HR Analytics: Demonstrating the Value of People

High productivity is the key to strong business performance in today's competitive global environment. Yet while organizations measure and track the performance and impact of various key assets on the bottom line, including financial capital, technology, and facilities, many are not defining, capturing, and analyzing the value of perhaps their most important asset: People.

Often, companies have only a partial understanding of their current and future workforce needs. They lack the insights required to identify budding performers, match employees to the right roles, boost retention rates, and ensure optimal resource allocation. As a result, organizations are not effectively capitalizing on opportunities that could boost profitability and the flexibility to quickly respond to changing market needs.

To maximize their investment in human capital, business leaders need to understand the complex relationship between various tangible and intangible workforce variables such as staffing levels, competencies, compensation structures, training effectiveness, and employee engagement. Workforce analytics help assess and measure the impact of workforce performance and talent management initiatives on the business. Such insights enable informed decision making rather than operating on assumptions. This in turn helps to promote an open and transparent organization by building trust and confidence with employees, management, and other key stakeholders.

LINKING HR TO BUSINESS OUTCOMES

The human resources function has evolved from a largely administrative function to one that today employs technology, process standardization, and complex metrics to manage talent, reduce costs, and enhance operational efficiencies. However, competitive market forces and global talent shortages are driving further transformation-where HR must demonstrate clear and measurable value against the company's strategy and growth objectives.

Measurement already plays a strong role in HR, with many practitioners tracking recruitment costs, time to hire, staff turnover, training days, diversity statistics, and more. However, these metrics don't provide meaningful insights into future workforce performance and trends.

Applied properly, HR analytics can establish cause-and-effect relationships between various HR programs and business outcomes. This in turn will help direct investments in those employee initiatives that have the most positive impact on the business. It will also provide leaders with the kind of quantifiable and actionable intelligence that can facilitate better decision making. Additionally, it will help HR departments to demonstrate their business value to the organization and proactively participate in the business strategy. Most importantly, analytics create meaningful insights, which can help put the right people with the right skills in the right job, which in turn benefits both the organization and its employees.

For all its potential, adoption of workforce analytics across the globe still remains low. According to a research report by Harvard Business Review, about 27% of survey respondents used little or no workforce analytics, and about 61% reported their use as tactical, ad hoc, and disconnected from other key systems and processes.i

This could be due to several reasons. First, there has been an explosion in both the volume and complexity of enterprise data, which often resides in several disparate systems and departments or across geographies. Secondly, there are often data credibility issues largely due to incomplete or old employee data or legal and financial constraints. Also, in many cases, HR professionals may not know which data to analyze or lack the skills required to carry out the sort of complex statistical analysis required to derive meaningful workforce insights.

GETTING ANALYTICS RIGHT

For HR to truly become a strategic partner to the business, there has never been a better time to develop a more advanced, organized, and consistent approach toward analyzing and communicating workforce insights. Here are some points to consider:

Determine the Right Metrics or Data to Focus on: In order to gain meaningful insights, the HR team first needs to determine what workforce-related problems the business needs to solve. For this, HR needs to ask questions such as which employee compensation and benefits programs drive higher retention rates, how do internal job movements drive higher engagement levels, or even which recruiting channels provide the most effective sales leaders? Asking the right questions will help focus the team's efforts on the right data to analyze for the most beneficial results.

Implement a Comprehensive Workforce Analytics Platform: An organization needs to determine which analytics platform best meets their business needs. The platform should be able to integrate and analyze data from multiple systems and sources including ERP, CRM, finance, sales, customer-facing, and operational data. Implementing point solutions may offer useful metrics within a specific workforce area, but they do not provide a comprehensive picture of overall performance, which can only be gained by integrating information from across departments.

Build HR Analytic Capabilities: This is one of the major barriers toward gaining meaningful workforce insights. Organizations need to enhance the analytic capabilities of their HR professionals to ensure they're not only familiar with the various analytic tools and technologies, but can determine which tools best meet the organization's needs. This could be achieved either through training, hiring HR professionals with analytics backgrounds, or even rotating employees from other departments such as finance or sales into HR.

Communicate the Value of Analytics: While analytics provide quantitative data, this does not always provide a complete picture. It's important to go beyond the numbers to get the full picture and understand what is driving the numbers. This requires HR to have a good understanding of employees' needs, expectations, aspirations, and concerns. It also requires two-way communication between senior management and the employees, which ultimately provides real insights into people and could help in bridging the gap between an employees' perception of the organization and reality.

In today's competitive economic climate, finding and retaining the right talent has become an organization's biggest challenge. They must rely on a combination of quantitative and qualitative data to make smart decisions that can enhance business performance over the long term. Applied properly, workforce analytics can play a vital role in addressing many of the human capital challenges facing organizations today, as well as in enabling HR departments to contribute more proactively toward influencing corporate strategy and direction.