How HR Analytics Are Changing Business

Analytics icons surrounding a cityscape.

In the human resources field, decision-making is changing. Once guided by instinct and intuition, modern human resources specialists utilize data and algorithms to drive business solutions. According to Entrepreneur, a 2015 report by Deloitte found that 35 percent of surveyed companies said they were actively developing data analysis capabilities for HR. In today’s data-driven world, HR analytics are helping to guide talent, management, and hiring decisions for organizations of all sizes and in all industries. Many organizations use metrics in HR to influence how they recruit, retain, and compensate employees. This is beneficial because it allows companies to capture and analyze data that can “both increase revenues by better understanding and more accurately targeting customers and cut costs through improved business processes,” according to Startup Focus, a global program at the forefront of the big data and analytics space.

At a time when the old ways of running HR are no longer enough to keep pace with competition and new technology, the field is at a crossroads. As Fast Company says, “It’s now moving from transaction to interaction,” meaning that technology is changing the way HR relates to both employees and stakeholders. Though the use of analytics is far from new, more and more organizations have realized in the past two years that data can improve both HR functions and business processes as a whole.

HR plays an important role in business outcomes, and utilizing data provides a key advantage in terms of decision-making. As Deloitte’s Global Human Capital Trends 2016 report notes, “77 percent of executives now rate people analytics as a key priority … In response, companies are building people analytics teams, rapidly replacing legacy systems, and combining separate analytics groups within HR into one strategic function.” The same report found that 44 percent of surveyed companies use workforce data to predict business performance.

Though analytics won’t solve every HR challenge, they can provide an understanding of business functions and help trained HR professionals develop plans that “[optimize] talent investments while effectively monitoring recruiting, development, engagement, productivity, accountability, retention and many other workplace initiatives,” according to leading workplace intelligence expert Visier.

Transforming the World of HR

To understand how to apply HR analytics in the workplace, it is important to first identify what HR analytics are. Also known as talent analytics, HR analytics are “the application of considerable data mining and business analytics techniques to human resources data,” Startup Focus says. They aim to provide insight into how best to manage employees and reach business goals. Because so much data is available, it is important for HR teams to first identify which data is most relevant, along with how to use it for maximum ROI.

In order to successfully leverage HR analytics, businesses should gather data and then use it for decision-making and process improvement, the same article explains. Now that more businesses realize that data helps them hire and retain the right talent, companies are investing in HR analytics tools, along with trained professionals who understand how to mine and apply them. Deloitte reports that, while only 24 percent of companies felt ready for analytics in 2015, that number increased by a third to 32 percent in 2016. The same report notes that modern talent analytics combine data from HR and other business functions to address challenges related to:

  • Selecting high-performing job applicants
  • Identifying characteristics of high-performing sales and service teams
  • Analyzing engagement and culture
  • Identifying high-value career paths and leadership candidates

Analytics tools and technology are now more accessible than ever. Companies can purchase analytics solutions off the shelf and adopt integrated, cloud-based HR systems easily. This puts integrated HR data within reach for both small and large businesses. However, it is important to note that those at the forefront of HR analytics go beyond simply utilizing tools. Forbes points out that leading companies invest in sound data management, building strong relationships with finance and operational analytics teams, communications and other “critical” skills. A multidisciplinary approach to applying HR analytics is the best way to identify and address areas for improvement.

Applying HR Analytics in the Workplace

HR analytics can help businesses make smarter decisions in areas such as the following, according to Visier:

  • Turnover: Utilizing data enables HR teams to predict the risk of turnover by function, location, and position. In addition, trained analytics professionals can use HR analytics as a method of “modeling the scenarios in advance to reduce the losses.”
  • Retention: HR analytics can identify where the highest risk of turnover is, along with which individual employees are at risk. This information is useful because it arms HR professionals with knowledge related to resource allocation and training.
  • Risk: Analyzing data can aid in building profiles concerning “which candidates are at risk for leaving prematurely and when” as well as likelihood of decreased performance.
  • Talent: In terms of new hires, HR analytics can identify which new hires will be high performers. This information helps determine “if they should be shifted into fast-track programs.”
  • Futurecasting: Among the most valuable applications of HR analytics is modeling the changes that may be in the company’s future. HR teams can identify “what the impact of talent hiring, retention and engagement could be.”

Of course, there are other ways to apply HR analytics in the workplace. Teams can better allocate resources to the talent pool such as cost per hire, revenue and expense per employee, Startup Focus says. Data analysis can help define retention and hiring plans as well. In general, predictive analytics can identify common factors and important patterns. HR professionals can then make informed recommendations in terms of policies and decisions that may affect company culture. 

Analytics Challenges and Opportunities

It is important to note that access to analytics is only the first step when it comes to leveraging data to improve company policies and practices. As Deloitte points out, “The real value is in turning these insights into change that delivers business value. The hardest part of people analytics is implementing the changes recommended by the models, which call for people analytics to be accompanied by sound change management practices.” This is where trained HR professionals come in.

Experts say the current trend toward HR analytics will continue to grow, with analytics playing a central role in talent acquisition, development, and operations. HR teams have the opportunity to “show the value and ROI that investment in analytics can bring, which will result in a willingness to invest further and spur acceleration in analytics capabilities,” Deloitte says. Stakeholders should invest in integrated analytics capabilities as a way to make the most of human capital and employee performance. Especially as recruiting becomes more competitive and organizations continue to seek top talent, HR professionals will remain “part of the core management team,” Fast Company says. When HR teams are able to take advantage of the numerous insights technology has to offer, they can gather information that is crucial for ongoing success.

With innovative changes like the widespread adoption of analytics, now is an exciting time to be a part of the human resources field. Lesley University’s online master’s degree in management is an ideal way to gain a competitive advantage in the workplace as you develop valuable knowledge and experience related to both management and HR. The curriculum emphasizes the development of effective leadership skills, teaching you to manage effectively in today’s changing workplace.