2017-05-15

The importance of HR analytics

Drake Editorial Team

Using and understanding HR analytics can be vital in moving a business forward. Thomas Watson explains why it’s important, and how you can use it in your company.

The largest expense for a company is often its payroll

 How we recruit, train and retain our talent has a major impact on how our businesses perform. But how well do we truly understand the factors that influence our HR decisions? How much statistical analysis is applied to our recruitment, staff development and talent retention strategies? The answer, at present, has to be — not enough.

What and where is HR data?
The truth is that HR data is everywhere. The difficulty is collating it, integrating it and analyzing it.

 For years, companies have collected employee demographics, educational history, performance data and training records. And as social media infiltrates through businesses as an effective way to communicate corporate culture and encourage engagement, the amount of potential data collection points is growing.

How is this data being used?
Is it being used to address talent retention issues by actively identifying those who are statistically at risk of leaving? Is it being used to locate recruitment sources that may provide fertile ground for candidates? Is it being used to drive performance? Thankfully the answer to all these questions is increasing yes. Attend any HR conference and you will find data and analytics high on the agenda. The appetite for analytics is certainly there.

How HR analytics can push businesses forward
Many HR decisions about hiring, onboarding, promotion, rewards or retention continue to rely on professional instinct, or gut feeling as it is more commonly known, and a heavy reliance on the company way. This can lead to a normalizing of bad practices which fail to challenge common workplace injustices, such as a gender pay gap.

 

HR analytics can help us truly understand what could improve our workforce’s performance, create a team that consistently meets its targets, identifies why certain managers continue to thrive while others burn out, and predict exactly which candidates are likely to succeed.

How HR analytics can drive performance
Josh Bersin recounts how one company put analytics to the test. After undertaking an extensive statistical analysis of the talent factors that affected its sales productivity, the company discovered indicators that were being considered critical to the recruitment process – such as education and the quality of references – had minimal impact on an employee’s actual performance.

In fact, the factors that were actually influencing sales achievement came from areas that weren’t being taken into consideration, including big-ticket sales experience and the ability to thrive under unstructured conditions.

Barriers to adopting analytics
A CIPD (UK Chartered Institute of Personnel and Development) report suggested that 'silos, skills gaps and suspicion' continue to hamper the effective use of analytics by HR staff. The data may all be there, but many cases it’s dispersed across various systems. The CIPD commented that “system and structural silos, both within HR and with other functions, prevent...timely and efficient access to data”. It goes on to argue there is also confusion over who should undertake the analysis: should HR teams be up-skilled or should specialist skills be brought in? Finally, it argues that HR’s sense of its own purpose often clashes with what can be seen as an over-reliance on cold data. But despite these barriers, the opportunities are just too great to ignore.

How to use HR analytics
Here are just some of the ways that HR analytics could be driving businesses forward:

• Recruitment: what candidates succeed in the business and where can they best be found?
• Sales performance: what helps the sales team exceed performance targets? 
• Health and safety: what circumstances, roles and locations are at the highest risk of accidents and expensive claims? 
• Employee retention: What creates engagement and influences retention? 
• Predicted leadership and talent gaps: where are current talent gaps, how can retention and the pipeline be developed and what gaps should we be working to minimise in the future?

The benefits are clear. The data is there. The challenge is to use it effectively.

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 Thomas Watson is a Senior content manager at totaljobs.com, helping create articles, interactive content and videos for both b2b and b2c audiences. An experienced editor (both in print and online), Thomas has covered everything from web design to education, student life, to recruitment.