It’s no secret that people are every company’s most valuable (and expensive) asset.
From their salaries and benefits, to the office space they sit in and the technology that they use. To protect this massive investment, human resource professionals turn to HR analytics to find out what’s going on in their workforce and how to best deploy resources.
HR analytics is the data HR teams gather and analyze to understand their company’s workforce. It includes everything from headcount, compensation, job title and function, work location (e.g. in-office or remote), hiring, onboarding, turnover, employee engagement, diversity and inclusion, learning and development, and more.
These analytics are gathered from multiple sources, including employee surveys, applicant tracking systems (ATS), HR information systems (HRIS), human capital management (HCM), and human resource management systems (HRMS).
Like a marketer would use data to shape an ad campaign or a company would use analytics to determine where to open a new office, HR teams use HR analytics to:
This is especially critical for large companies with thousands of employees and multiple locations. HR analytics can help HR teams monitor employee performance and engagement to reduce turnover and build a more productive workforce.
Companies are built upon the strength and innovation of their workforce. Without HR analytics, human resource professionals risk missing important trends, like bad managers or lack of professional development. Unhappy or unfulfilled employees will cost any company dearly in terms of lost productivity and money.
How can we speed up our hiring process? When is the right time to promote someone? How can we make sure our workforce is diverse and inclusive? These are just a few of the many questions HR analytics are designed to answer. From submitting an application to retirement, HR analytics offer insights on an employee’s entire work journey.
Human resources professionals work hard to hire the best people for the right position in the shortest amount of time. To do this efficiently, recruiters often use HR analytics to not only find talent, but also to evaluate the recruiting process and quality of candidates.
Recruiters and hiring managers use HR analytics for the entire recruitment process. For example, when writing job postings, they can use HR tech and skills data to write better job postings that attract the right people. Without HR analytics, it’s hard to know what job title, description, and required skills and experience to include in a job posting.
HR analytics can also help recruiters and hiring managers figure out where they should be recruiting for any given job. For example, if you wanted to hire web developers for the best price, you could use data from an HR tech tool to build a recruitment strategy. This could include compensation, supply, demand, competition, turnover rates, diversity, and more – all for any given region.
If your organization recruits interns or entry-level employees, you’ll likely have a university recruiting plan, too. HR analytics can help recruiters narrow down their list of universities to visit or partner with so they only spend time and money recruiting from the most productive schools.
HR analytics also helps HR teams determine where to post their open jobs. Which job boards should they use? Where should they spend their money to get their postings in front of the right people? Tracking the performance of past job postings can inform future ones.
Finally, after employees have been hired, recruiters and hiring managers can use HR analytics to evaluate the quality of those hires. For example, were there any “quick quits” aka employees who left within the first six or 12 months.
Like the name suggests, time-to-hire is a metric HR teams use to measure how long it takes to get someone in a role. This process includes getting the job description approved, posting the job, screening applicants, interviews, making an offer, background checks, and finally, signing final paperwork.
Companies lose money and productivity every day a job goes unfilled. That’s why it’s so critical that HR teams keep time-to-hire as minimal as possible. HR analytics can track the entire time-to-hire workflow, noting how long each step of the process took. Using this data, HR teams can identify backlogs (like challenges with scheduling interviews with busy hiring managers) and develop a solution.
For example, some companies set up automated emails to keep candidates engaged through the process. HR analytics can help inform the timing of those emails. How long after a screening interview should the candidate get a follow-up email?
The hiring process can leave new employees with a bad taste in their mouth or it can create happy candidates that are excited to work for you. HR analytics help keep the process smooth and informed.
As new hires settle into your company, they will need to get set up with technology and equipment, complete trainings, fill out paperwork, meet their colleagues, and get up to speed in their role. As we all know, this process can take some time. In fact, some HR pros say onboarding should take at least three months. With that much time (and money) invested, it makes sense to use HR analytics to ensure it’s an effective process.
There are many ways HR analytics can help with onboarding, including dashboards to help managers track a new hire’s progress. But an increasingly popular one is organizational network analysis (ONA). Deloitte defines this as “a structured way to visualize how communications, information, and decisions flow through an organization.”
We all have our go-to people in each department, the ones we know will have the answers. ONA helps HR teams track those interactions. They get a feel for how employees interact with each other and who those go-to people are in each department and at every level of management. That way, HR knows who to connect new employees with to streamline their onboarding and learning process.
If you’re wondering how HR teams track such a nebulous thing, there are two ways. One (the non-creepy way) usually involves a network analysis survey. Employees answer questions regarding who they talk with most often, who they’ve met on the team, who their go-to people are, etc. Then, HR creates a network map based on those surveys.
The second (significantly creepier way) involves HR teams tracking employee calendars to see who they’re meeting with and how often. Just another reminder that nothing is ever really private.
Since personnel is most companies’ largest expense, it’s important to track how long employees stay with your company. And if they leave, why? HR analytics can help HR teams answer those questions and create strategies to improve retention and decrease turnover.
With HRIS tools, HR teams can track the movement of every employee in their organization. When they’re hired, if they get promoted or move to a different department, how long they were in their role, what their performance rating was, and when they leave the company. Using HR analytics (paired with exit interviews), HR teams can evaluate all of those patterns to identify the drivers of turnover.
For example, if employees consistently leave one team, it might indicate a bad manager or an unreasonable workload. If people consistently leave after a year or two, the HR team might need to look at adjusting pay rates, work environment, professional development and promotion opportunities.
Turnover is expensive. Not just because of the loss of productivity, but also the loss of institutional knowledge. HR analytics can help HR teams identify problems and intervene appropriately.
Professional development is one of the best ways to build and retain great employees. Employees who don’t feel like they’re moving up or making progress toward their career goals will eventually leave. But what kind of professional development should companies offer? And to whom? And when?
Most companies have some kind of performance review system, whether it’s annual, bi-annual, or quarterly. HR teams can use these reviews to track which employees are performing well. And if they’re not performing well, HR teams can try to figure out why.
Performance reviews are also a chance for the company to learn about their employees’ goals. How can the company help them excel in their role and career? Do they need more skills and professional development? Many companies use talent management systems (often modules built into an HRIS or separate LMS or HCM solution) to house learning and development resources.
Some organizations will build their own in-house learning content and courses. Others link to open online courses like Coursera, Udemy, and edX or partner with education providers, colleges and universities, bootcamps, etc.
Companies that analyze the current skills of their workforce and provide resources for employees to develop more skills will have better retention rates. Plus, this kind of development and analytics also helps with succession planning. Who might be ready for management? When a longtime employee retires, who can take their place? HR analytics helps HR teams plan for these big changes.
Not only is building a diverse team the right thing to do, but it’s also the profitable thing to do. According to a 2018 McKinsey report:
“Companies in the top-quartile for gender diversity on executive teams were 21% more likely to outperform on profitability and 27% more likely to have superior value creation.” And “companies in the top-quartile for ethnic/cultural diversity on executive teams were 33% more likely to have industry-leading profitability.”
Most companies have diversity and inclusion (D&I) initiatives to increase diversity in their workforce, particularly with race and gender. HR analytics plays a critical role in D&I, allowing HR teams to set goals and track progress.
HR teams use HR analytics to track diversity data so they know how many women and minorities apply for jobs at their company, get interviewed, and get hired. And once they’re hired, how many move into management or executive leadership? How much are they paid? How often are they promoted or given a raise?
Having this data keeps companies accountable and helps HR teams make all processes, assessments, and systems as inclusive as possible, whether it’s addressing implicit biases in the hiring process or eliminating any pay inequality.
Most companies start by setting benchmark diversity goals based on the demographics of the region in which they’re recruiting. Using their diversity data, HR teams can also flag job codes that are typically underrepresented by minorities. Then they’ll take steps to diversify the applicant pool by posting jobs on job boards targeting minorities, like the National Black MBA Association or Women Who Code.
Now that we’ve talked about the different ways HR teams can use HR analytics, let’s walk through each step of the data collection and analysis process.
Most HR analytics data is collected via three tiers of HR systems. Here’s a breakdown:
HR teams often use an ETL (extract, transform, load) data management process to extract the data from HR systems and put it into a data visualization tool. That way, it’s easier to analyze.
Some larger companies have data analysts specifically dedicated to finding the insights in the numbers. While smaller companies might have one or two people managing the HR systems and doing the data analysis and reporting. The more employees and systems you have, the more HR specialists you’ll need.
Key HR metrics and reporting strategies will vary between companies, depending on their size, goals, and HR team. Here are some general metrics that are trackable via HR analytics.
HR analytics help HR teams set goals, measure success, and optimize processes so the company can focus on driving revenue. When used responsibly and effectively, HR analytics provide the insights companies need to tackle difficult challenges like lack of diversity or a high turnover rate. Data takes the guesswork out of HR, allowing HR teams to become subject matter experts trusted by the C-suite.
Meredith Metsker is a content marketing specialist at Emsi, a labor data analytics firm. As a journalist-turned-marketer, she specializes in data-driven storytelling about HR, people analytics, talent acquisition, and the U.S. economy. When she’s not swimming in data, this Idaho native enjoys camping and hiking (often in national parks) with her husband.
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