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 – but what is HR analytics and what makes it superior and better for business than the tried and tested traditional methods of reporting?
What is HR analytics?
Simply put, human resources analytics are metrics that businesses can use to analyse their talent pool. They’re also sometimes referred to as ‘talent analytics’ for this reason, or, alternatively, ‘workforce analytics’.
HR analytics is an area of the field which applies analytic processes to the HR department of a business. Utilising this kind of analytics aims to help businesses 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 that 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 to improve these processes so that paramount goals can be reached with speed and efficiency. It also has a predictive element not found in traditional HR methods.
Capgemini identifies three main areas of HR analytics as well as the areas that they cover:
- Performance analytics
This area of HR analytics is concerned with the performance of staff 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 the best skills for their needed roles.
- Strategic workforce analytics
This section focusses 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, it aims to answer the question of 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 is hiring and promoting the right kind of people. It examines how effective the businesses’ training programme is and how employee’s skills could be improved in more effective ways. It also aims to discover what factors work to influence staff retention and the key motivators that employees have.
What are the benefits of HR analytics?
There are a number of benefits that businesses can reap by investing in and using HR analytics:
- Better and faster decision making
In any business, making decisions requires a lot of thought and consideration. Businesses need to understand the outcomes that they are aiming 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, and give business leaders the confidence to know their decisions are more likely to have a positive impact on their organisation.
- Saving time and money
As HR analytics measures staff turnover, businesses can start to understand it’s causes and put effective systems into place to control it and keep it down where possible. This saves both time and money on advertising for new staff and going through the 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. It allows business to focus on critical initiatives that will have a real and positive impact on their employees and their operations, instead of the latest trends in HR that promise to improve employee wellbeing and satisfaction without any real results.
Any investment that a business decides to make will result in outcomes that are both tangible and quantifiable for all stakeholders in the company – shareholders, customers, and employees alike.
- Improved relationships
Human resources analytics means that HR executives and their department 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 which invested in better analytics had:
- 8% higher sales growth
- 24% higher net operating income
- 58% higher sales per employee
Why is it better than traditional HR methods?
Luke Smeyers, chief executive of HR analytics company iNostix, argues that ‘HR is typically retrospective in its data use, but predictive analytics offer an opportunity for HR to move from just describing what has happened to predicting 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 case study of a European call centre 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 lead to employees being made to take part in ineffective training programmes to ‘improve’ their skills, even though it has been proved that these kind 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 they’re skills would fit and work better. This system saved the call centre hundreds of thousands of euros on ineffective training.
So, HR analytics is a way of HR departments moving forward with clear, positive, demonstrable results. The predictive element of HR analytics makes it superior to traditional HR metrics, and it can have a number of benefits for businesses that implement the system.