The Essentials of HR Analytics
In the past, HR has made decisions based on instincts; and now the new age business context is now looking for Organization Development through hard data and facts.
The power of technology is rapidly gaining ground, be it social, mobility, cloud, wearables, data, and analytics. These have had a strong impact on the workforce of today. With the advent of strong collation of data and powerful tools around analytics, Organizations are looking to drive their growth based on predictive and prescriptive analytics. Organizations are now seeking not only preventive and reactive approaches, but also proactive approaches to manage the workforce and fuel their growth story.
HR’s primary goal was to collect and track employees’ professional and personal information, including performance reviews. Now, expectations to analyze this data and play a more active role has led HR to adopt analytics as a key skill to deliver to expectations.
Differentiating HR metrics from HR analytics – HR metrics can measure attrition rates, satisfaction scores, etc.; while HR analytics can gauge employee engagement, and analyze whether they have the required skills to reach company’s goals. This can then drive the hiring, and developing the workforce proactively. HR analytics can further recognize trends / issues, and take proactive steps for the smooth functioning of the company.
Taking the first step
The first step is always the hardest, and if you do not know the first step, it is almost impossible. The good news is that it is not as difficult as it may sound. Much like big data has revolutionized marketing and finance, HR analytics can help companies analyze information about their workforce and use it to transform the way HR can contribute to growth. While it can be difficult for HR managers to get away from "gut-feeling" decision making, the need to be more analytical in their approach is essential.
As an increasing number of companies venture into HR analytics, it is becoming costly to lag behind. In situations where HR employees are unprepared to serve as statisticians, experts say companies often hire specialty staff while the HR department plays catch up. And catching up is not impossible if HR professionals make a conscientious effort to bring themselves up to speed.
For instance, if you see that 10% of your team is leaving every year, then there’s something wrong about the culture, as people are eager to join, but equally eager to get out. A HR manager with good analytical skills could spot trends and come up with a pro-active course correction. When there's a retention problem, one can look at the characteristics of the team or manager that's causing people to leave, or it could be the compensation, or the way the work is organized. You can look at skills gaps, and where people are untrained. If you can collect data about the workforce and look at it holistically, you can predict who the right people to hire are, and who are most likely to be successful as leaders. Once the predictive layer is in place, HR can begin to do what-if scenario planning. Again as an example, in one organization the HR analytics showed that there was a lot of concern on the “extended work hours” which became more of a norm rather than an exception. This brought out clarity that this would need to change if they wanted to retain talent for a longer period of time.
Getting Leadership buy-in
The reason HR analytics is fast growing, is based on the fact that it has delivered tangible results. HR has long been trying to tell a story around metrics that they can get their hands on instead of focusing on metrics that are meaningful to the business. What’s the difference between a typical HR metric and one that is meaningful to the business? Using the same attrition example, by analyzing the data, companies can make effective HR-related decisions or even Organization level policy decisions. We have all this data lying around that is an asset to the organization and by not leveraging it would be a folly. Because analytics tools have become much more useable to HR people and because organizations are placing more value on employees as a strategic asset, making the business case for these programs is much easier now, than it’s been in the past. As with most key initiatives, it’s critical to have an executive-level champion -- typically an HR vice president who believes in the power of analytics and its ability to land HR a seat at the executive table, and this would be possible if one can evolve the HR analytics program in line with the company strategy. You have to use analytics to ask the right questions to address the key organizational pain points, and then determine the metrics and best practices that will move the company towards productivity.
Here is a four-step approach using HR analytics to better manage their workforce:
Step 1. Do a thorough accounting of all the employee and human resources data, identify where it resides, and plan for integration.
Step 2. Once employee data is integrated, determine what metrics to measure. This involves first looking at backward-looking metrics, then moving to predictive, forward-looking analytics, before finally resulting in KPIs based on historical data. These metrics should be linked to business outcomes and not on cost cutting.
Step 3. Next, companies have to use a suitable technology strategy comprising of a data warehouse and leverage Business Intelligence tool on it.
Step 4. With analytics in place, the next step is to determine in which format to present the results to ensure maximum effectiveness, like delivery models, graphical reports and interactive tools, so people can actually understand and manipulate and act on the information you are giving them.
Be ready and prepare everyone to be ready for continuous change, keeping the changing goals of the organization in mind. Effective workforce management through human resources data analytics requires a change in mindset.