Why HR, data and analytics are friends

HR isn’t the first thing that comes to mind when you think about data. However, data analysis is crucial for a better understanding of the people within an organisation and how they can help the company thrive and grow further. 

It is an undeniable fact that people are the most important asset of an organisation. Therefore, it is essential to measure how well they are doing – not only productivity-wise, but also from a behavioural standpoint. 

Do you know how well your people are doing?

If we look back at the last two decades, various departments within multiple organisations have increasingly relied on data to thrive and support company growth: 

  • Marketing has increasingly relied on data to better understand its audience and disseminate effective campaigns. 
  • The most successful sales teams have grown to maximise the use of data to reach out to the right people at the right time. 
  • Product teams have seen the value of monitoring usage to identify pain points and opportunities.

What about HR? As a department that deals with invaluable assets — people — it is imperative that we also begin to maximise the use of data to revolutionise our organisations. With the help of accurate, verifiable data, HR professionals can make smarter, more informed decisions concerning hiring, management, and talent retention. 

Overall, this is great practice for improved ROI, maximising productivity, and creating a better work environment.

Ultimately, HR Analytics drives data-based decision-making, leaving little to no room for uninformed decisions based on guesswork or hunches.

What is HR Analytics?

Also referred to as People Analytics, Workforce Analytics, or Talent Analytics, HR Analytics is a way to collect, aggregate, and measure key HR indicators that affect overall business performance. 

It is a specialised branch of data analytics that applies statistics to the ‘human capital’ in an organisation to improve employee performance, motivation, and retention, leading to better business outcomes and an increase in ROI.

In a nutshell, it can also be understood as the practice of using employee data to make better decisions.

“People Analytics is a data-driven approach to managing people at work.”

—Uri Gal, Jensen and Stein, 2017

HR Analytics is not new, but has recently become mainstream for the following reasons:

  • HR data is now more accessible because of technology.
  • Both machines and people have better analytical capabilities (better computing power, more data literacy).
  • Big data analysis is becoming more popular.
  • The connection between increased ROI and the use of data analytics is more apparent.
  • HR teams are increasingly being asked to show results and to justify HR-related investments.
  • Senior executives are beginning to realise how important people are in keeping their organisations afloat.

That being said, HR Analytics is still fairly new and vastly unexploited compared to the use of analytics in sales, production, and marketing. It’s like a new tool in the Human Resources Management toolbox, and an intuitive, useful one at that.

Ultimately, HR Analytics drives data-based decision-making, leaving little to no room for uninformed decisions based on guesswork or hunches.

A note on terminology

There is a debate amongst HR professionals as to whether we should even talk about HR Analytics. The term may be sending the wrong message: It’s too distant. 

A general preference is emerging for People Analytics over HR Analytics, for a simple reason: HR is all about people

And we couldn’t agree more.

This is why from this point on, we will be using the term People Analytics. It fits the spirit of more human-centric business communication.

Why is HR data important?

According to a study by Deloitte, over 70% of organisations make investments in People Analytics solutions to make better decisions based on data. However, only 26% of Deloitte’s 2021 Global Human Capital Trends respondents feel that they effectively use technology and analytics to improve their teams.

People Analytics is primarily based on data. It enables HR professionals to utilise data in functions such as the management, recruitment, engagement, and retention of top talent within an organisation. Consequently, reliable people data also leads to better decision-making in these areas.

The statistics outlined above from Deloitte’s study show that while there is no problem getting organisations to purchase tools for data analytics, there’s a gap in the interpretation and optimisation of gathered data. 

So, while large volumes of data are collected by HR departments daily through the help of software and tools, the main problem lies in the interpretation of this data and using it to gain valuable insights. 

As a quick exercise, see if you can answer the following questions in under a minute: 

  • How high is your annual employee turnover?
  • How much of your employee turnover consists of regretted loss?
  • Do you know which employees are most likely to leave your company within a year?

The right use of People Analytics gives you actionable insights on the matters above and more. Among the benefits of maximising People Analytics are:

  • Improved HR performance: People Analytics can greatly improve decision-making.
  • Situating HR as a strategic partner in company decisions: People Analytics situates the HR department in a strategic position to heavily influence personnel matters. Because of the value that employee data holds, HR departments are empowered and recognised as important decision-makers within the company structure.
  • Identifying causes of attrition: This can be hard to pinpoint without verifiable information, but with employee data, HR can understand which departments are suffering from attrition, what the patterns are, as well as the root causes.
  • Identifying top-performing talents: People Analytics can help HR identify valuable insights about a company’s workforce, which includes identifying the top-performing personnel within an organisation.
  • Identifying in-demand skills and positions within the organisation: People Analytics data can help HR professionals to accurately determine which skills and positions are in demand within their organisation. 

People Analytics can help HR departments identify what programs and training sessions work best for their employees and colleagues.

How People Analytics helps Human Resources Management

People Analytics is a key determinant in moving a company from mediocrity to prime excellence. What are the tangible benefits of People Analytics? They can be seen below as:

  • Personnel development
  • Better labour force planning
  • Better employee experience
  • Process enhancement
  • Technology-driven tasks
  • Superior talent engagement
  • Increased labour force effectiveness
  • Maximised employee retention

Let’s now discuss some of the major benefits People Analytics brings in greater detail:

Linking Hiring Decisions to Business Needs

People Analytics can help HR departments greatly contribute to the company’s success by making informed hiring decisions based exactly on what the business needs. Using People Data can lead to better workforce planning, meaning HR can anticipate hiring before it becomes critical, thereby avoiding placing extreme stress on the existing workforce.

Furthermore, it can improve the effectiveness of a company’s talent acquisition function by providing insights on the skills and positions that are crucial to the company’s needs at the moment of hiring. Thus, talent acquisitions can be made in support of the organisation’s goals every time.

Reducing Staff Turnover

A reduction in staff turnover is one of the biggest benefits of using People Data wisely. With it, HR can mitigate turnover risks by identifying early signals that could lead to employee resignation. 

Some examples are issues on compensation, a pattern of absenteeism, reduced productivity, and lack of opportunities for training and development.

Work On Diversity and Inclusivity

Workplaces today are focusing on building more diverse and inclusive work environments. Recognising and fostering diversity and inclusivity in the workplace is important, because it shows employees and stakeholders that their organisation values individual strengths and potential. 

Furthermore, an inclusive environment can make employees feel safer, thereby improving employee experience. People Data can be extremely helpful for tracking diversity ratios concerning the hiring process, current workforce, and internal mobility.

Support Your Talent Management Strategy

People Analytics can help HR departments identify what programs and training sessions work best for their employees and colleagues. This leads to better relationships, better employee experience, and performance

HR departments can also use People Data to efficiently outline talent management strategies that help staff work on their competitive advantage.

Delivering Advanced People Analytics Reports

Advanced People Analytics Reports are highly customised reports that give HR professionals access to valuable statistics and data to help them analyse trends within their organisation. 

Predictive People Analytics

One type of advanced analytical reporting is predictive People Analytics, which is essentially the use of data, algorithms, and Machine Learning techniques to identify or ‘predict’ future outcomes based on historical data. Through predictive analytics, HR managers can make informed decisions and anticipate needs based on patterns revealed by advanced reporting.

Measuring Employee Motivation and Engagement

Another metric HR can measure through People Data is employee motivation and engagement. HR departments need to keep employee motivation and engagement up to increase productivity, avoid fast turnover, and improve ROI.

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How to Get Started With People Analytics

Here are a few questions to help you get started with People Analytics:

What Are Common Data Sources for People Analytics?

Common data sources include the following:

  • Demographic employee data
  • Payroll data
  • Employee performance data (such as 360 assessments and succession programs)
  • Employee engagement data (such as training attendance, self-development, outcomes of projects, etc.)
  • Any project-specific data
  • External sources like labour market data, population data, and LinkedIn data

What Skills Are Required to Do People Analytics?

Relevant skills for People Analytics include:

  • Business consulting to identify critical issues
  • Analytical skills to effectively interpret the data
  • Stakeholder management to bring everyone together and enable the People Analytics project
  • Storytelling and visualisation skills to communicate effectively with the business and share tangible results

Encourage a Culture of Data-Based Decision-Making

Creating a data-driven culture in HR may be a foreign concept to some, but as you have read thus far, data can be incredibly helpful in decision-making, especially on a larger scale. 

It is important to foster a culture of data-based decision-making – not only among upper management but also among new hires. The sooner people understand and appreciate the value of analytics as a great resource and not just some obscure, abstract concept, the sooner we’ll be able to see real change and streamlined processes within our work environments. 

The key to this lies in making data widely available and accessible to everyone through training and acquiring the right tools for data gathering, interpretation, and reporting. 

It might also be worth mentioning that there is also a need for openness to change and a healthy feedback system amongst members of management and the workforce. People Data is a great strategic tool, but not for organisations stuck in their old ways ‘because that’s how things have always been done.’

Data can shake things up, which is great news if you’re looking for ways to improve your workflow, decision-making, and procedures. Essentially, a data-driven culture is one with a high level of data literacy amongst staff and management and a firm understanding of data as a strategic tool to help everyone perform better.

For further reading: Top HR Trends in the 2020s

 

HR KPIs are measurable values used by HR departments to track specific business objectives or gauge their progress. 

 

What KPIs to Track in People Analytics

One of the reasons why many people are put off by data analytics is the sheer volume of data gathered. 

At a glance, everything may seem relevant, and there’s an urge to try and make sense of every piece of data ever gathered. However, that’s just not realistic—and it’s a great recipe for burnout and information overload. To be able to use and interpret your data wisely, you need to focus your attention on your KPIs.

KPIs are like the antidote to information overload: they help visualise data and make it more understandable, thereby allowing you to focus on the most relevant factors to your department. 

HR KPIs are measurable values used by HR departments to track specific business objectives or gauge their progress. 

Here are some of the top KPIs to keep track of:

  • Absenteeism rate: The absence rate in an organisation is calculated by dividing the number of working days in which the employee was absent by their total number of working days. This gives HR perspective on how much labour and productivity is lost regularly due to sickness and/or unplanned leaves.
  • Cost of absence: This can be measured by adding employee pay, costs associated with managing the absence, and replacement costs. Cost of absence is relevant for European countries that have strong labour unions and employee protection.
  • Turnover rate: Employee turnover is a top metric and an important KPI as a high turnover rate can be very costly. Other KPIs related to turnover you might want to track are:
    • Voluntary turnover rate: The number of resignations initiated by employees as a percentage of total resignations.
    • Involuntary turnover rate: The number of resignations led by the employer as a percentage of the total resignations.
    • Unwanted turnover rate: The number of top performers leaving as a percentage of all performers.
  • Benefits satisfaction: This KPI is usually measured via an employee engagement survey. By finding out whether or not employees are satisfied with their benefits, HR can significantly reduce employee turnover.
  • Productivity rate: This is a bit hard to calculate, but it can be done by focusing on work speed or accuracy. Looking at employee productivity gives HR insight on growth potential in terms of productivity rate. 
  • Employee satisfaction: This can be measured through employee engagement surveys. This is important to measure because dissatisfaction is a common cause of employee turnover.
  • Employee engagement: Employee engagement is also measured through engagement surveys. High employee engagement means higher productivity and lower turnover, as well as many other positive outcomes for the organisation.
  • Quality of hire: This is the percentage of new hires given high ratings during their performance review. This KPI indicates how effective the recruitment and selection process is, and will help HR to improve its hiring standards and procedures consistently. 
  • Training effectiveness: Depending on the focus or kind of training conducted, HR can measure related KPIs such as productivity, engagement, communication, and the like, to gauge training effectiveness.
  • 90/360 day quit rate: This refers to the number of employees that leave within the first three months to a year of being hired. It is important to measure this KPI because a high quit rate (double digits) indicates that something is amiss with the recruiting procedure. 
  • Internal promotion rate: This is measured by dividing the number of senior positions or roles that were filled through internal promotion by the total number of senior positions filled. Ideally, internal hires should be prioritised because they are already familiar with the organisation and workflow and have higher chances of staying in the company longer.
  • Cost of the workforce: This is measured by dividing the total cost of the workforce by the total cost faced by the organisation. This KPI is helpful when facing a need for cost reduction or assessing the need for automation or robotisation in certain areas.

 

Rely On the Right HR Technology

Like we discussed, People Analytics can have a significant impact on your organisational growth. There are tons of great tools out there, but remember – the key to great data utilisation is the proper interpretation of data. 

Tools are only as great as the use you make of them. Most People Analytics tools allow you to perform the following functions:

  • Collect data
  • Aggregate it
  • Interpret the results and take action

Large volumes of data can only benefit your organisation if the collected data is accurate and available to end-users in an understandable and organised manner. This kind of data fosters a data-driven culture and can help improve businesses overall.

Luckily, you don’t need to become a data scientist to be able to maximise People Data. If you want to improve your understanding of People Analytics, many resources will help you lead the way in reaching your company’s goals. 

For instance, we have an on-demand webinar on how to succeed with HR Analytics that you might want to check out. It will take you through the most important KPIs as well as give you guidelines on efficient data reporting.

For further reading: Dashboard as HR management tool

Integrate Your Data Into an HR System

Integrating your data into your existing HR system can make things easier for everyone in the team. 

While it may take a bit of time and resources, and possibly a little help from the IT department, integrating your data into your current system can have significant payoffs, such as:

  • Generating insightful workforce analytics
  • Creating a better resource for managers concerning data-driven decision-making
  • Providing a more seamless experience for team members and other users
  • Improving HR workflow overall by making data more accessible and intuitive
  • Creating more efficient systems driven by data (Example: Data on needed skills and job positions can be made to correspond to notifications about existing employees who might be available for the post or internal promotion)

A Note on Data Regulations and GDPR Compliance

The General Data Protection Regulation (GDPR) is the European Union’s new data privacy regulation that went into effect on May 25th, 2018. 

Since employees generate a large amount of personal data that HR collects, manages, and stores, GDPR directly affects how HR departments operate. Things such as Excel files with contact information are considered personal data and are therefore subject to GDPR. 

The goal of GDPR is to protect personal data through data privacy and security requirements. GDPR is a replacement for the 1995 EU Data Protection Directive. In line with the changes effected by the digital age, the new regulation seeks to give individuals greater control of their data. 

Some of the changes that are significant to employers and HR departments are:

  • GDPR applies to all employers that have EU-based employees. The companies do not have to be based in the EU to be asked to comply. Employers based outside of the EU must comply as long as they are involved in handling, storing, managing, or processing EU residents’ personal data.
  • Personal data is defined as ‘any information relating to an identified or identifiable natural person.’ 
  • GDPR directly regulates data processors, including any vendors that HR uses to process its employees’ personal data.
  • Employers must immediately report any data breach to authorities within 72 hours and notify affected employees.
  • If a company regularly monitors employees’ personal data, they need to appoint a Data Protection Officer. This is a new requirement outside of Germany.
  • GDPR grants employees more control over their data and how it is used. They have the right to access, rectify, and request the deletion of their personal data. They can also request to be informed of how their data is being used and withdraw their consent to its processing. 

Data can be a powerful strategic tool, but organisations also need to do their part in making it accessible to their staff.

Conclusion

HR Analytics or People Analytics is undoubtedly a valuable resource to HR departments across all industries. 

Given the right tools and proper training, management and staff alike can use People Data to make better decisions, increase productivity, improve hiring, and strategise various personnel-related activities.

The goal is to create a data-driven culture amongst management and staff, one that is open to new ideas, critical insights, and new ways of doing things. 

Data can be a powerful strategic tool, but organisations also need to do their part in making it accessible to their staff. That’s what it takes to cultivate an appreciation of data analytics, and develop a stronger, happier, and more cohesive workplace.

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