In a nutshell, HR Analytics involves using analytics to optimise the HR function and ensure that people processes operate in a way that aligns with the organisation's strategic goals. It’s defined as:
“Applying analytic processes to the human resource department of an organisation in the hope of improving employee performance and therefore getting a better return on investment.”
Basically, HR Analytics is all about helping HR decision-makers get to the root of why things happen the way they do. It gives them a better understanding of their workforce and helps them to make accurate predictions about how decisions that revolve around people will impact the business as a whole. The easiest way to explain this is to look at some of the problems that HR Analytics aims to solve.
Recruiting can be tedious and expensive, especially if there’s no proven evidence to indicate the specific qualities needed to increase the chances of a successful hire.
HR decision-makers can struggle to understand everything that’s going on in their organisation, leading to decision-making based on intuition and estimates.
HR Analytics gives HR decision-makers a birds-eye view of what is going on in their organisation so that they can ensure that all of their decisions are driven by data, and therefore accurate.
It costs a lot to replace employees that leave.
HR Analytics allows HR decision-makers to, understand which employees are most likely to leave the organisation, empowering them to take measures to prevent this from happening.
As the largest cost to an organisation, people costs are notoriously difficult to manage.
HR Analytics aligns HR data (e.g. payroll, bonuses) with data across the wider business (e.g. financial forecasts) in real-time so that resource can be effectively matched to the available budget.
People are the lifeblood of an organisation, not only are they an organisation’s biggest cost, but they’re also its biggest asset.
That’s why if an organisation hopes to achieve their wider strategic goals, it’s crucial that people processes like managing talent, attracting the right people and retaining employees are fully optimised.
Many organisations rely on manually inputting data into spreadsheets to track their people processes, but not only is this approach time-consuming and error-prone – it’s also limited in the level of insight that can be achieved.
HR Analytics empowers HR to break away from manual data processes and embrace a more efficient way of working.
It gives HR practitioners full visibility of their people processes so that they can understand it at a granular level. This means that it’s possible to understand how even something as small as an employee receiving a bonus or taking annual leave will impact the resource available.
People data is at the heart of HR Analytics. This includes everything from pay grade, attrition rate and absence records; to performance scores, diversity metrics and engagement levels… Essentially anything that involves people.
HR Analytics combines this people data with data from the wider business such as financial plans and operational performance metrics in order to give HR decision-makers an understanding of how people impact all other areas of the organisation.
For instance, through HR Analytics, it’s possible to see how reward models such as a pay rise after 10 years of service will impact the yearly budget, or the effect that employee attrition will have on the resource available to carry out the business strategy.
Deloitte’s 2018 Global Human Capital Trends study surveyed 11,000 business and HR leaders across 124 countries and found that 84% of respondents viewed the use of analytics to manage people costs as important or very important, making its perceived value stand even above employee-wellbeing.
Other research has revealed that organisations that use HR analytics have a significant advantage over organisations that have not. According to the High-Impact People Analytics industry study carried out by Bersin by Deloitte, organisations that use people analytics to support business decisions see 82% higher three-year average profits than their counterparts.
A survey by MIT and IBM also reported that organisations with a high level of analytics had 8% higher sales growth, 24% higher operating income and 58% higher sales per employee. Whilst other research shows that companies that invest in analytics are paid back $13.01 for every dollar spent.
To put it simply, HR analytics has the power to give organisations a competitive advantage and to reach their goals faster.
What does the future hold for HR?
What's the current state of HR Analytics within the HR function and how can organisations begin to use HR Analytics to reach their wider strategic goals?
Improving employee performance – Understanding the individual value that each employee has to offer is increasingly becoming a hot topic within HR. HR Analytics gives insight into how employees are performing, and whether any additional training needs to be put in place to aid further progression.
Optimising recruitment channels – HR Analytics helps organisations to get inside the minds of their ideal candidates. It reveals insights like where the best candidates are likely to come from and the social channels that they’re most likely to use so that recruitment efforts can be targeted to save time and money.
Developing company culture– Company culture is everything. It dictates how employees behave, how the different areas of the business are connected and the overall effectiveness of teams. HR analytics helps decision-makers to understand the inner-workings of their organisation and reveals warning signs that may pose a risk to promoting a healthy workplace.
Understanding employee churn – Hiring employees and training them to the point that they’re fully integrated into the organisation is expensive business. It’s no surprise that companies want to hold onto good people when they find them. HR Analytics uses metrics such as employee satisfaction and engagement levels to predict factors that indicate when an employee may be likely to leave. Using this information, a business can put measures in place to prevent this from happening.
Understanding the capabilities needed for success – Which features make up a great leader? What are the essential skills that are needed in a team? HR Analytics can take historical data from current employees to drill-down and reveal the core capabilities that a business needs to reach its full potential.
Acquiring the right business competencies – As well as understanding which competencies are needed, it’s also important to understand how effectively these skills are being acquired. HR Analytics helps to manage talent acquisition so that the right training programmes can be put in place.
Insight into employee capacity – Spending too much time on admin is a burden for many businesses. It takes up precious time and means that employees have less time to spend on activities that generate the most value. HR Analytics seeks to understand where employees’ time is being spent so that if needed, tools can be put in place to ensure that employees are fully utilising their skills.
When it comes to who is responsible for HR analytics, the natural answer would of course, be the HR department, but this can vary based on the type of organisation. Below are some examples of who usually takes ownership of this:
In-house analytics team
Learning & development team
In our 2018 survey with YouGov, we asked HR decision-makers what the biggest barriers stopping them from implementing HR analytics were and the most widely reported barrier was not having the right knowledge or skills.
A huge misconception is that you have to be a data scientist or be armed with an in-house analytics team to implement HR analytics, but the reality is that you can start no matter what level you’re at. Here’s an outline of the basic process you’ll have to go through to begin implementing HR analytics:
1. Determine what business problems you’re currently facing
2. Establish your aim
3. Prioritise the areas that you want to improve
4. Confirm what resources you’ll need to implement your plan i.e. technology, budget
5. Determine how you’ll communicate your insights
6. See what actions you’ll need to take based on our findings
7. Understand the impact of the action you take on the wider organisation
8. Put a plan in place to establish how you’ll prepare your organisation for change
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