Essential Guide

A guide to HR analytics

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Building a case for HR analytics

New predictive capabilities and executive-level dashboards are helping companies make smarter HR decisions.

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A guide to HR analytics

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That old saying, “better late than never,” has particular bearing for human resource (HR) departments, which are only just now getting started with HR analytics and metrics as a way to unlock valuable insights from data and foster better decision making.

HR departments have long been awash in data, but most of the information collected has been transactional. While important data exists in employee performance, staffing levels and turnover, HR managers haven’t had an easily accessible way to analyze the data. Experts contend that the lack of executive-friendly dashboards made it difficult to showcase results in any kind of meaningful way.

As a result, HR has lagged behind other departments like finance and operations in the successful adoption of analytics.

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“Typically, HR has struggled to be a real adviser to business leaders -- they are known more as those people who take care of benefits and transactional kind of work,” noted Claire Schooley, a senior industry analyst with Forrester Research Inc. in Cambridge, Mass. “With analytics, they’ve got the opportunity to link more closely with the business and to really identify the appropriate metrics to evaluate all business decisions.”

Meaningful HR metrics

What's the driver behind the sudden push for HR analytics? Experts say a number of things have converged, including new technologies and a realization that HR analytics can help organizations achieve strategic objectives. HR metrics such as talent analytics and workforce analytics can help companies identify top performers, foster successful employee retention and talent recruitment programs and ensure the firm has the proper workforce in place to orchestrate its goals. These are very different than traditional HR metrics, such as the rate of turnover and absenteeism or how quickly the department can fill a position.

“HR has long been trying to tell a story around metrics that they can get their hands on instead of focusing on metrics that are meaningful to the business,” said Al Adamsen, CEO of San Francisco-based People-Centered Strategies LLC, an advisory firm specializing in leadership development and talent strategies.

What’s the difference between a typical HR metric and one that is meaningful to the business? Consider the example of turnover, which HR may have provided to the business as a monthly report highlighting a specific number, but without any context.

“You have to apply analytics to help tell the story of what’s good turnover or bad turnover,” Adamsen explained. If turnover goes up 2% and you discover key talent is affected, that could have an adverse effect on business continuity and require a specific action, he said. Yet the turnover number might also reveal that there isn't enough mobility at a certain job level.

By analyzing the data, companies can make effective HR-related decisions about talent analytics and workforce analytics -- for example, whether to bolster retention programs for highly valued personnel or invest in training to promote job advancement among the rank and file, he explained.

“We have all this data lying around that is an asset to the organization and to not leverage those assets to produce insight and reduce risk is increasingly viewed as irresponsible, particularly now that the analytic discipline in other areas is pretty mature,” Adamsen said.

More tools available for HR analytics

From a technology perspective, an array of developments is opening the door to this new level of business insight. For example, highly visual business intelligence applications in SAP BusinessObjects are being paired with the processing engine SAP HANA to deliver real-time analytics to the SAP HR data set.

“What’s happened in the last few years is the price of memory has gotten cheaper, and there is more access to real-time data, enabling customers to go beyond reporting to do analytics that tie back to business need,” explained Kouros Behzad, SAP’s director of systems management for line-of-business HR. “It’s not that it’s any more important today, it’s just that the tools enable you to do this work better.”

Align HR analytics with company strategy

Because analytics tools have become much more useable to HR people and because organizations are placing more value on employees as a strategic asset, making the business case for these programs is far easier than it’s been in the past, experts say. As with most key initiatives, it’s critical to have an executive-level champion -- typically an HR vice president who believes in the power of analytics and its ability to land HR a seat at the executive table.

What’s also critical, according to Forrester’s Schooley, is to evolve the HR analytics program in line with company strategy, not in isolation from the business.

“If there’s not strategy there, don’t do HR analytics yet,” Schooley advised. “You have to use analytics to ask the right questions to address the key organizational pain points, and then determine the metrics and best practices that will move the company towards productivity.”

A veteran business and technology reporter, Beth Stackpole has spent the last 25-plus years writing for a variety of leading publications and websites, including TechTarget, Computerworld, CIO, eWeek, Managing Automation, Design News and others.

This was first published in June 2012

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