WHAT IS HUMAN RESOURCE ANALYTICS?

HR analytics (also known as people analytics) is the collection and application of

talent data to improve critical talent and business outcomes. HR analytics leaders
enable HR leaders to develop data-driven insights to inform talent decisions, improve
workforce processes and promote positive employee experience.
HR analytics doesn't collect data about how your employees are performing at
work, instead, the main goal of analytics in human resource aim is to provide better
insight into each of the human resource processes, gathering related data and then
using this data to make informed decisions on how to improve these processes.

. Examples in HR Analytics
How can HR Analytics be used by organizations?
Let’s take a look at a few examples using common organizational issues:

1. Turnover

When employees quit, there is often no real understanding of why. There may be
collected reports or data on individual situations, but no way of knowing whether there is
an overarching reason or trend for the turnover.

With turnover being costly in terms of lost time and profit, organizations need this insight
to prevent turnover from becoming an on-going problem.

HR Analytics can:

 Collect and analyze past data on turnover to identify trends and patterns
indicating why employees quit.

 Collect data on employee behavior, such as productivity and engagement,

to better understand the status of current employees.

 Correlate both types of data to understand the factors that lead to

turnover.

 Help create a predictive model to better track and flag employees who
may fall into the identified pattern associated with employees that have
quit.

 Develop strategies and make decisions that will improve the work
environment and engagement levels.
  Identify patterns of employee engagement, employee satisfaction and
performance.

2. Recruitment

Organizations are seeking candidates that not only have the right skills, but also the
right attributes that match with the organization’s work culture and performance needs.

Sifting through hundreds or thousands of resumes and basing a recruitment decision on

basic information is limiting, more so when potential candidates can be overlooked. For
example, one company may discover that creativity is a better indicator of success than
related work experience.

HR Analytics can:

 Enable fast, automated collection of candidate data from multiple sources.

 Gain deep insight into candidates by considering extensive variables, like

developmental opportunities and cultural fit.

 Identify candidates with attributes that are comparable to the top-

performing employees in the organization.

 Avoid habitual bias and ensure equal opportunity for all candidates; with a
data-driven approach to recruiting, the viewpoint and opinion of one
person can no longer impact the consideration of applicants.

 Provide metrics on how long it takes to hire for specific roles within the
organization, enabling departments to be more prepared and informed
when the need to hire arises.

 Provide historical data pertaining to periods of over-hiring and under-

hiring, enabling organizations to develop better long-term hiring plans.
How does HR Analytics work?

Understanding the process of HR Analytics

HR Analytics is made up of several components that feed into each other.

1. To gain the problem-solving insights that HR Analytics promises, data

must first be collected.

2. The data then needs to be monitored and measured against other data,
such as historical information, norms or averages.

3. This helps identify trends or patterns. It is at this point that the results can
be analyzed at the analytical stage.

4. The final step is to apply insight to organizational decisions.

Let’s take a closer look at how the process works:

1. Collecting data
-Big data refers to the large quantity of information that is collected and
aggregated by HR for the purpose of analyzing and evaluating key HR practices,
including recruitment, talent management, training, and performance.
-Collecting and tracking high-quality data is the first vital component of HR
analytics.

-The data needs to be easily obtainable and capable of being integrated into a reporting
system. The data can come from HR systems already in place, learning & development
systems, or from new data-collecting methods like cloud-based systems, mobile devices
and even wearable technology.

The system that collects the data also needs to be able to aggregate it, meaning that it
should offer the ability to sort and organize the data for future analysis.

What kind of data is collected?

 employee profiles
 performance
 data on high-performers
  data on low-performers
 salary and promotion history
 demographic data
 on-boarding
 training
 engagement
 retention
 turnover
 absenteeism

2. Measurement

-At the measurement stage, the data begins a process of continuous

measurement and comparison, also known as HR metrics.

HR analytics compares collected data against historical norms and organizational

standards. The process cannot rely on a single snapshot of data, but instead requires a
continuous feed of data over time.

The data also needs a comparison baseline. For example, how does an organization
know what is an acceptable absentee range if it is not first defined?

In HR analytics, key metrics that are monitored are:

Organizational performance
Data is collected and compared to better understand turnover, absenteeism, and
recruitment outcomes.

Operations
Data is monitored to determine the effectiveness and efficiency of HR day-to-day
procedures and initiatives.

Process optimization
This area combines data from both organizational performance and operations metrics
in order to identify where improvements in process can be made.
Examples of HR analytics Metrics

Here are some examples of specific metrics that can be measured by HR:

 Time to hire – The number of days that it takes to post jobs and finalize
the hiring of candidates. This metric is monitored over time and is
compared to the desired organizational rate.

 Recruitment cost to hire – The total cost involved with recruiting and
hiring candidates. This metric is monitored over time to track the typical
costs involved with recruiting specific types of candidates.

 Turnover – The rate at which employees quit their jobs after a given year
of employment within the organization. This metric is monitored over time
and is compared to the organization’s acceptable rate or goal.

 Absenteeism – The number of days and frequency that employees are

away from their jobs. This metric is monitored over time and is compared
to the organization’s acceptable rate or goal.

 Engagement rating – The measurement of employee productivity and

employee satisfaction to gauge the level of engagement employees have
in their job. This can be measured through surveys, performance
assessments or productivity measures.

3. Analysis

The analytical stage reviews the results from metric reporting to identify trends and
patterns that may have an organizational impact.

There are different analytical methods used, depending on the outcome desired. These
include: descriptive analytics, prescriptive analytics, and predictive analytics. Now let’s
get into these four levels of HR analytics and how you can use them to create business
impact:
 The first type of HR analytics on the list is descriptive analytics. This is the most
basic type that analyzes data patterns to gain insight into the past.
Descriptive Analytics is focused solely on understanding historical data and what can be
improved. It is known as decision analytics, and uses statistical analysis techniques to
explain or summarize a particular set of historical, raw data. It focuses on past data to
account for what happened but doesn’t make predictions for the future.

How descriptive analytics works

Descriptive analytics can use a combination of numerical data and qualitative
data. It involves performing mathematical calculations, such as central tendency,
frequency, variation, ranking, range, deviation, etc. This allows HR to see patterns and
inconsistencies to improve planning.
Descriptive analytics can help with:
Assessing behavior
Comparing characteristics across time
Spotting anomalies
Identifying strengths and weaknesses
Descriptive analytics advantages Descriptive analytics disadvantages

– The simplest form of data analysis. – Limited to a simple analysis of a few variables after
– Requires only basic math skills, and Thefact.
 – For instance, an employee headcount summary
it allows you to present complex data
Captures a time period and reports the “what” but
in an easy-to-digest format
not the “why” or “how.”

Descriptive analytics examples

Efficiency metrics that HR has traditionally tracked fall under the descriptive analytics
category. Here are two examples:
PTO: Using descriptive analytics, HR can analyze the average number of paid time off
days that employees use in one year.
Turnover: Descriptive analytics could be used to analyze employee turnover rates to
compare the annual turnover between two teams or two departments.
Predictive Analytics uses statistical models to analyze historical data in order to
forecast future risks or opportunities.

-A general prescriptive analytics definition would be the targeted recommendation for

decision options and actions based on the findings of predictive analytics. It offers
options for where and how to act to achieve success.

Predictive analytics simply predicts a decision or action’s most likely outcomes. With
prescriptive analytics, you can forecast what will happen next, why, and what you can
do next. It anticipates the most likely scenarios and which interventions have the
potential to bring optimal results.

Predictive analytics
Predictive analytics disadvantages
advantages

– It can reduce human

– It requires substantial and relevant data (big data set
error, help you avoid risks,
– It’s also challenging to ensure that
improve operational
all of the variables are considered, and the
efficiencies, and refine the
model must
forecasting for your
be updated as data changes.
organization.
Predictive analytics is a valuable tool in many HR functions. Here are two predictive
analytics use cases:
1. Recruitment
Predictive analytics can analyze data from the hiring process (resumes, job
descriptions, etc.) to narrow in on the desired skill sets. Certain elements of social
media profiles and answers to automated application questions can also reveal the key
attributes that indicate a candidate is a right fit for long-term success with the
organization. Then you can tailor your recruitment strategy to attract and engage this
type of applicant.
Furthermore, you can implement predictive analytics to estimate what your future
demand for certain roles will be. This allows you to start recruiting at the appropriate
time and target suitable candidates.
2. Retention
With predictive analytics, you can forecast various talent management outcomes, such
as who will quit. The HR department at consumer credit institution Experian developed
a predictive model that can identify who’s at risk of leaving and what the surrounding
factors are.
Gathering and analyzing data for employees’ projected flight risk can expose who may
leave and what their reasons are. These indicators point out what needs to be
evaluated. For instance, the growth opportunities or compensation and incentive
packages your organization offers. With this knowledge, you can make changes that will
keep more staff with the company and lower the turnover rate.
According to Experian HR executive Olly Britnell, “We’re using machine learning to track
interventions such as changing the team structure offering more training, and then
tracking which ones are having an impact.”
Prescriptive Analytics takes Predictive Analytics a step further and predicts
consequences for forecasted outcomes.

How prescriptive analytics works

You can think of prescriptive analytics like Netflix for business. It works in the
same way that Netflix suggests films based on viewing behaviors. Prescriptive analytics
goes beyond predictive analytics with a more pre-emptive approach to looking at the
future.

Prescriptive analytics relies on big data and uses an assortment of technical tools,
including:
 Machine learning
 Algorithms
 Artificial intelligence
 Pattern recognition

Predictive
analytics Predictive analytics disadvantages
advantages
– Equips HR
leaders to make
informed, real-
time decisions
to improve
performance,
– An iterative process that requires time. Also, the quality of recommendations
solve
is dependent on the quality of
complicated
the data, so it won’t be effective if your data is incomplete or unreli
problems, and
– You must also be careful about weighing the options presented and ensure
take advantage
that taking the recommended action is reasonable from an HR perspec
of opportunities.
– Algorithms can’t always reflect the diverse intricacies of dealing with human being
– For example,
it can
recommend
strategies for
training that will
boost

Because of its complexity, prescriptive analytics is also known as the ‘final frontier of
analytic capabilities’. It requires more advanced analytics skills that you can develop by
participating in an AIHR People Analytics Certificate Program.

Prescriptive analytics examples

Here are two prescriptive analytics use cases related to HR.
1. Staffing
Prescriptive analytics can help you prepare for upcoming staffing needs. Data
surrounding employees’ interactions with digital benefit options can reflect potential
openings. An uptick in activity surrounding retirement planning or medical and family
leave policies can lead to staffing recommendations that will address departures and
long-term absences.
2. Attrition-
As mentioned above, Experian is using AI to predict high-flight-risk employees.
However, they are also taking the next step with prescriptive analytics to prevent the
contributing factors to flight risk from happening.
 Diagnostic analytics
Diagnostic analytics takes descriptive analytics to the next level by providing an
explanation for what has been revealed. It aims to determine the underlying reasons for
what the data exposes.
Although it is based on the same historical data as descriptive analytics, there is a key
difference. Diagnostic analytics goes into the next step of summarizing what happened
in understandable terms. It digs for the “why” behind the data’s trends, correlations, and
anomalies.
Diagnostic analytics process
 Conducting a diagnostic analysis typically involves the following steps:
 Identifying the patterns and anomalies within the data that raise questions and
need to be studied further.
 Discovering what factors could be contributing to the patterns and anomalies to
identify the relevant data.
 Determining causal connections by analyzing the data with various methods.
There are multiple diagnostic analytics techniques, including::
Data drilling: Taking information from a more general overview and providing a more
granular view of the data.
Data mining: Extracting patterns from data to help predict future events
Probability theory: Quantifying uncertain measures of random events
Regression analysis: Determining which variables will impact an outcome
Correlation analysis: Tests the relationships between variables
Statistical analysis: Collecting and interpreting data to determine underlying patterns
What is the purpose of diagnostic analytics?
Diagnostic analytics is used to transform data into worthwhile insights. It identifies
patterns, variances, and causal relationships while also considering internal and
external factors that could be influencing them. This helps HR see the big picture of a
situation and zero in on which factors have the potential to create problems. Then you
can focus your efforts in the right place to mitigate them.
Diagnostic analytics
Diagnostic analytics disadvantages
advantages

– Focuses on past occurrences which makes it

– Shows a more comprehensive
very reacti
interpretation of the data for
– Can’t provide actionable insights to support
informed decision-making.
your planning processes.
Diagnostic analytics use cases
Let’s look at two examples of diagnostic analytics put into action with HR:
1. Employee absenteeism
If your absenteeism rate is climbing, you can use diagnostic analytics to find out why
employees are missing work more often.
This could involve looking at your absenteeism data to see if more unplanned absences
occur on certain days of the week, when there is a long time between paid holidays, or
after employees’ requests for time off have not been approved. You can also review
pertinent information from employee feedback surveys and exit interviews.
Once you understand the most common reasons for absences, you can develop
strategies to change these factors.
2. Employee engagement
Diagnostic analytics can be used to improve your employees’ engagement and
your company culture. Digging into the data from internal surveys and exit interviews
should uncover the areas that make employees feel connected and satisfied in their
work and those that don’t.
Since highly engaged employees tend to be the most productive, linking engagement
scores to performance measures will show the impact. A 2019 report noted how shoe
retailer Clarks discovered that for every 1% improvement in employee engagement
there was a 0.4% increase in the company’s performance.

Examples of Analytics:

Here are some examples of metrics at the analytics stage:

 Time to hire – The amount of time between a job posting and the actual
hire is a metric that enables HR to gain insight into the efficiency of the
hiring process; it prompts investigation into what is working and what is
not working. Does it take too long to find the right candidate? What factors
could be impacting the result?

 Turnover – Turnover metrics that indicate the rate at which employees

leave the organization after hire can be analyzed to determine what
specific departments within the organization are struggling with retention
and the possible factors involved, such as work environment
dissatisfaction or lack of training support.

 Absenteeism – The metric indicating how often and how long employees
are away from their jobs as compared to the organization’s established
norm could be an indicator of employee engagement. As absenteeism
can be costly to the productivity of an organization, the metric enables HR
to investigate the possible reasons for high absence rates.

4. Application

Once metrics are analyzed, the findings are used as actionable insight for
organizational decision-making.
DATA ANALYTICS FOR HR DECISION-MAKING
How can analytics be used for HR decisions?
HR analytics, also referred to as people analytics, workforce analytics, or talent
analytics, involves gathering together, analyzing, and reporting HR data. It enables your
organization to measure the impact of a range of HR metrics on overall business
performance and make decisions based on data.

What is one way you can use HR data analytics to improve decision-making?
To help you improve decision-making with HR analytics, we asked HR professionals
and business owners this question for their best insights. From customized recruitment
strategies to listening to employees, there are several ways your company can improve
its decision-making and leverage valuable HR data.
Here are 13 ways to use HR data to improve decision-making:

 Customized Recruitment Strategies

 Connect With the Right Candidates
 Compensation and Benefits
 Streamline Payroll
 Improve Candidate Experience
 A/B Testing
 Measure and Improve Employee Engagement
 Diversify Hiring in a Meaningful Way
 Exit Interviews and Turnover Data
 Be Proactive Rather Than Reactive
 Improve Attrition and Retention
 Identify Antecedents to Concerns
 Listening to the Voices of Employees

Examples of how to apply HR analytics insights:

Here are some examples of how to apply the analysis gained from HR analytics to
decision-making:

 Time to hire – If findings determine that the time to hire is taking too long
and the job application itself is discovered to be the barrier, organizations
can make an informed decision about how to improve the effectiveness
and accessibility of the job application procedure.
  Turnover – Understanding why employees leave the organization means
that decisions can be made to prevent or reduce turnover from happening
in the first place. If lack of training support was identified as a contributing
factor, then initiatives to improve on-going training can be put together.

 Absenteeism – Understanding the reasons for employee long-term

absence enables organizations to develop strategies to improve the
factors in the work environment impacting employee engagement.

Pros and Cons of HR Analytics

HR analytics is fast becoming a desired addition to HR practices.

Data that is routinely collected across the organization offers no value without
aggregation and analysis, making HR analytics a valuable tool for measured insight that
previously did not exist.

But while HR analytics offers to move HR practice from the operational level to the
strategic level, it is not without its challenges.

Here are the pros and cons of implementing HR analytics:

Pros:

 More accurate decision-making can be had thanks to a data-driven

approach, which reduces the need for organizations to rely on intuition or
guess-work in decision-making.

 Strategies to improve retention can be developed thanks to a deeper

understanding of the reasons employees leave or stay with an
organization.

 Employee engagement can be improved by analyzing data about

employee behavior, such as how they work with co-workers and
customers, and determining how processes and environment can be fine-
tuned.
  Recruitment and hiring can be better tailored to the organization’s actual
skillset needs by analyzing and comparing the data of current employees
and potential candidates.

 Trends and patterns in HR data can lend itself to forecasting via predictive
analytics, enabling organizations to be proactive in maintaining a
productive workforce.

Cons:

 Many HR departments lack the statistical and analytical skillset to work

with large datasets.

 Different management and reporting systems within the organization can

make it difficult to aggregate and compare data.

 Access to quality data can be an issue for some organizations who do not
have up-to-date systems.

 Organizations need access to good quality analytical and reporting

software that can utilize the data collected.

 Monitoring and collecting a greater amount of data with new technologies

(eg. cloud-based systems, wearable devices), as well as basing
predictions on data, can create ethical issues.

To conclude
HR analytics is the driving force behind effective planning and decision-making in HR.
The insights analytics reveals provide a more complete perception of what’s really going
on in the company. This opens up possibilities and opportunities you wouldn’t otherwise
be aware of.
The better you understand the different types of metrics and analytics in HR, the more
relevant information you’ll be able to gather from data to help meet business goals. Your
ability to leverage analytics puts you in the position to serve your organization in a more
strategic capacity.