HR analytics is the application of statistics, modeling, and analysis of employee-related factors to improve the business outcomes. Learn why data-driven decisions in the HR department are essential for the successful management of any business.
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The first question one can ask is “What is really meant by HR analytics?”. Addressing this question to experienced HR professionals won’t help too much, this being a new and still developing tool.
It is a well-known fact that HR management as a discipline has been historically attached to a qualitative skillset, to the detriment of using the quantitative skill set. In other words, the HR professionals are not used to a numerically-oriented approach of the human resources components and this unilateral orientation has led HR practitioners to ignore and neglect a wider range of knowledge, to leave unexplored a large space of data, sciences, and analytics.
To a certain extent, there still is a considerable dose of confusion about the measurable added value that HR analytics can bring to the HR functions and more importantly, to the business and the strategic role of human resources in the organization.
HR is regarded as soft and old-fashioned, where things are done in a certain way just because they’ve always been done that way. HR doesn’t have a reputation for bringing in the big money, like sales. It also struggles to quantify and measure its success, as marketing and finance do.
But lately, things started to move in the right direction, and the HR analytics are gaining the attention they deserve.
HR analytics is the application of statistics, modeling, and analysis of employee-related factors to improve the business outcomes.
In other words, HR analytics refers to the analytical approach of all the HR processes in hope of finding the weak points of the employees’ performance as well as improving those aspects and thus getting the best return on investment.
HR analytics combines the knowledge and expertise from 3 different disciplines: human resources, data management (IT systems and infrastructure), and data science and analytics. Any analytics cycle should commence with a business problem and it should end with actionable interventions. In a specialized language, HR analytics is also often referred to as:
A more complex definition of HR analytics which can be used sounds as follows:
HR analytics represents the process of addressing a strategic HR concern using human resources data and, if necessary, internal and external data, which includes the following components:
HR analytics enables HR professionals to make data-driven decisions to attract, manage, and retain the best employees. It also helps them to make the best choices to create better work environments and maximize employee productivity.
HR professionals have a wide range of sources for their data gathering. Among these sources we can find:
The HR managers must align the gathered data to the organization’s goals. To accomplish these goals, they are proposing different solutions and initiatives, they use tools like flexible hours, work-from-home programs, company events, promotions, and bonuses. To determine how successful the initiatives are, HR analytics can be utilized to examine the correlation “initiative vs. the company’s goal”.
Regardless of the type of business, any organization owner wants to get measurable, quantitative answers to the questions he or she has. Until recently, it was unthinkable to address this kind of question to HR specialists. But now, thanks to the HR Analytics, one can ask the HR personnel: “How high is the annual employee turnover?”, “How much of the annual turnover consists of unwanted loss?” or “Which employee will be most likely to leave the company within a year?”
You can only answer these questions using data. Most HR specialists can easily answer the first question, but answering the second one is quite difficult. To have a pertinent and correct answer, you need to combine data from two different systems: HR Information System and Performance Management. To get the answer to the third question, you would need more than just two sources as well as a profound analysis of the collected data.
HR departments are well known for collecting vast amounts of data but, unfortunately, this data often remains unused. As soon as organizations start to look for solutions to their employees’ problems using this data, they are engaged in HR analytics.
Undoubtedly, HR analytics has revolutionized HR thinking and approach. It enables HR professionals to:
HR serves the business and it should follow the organizational objectives. And this is where analytics steps in.
Most large corporations now utilize HR Information Systems, but it wasn’t always like this. Emerged from the old forms of traditional measurement, HR analytics has come a long way today. Different experiments, surveys, academic research, and the rise of the big-data era have added many twists and turns in the evolution of HR analytics. However, the development is still happening and several growth possibilities are yet to be explored.
As part of the evolution of the HR functions towards being more strategic, the discipline of HR has evolved from focusing on basic measurement to strategic planning, it has moved from an operational discipline towards a more strategic discipline.
We are now seeing companies work through initial challenges involved in figuring out how to best use the systems and data that enable HR analytics.
Research conducted by Harvard Business Review indicates that to enable faster and more effective decision-making, the analytics must be:
Of course, the multi-faceted nature of HR activity can’t be reduced solely to a set of numbers and charts – people are individuals, and qualities, empathy, and relationship-building are essential to the professional toolkit. HR analytics simply offers the potential to unlock value that may otherwise be under-utilized, or hidden, or, as Carly Fiorina (HP) said: “the goal is to transform data into information and information into insight (...) It is about transforming data from passive to active, from static to dynamic - transforming data into insight”.
You can imagine that HR analytics holds enormous value for any organization, enabling companies to measure the business impact of people’s policies.
By applying complex statistical analyses, the HR department can now predict the future of the workforce and the managers have the tools to measure the financial impact of HR practices.
Knowing the impact of HR policies will also help HR to become a strategic partner and get rid of its ‘soft’ image. It helps HR to align its strategy with business goals and to quantify the value it adds to the business.
Organizations usually ask simple questions, like: “Which employees are my high potentials?” You can answer this question using quite simple statistics that help to quantify the relationships between people’s abilities and organizational outcomes. This way analytics helps companies track absenteeism, turnover, burnout, performance, and much more.
Also, if you know what makes your employees have a winning mentality, you can create a better work environment and identify future leaders. Imagine that you can predict which employees are most likely to leave the company. This information helps your succession management and benefits strategic workforce planning.
Start your analytics asking the right question. Afterward, you have to select data from your different systems. This data is then combined, cleaned, and analyzed. This analysis leads to insights. Not all insights are equally interesting. That’s why you should ask questions about things you can change. For example, you can’t change an employee’s gender or religion. However, you influence your management styles and engagement levels. Asking the right questions leads to actionable insights. Analytics makes HR even more exciting. Its insights are input for strategic decisions and optimize day-to-day business processes.
Thanks to HR Analytics, you have access to data that lets you see what’s happening in the organization and how employees are perceiving it. When you are armed with data, it lets you fix what’s supposedly broken and improve future processes. You have a clear image of what’s working and what’s not.
When you change the processes to make them better or introduce new ones, your employees take notice. They know their feedback is valued and the management team will act on it. This is crucial to build and maintain employee trust, a critical element to high employee engagement, employee success, and employee retention percentages.
HR Analytics does not mean buying expensive software, setting up a huge team, or long processes. You can start small – have conversations with employees, record their responses, involve various functions, make a plan, share it with everybody, and commit to it. Sharing the data is crucial to make sure everyone knows it, understands it, and suggest ideas to improve the employee experience. Use the data to drive initiatives, remedy any existing problems, and bring positive changes in the organization. HR Analytics will help you monitor and improve your employee engagement, employee retention, employee wellness, employee productivity, employee experience, and work culture.
The key to successful HR analytics relies on the understanding that the size of the measured data isn’t the key to success, but rather, the impact the data can have on decision-making in the organization. HR analytics shouldn’t be seen as influential only in the HR department, but rather as something, that has the potential to create value throughout the organization.
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