What is HR Analytics

HR Analytics: What It Is, How It Works, and How It Helps Your Business

What is HR Analytics? Why is it useful for your business?

In the past, people management has always been one of the least analytical areas in most organizations. And that's good in many ways. The main focus of an HR manager or the human resources department of a company is namely on people, before numbers. It is therefore right to ensure that assessments and decisions in this area are influenced by the most humane approach possible.

However, it is also true that in an increasingly competitive work environment characterized by numerous changes (such as the expansion of remote work), decisions based on real data are becoming increasingly important. Play for this reason HR Analytics and Big Data an increasingly important role in all companies today.

In this article, you will learn what HR analytics is, how it works, and how it can help your company make more informed HR management decisions.

Definition: What is HR Analytics?

HR Analytics is the process of collecting, analyzing and organizing data from the human resources department (HR or Human Resources) with the aim of improving the performance of the company's employees and reducing their turnover rate.
This English term has various synonyms and is often called People Analytics or Talent Analytics designated. HR Analytics takes into account all the data that is regularly collected by a company's HR department and relates it to the company's goals. In this way it is possible to get a concrete idea of ​​how the initiatives of the HR managers contribute to the achievement of the company's goals.

For example, if a company has a high turnover rate (unless motivated by the nature of the company itself), it is likely to be overlooking key factors in its people organization.
This is certainly not an easy process. It takes time and investment to achieve maximum employee satisfaction and productivity. HR Analytics helps to understand what works and what doesn't, so that companies can improve in the future and grow in the right direction.

HR Analytics: How It Can Help Your Business

Very often there are doubts when it comes to HR Analytics. Some companies already collect their employee data on a regular basis. So what is the real benefit of a particular analysis? Can't managers and HR departments just see the data they already have?

On paper, the reasoning may be correct. The problem, however, is with the nature of the data and the way in which it is collected. The vast majority of the data that human resource managers collect is nothing more than raw, generic and decontextualized data that alone cannot provide any specific information. All of this is equivalent to looking at a large Excel spreadsheet full of numbers and words.

Without organization and guidance, the data actually seems confusing and meaningless. HR Analytics helps with the analysis, organization, contextualization and comparison of the collected raw data and offers a useful strategic vision from which the right ideas for action can be derived.

An HR analytics system can help a company to answer important questions for its development, e.g.

  • Which trends or situations lead to a high turnover?
  • How long will it take my company to hire an employee?
  • What financial investments are required to ensure that employees achieve optimal levels of productivity and satisfaction?
  • How many and which of my employees are most likely to quit their jobs in the next 12 months?
  • Have the personnel training and development measures had a specific effect on the performance of my employees?

With real, clear and contextualized data available, organizations can focus on any changes that need to be implemented to improve.

The benefit of the strategic ability to answer a company's key organizational questions without resorting to hypotheses or sentiments is to convince more and more companies to use HR analytics to measure their performance indicators and the results of their HR initiatives improve.

Examples of HR analytics: How to use big data

Let us now come to the specific aspect. How can I use HR Analytics to improve human resource management in my company? In which specific critical aspects can I intervene thanks to correct data acquisition and analysis?

Here are a few examples of big data and HR analytics usage that you can take inspiration from.

Replacement of staff

When employees leave, most companies don't really understand why. And very often this happens because the right questions are not asked, or you are not really investigating and recording the reasons for quitting.

In some cases, written reports or data on individual situations may be collected, but in the vast majority of cases it cannot be determined whether there is a specific reason and whether this is a general trend that could explain, for example, high employee turnover.

Since a high turnover rate is expensive for a company, both in terms of time and revenue, it is essential to understand the reasons why employees leave the company, identify trends and take the necessary steps to avoid them.

Search and selection of personnel

Companies that really make a difference today are looking for candidates who not only have the right skills, but also the right soft skills and the right attitude. You are looking for candidates who complement both the company culture and the manufacturing needs of the company itself. The culutral fit has to be right.

Reviewing hundreds of thousands of résumés and basing your recruiting strategy on basic information is limiting and counterproductive. This is because many potential candidates can be overlooked simply because they lack a certain skill. The truth is, skills can be acquired, but soft skills cannot.

Thanks to HR Analytics, a company could, for example, use the available data to recognize that the ability to work in a team and creativity are a better indicator of success and performance than professional experience. And that is how you look at candidates that you would have previously excluded.

Analysis of corporate culture

The corporate culture of an organization is not only extremely important at all levels, it is also very difficult to change. Very often unwritten customs, procedures and behavior models that have become consolidated over time and are characterized by little transparency or communication, have a strong influence on the culture of a company, even more than the organization or the type of business.

Analyzing corporate culture through HR Analytics is a fundamental process that must be carried out in order to better understand what kind of culture characterizes your workplace. With a deep knowledge (also from an analytical point of view) about your own corporate culture, it is possible to evaluate and follow the observable trends.

This culture tracking helps identify the first signs that the company culture is in some way negative or toxic. This is one of the first factors of dissatisfaction for any employee.

Competence analysis

There is no doubt that much of a company's success depends to some extent on the skill level of its employees and their skills. Competency analysis specifically relates to the process of managing your in-house talent, which allows you to identify the key competencies that characterize your company.

Once you have identified the key competencies that you need, you can create an ideal competency scale as a reference point and compare that to the skills and competencies that your employees are actually bringing in. This will allow you to more accurately assess the existence and distribution of the skills you need in your employees and identify any gaps.

Leadership management

Low-level management is perhaps worse than no management at all. Bad managers cost money, time, and can literally drive people away, especially the best. Employee retention becomes extremely difficult for a company in such a scenario and prevents it from achieving its full potential.

With HR Analytics, you can analyze different aspects of your executives' performance in the workplace to find out who is actually a good leader and who is not. The data can be collected in several ways: through qualitative (opinion) and quantitative (vote) questionnaires, using a mixture of both methods, or through surveys, focus groups, or specific research.

How does HR Analytics work?

How does HR Analytics work in practice? To begin with, it is important to remember that you are not simplifying anything by putting everything together, but rather separating the various elements that make up the process.

An HR analytics process consists of four main parts:

  1. Data collection: It goes without saying that data must be collected on the topic to be analyzed in order to reach a conclusion
  2. Monitoring and measuring data: Once collected, the data must be observed, measured and contextualized in order to achieve correct results
  3. Data analysis: The analysis phase allows final conclusions to be drawn and trends or problems to be identified
  4. Turn conclusions into actions: The final step is to meet the requirements resulting from the analysis and apply the necessary actions

Data acquisition

When we talk about HR analytics and big data, we are referring to the large amount of data that is collected and aggregated by the HR department to analyze and evaluate the key aspects of HR management, including recruiting, talent management, employee training and performance.
Collecting high quality data is the first component in personnel analysis. The data must be easy to collect and be able to be integrated into a reporting system. The data can come from existing HR software, questionnaires and surveys, new methods of data collection via mobile devices or absence management.

The system that collects the data must also be able to aggregate it. This means that it should provide the ability to catalog, organize, and archive the data for the future.

What kind of data can you collect through an HR Analytics system?

  • Type of employment position of employees
  • KPIs and other performance indicators
  • Salary and promotion data
  • Demographics
  • Employee onboarding data
  • Data on the impact of training
  • Working time data
  • Company sales data
  • Attendance and absence data

Data measurement: HR analytics and KPIs

After collecting the data, we move on to measuring, comparing and contextualizing the data in this phase. The data is then compared to key performance indicators, also known as HR KPIs.
In short, through measurement, the collected data is compared to the historical trend of the same data and to the standards set by the company. Of course, this process cannot rely on a single snapshot of the data at any given point in time, but requires that the data be consistently monitored over an extended period of time.

As mentioned earlier, the data needs a benchmark or KPIs. How can you define what number of absences is acceptable if you don't define them first?

The metrics most commonly defined by HR managers are:

  • Time invested in the hiring process
  • Costs per new hire
  • Turnover rate
  • Absenteeism
  • Employee satisfaction

Data analysis

In the data analysis phase, the reports and statistics on metrics (KPIs) are examined in order, as mentioned earlier, to identify certain trends and / or critical points that have an impact on the business.
On a general level, and based on the outcome you want to achieve, there are three main methods to analyze the data collected during an HR Analytics process:

  • Descriptive analysis: This type of analysis focuses solely on understanding and evaluating historical data, using it as a starting point to understand which aspects can be improved.
  • Predictive Analysis: This analysis consists of using basic statistical models to analyze historical data in order to be able to predict potential risks and / or opportunities for the future.
  • Prescriptive Analysis: The latter type of analysis goes a step further and tries to predict the consequences of the expected results for the company

Turning conclusions into action

Once the data has been collected, the metrics analyzed and compared to the associated KPIs and we have come to concrete conclusions, it is time to take action. In fact, this entire data analysis and comparison process is useless if it is not used to actually improve the processes.

There are several aspects that can be improved in HR management thanks to the conclusions of your HR analytics, such as:

  • High turnover rate: If the data shows an excessive turnover rate due to a bad corporate culture, you can improve the flow of communication within the company and suggest that a list of company values ​​to be followed be drawn up in writing.
  • High cost per hire: If you've identified excessive costs to your recruiting processes, you can make the necessary cuts and try to streamline selection processes, narrow down the steps and people involved, and use technology to help you do so.
  • Working hours not adhered to: If you've found that working hours are not always being adhered to, you can implement a more efficient attendance system.

Factorial: your HR Analytics software

Now that you have understood how an HR analytics process works and how it can help your company, the question arises, “How can I actually implement it in my company?”. The answer is to rely on specific software to help you manage your HR data.

Factorials HR Software provides a reporting and analysis system for HR data that allows you to collect and monitor your data to make better decisions in managing your people and your company.

Thanks to Factorial you can:

  • Create custom employee reports, metrics, and more. Downloadable and created in various formats with just a few clicks.
  • Manage your reports in one dashboard with all your HR KPIs to access all information in one place
  • Create and edit your company organization chart
  • Manage your employees' attendance and absence data to reduce absenteeism

Try Factorial for free and start more efficient human resource management

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