Essential Guide

A guide to HR analytics

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With the right metrics for HR analytics, HR can become strategic asset

By working with business managers and using HR analytics to identify workforce trends, HR leaders can burnish their image within their organizations.

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A guide to HR analytics

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It's no secret that many HR managers want a bigger role in the C-suite. In addition to performing essential HR duties, they want to be integral to the strategic planning process.

There's no easy answer for how to achieve that status, but industry consultants say one important option is to apply HR analytics more effectively to slice and dice the data that's routinely being captured about employees and their overall contribution to the business. To do that, HR leaders must do more than just create traditional reports using standard data, such as headcounts and absenteeism rates; they should also take a fresh look at the types of information being collected that can help senior executives make better decisions.

"HR should take the lead in saying, 'These are the corporate goals of the company; now what do we need to do in terms of the workforce to meet them?'" said Claire Schooley, senior industry analyst at Forrester Research Inc., based in Cambridge, Mass. "There need to be those kinds of discussions, but they often don't happen, which means HR is not seen as a player as often as it should be."

Strategic moves

Industry research shows that many HR managers do in fact play a strategic role in their companies, but the degree to which this happens hasn't increased significantly in recent years. For example, HR managers spend a little more than a quarter of their time -- 26.8% -- acting as a strategic partner, according to data presented in CFO earlier this year by John Boudreau, professor and research director at the University of Southern California's Marshall School of Business and Center for Effective Organizations. That's about twice as much as the time devoted to maintaining records, but less than that devoted to the broad activity of providing human resource services.

But there's certainly a strong incentive to enhance the role of HR managers to strategic advisors, according to Boudreau. "HR leaders that report spending more time on strategic partnership also report a stronger strategic role, greater functional effectiveness and greater organizational performance," he wrote.

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What metrics should HR managers home in on to enhance their strategic importance? Schooley says that's probably not a question the HR department can answer alone. Instead, she advises the managers to initiate discussions with line-of-business leaders with the goal of first identifying each department's key business needs and how well they're being met.

For example, one perennial objective for most enterprises is to increase productivity. From a workforce perspective, HR and its business department peers might address this by identifying the workforce's best talent based on performance ratings and manager evaluations. The leaders can then apply analytics to determine whether members of this elite group work in key positions that contribute to productivity.

Other areas of interest include how well recruiting processes are identifying needed talent, and the initial satisfaction rates of new hires with their jobs.

Looking beyond basic metrics

There may be a range of available workforce metrics that routinely go unnoticed but nevertheless have a strategic impact on organizations. One example is the length of time people stay in a particular role, said Al Adamsen, CEO of People-Centered Strategies LLC, a San Francisco-based consulting firm. "This data is particularly useful with Gen-Y workers, many of whom want to change roles every 18 months. That may not be in the best interest of the organization."

Adamsen advises organizations to look beyond generational stereotypes and instead analyze the underlying causes for wanting to make frequent moves. First, is the urge more prevalent in particular workgroups or departments? If so, the organization may want to drill down to see if there is a lack of commitment among the employees, problems with the individual manager or a breakdown in the hiring process. "Maybe the hiring manager isn't setting the expectation that the organization would like a 24- to 36-month horizon before someone makes a move," Adamsen explained.

The data that can provide insights into these questions includes a list of the relevant hiring managers and what tools were used to evaluate job prospects, such as candidate assessment programs or structured, face-to-face interviews. "There may be an opportunity to coach the hiring manager or adjust the assessment instrument so it's asking the right questions," Adamsen said.

The hunt for relevant HR data

Knowing the questions to ask and how to analyze the data isn't enough -- HR managers also need to know where to find the information they need. Some data sources are obvious -- traditional headcount and absenteeism numbers are readily available from the core HR platform. Managers should also look to new resources, such as social media applications, which can provide real-time feedback about employee attitudes and foster ongoing dialogues among workers and managers.

"The whole idea of grabbing employee thoughts, feelings and perceptions is taking on paramount importance," Adamsen said. "So if I get hired and the reality of my job is much different [from what] I originally thought it would be, that's a valuable insight for my immediate manager, the business unit leader and for the organization. Maybe the person before me had that same experience, but no one knows that unless you have that data."

But one challenge to finding relevant information may be the sheer volume of data being collected from traditional HR applications and social media sites. To cope, Schooley advises HR organizations to focus on a key area, such as an up or down change in attrition rates, which has the potential of delivering useful insights about the workforce and business strategies.

"Find something that you can really engage in, and then analyze the variety of report types that are available to you," Schooley said. "If you try to analyze everything at once, it's just too overwhelming."

This was first published in October 2012

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Essential Guide

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