, executives and technicians) will hold PMET positions. What are the implications of this? Will we have sufficient jobs in Singapore for these PMETs? Do we have to redesign jobs? Will we need to restructure HR programmes, salaries and career to manage the aspirations of this group of employees? How will industries that traditionally utilised non-PMETs manage their resourcing?

These are hard questions to answer and given all these issues that companies in Singapore are facing, HR analytics should be employed actively by organisations so that they are future ready.

Moving forward, HR analytics will potentially become the link between the HR function and the boardroom. HR analytics play a central role in predicting the behaviour of talent, managing it and developing a customised plan for the organisation’s workforce. I believe well thought-out predictive workforce analytics could become as important to the CEO as the balance sheet and Profit-and-Loss statement.

Technology and workforce analytics could really shake up HR as we currently know it, forcing the function to reinvent itself as it plans the future use of the most valuable resource in the talent economy – people.

This article is contributed by Ms Miranda Lee, director of people and change management at KPMG in Singapore. The views expressed are her own.