As one of the most human-centric parts of an organization, the HR department is constantly evolving and adopting new measures to take the business to new heights. Recent developments in technology have shifted the HR paradigm towards modern people/data management processes. The focus is now on creating sustainable business development through information-based approaches of identifying patterns, calculating costs, tracking performance, and discovering new opportunities to deliver critical insights, thereby making informed decisions.
In this blog, we will discuss everything you need to know about the biggest talk of the HR town today - HR Analytics.
- What does HR Analytics mean?
- Why is HR Analytics important?
- What are the examples of HR Analytics?
- What are the key metrics in HR Analytics?
- How to use HR Analytics & Metrics to drive performance?
Without further ado, let’s get started!
What is HR Analytics?
HR analytics AKA people analytics, talent analytics, or workforce analytics is a data-driven approach towards HR management. It revolves around gathering, analyzing, and reporting HR data through interpretation of data patterns to measure the impact of HR metrics on overall business performance and make decisions based on the same.
HR analytics meaning can be best explained by the scientific definition of Heuvel & Bondarouk – “HR analytics is the systematic identification and quantification of the people drivers of business outcomes.”
The phenomenon deals with people analysis by implementing analytical processes to the human capital. The approach doesn’t focus on tracking employee performance data. Rather, the sole aim of HR analytics is to provide better insight into each HR process, collect relevant data, and use it to draw conclusions.
HR analytics (also known as people analytics) is the collection and application of talent data to improve critical talent and business outcomes. HR analytics leaders enable HR leaders to develop data-driven insights to inform talent decisions, improve workforce processes and promote positive employee experience.” GARTNER
What is the importance of HR Analytics?
The use of HR analytics has several benefits that make the organization more strategic and drive long-term benefits for your business, if used effectively.
You can answer various important questions about the organization’s HR system using HR analytics such as:
|1. Is your employee turnover rate high or low and to what degree?|
|2. What is the percentage of employee turnover that is considered a regretted loss?|
|3. Which of your employees will quit working in your organization within a year?|
Besides answering the aforementioned significant questions, Human resource data analytics is proves beneficial to a business in the following ways:
- Using HR metrics and analytics, descriptive, predictive, and prescriptive reports can be prepared which help in minimizing employee attrition/churn rate
- Analytics can help businesses get to the bottom of employee turnover rates and identify severe lapses to improve their retention rate
- The indulgence of AI and automation in hiring and virtual onboarding improves the overall hiring process
- The newly adapted exercise of virtual training and upskilling is used to upgrade talent processes
- HR analytics boost employee productivity through detailed performance management, succession planning, and career development
- Data security, transparency, and ease of data accessibility achieved with the help of HR analytics help in strengthening employee trust
- Enhances employee experience by monitoring pain areas, and ultimately improving HR performance
What are the examples of HR Analytics?
Some of the common examples of HR Analytics are mentioned below, based on which analysis can be done effectively:
- Time: Time consumed in recruitment, training sessions, building team, engaging employees, etc.
- Employee Churn: Overall turnover in an organization from existing employees leave to new joiners hired.
- Capability: Core competencies of the workforce are measured to assign roles and responsibilities.
- Culture: Organisational culture is considered for actionable insights and metrics
- Capacity: Determine operational efficiency of employees on basis of evaluation factors
- Leadership: Know the leadership style of managers and other seniors for HR Analytics.
Key metrics in HR Analytics for Organizational Development?
For businesses to sustain, adapting to changes is crucial for survival. Thus, in the future of work, organizational development is becoming a top priority which is also the new normal – a powerful strategic process formulated to help organizations thrive.
Organizational development can be tracked with proper HR analytics and metrics. Since financial data or traditional HR KPIs alone are not enough to describe organizational capabilities, a mix of key metrics is required to build a future-proof organization.
Here are the top 5 HR metrics specifically designed to monitor organizational development that will help you manage your organization’s effectiveness and ability to change:
Quick question – What percentage of your employees are able to drive innovation and change?
In order to get to the number of high-performing employees in your organization, you should evaluate the percentage of employees with high productivity and performance as compared to the total employee base of the company. In this way, you can easily analyze the metric as to how much of your workforce is ready for driving innovation and change.
Scope of Leadership
Quick question – Are your key managers able to bring about change?
To answer this question, you can focus on the percentage of managers who take part in leadership/skill development programs. Moreover, you should also take note of managers and supervisors who are rated in the higher categories of performance evaluation measurement scale. This will help you keep track of the managers who can identify and effectively capitalize on opportunities besides giving you insights into the success of your leadership programs.
Human Resource Processes
Quick question – Are your critical HR processes designed to enhance employee effectiveness?
For this, you need to identify the number of critical HR processes designed using high-performance work systems (HPWS). These are the interconnected HR practices that are implemented to boost employee effectiveness. This metric helps to analyze the benefits obtained from this approach.
Culture of Innovation
Quick question – Does your workforce adopt and promote innovation?
To answer this question, it is crucial to know what percentage of employees actively use the implemented tools and tech platforms. Besides, the total number of innovation training hours per employee should also be tracked regularly. The innovation culture metric not only tells you if you need to promote technology adoption to get more value out of these platforms but also empowers the workforce to help the organization adapt to and victoriously overcome challenges.
Wellness At Work
Quick question – Do your employees feel empowered and supported by organizational processes?
Here, you need to investigate how many employees, in the climate survey (conducted to use the results of the survey in shaping future activities of employees and making informed decisions to enhance employee engagement and overall business productivity), assess/rate items related to the work characteristics (like meaning, responsibility, and complexity), methodologies, technology, and procedures positively. This metric helps you create team players that can add incredible value to the organization and also reveals whether you need to improve the existing tech, methodologies, and procedures of the organization or not.
It is not a cakewalk to measure the impact of the workforce on organizational results. The prime challenge lies in assessing the “intangible” assets. This has shifted the focus on identifying what is possible as opposed to what is necessary.
Nevertheless, organizations require a strategic HR function that is capable enough to synchronize the workforce and organizational effectiveness. For this purpose, HR metrics are developed and tracked for ultimate organizational development. Along with the above metrics parameters, there are some more to be considered for organizational development:
- Time To Fill: The days between posting a job opening, hiring an employee, and filling the vacant position is termed as time to fill. By measuring this time, recruiters can enhance their strategy to identify the most time-taking areas.
- Time To Hire: Total number of days taken from approaching a candidate to the offer acceptance. Data-driven analysis of time to hire helps recruiters reduce this time and improve overall candidate experience.
- Average time per hire shows the efficiency of the hiring process. It also provides an insight into the troubles to fill up certain types of job openings.
- Cost incurred per hire helps in measuring the cost that the company has incurred in hiring new employees
- Early turnover is considered a very important metric that helps in determining hiring success in a company. It is an expensive metric that takes 6-12 months before employees have properly been settled and reached their optimum productivity level.
- Time till promotion helps you determine why your high potential employee(s) left the organization.
- Offer Acceptance Rate: Total accepted formal job offers divided by the number of offers given in a certain period. If this rate is lower, this data can be used to redefine the company’s talent acquisition strategy. A rate above 85% indicates a good ratio.
- Training Efficiency: This factor is measured from the analysis of multiple data points like performance improvement, test scores, and upward transition in employee roles in the organization post training.
- Training Expense Per Employee: Divide the total training expense by the number of employees who received training and you will receive this expense. Training efficiency can be used to determine the value of this expense.
- Revenue Per Employee: This amount is deduced by dividing business revenue by the total employees in the company. This factor suggests the average revenue generated by each employee individually.
- Revenue per employee helps in determining the efficiency of the organization. It helps to calculate the quality of hired employees.
- Performance and potential metric determines the potential and performance of each employee.
- Voluntary Turnover Rate: When employees voluntarily choose to leave their jobs, the phenomenon of voluntary turnover occurs. It can be obtained by dividing the total employees who left voluntarily by the total employees in the organization.
- Involuntary Turnover Rate: Involuntary turnover occurs when an employee is terminated from his/her position. This rate is calculated by dividing the total employees who left involuntarily by the total employees in the organization.
- Absenteeism: This one is a productivity metric, evaluated by dividing the number of days missed by the total number of scheduled workdays. Absenteeism can offer insights into overall employee health and an indication of employee happiness.
- Human Capital Risk: This factor includes employee-related risks including absence of a particular skill to fill a job vacancy, dearth of qualified employees to fill leadership positions, the potential of an employee to leave the job based on several factors, such as relationship with managers, compensation, and no clear succession plan.
- Employee engagement: Determine the number of employees who are keen to come to work. Calculate the number of employees who are fully content with the management. It can be surveyed based on the following topics.
- Engagement and learning arranged by supervisors
- Rewards and Recognition awarded by supervisors or senior management
- Knowing the fact that the work they are doing makes a lot of difference
- Compensation and benefits: Determine the effects of compensation on employee performance. Calculate employee satisfaction from compensation. Thereafter, determine the percentage of employees who are satisfied with their compensation.
- Calculate the association between satisfaction from compensation and job productivity.
- Determine the percentage of top-performing employees who quit the organization because of compensation.
The above-mentioned metrics provide you with a deeper picture of how productive is your organization and what are factors contribute towards productivity. You can identify the factors that contribute to high productivity levels, adjust recruitment or employee engagement strategies to incorporate them, and maximize the productivity of the organization. By determining all these metrics, the organization can move on the success path!
How to use HR Analytics & Metrics to drive performance?
Identifying the relevant metrics for HR analytics is critical to driving success from the analytic information! The metrics offer valuable input for strategic decision-making. While HR managers may attribute success or failure of their decision-making directly to the HR analytics tool they utilize, it is also dependent on what metrics they choose to track.
So, how can the HR department contribute its two cents towards the success of the organization? Well, the answer is, by measuring the right pieces of information.
In order to use HR metrics strategically, you need to first understand the role that metrics play in People Analytics. Moreover, religiously building a business case, and identifying the workforce-driven components of business-driven metrics can drive business performance.
For effectively using HR Analytics and Metrics, follow the steps mentioned below:
- Strategize: Focus on the value proposition of the business and prioritize them for creating HR metrics and analyze them for better results.
- Centralization: Create a repository of employee data along with their roles and responsibilities for accuracy and consistency of analysis.
- Training: Conduct sessions for your HR professionals to develop analytical capabilities and establish improved decisions.
- Software: Install HRMS software in your organization for generating multiple reports and analyzing various parameters in detail.
- Improvement: Without continuously updating people, processes, and software, HR analytics can stay in accordance with business requirements. Keep modifying parameters and methods of HR Analytics.
“HR analytics could be used to measure investments in reskilling, which will deliver the right competencies to support a new revenue model, using data-driven insights to modify the training offering as sales results emerge.” – Mick Collins
4 tips recommended by SHRM to drive business performance using HR Analytics & Metrics:
|1. Do not measure things for the sake of metrics. Focus on data insights and analysis and drawing conclusions from it.|
|2. Adjust the reporting strategy such that all your metrics lead to action.|
|3. Identify the right audience for each HR metric and distribute relevant metrics as per specific responsibilities.|
|4. Determine organizational goals and targets for each metric that directly links to the overall business success.|
All the effort you put into human resources is extremely crucial to your organization’s well-being and profit. If you do not measure and track the HR metrics that count, it can become difficult to analyze how your work makes a difference or how you can improve your efforts to better your approaches. Hence, HR analytics & metrics are the real drivers of a successful and streamlined organization.
To know your Return on Investment (ROI), you must analyze your human resource comprehensively. Maintaining multiple dashboards and spreadsheets to keep track of various metrics might be challenging for you. So, we suggest you install enterprise-ready HRMS software- HROne to your organization.
HROne offers multiple AI-based dashboards, automatically generated insightful reports, and pre-defined customized workflows to monitor HR functions in real-time along with analyzing reports at regular intervals.