HR analytics continues to be one of the top 5 global HR trends. As an HR leader, do you truly understand why it’s a top trend and do you understand where teams have gone horribly wrong with it? If you don’t, this article will help to set you in the right direction as you enter the analytical world.
The purpose of HR analytics is to connect HR measures to business outcomes. In the past, HR has been viewed as a function quite separate and independent from the rest of the business. It has been viewed as a department that is not known for generating measurable outcomes. If you ask the opinion of a leader outside of HR, they will tell you that HR is purely a cost center. It certainly isn’t known for contributing to the bottom line of financial reports. All of that is starting to change with the implementation of HR analytics.
Let’s begin with where analytics teams have gone seriously astray so that you, the HR leader, can avoid the same mistake. We can all agree that HR is in possession of a vast amount of data. Faced with this volume of information, some companies began to analyze their data, any data, without putting much thought into what they were hoping to accomplish. They were mining data for the sake of mining data, hoping to find a magical nugget upon which to strike it “analytically rich.” This approach was random and unfocused. It resulted in a great deal of wasted time, effort and cost.
To avoid this pitfall, allow me to provide you with some advice on how to focus your efforts. Consider the following:
- What are the pain points in your workforce that prevent business leaders from achieving their goals?
- What aspects of the workforce are driving up costs?
- What would it be worth to your company to solve these problems?
Considering these types of questions will help you see where the use of HR analytics might impact the bottom line.
Let’s look at a specific example by considering turnover. Turnover is an HR measure. One of the business outcomes of turnover is the cost of that turnover. Cost is something that businesses pay attention to. If you can reduce turnover, then you can save the company money. That’s what we mean when we say we want HR analytics to impact business outcomes.
But before you head into a detailed study of your turnover, where many companies went wrong was in failing to answer the following question first. What is it worth to the company to remedy this problem?
If you’re a large company with 15% turnover, then you have a huge cost associated with that turnover when you must rehire, retrain, advertise job openings, etc. The ability to reduce your turnover could save your company substantial money. But if your turnover rate is only 2%, there’s not much room for improvement and the associated opportunity for cost savings isn’t worth the effort. In the latter situation, it makes more sense to forego studying turnover and to dedicate your analytics resources to topics that will have a larger impact to the bottom line.
Success will be achieved through focus and prioritization.
Let’s look at another example. If you’re a manufacturing company, the topic of safety is very important, not only from a people perspective but also from a cost perspective. Safety fines have increased substantially over the years, so anything that can reduce the number of safety incidents will also serve to reduce cost. By studying patterns in safety incidents, companies have managed to pinpoint the factors that drive accident rates. Do these incidents happen more on the night shift? With employees with fewer training hours? With teams that have lower engagement scores?
As you can see from these examples, analytics is being used to recommend change and action. It is the actions that are taken that can benefit the company financially. This is how we use HR analytics to improve key business concerns.
As we wrap up this article, I will leave you with a few guiding questions and comments.
- What are the business questions you are trying to answer with analytics?
- What is it worth to your company to answer those questions?
- Move forward with analytics projects where you can act on the results and where those actions generate value for the company.
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