The Importance of HR Analytics in an Organization

A recruiter’s role has evolved over the years. Earlier they were only responsible for filling up vacancies arising out of a new role or requirement, or an employee moving out. In the current context, a recruiter has a bigger role to play. Organizations now understand that their biggest asset is their workforce, which explains why there is an increasing emphasis on finding and attracting the best talent.  This growing competition for talent is also a result of rising candidate awareness. High performance employees understand they are a valuable asset and therefore do comprehensive benefit analysis before committing to a particular organization.

 

Job search is no longer a once in a two year affair. In this smartphone age, jobseekers are constantly checking out new, better opportunities on the go or even while at work. Thus, your role as a recruiter, hiring manager or talent acquisition specialist has grown manifold. From filling up vacant positions to finding and hiring top talent, to retaining them, it’s a tough task at hand. Helping you out in your daily pursuit are the latest HRMS, comprehensive recruitment software, talent management systems and applicant tracking systems.

(Also Read: Disruptive HR Practices in 2018: What is changing for HR?)

 

Collectively expressed as HR Technology, these tools have opened up new possibilities for recruiters that either remained hidden till now, or were ignored for lack of the requisite data and resources. The infusion of HR Technology has given way to data-driven recruiting and HR analytics. These methods work on data acquired through HR technology tools like Applicant Tracking Systems and Recruitment Management Systems. Learn more about HR analytics here:

• What is HR Analytics?
• Benefits of HR Analytics
• Challenges of HR Analytics
• How to Use HR Analytics?
• Disadvantages of HR Analytics

What is HR Analytics?

Analytics is based on data. HR analytics is the science of gathering, organizing and analyzing the data related to HR functions like recruitment, talent management, employee engagement, performance and retention to ensure better decision making in all these areas. By using various types of HR software and technology, HR departments are creating a large amount of data every day.  However, the objective of HR analytics is to actually make sense of this data and turn it into a valuable insight.

Benefits of HR Analytics

Application of HR analytics results in a number of strategic and operational advantages to HR.

• Increased need for data and analytics tool in HR to make better HR decisions
• Better Quality of Hire is one of the HR data analytics benefits
• A vital benefit of HR metrics and analytics is Employee Retention
• Transformation of HR as a strategic partner is one of the benefits of Workforce analytics
• Business analytics in HR can help predict the hiring needs of an organization

Increased need for data and analytics tool in HR to make better HR decisions

An important role of HR analytics is to provide access to critical data and insights about the workforce which can be then analysed for making better decisions. Not only does it improve the HR performance but also provides a better understanding of what motivates employees to work productively, and how do the organizational culture affects employee performance.

(Also Read: How to Improve Your Human Resources Department?)

Better Quality of Hire is one of the HR data analytics benefits

Running machine learning algorithms on jobseeker’s data allows companies to identify the best matching talent for a vacant position, thus improving the quality of hire.

A vital benefit of HR metrics and analytics is Employee Retention

Similarly, using employee data, recruiters can recognize a pattern of high performing employees and accordingly modify their employee hiring and retention strategy. HR analytics helps identify the departments suffering from the maximum attrition and the reasons causing it. It can also help HR in identifying the activities which have the maximum impact on employee engagement and thus allow organizations to invest in such activities.

(Also Read: How to Increase Employee Engagement – Five Important Tips)

Transformation of HR as a strategic partner is one of the benefits of Workforce analytics

The application of HR analytics can provide a unique vantage point to HR department to validate its importance and its role as a strategic partner in a business’ performance.  HR professionals can provide business leaders with verifiable data to back their talent hiring, retention and engagement policies.

(Also Read: How to Improve Talent Acquisition?)

Business analytics in HR can help predict the hiring needs of an organization

HR analytics can help predict the changes that may be in the organization’s future. Using HR analytics, one can predict the skills and positions which are needed to improve business performance.

With the manifestation of HR technology on a never before scale, we can assume there will be more focus areas adding to this list where HR analytics can play a role in ensuring better HR performance and improving business performance an a whole.

(Also Read: Big Data in HR: Why it’s here and What it means)

Challenges of HR Analytics

It is true that the various HR tools being used today churn out huge amount of data every day, but without the clarity of how that data can be useful for a particular decision making process, it is difficult to tap into the true power of HR analytics. Although there are many local challenges that a company might face while implementing a HR analytics strategy, the major challenges that HR analytics face globally boil down to:

• Multiple sources of data: With different HR tools catering to different functions of HR, there are too many sources of data working in isolation. Whether it is your HR information system, Applicant tracking system, learning management system or an employee referral software, every tool creates its own data and integrating it with the other sources is a major challenge. You could be surprised to know that data scientists spend 85% of their time just collecting and cleaning data, i.e separating the useful data from noise. Also, you cannot use the data from one source in isolation while making a strategic business decisions.  Thus a major challenge is to integrate these silo systems and make them communicate with each other.
• Lack of Skills and Training: While it’s true that data scientists are at the forefront of this data & analytics revolution, Hiring managers and even CHROs have a preconceived notion that HR departments have little to no role to play in analyzing the data. Considering the technicalities involved, they hesitate to learn and implement these tools, supported by a mindset which is fearful of the learning curve. The HR managers would rather rely on their human intellect and understanding than going through training for a HR analytic tool. They often fall back on a faulty argument that machine intelligence will take out human from human resources, which is not at all true.

How to Use HR analytics?

Despite these challenges, organizations are committed towards utilizing the benefits of HR analytics and use it in the following ways:

• Long term planning and strategic decision making: Most top performing businesses use data not to make windfall gains but to forecast and plan for future. Using data to analyze the ROI of various programs and initiatives helps make better decisions for company’s future.
• Using automated tools: Using automation tools and automated processes not only reduce data errors due to human factors but also give time for more important strategic tasks. Evolving to these tools is one of the easy ways to utilize the real power of HR analytics.
• Building an analytics savvy HR team: It is good to have data but without a team which feels comfortable with data, one is still stuck with age old methods. Therefore, building a HR Tech savvy team of human resource professional, either by training or reskilling or new hiring, is going to be mandatory in future. Top performing organizations are already working towards enabling digital transformation in their human resources department.

Disadvantages of HR Analytics

While the advantages of HR Analytics are immense, there are also a couple of disadvantages to using it in the current scenario. Since HRs deal with huge amount of sensitive and confidential data, security and privacy are two main concerns. Any HR analytics system which handles this data must be designed to prevent any unauthorized access. There have to be multiple levels of access and the system must be constantly monitored for any data theft. Maintaining such a system will obviously lead to greater costs and that’s the second main disadvantage to implementing HR analytics. High acquisition and maintenance costs mostly act as a deterrent, especially for smaller companies to implement such a system. Also, operating a sophisticated HR analytics tool requires special expertise and that results in additional training costs, or the costs of hiring an IT expert to handle this system.

However, since HR analytics is still in development stage, HR are still awakening to its immense potential, there will soon be a time when using these tools will become far easier and cost effective.