Many organizations are turning to human resource analytics (HR analytics) to evaluate their HR efforts in order to improve workforce performance and get an optimal return out of employees. However, HR analytics applications are being used for more than watching operational performance.
In a tight job market, it is imperative for companies to find the diamonds in the rough in their employee base and to win in outside talent recruiting. Some, but not all, companies get this point and are using HR analytics for retention, recruiting, and more.
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Results of an HR analytics research study
A Bersin by Deloitte 2013 research study revealed that while over half of corporate survey respondents reported that they used HR analytics for company operational reporting, only 30% were using HR analytics for decision making, 10% were using it to map human capital talent to business objectives, and only 4% were using predictive analytics for future workforce planning.
The study also looked at companies that were actively exploiting their HR analytics. The study found that high-tech companies were able to see why top engineers quit and how to build compensation and work environments to get people to stay. In finance, companies were using analytics to determine why people commit fraud and what environmental or hiring issues might contribute to such violations. In product companies, analyses of demographic, educational, and experiential factors were correlated with high-performing sales people and also with why top sales people quit.
Analytics like these cut to the core of corporate workforce issues.
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HR analytics success stories
In a December 2013 Harvard Business Review article, Mick Collins, a Principal Consultant in Workforce Analytics & Planning at HR software firm SuccessFactors, references Ameriprise Financial, a financial services company that lacked an HR analytics framework. "To improve their HR functions, Ameriprise began to integrate workforce and financial data to align talent investments with business results, and more proactively develop data-driven insights used to predict turnover, reduce new hire failure rates, and manage persistent poor performers," said Collins. "Employee feedback was overwhelmingly positive, with HR transforming from 'order taker' to 'key business contributor.'"
High-tech companies like Google have taken HR analytics to the next level. In an Ere Media post in February 2013, Dr. John Sullivan, an internationally known HR thought leader from the Silicon Valley, reported that at Google, each employee generates nearly $1 million in revenue and $200,000 in profit each year. "Google's success has to be attributed in large part to the fact that it is the world's only data-driven HR function," said Sullivan.
According to Sullivan's 2013 article, Google uses HR analytics to determine the eight characteristics of good leaders. It also uses HR analytics to design the most productive work environments for employees, and to predict which employees are most likely to leave the company. In the area of employee retention, getting an early heads up about an employee gives management a chance to act before it's too late and the employee leaves. Google uses HR analytics to forecast future manpower needs, to identify the root causes of weak diversity recruiting, to predict which candidates have the highest probability of succeeding, and to evaluate promotional opportunities for women engineers.
Advice on how your company should approach HR analytics
Most companies remain mired in thinking that relegates HR to a back office record keeping function, and they fail to use analytics that can make a difference in how their workforces perform. How can these companies start using HR analytics?
One approach is to take a single business issue—say, employee retention—and to attack it with analytics. Today, many companies try to find out why employees leave by reading exit interviews, but departing employees aren't always willing to tell everything.
If you see an employee retention problem in a certain area of the company, or in a certain work environment, you can use analytics to start looking for underlying causes and develop strategies to preempt losing valuable employees. Then, as your analytics gain traction, you can move to other HR issues that your company wants to tackle.
Some HR software companies offer HR analytics best practices reports and query templates; SAP's Headcount and Headcount FTE is one example. This can help speed your time to adoption for HR analytics and make you a better employer.
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Mary E. Shacklett is president of Transworld Data, a technology research and market development firm. Prior to founding the company, Mary was Senior Vice President of Marketing and Technology at TCCU, Inc., a financial services firm; Vice President of Product Research and Software Development for Summit Information Systems, a computer software company; and Vice President of Strategic Planning and Technology at FSI International, a multinational manufacturing company in the semiconductor industry. Mary is a keynote speaker and has more than 1,000 articles, research studies, and technology publications in print.