Your workforce is the engine that drives your business toward its goals. For this reason, it’s crucial to motivate and nurture your people to stay competitive in today’s fast-paced environment.
HR analytics play a pivotal role by providing data-driven insights that guide your organization’s decisions. Let’s explore how this powerful tool can elevate your HR management strategies and boost overall business performance.
What is HR Analytics?
In HR analytics, HR teams collect, analyze, and report HR data to drive organizational results. The process helps your business understand its employees better, make data-driven decisions, and see how effective specific metrics are. As a result, your organization performs at its best.
The Different Uses of HR Analytics
Your HR team can use HR analytics to:
- See consistent trends in voluntary and involuntary employee turnover.
- Evaluate your organization’s hiring process.
- Assess how you manage top talent. For example, HR teams can gauge employee engagement to identify areas of improvement in your workforce management efforts.
- Offer more competitive compensation and benefits to prospective and current employees.
- Know what employees need throughout their tenures with insights based on their demographics, skill sets, and expectations for when they retire.
HR Analytics & How It Helps HR Teams Perform Better
There are several reasons why HR analytics is crucial to your HR team’s performance, including:
Making Data-Driven Decisions
When your HR team (and your management team) is guided by HR analytics, it takes effective, data-driven action. This process allows your HR department to pinpoint and understand what affects employee turnover, engagement, productivity, and satisfaction. From here, it can devise and implement the right retention and engagement strategies for your organization.
Improving Current HR Policies & Practices
Through HR analytics, your HR team sees how the policies and practices they’ve set affects organizational performance.
Let’s say you’ve updated your learning and development program to cover new workforce trends such as generative AI, or you’ve refined your recruitment process. Your HR team can look into these changes, determine whether they’re working for your business, and suggest potential improvements.
Adapting to Changes
The way we work keeps evolving. Right now, employers are navigating the rise of generative AI in the workplace and the challenges of managing flexible work arrangements.
Some HR analytics tools are predictive, which means they:
- Tell you the skills that employees must learn and hone to thrive in a changing world of work.
- Gauge whether your workforce is ready for emerging workplace trends.
- Help you use technology and automation better.
Data gathered by these systems can drive desired results from the different parts of your HR operations, including recruitment and retention.
A Quick Look at Basic HR Metrics
To inform critical decisions and execute effective employee-centric initiatives, your HR team must set and track specific HR metrics. These data points are used to monitor your workforce and determine how important your current HR efforts are to your business and its growth.
HR metrics vary by company, but you can start tracking HR performance with these commonly used metrics.
- Employee turnover: Refers to the percentage of employees a company loses yearly
- Absenteeism: Measures how often an employee makes unplanned absences, potentially indicating low morale and deep-seated issues to be addressed
- Employee net promoter score (eNPS): Quantifies how loyal employees are to your organization and how happy they are working for it
- Cost per hire: How much your organization spends on hiring new employees
Outstanding Real-Life Examples of HR Analytics
Large enterprises and even small businesses have used data to optimize their overall HR performance. Let’s look at two companies that integrated HR analytics into their business operations.
One of the world’s biggest tech firms developed custom HR analytics tools for effective retention, workforce planning, and recruitment.
- Google’s people analytics team formulated a mathematical algorithm that forecasts potential exits from certain departments. Using this algorithm, company leaders can intervene and implement personalized retention strategies.
- The firm also identifies future issues and trends that could affect its people operations. Predictive models and “what if” analyses help Google predict potential challenges and opportunities accurately over time.
- Another of Google’s HR-related algorithms focuses on the candidates most likely to succeed post-recruitment. Moreover, conducting more than four interviews proved to be less constructive, dramatically reducing their HR team’s time to hire.
Nielsen
When Nielsen recorded an increasing attrition rate in 2015, it built a simple yet data-driven solution to address the problem. The company developed a model that gathered 20 basic HR metrics such as age, gender, tenure, and manager ratings, then covered additional data over time.
This framework helped Nielsen’s HR experts implement many effective programs for lower attrition. For example, company leaders met with the employees most likely to leave the firm. 40% of them took on new roles afterward.
How to Get Started with HR Analytics
To maximize HR performance with data, follow these simple steps.
- Set clear, measurable, and achievable goals. For example–do you want to raise employee engagement, streamline your hiring process, or improve productivity?
- Identify the metrics you aim to measure. Try using the sample metrics we’ve listed earlier or combining them with other data points.
- Collect the necessary data from your employee management system, pulse surveys, performance reviews, and other sources.
- Analyze your data. HR information systems with built-in analytics expedite the process.
- Interpret your findings. Identify pressing issues and use them to improve your approach to people management.
- Introduce and implement your data-driven initiatives. They can include an overhauled recruitment process, more opportunities for professional growth, or changes to your performance management process.
If you’d like to learn how a digital HR system can help you attract, engage, and retain top talent through data analytics, schedule a meeting with Sprout Solutions today.
