Is HR analytics future of HR?

Human resources analytics have become a hot topic in organization of all sizes. Interest is rising. Organizations are reaching out to learn more about analytics and how they can use them to improve organizational effectiveness. Today, most of the organizations are encouraging HR to design various types of data or metrics or analytics which are not just related to people but also on various processes - recruitment, compensation, grievances, benefits, training & development, separation and etc.

What is HR Analytics? HR Analytics is an area in the field of analytics that refers to applying analytic processes to the human resource department of an organization in the hope of improving employee performance and therefore getting a better return on investment. HR analytics does not just deal with gathering data on employee efficiency; instead it aims to provide insights into each process by gathering data and then using it to make relevant decision about how to improve various processes.

Benefits of HR Analytics:

• Respond to business in advance through predictive analytics for Human Resources;
• Improve organizational performance through high quality talent related decisions;
• Optimize talent supply chain;
• Increase ROI on Talent;
• Serving as a source of competitive advantage for organizations;
• Execution of business strategy.

 Below are some of the few processes where HR analytics can be applied:

      a.       Talent Acquisition:

·         Ratio of offers made to open positions;

·         Ratio of offers made to acceptances;

·         Ratio of acceptance to joining;

·         Cost per hire;

·         Time to fill open position;

·         Ratio of offers made to employee referrals.

      b.      Talent Development:

·         Feedback analysis of participants attending training;

·         Effectiveness evaluation of training;

·         Ratio of participants to nominations for a training program;

·         Cost per participant.

      c.       Grievances:

·         Grievances received to resolve;

·         Time to close a grievance;

      d.      Employee Separation:

·         Total separation ratio in a month/year;

·         Involuntary separation;

·         Voluntary separation;

·         Voluntary separation by length of service.

      e.      Head count:

·         Hires as a percentage of total employees;

·         Hires to separation;

·         Demographics – age, gender, geographical, departmental, qualifications and etc;

      f.        Compensation:

·         Compensation as a percentage of Revenue;

·         Compensation as a percentage of Expense;

·         Benefit cost as a percentage of Revenue;

·         Benefit cost as a percentage of Expense;

·         Benefit cost as a percentage of compensation;

·         Supervisory compensation percentage;

       g.       Other analytics may include

·         Revenue per employee;

·         Expense per employee;

·         HR Department expense per company employee;

While the above list is only a sample, HR Analytics can be used in various other HR processes. It depends on the need and necessity of the organization.

Usage of HR Analytics:

Human Resources analytics has become an umbrella term that encompasses a wide range of activities and processes. HR Analytics are used in various ways and forms.

• Reporting: A substantial amount of effort in the study and practice of analytics has focused on reporting. Reporting incorporates decisions about what analytics will be reported; How analytics will be packaged; How, when and whom they should be reported?
• Dashboards: Dashboards are enriched component of reporting. Dashboards contain business unit analyses to permit managers to drill down to examine analytics on several levels of the organization. 
• Benchmarking:  Benchmarking provides insights into what is possible.
• Data Mining: Data mining refers to efforts to identify patterns that exist within data and that may identify unrecognized causal mechanisms that can be used to enhance decision making. To identify these causal mechanisms, data mining used correlation and multiple regression methods to identify patterns of relationships.
• Better problem solving and decision making: In organizations, decisions result in tactical decision. Making these decisions requires: understanding the outcomes that one is attempting to achieve, understanding the factors that influence those outcomes and their current states and knowing available tactical options and their costs.

 Useful things to remember about HR analytics:

• Don’t “Do Analytics”: The primary objective of developing capabilities in HR analytics is to increase organizational effectiveness. Simply conducting the analysis and developing reports are activities and activities raise cost. Developing HR analytics to be used by managers must involve a return on the organization’s investment.
• Bigger is not always better: The success of any analytics is not measured by how many people are involved, but it is measured on how many analytics are tracked, how many people receive reports. It is gauged by the impact that the results have on managerial decisions.
• HR Analytics is a journey and not a destination: Because the focus is on identifying and responding to opportunities and problems, useful and effective HR analytics projects change over time. If organizations are successful in solving operational problems, the focus for managers naturally shifts to other problems or new opportunities.
• Be willing to learn: Organizations that have an HR analytics function will develop a bias for experimentation to try out new HR activities, programs or processes. Organizations should develop analytics “laboratory” where the HR professionals can experiment with new analyses and test existing assumptions about the requirements of the organization’s current systems.
• Avoid the temptation to measure everything aggressively: Not every function, process that can be analyzed should be. Successful efforts will focus on those things that are most likely to have the greatest impact on managerial decision making. The analytics should be focused on factors, processes, and functions related to those things that are likely to have the greatest impact on organization effectiveness.

HR analytics in the present competitive world is the future of HR

The development of useful and effective HR analytics is already viewed and if not, likely to be viewed in the future as a very significant source of competitive advantage. By using HR analytics, decision makers will acquire the ability to more effectively manage and improve HR programs and processes as well as to improve the organization effectiveness.