With the rise of so called ‘Big Data’, analytics is becoming an important part of every business department, and human resources is no different. Today, many businesses are looking to analytics to offer assistance in the HR department.
HR analytics can help to improve processes, and help organisations achieve their core aims and objectives. However, many companies are still proving slow to make the move from standard reporting to HR Analytics.
But what exactly is HR analytics and what makes it superior and better for business than the tried and tested traditional methods of reporting? Keep reading to learn everything you need to know about HR Analytics.
What is HR Analytics?
Simply put, human resources analytics are metrics that businesses can use to analyse their talent pool. For this reason, it’s also sometimes referred to as ‘talent analytics’, or, alternatively, ‘workforce analytics’.
HR analytics is an area of the field that applies analytic processes to a business’s HR department. Utilising this kind of analytics aims to help companies to improve employee performance, helping to give businesses a better return on their investments in staffing choices and initiatives.
However, a common misconception is that HR analytics deals solely with measuring the efficiency of employees. While HR analytics does do this, it is not the only thing it is concerned with. It aims to give businesses insights into processes by gathering relevant data and then using it to make important decisions about improving these processes so that top-priority goals are reached with speed and efficiency. It also has a predictive element not found in traditional HR methods.
Main areas of HR Analytics
As identified by Capgemini, there are three main areas of HR analytics which focus on performance, strategic analysis, and people management.
This area of HR analytics is concerned with staff performance and how this can be optimised for the maximum benefit to the business. It also aims to resolve issues around how a company can find, attract, nurture, and retain the people who possess the best skills necessary for their roles.
Strategic workforce analytics
This section focuses on identifying the number of staff a business needs and what skills these employees need to have, both now and in the future. It is also the area of HR analytics that looks at what causes turnover in a business and aims to address how this can be contained and controlled.
In addition to this, strategic workforce analytics aims to answer how a business should best deal with seasonal or part-time workers, along with contracted employees.
People management analytics
This area looks at whether the organisation hires and promotes the right kind of people. It examines how effective the business’ training programme is and how employees’ skills could be improved in more effective ways. It also aims to discover what factors influence staff retention and employees’ key motivators.
How can HR Analytics benefit your business?
Businesses are constantly pressured to become more productive and get the most from their human capital in the current economic climate. HR analytics can record basic data such as holidays taken, sick leave, timesheets, expenses, recruitment stages, performance metrics, and employee engagement, and then turn it into a tool that capitalises on this information.
Fundamentally, HR analytics make your data relevant and actionable. There is no point in having the employee data that most businesses do if you can’t appropriately access it and use it to inform and drive change. Once you are in this position, a world of possibilities open up, presenting your business with numerous benefits.
Better and faster decision making
In any business, making decisions requires a lot of thought and consideration. Companies need to understand the outcomes they aim to achieve, understand the factors that influence those outcomes, and weigh up the costs of every possible outcome.
Having the most important and relevant data at the ready can help speed up this process threefold, giving business leaders a better understanding of their various teams and productivity levels. This, in turn, allows business leaders to ‘fill the gaps’ as they are equipped with the knowledge needed to make better decisions on performance management, training requirements, or who they need to recruit.
Furthermore, drilling down through the data with HR analytics makes it possible to gain an even greater understanding and therefore take even the most detailed business decisions with confidence. For example, analytics will allow a business manager to ask ‘Why does employee A consistently outperform employees B, C, and D?’ and be able to come out with quantifiable understanding rather than supposition.
Saving time and money
As HR analytics measures staff turnover, businesses can start to understand its causes and put effective systems into place to keep it under control and as low as possible. This saves both time and money on advertising for new staff and going through a rigorous application process.
In addition to this, it stops businesses from wasting money on initiatives that do not work for them. Instead, businesses can channel this money into employee initiatives that do work. Instead of implementing the latest HR trends that promise to improve employee wellbeing and satisfaction without any real results, HR analytics allows businesses to focus on critical initiatives that will have a real and positive impact on their employees and their operations.
Any investment that a business decides to make will result in tangible and quantifiable outcomes for all stakeholders in the company – shareholders, customers, and employees alike.
HR analytics lead to improved relationships
Human resources analytics means that HR executives and their departments will be more involved in important conversations and the decision-making process within the business.
In addition to these key areas of benefit, research by MIT and IMB found that companies that invested in better analytics had:
- 8% higher sales growth
- 24% higher net operating income
- 58% higher sales per employee
HR Analytics keeps your business in line with employment law
HR analytics provides business leaders with a concrete way of staying on the right side of employment law. With analytics used appropriately, it is possible to utilise employment data to support decisions in all HR areas.
For example, in recruitment, HR analytics allows you to quantify exactly why candidate A was chosen in preference to candidate B. In payroll, analytics enable you to see if there is equity in pay for same-level employees. In training, HR analytics allows you to see the return on investment for a certain training strategy or certification.
Overall, HR analytics is a more ethical and less subjective way of looking at and acting on matters in the business pertaining to your human capital.
Provides a source of credibility and validity
Technology is continually advancing, which is as true for HR analytics as it is for any other business area. If you look back 15 years ago, an HR system that recorded employee data and could generate standard reports was cutting edge. Now that’s simply not enough.
HR analytics is only as credible as the data it draws on. However, the best HR systems are now more holistic and easier to use with greater reliability. An HR system like Natural HR removes the need for various softwares, which all involve data entry and can’t be integrated. Holistic HR software links naturally to HR analytics, and the generated information is consistent, valid and credible.
Importantly, HR analytics allows for a better return on investment within the business and the measurement of human capital against key performance indicators. This saves time and enables HR managers and business managers to make informed decisions, backed-up by fact.
How is HR Analytics the solution to standard reporting?
HR has always had a tricky personality problem. Whilst times have changed, and HR firmly has its foot in the management door, it can still be left justifying its mere existence against old-school critics.
Standard HR reporting doesn’t help this image. The reason is standard reporting is too much like the basic personnel data of old. Further, standard reporting is often drawn from data that may or may not be complete, and it tends to come from several sources that are likely to be rife with error. Thus, its authenticity and reliability is questionable from the start.
Even if the data presented to business leaders in a standard report is accurate, it’s hard to get real meaning from the data. When you compare the technology that is now used to analyse and verify data, standard reporting and its interpretation is lacking.
Contrastingly, when one looks at HR analytics, one finds an entirely different scenario. The CIPD has asserted HR analytics “enables better decision-making by providing an organisation with insights about the workforce and the HR policies and practices that support them”. This is the crux of the argument for why HR analytics beats standard reporting. In short: they allow better business decision making.
The by-product of this is that HR managers have a valid, quantifiable business case for HR. They become a true business partner. Data on the human capital of the business, which can be analysed and therefore utilised, is incredibly valuable to a business’s success. Big names like Talk Talk are finding that HR analytics enables HR to be “taken incredibly seriously”.
An article in Personnel Today argues that ‘HR is typically retrospective in its data use, but predictive analytics offers an opportunity for HR to move from just describing what has happened to predict what might happen.’ Thus, HR analytics is far more forward-thinking in its methods and approaches than traditional methods used in human resources.
It has also provided much better results for businesses that have adopted it so far, as the European call centre case study that Luke Smyers cites clearly demonstrates. The call centre, with 2500 employees, moved to predictive HR analytics. These analytics could highlight ‘just who wouldn’t make it in sales, with a high degree of accuracy’.
In previous years, this discovery would have led to employees being made to take part in ineffective training programmes to ‘improve’ their skills, even though it has been proved that these kinds of analytics do not deliver the desired results. Instead, using the newly implemented HR analytics, recommendations were made for some of these employees, ill-suited to the sales department, to move to other departments where their skills would fit and work better, saving the call centre hundreds of thousands of euros on ineffective training.
So, HR analytics is a way for HR departments to move forward with clear, positive, verifiable results. The predictive element of HR analytics makes it superior to traditional HR metrics, and it can have several benefits for businesses that implement the system.
If you’d like to see how HR analytics can benefit your organisation, book a demo, and we’ll get in touch.