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Strategic Business Value of HR Analytics

Updated: Dec 20, 2023

HR Analytics – Strategic Business Value → Beyond Workforce Metrics

HR Analytics has transformed from a mere tool for measuring workforce metrics to a strategic asset in business decision-making. It's crucial to understand the strategic business value of HR Analytics and how it goes beyond traditional HR metrics.

HR Analytics involves collecting and analyzing HR data to make strategic business decisions. Unlike basic HR metrics, which focus on measurements related to time and money, HR Analytics interprets these metrics to provide insights for improving workforce performance and business outcomes. This approach helps in understanding trends, identifying gaps, and making data-driven decisions that can significantly impact a company's productivity and bottom line.

In this article, we'll explore the evolution of HR metrics to HR Analytics, the difference between metrics and analytics, and how HR Analytics serves as a strategic business tool. We'll also provide examples of common HR metrics and analytics, demonstrating their application in solving business problems and contributing to strategic goals.

HR Metrics – Then

I can remember when getting a handle on Human Resource (HR) issues like turnover and retention was a time-consuming and labor-intensive exercise. HR data came from Excel spreadsheets and Exit Interviews. The data input was not always consistent or complete, and calculations were only as good as the information recorded and the employee crunching the numbers – not always the quantity and quality needed to get to the bottom of the matter.

HR Metrics – Now

HR technology evolved over time with the introduction of Human Capital Management (HCM) systems and software. More useful data sets, comprised of multiple input sources, made analyzing data and reporting results easier, more accurate, and more valuable. But there was still something missing. Database reports only told part of the story.

The data showed how many, how often, or how much, but not why. You could find out how many employees voluntarily left the company last quarter, but not why they left and – more importantly – not how to prevent top performers from leaving again.

Enter HR Analytics!

HR Analytics is a process that collects and analyzes HR metrics to contribute to strategic decision making. More than just measurement, HR analytics interprets data, such as cost to hire or voluntary turnover rate, and provides insights geared toward improving workforce performance and business outcomes.

Metrics vs. Analytics

  • Metrics are measurements; usually a calculation of employees in relationship to time and/or money.

  • Analytics are the interpretation of those metrics providing insight into an issue to achieve a specific objective or business goal.

Metrics and Analytics are both essential HR tools and work best together. Understanding the difference and how to use them effectively is key.

HR Metrics/Analytics – Some common examples

Once you have determined the problem to solve, or the critical business objective, you can choose the appropriate HR metrics to analyze. Here are just a few examples:

Time to Hire - Metrics/Analysis

Time to Hire represents the number of days between identifying a potential candidate and that candidate signing a job contract.

Analyzing time to hire metrics helps to identify patterns in recruitment efficiency, issues with filling specific job types, and strategies to improve time spent recruiting.

Costs to Hire – Metrics/Analysis

Cost to Hire measures the total expense incurred to hire a new employee.

Analyzing cost to hire provides insight into the recruitment process and offers opportunities to streamline those steps and improve procedures.

Early Turnover – Metrics/Analysis

Early Turnover occurs when an employee voluntarily leaves their job. Given it could take 6 – 12 months for a new hire to become fully productive, voluntary turnover is a costly and significant loss.

Analyzing this metric is critical to understanding why the employee left and identifying areas for improving the recruiting and hiring process for best fit, as well as possible gaps in management.

HR Analytics – Strategic Business Tool

As you can see by just a few examples, analytics uses HR data to identify trends and patterns, as well as gaps and opportunities, to improve many critical areas impacting productivity, efficiency, and the bottom line.

Today’s HR professionals use HR analytics to support CFO’s and CEO’s in making data-driven decisions that drive results. Attracting and retaining employees and managing talent directly impacts ROI. When used effectively, HR Analytics can have a major impact on business success.

Value-Added Checklist using HR Analytics

  • Work with Business Partners to identify the business goal or objective

  • Articulate how HR can contribute data-driven insight into meeting this goal

  • Choose the appropriate HR metrics to analyze

  • Use HR Analytics to provide knowledge to your Business Partner

  • Provide data-driven recommendations to promote change and add value

  • Implement, follow up, and measure the contribution to improved productivity

HR Analytics - Do you have what you need?

Q: Do your current HR applications, systems and services provide the capabilities you need to effectively analyze your HR data today?

Q: Are you supporting your organization with the best data-driven analysis available to be a strategic business partner?

A: If you have any questions, or would like to discuss anything further, please feel free to contact me directly.

Knowledge is power!


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