Introduction

The initial perception about human resource people in the business organizations as an expense
resulted in the adoption of quantitative methods. Human resource departments use these methods
to establish their worth in the organizations. Human resource analytics (HR analytics) is a latest
development in this regard (Fitz-enz, 2010). Its importance comes from its ability to enhance
people related decisions by linking them with the bottom line of the business. It is defined as “the
application of methodology and integrated process for improving the quality of people related
decisions for the purpose of improving individual and/or organizational performance” (Bassi,
Carpenter, and McMurrer, 2010).

Questions HR analytics can help answer include:

 What are the patterns in employee turnover?

 What level of performance should I expect from new hires?
 Which employees are likely to leave within the next 6-12 months?
 What salary should be provided for a new job role?
 How much investment is needed to enable employees to be fully productive?

To achieve the intended objective, HR function in the organization needs data that is usable to
adopt HR analytics. This data is called big data. Big data refers to the data that has ability to
provide material for meticulous analysis that successfully explains the link between behavior and
outcomes (George, Haas, and Pentland, 2014). For HR, it comes from programs like human
resource information system (HRIS) in many organizations. Human resources departments in the
business organizations have data of employees as well as of those people who applied but were
not selected in the organizations. They typically comprise the information of employees’
demographics information, skills, competiveness and employment history and also of those who
are not hired. They record data routinely regarding hours worked, pay, information on training
and development, grievances, capability and disciplinary cases, dispute resolution, internal
communication, staff attitude survey information and appraisal. Further, they can get this data
combined with bigger data from emails, communication and geo-location data of employees in
the field for the analysis (Angrave, Charlwood, Kirkpatrick, Lawrence, & Stuart (2016). In other
words, HR departments need data and data analytics to show how human capital management
decisions affect organizational performance (Lawler III, Levenson and Bourdreau, 2004).
However, there is a widespread confusion regarding the difference between HR metrics and HR
analytics (Marler and Boudreu, 2017). HR metrics are not HR analytics. HR metrics refers to
measures of HRM outcomes whereas HR analytics refers to statistical techniques and
experimental approaches that are used to measure the effect of HR activities on organizational
performance (Lawler III, Levenson and Boudreu, 2004). Structural equation modeling (SEM) is
one such technique which uses multiple independent and dependent variables concurrently
(Mondore, Douthitt and Carson, 2011). Hence according to Fitz-enz and Mattox II (2014), it is
“first a mental framework, a logistical progression and second a set of statistical operation”.

Analytics is divided into three levels:

1. Descriptive. Traditional HR metrics are largely efficiency metrics
(turnover rate, time to fill, cost of hire, number hired and trained,
etc.). The primary focus here is on cost reduction and process
improvement. Descriptive HR analytics reveal and describe relationships
and current and historical data patterns. This is the foundation of your
analytics effort. It includes, for exam- ple, dashboards and scorecards;
workforce segmentation; data mining for basic patterns; and periodic
reports.
2. Diagnostic analytics takes descriptive data a step further and provides
deeper analysis to answer the question: Why did this happen? Often,
diagnostic analysis is referred to as root cause analysis. This includes
using processes such as data discovery, data mining and drill down and
 drill through.

3. Predictive. Predictive analysis covers a variety of techniques

(statistics, modeling, data mining) that use current and histori- cal
facts to make predictions about the future. It’s about prob- abilities
and potential impact. It involves, for example, models used for
increasing the probability of selecting the right people to hire, train,
and promote.
4. Prescriptive. Prescriptive analytics goes beyond predictions and
outlines decision options and workforce optimization. It is used to
analyze complex data to predict outcomes, provide deci- sion
options, and show alternative business impacts. It involves, for
example, models used for understanding how alternative learning
investments impact the bottom line (rare in HR).

Importance of HR analytics
The importance of HR analytics has been eventually increasing in the business industry. It is
because of its main function of relating HR determinants to performance of the organization. HR
analytics refers to taking people related decisions and linking them to the organizational
outcomes. It is just not a hypothetical assumption. It is rather supported by empirical research. It
uses HR data to answer strategic questions on how human resource creates value for the
organization (Angrave et.al., 2016). Furthermore, previous studies in the literature found that the
organization that use data analytics are ahead of their peers in terms of financial performance.
They mention that the extent to which HR analytics is used decide the performance of the
organization. It was also reported in the literature that organizations that implemented data
analytic-driven decisions performed two times better at predicting outcomes than those that
didn’t. They were thrice good at predicting risks than those that didn’t use HR analytics.
Moreover, they increased their performance by 5 - 6% (Wong, 2012). It gained importance
because of several reasons. For example, its approach is evidence based. It attempts to improve
individual as well as organizational performance. It examines the effectiveness of HR policies
and practices and identifies the areas where effort, resource and budget fail to produce theory
intended impact (Bassi. et.al., 2011). It explores the relationship between HR policies and
practices and business objectives and enables the HR department to be a strategic partner in the
organization (Mondore.et.al., 2011). Additionally, there is an important advancement in the
implication of HR analytics. It evolved from descriptive analysis to predictive analysis (Heuvel
and Bondarouk, 2016). Nonetheless, its capability has gone beyond prediction. It can spawn
innovative prediction and services. For example, Capital one, a fortune 500 company uses
insights from the data to experiment with innovative combinations of customer segments and
new products (Wong, 2012).