When one hears of the term ‘human resources,’ they automatically think of that section of the organization which handles hiring and extending jobs to potential employees. Not many know that the functions of an HR team extend much beyond what is general knowledge.

HR analytics is a method used to create and assess insights into the workforce, to determine the contribution of every employee towards generating revenue for the organization, reducing overall costs, modifying risks, as well as accomplishing strategic plans.

It is a method of data analysis wherein employee data is routinely collected by HR, and this data is used to understand how the company can ensure organizational success. The objectives of the company are used as an assessment point by HR teams, which further showcases how HR input contributes to the organization’s goals.

HR analytics is a handy tool for an organization to understand where its strengths and weaknesses lie. Considering that the workforce is the major driving factor of an organization, understanding the contributions of this workforce, using quantifiable metrics, will help an organization understand what works and what doesn’t. Furthermore, this data can be used to create strategies to push the organizational agenda and bring in more success.

How does HR analytics work?

HR analytics follows a pattern of acquiring and analyzing information, which can help the organization derive crucial insight into their functions. Overall, HR analytics follows a multi-step process to understand their workforce more thoroughly.

Data collection

One of the first steps of HR analytics involves gathering the necessary data. This data includes employee profiles, performance, data on high-performers and low-performers, employee demographics, salaries, promotions, training, attendance, engagement, retention, and turnover.

The HR units of companies gather this data and analyze it to evaluate the efficacy of crucial HR practices like talent management, recruitment, and training.

Typically, the data required to carry out HR analytics comes from the HR systems that are already in place. Additionally, the data can be derived from new data-collecting methods like cloud-based systems. The data should be easy to obtain and should be able to fit into a reporting system.

The acquired data should also be organized and sorted. This will enable companies to refer to the given information for future purposes easily.

Measurement of data

At this stage, companies will continuously evaluate and compare the data that they have acquired using what is known as HR metrics. For this step to be carried out smoothly, there needs to be information that can be backtracked. A continuous inflow of data will be required for HR to be able to compare present data and evaluate changes. To track the evolution of data, it needs to have a comparison baseline as well. The three key metrics used by companies to measure data are – organizational performance, operations, and process optimization. Some common examples of HR metrics include –

• Turnover rate – The rate at which employees quit their jobs after a given year of working at an organization.
• Absenteeism – The average number of days off and the frequency of leaves applied by employees.
• Hiring costs – The total expenditure involved in recruiting and hiring candidates.

These metrics are gathered over time and then compared with an acceptable rate set by the company to evaluate its performance.

Analysis of data

The next stage of HR analytics involves analyzing the data gathered and measured. This stage focuses on identifying critical patterns and trends that can impact the organization in the long run. The analytical stage uses the information from the HR metric stage to see how the data can help in giving the HR insight into the company’s current operations and determine areas of improvement.

There are three defined methods of analysis –

1. Descriptive analytics

The type of analysis wherein historical data is used to understand ways in which operations can be advanced.

2. Predictive analytics

This type of analysis uses statistical models to predict future risks and opportunities for the organization.

3. Prescriptive analytics

This type of analysis uses the forecasts gathered by predictive analysis and uses it to identify the consequences of these predicted outcomes.

Some HR analytics examples that are applicable in different areas –

• Turnover – When analyzing employee turnover rates, companies can evaluate which departments within the organization are facing more turnovers and the reasons. These factors could range from a lack of proper training support to dissatisfaction within the work environment.
• Absenteeism – One of the leading causes of absenteeism is a lack of proper employee engagement. HR can analyze the reasons for the same and predict factors that cause a lower employee engagement rate.
• Hiring process – The data collected from the time a job is posted to when the position is filled can help companies understand lapses, if any, in their recruitment strategy.

Analysis of data is perhaps one of the most crucial stages of HR analytics because it can help HR to correctly understand the various factors that may be limiting overall organizational growth, and determine the areas where improvements are needed.

Application of data

The last step of the HR analytics process is the application of the data that has been collected, measured, and analyzed. This stage requires companies to make informed decisions about the next steps they have to follow to bring about changes in certain areas of the organization.

At this stage, organizations can also implement new initiatives and strategies within the workforce that can weed out the weaknesses and bring more efficiency in operations.

Types of HR analytics

Companies that can effectively manage their talent and utilize their resources optimally can be assured of long-term success. Evaluating employees is a key factor in understanding organizational strengths and weaknesses and determining the right course of action.

Here are the different types of HR analytics that organizations take into consideration –

Employee turnover rate

Employees are indeed a highly valuable resource for companies. Employee churn refers to the rate of turnovers within an organization. Every HR unit needs to analyze the rate at which existing employees leave the organization within a specific period. Considering the fact that high turnover rates are expensive for any organization, it is essential to analyze factors that contribute to such rates and deduce how this can be limited in the future. Predictive analysis is used to compare current data to historical data and find avenues for improvement.

Organizational culture

Workplace culture is a big determinant of how your organization operates on a day-to-day, practical basis. Culture is not something that employers actively seek to change, mostly because it falls into set patterns and systems that are hard to modify. Employers analyze organizational culture to determine if employees are clear and consistent with their contributions towards the organization, as well as their common understanding towards company goals. This form of analytics helps HR determine early signs of a toxic work culture, which can help prevent serious lapses in productivity, and set the right example.

Capabilities

The ability of a business to perform well certainly comes down to the skills of the workforce. When you hire employees, who are experts in their domain, you can surely expect to witness higher success rates. Capability analytics is the process of talent management used by companies to identify and work upon the strengths of your workforce. It is important for HR to lay out certain measures of these core competencies and use it as a reference to determine how capable employees are, and how they can contribute to overall organizational growth.

Capacity

It is important for HR teams across all organizations to know if their current employee capacity is able to help the company achieve its goals. Capacity is a factor that certainly affects revenue, and no employer would want to be paying someone for low-quality work that yields no returns. Capacity analytics is a subsect of HR analytics that focuses on determining the operational efficiency of your workforce. The capacity analysis takes on certain evaluation factors that include behavioural analysis as well. This type of analysis can give HR a clearer picture about the ability of an employee to grow and contribute to the organization.

Leadership

When evaluating employees, it is also important to analyze their managers. Leadership is an essential aspect of the overall productivity of a company. A team headed by a leader who is lax and demotivating will also inevitably show poor performance. An inefficient leader can also lead to higher turnover rates within a certain department while wasting time and money as well. Businesses will not be able to perform at their fullest potential if they are unable to retain employees for longer periods. Leadership analytics makes use of data pertaining to team leaders and analyses how their headship affects the overall company growth. Leadership data is often collected using surveys, polls, and a mix of qualitative and quantitative research methods.

The different types of human resource analytics used varies from company to company. Still, the five types mentioned above are some of the most important factors that will enable organizations to carry out effective HR analytics.

How to get started with HR analytics

The starting point for every HR team should be a simple question – “Which employees offer the highest potential to the organization?” This simple query can raise a number of different variables with which companies can evaluate and utilize essential data to determine the efficacy of their workforce.

With the help of HR analytics, you will be able to track key aspects that require monitoring – turnover rates, absenteeism, performance, and more. The inputs HR can gather from analytics can help them make better-informed decisions, while also optimizing business operations. Furthermore, the HR team will have a much bigger role to play in organizational dynamics, and their scope will extend beyond just recruitment and the like.

To start the process, you will first need to centralize all your data. A centralized repository will help you save time and effort while also giving you more clarity during the process. Next, you will need to create an HR dashboard where you can monitor key HR metrics. Once that is done, train the HR team to develop the skills needed to efficiently carry out analytics and make the best use of data gathered. Lastly, you have to put HR analytics into practice and drive continuous improvement by monitoring your process for risks and errors and learning along the way.

Why is HR analytics needed?

HR analytics is a very useful tool that can help organizations understand their own strengths and weaknesses. It is the goal of every company to enhance productivity, optimize cash flow, and achieve a good reputation in its domain. When an organization is not aware of where their capabilities and drawbacks lie, they will not be able to make the right changes required to achieve organizational success and development.

HR data analytics can be transformative in determining the key factors that drive change and utilize these to increase the efficiency of your workforce.

Examples of HR Analytics

Here are some of the most-used HR metrics and analytics –

· Offer acceptance rate

· The efficiency of training practices

· Expenses in training each employee

· Revenue per employee

· Turnover rate (voluntary and involuntary)

· Hiring time

· Absenteeism

· Employee-related risks

Benefits of HR analytics

HR analytics has several benefits that can drive long-term success for organizations that utilize it effectively.

1. HR analytics can significantly improve the HR team’s decision-making skills. Companies can be more accurate with their decisions due to the data-driven approach offered by analytics. Companies will no longer need to rely on guess-work to make critical changes.|
   
2. HR can utilize the data provided by analytics to really get to the bottom of employee turnover rates. Analytics can help businesses identify severe lapses and improve their retention rate.
   
3. One of the leading causes of employee absenteeism is a low level of employee engagement. With the help of HR data analytics, companies can better understand employee behaviour and even strive to create changes in processes and work environments that can boost engagement.
   
4. Analytics can go a long way in helping companies improve their recruitment processes. HR can determine the exact skillsets required by the organization to promote growth, and the profiles of current employees and potential candidates can be matched up to the standard.
   
5. The predictive analysis tool displays trends and patterns that can help organizations stay prepared in their vision and make informed decisions for all future needs.

Predictive HR analytics trends

HR analytics has immense scope, and the possibilities are endless. Here are some of the top HR analytics trends that are sure to be highly popular in 2020 –

1. Automated recruiting

Companies are sure to begin using AI or automation to find candidates that match the job profile and organizational skillsets perfectly. This will save companies a lot of time and human effort in identifying the right match for the job.

2. Interactive training

Sometimes, inadequate or inefficient training may be one of the major causes of poor employee performance. The data collected using HR analytics can be used to create an interactive training program that is suitable for both existing employees and new recruits.

3. Personalized employee experience

Candidates are very proactive in seeking out job opportunities that offer them employee satisfaction. The level of employee satisfaction is a significant determiner to understand the employee’s intention to stay within the organization and their dedication to their job. HR analytics can personalize and enhance the employee experience, which can go a long way in tackling high turnover rates and absenteeism.

4. Performance Measurement

When companies are looking for new people to fill in certain positions, they may be overlooking some current employees who are better suited for the position. It is always better to retain and promote existing employees, as it reduces the effort and time that comes with training new candidates. For this reason, automated performance measurement can go a long way in identifying employees’ efforts and bring them to the notice of the authorities.

5. Reduce turnover rates

The job market is quite unpredictable, and in tough times, companies cannot afford to have high turnover rates. With the help of predictive reporting, companies can analyze data that is specific to employee turnover and begin taking the necessary action to decrease the high rates.

Conclusion

Investing in talent acquisition and management is crucial for every company. Hiring the best employees but not investing enough in their development would amount to a waste of potential. The services of a company like Talenx.io are relevant to every organization in the market. Talenx.io focuses on talent acquisition and management and helps companies hire, grow, and retain top talent using I/O psychology. They offer the best HR analytics software for organizations to boost their candidates’ potential and achieve unparalleled success. Use the services of talenx.io to attain tailor-made solutions for all of your organizational needs.