HR analytics is the practice of using data to inform HR decision-making.
Beyond the trends, prioritising employee experience is important to improve productivity, reduce turnover, and enhance satisfaction. However, with so many factors contributing to employee experience, knowing where to focus your efforts can be challenging. This is where HR analytics can be helpful.
In this article, we will explore what are HR analytics and how your organization can benefit from them.
What are HR analytics?
HR analytics is the practice of using data to inform HR decision-making.
It involves gathering, analysing, and interpreting data related to HR metrics, such as employee engagement, turnover rates, and compensation, to help organisations make more informed decisions.
Organisations can use HR analytics to identify trends and patterns and make data-driven decisions that can significantly impact employee experience.
What is the link between HR analytics and the employee experience?
HR analytics is pivotal in enhancing the employee experience by offering data-driven employee insights into every lifecycle stage. The employee experience encompasses all employee interactions with an organisation, from recruitment and onboarding to development, DEX, performance management, and retention.
What are the benefits of HR Analytics
Some of the key benefits of implementing HR analytics are empowering businesses to make informed decisions, optimising operations, and enhancing employee experiences.
Let’s dive into each of them:
- Provides objective data: objective data can help HR leaders identify areas of the organisation where employee experience need to be improved. For example, if data shows high employee turnover rates in a particular department, HR leaders can investigate the cause and take action to improve the situation.
- Improved data-driven decision-making: move from intuition-based decisions to evidence-based strategies. By analysing patterns in employee performance, engagement, and turnover, you can make more accurate decisions regarding hiring, promotions, and team management.
- Improved talent acquisition: analytics can identify the most effective recruitment channels and strategies, helping you target suitable candidates faster. To optimise your recruitment process, you can assess candidate quality, time-to-hire, and cost-per-hire factors.
- Employee retention and engagement: by analysing trends in employee satisfaction surveys, turnover rates, and performance data, you can identify at-risk employees and take proactive steps to boost engagement and reduce turnover, saving costs associated with rehiring and retraining.
- Enhanced workforce planning: You can anticipate skill shortages and succession plans and align workforce capabilities with long-term business strategies.
- Optimised learning and development programmes: with analytics, you can evaluate the effectiveness of training programs and identify skills gaps across your workforce. This enables the design of tailored learning programs that align with individual and organisational goals.
- Cost reduction: track and optimise labour costs, identify inefficiencies, and allocate resources effectively. This includes better management of overtime, absenteeism, and benefits costs.
- Better performance management: implementing HR analytics can give you deeper insights into employee performance metrics and feedback. This can lead to more transparent performance appraisals, helping to motivate employees and improve productivity.
- Informed compensation and benefits decisions: analytics provides insights into compensation trends within your industry and workforce, allowing for more equitable and competitive pay structures. It also helps optimise benefits offerings based on employee preferences and organisational goals.
Key HR analytics metrics you can use (with examples)
Your organisation can measure several HR analytics to understand your company better, but the right ones will depend on the needs and goals you want to accomplish. Here is a short overview of some of the most critical metrics to use for starting this journey:
- Voluntary and involuntary turnover rates: this metric gives insight into the percentage of employees who leave the organisation. The voluntary rate calculates the percentage of employees who decide to leave the company, while the involuntary rate calculates the percentage of employees who get let go.
- Absence rate: the absence rate measures the total number of days an employee is absent from work; it does not include holiday periods. The absence is calculated by dividing the number of days worked by the total number of days the employee could have worked over a specific time.
- Retention rate: the retention rate offers insights into how well your organisation keeps its employees working. It is calculated by dividing the total number of employees who decided to stay employed over a given period by the total number of employees over that same period.
- Revenue per employee: this metric measures how much money the business brings in for every employee it has on staff and pays expenses, such as salary and benefits. It is calculated by dividing an organisation’s revenue by the total number of employees in the company
HR analytics best practices
When implementing your people strategy not one strategy suits every organisation. It will take time to find the right tools and metrics to support your overall goals and the needs of your people, but here are some HR analytics best practices that can help guide you in the right direction:
Promote a Data-Driven Culture
For HR analytics to be effective, everyone in the organisation must embrace data-driven decision-making. Resistance to change can be a significant barrier. You can do this by educating and training your people and leadership on the value of analytics. Ensure they understand how data can enhance their decision-making processes. Encourage the use of data in meetings and performance discussions to reinforce its importance.
Start Small and Scale Gradually
Starting with a focused pilot project allows testing, refinement, and quick wins. You can start with a small, manageable area (e.g., recruitment data, employee turnover) and focus on generating insights there first.
Invest in the Right Tools and Technology
The success of an HR analytics strategy depends on the tools used to collect, analyse, and visualise data. Without the right technology, extracting insights can be labour-intensive and inaccurate. Evaluate analytics platforms that fit your organisation’s needs. Integrate with existing HR systems and provide robust reporting and visualisation features.
Build a Cross-Functional Team
A diverse team ensures that technical, analytical, and business perspectives are considered. You can succeed in your organisation by forming a cross-functional team where HR experts define the business questions, data scientists manage the analytics models, and IT ensures smooth data infrastructure and system integration.
Monitor and Adjust Regularly
As the last HR analytics best practice you should continuosly monitor the effectiveness of your project and must collect feedback from stakeholders, measure the impact of initiatives, and adjust your models, data sources, and strategies accordingly.
The bottom line of using HR analytics to improve the employee experience
While HR analytics can be a powerful tool for businesses to prioritise employee experience and improve overall organisational performance, it is also not the be-all and end-all of how organisations should approach the needs of their employees. Data can be used to identify areas where employee experience may be lacking and to make informed decisions about where to focus their efforts.
There is still a human aspect to understanding employees through traditional methods like listening and reaching out to them to understand strategies to improve their organisation.
As an HR leader, incorporating HR analytics into your decision-making process can help you stay ahead and ensure your organisation remains competitive in the marketplace.
Another way to gain insights that help you stay ahead of the competition can be found in employees who are leaving the business. This can be done by conducting stay interviews. Learn more about this from one of our Top Employers now.