This article intends to explain how data-driven HR and HR Data Analytics helps in better decision making to support the business.
For the last few decades, the HR community has been working hard in supporting the business but with scarcity or unavailability of concrete data, without a single source of information within the organization and have no real proof to enable better decision making for themselves and the management.
Within the last decade, we have observed many new technologies evolving and paving the way to many possibilities in the field of Human Resource. HR leaders nowadays want to evolve their role which is more strategic – enabling them to have better problem-solving skills and with concrete proof to support the decision-making process as compared to “go with your gut” scenarios which used to be the case in the past.
Before you read more about this topic, we would like you to delve in your role and then try to find answers to the below questions –
- What is your company struggling with and what they care about most – Compliance, Legal, Group Reporting, Financial impacts?
- How all your employees relate to the business and how they can contribute?
- How you can be more strategic in your role?
- Does your management expect an answer to such a question (even if it’s not asked so often or directly) – “What else you can help me with apart from managing the talent?”
Hopefully, you will get all your answers by the end of this article.
The most critical or essential ingredient to all the above questions is the “Insights”. To address any problem or while trying to find an answer to a question, you need to have the insights and that can come only from data. To get the correct and reliable data, you need to make sure that your organization is equipped with the right kind of HR technology.
HR Technology or HR systems plays an important role here. You need a full-fledged HR system or a tool to capture & store information from your different kinds of processes and data sources. But please do make note of the fact that technology alone will not solve all your problems. Technology and humans go hand in hand, and we call this “Humanizing the Data”.
Any data source stored in your HR system or BI tool needs to be your single source of truth on which you can rely upon. In today’s era, we have a variety of ERPs, HR cloud solution and BI tools that can be implemented holistically across your organization to be a single & centralized source of information.
Implementing HR technology is the first step towards insights, better decision making, better problem solving and real proof showing impacts on your decisions.
In case, you already have a working HR system (an ERP or a Cloud-based solution) implemented across all your business units or locations then I would recommend you review its reporting capabilities as well as the ability to generate the required analytics. If the existing system is still not serving the purpose, then go for a Business Intelligence tool.
Implementing the right tool and continuously capturing the relevant information relating to your employees and organization will help you move forward to our second step called “Data Metrics/Analytics”.
As we all know – Analytics represents the quantitative & qualitative measurements that reflect critical success criteria and it can be an overwhelming task to share the relevant and actionable data within the organization without analytics & BI tools.
Over half of the HR professionals working in different companies either do not have access to the BI tool OR due to the outdated technology arises dissatisfaction with the current workforce metrics or reporting/analytics tools.
Need for BI Tool
In few of the cases – Tool exists but inaccessible due to the below predominant reasons:
- No Easy to use BI tools or not personalized as per organizational needs
- Too much manual intervention – HR professionals to retrieve data manually and work on cumbersome reporting tasks
- Another Reason is the HRMS/ERP currently being used is of limited functionality to meet the analytics needs
- Lack of Skill – No Training offered for HR professionals
- No Leadership support to implement BI – As it seems there are still many organizations that are unaware of the importance of BI
Here is the crux why organizations should look forward to a BI tool:
- Series of measurements of how a business is progressing in the medium and long term
- Performance and how to make a business operate better overall
- Enabling Decisions about the company’s prospects for future success
- Identify New Prospects/Opportunities through trends and analytics
A few of the basic criteria’s that one should look for before implementation of BI tool are user Friendliness, cost-effectiveness, easy to Integrate with existing systems, offer a wide range of metrics that can be customized, require less maintenance in terms of IT Support.
Some of the market leaders in terms of BI tools are Power BI & Tableau. I have personally used Power BI and found this tool very interesting as it is very helpful in handling or importing data from different sources. You can also download its free version to try out – Power BI Desktop.
Power BI Desktop allows you to do all the required tasks offering many features to build analytics with the help of graphs/charts, drill-down and data modeling options but the free version doesn’t allow you to publish your report or the analytics.
HR Metrics & Analytics
Now, Let’s discuss more about HR analytics. HR Metrics or Analytics are a set of quantifiable measures that are used within a company to measure or compare performance in terms of meeting strategic & operational goals.
KPIs may vary depending on the priorities and performance criteria within the company. This contributes to business metrics used to evaluate factors that are crucial to the success of the organization.
Some of the most common examples are as follows –
- Workforce Demographics – Gender Split, Average Age of Employees, Seniority & Average Length of Service
- Workforce Distribution – Headcount & FTE Distribution, Percentage of distribution as per Employment types
- Turnover Rate – New Employee turnover rate, Voluntary & Involuntary termination rates. Turnover rates can be further drilled down based on gender & age distribution
- Working Time Indicators – Absence Rate, percentage of total hours lost to absenteeism
- HR Budget Metrics
- Compensation and Benefits cost/sales turnover per year
- Recruitment Cost per Employee
- Actual Vs. Budgeted Cost of hire
- Training Costs per FTE
- HR to Employee Staff ratio (HR FTEs as % of total workforce FTE)
All the above are the most common ones used by the companies to track some of the basic things, however, you can think of the most important ones that are relevant & applicable to your organization.
If you think through some of these analytics, then you might have figured out by now that this requires quite many data points and that too very precise & accurate.
Here, technology comes into the picture and I have already addressed above, how you can capture info and come up with a single source of info for the whole company.
HR Tech will enable you with exciting and innovative use of your organizational data defining how you can use the data across key areas like Core HR, Payroll, Hiring, Compensation, Performance, and Benefits.
At one point, you must also make sure that your target audience – Management, Employees & Managers are aware of how to use the analytics to make better decisions.
Maybe a few of the audience might come back to you asking – What does this mean? Yes, this might be quite straightforward for the HR community but can be complicated for someone who is using or looking at such analytics for the first time.
You also need to set up a frequency or a time table of generating such analytics and to present them at different levels explaining to them what’s going on in the Organization.
Explain in detail what each analytics represents – maybe a few of them might lead to the financial impact, legal risk and have utmost importance at Group Level Reporting.
No BI Tool?
If your organization is new to the technology or doesn’t have an HR tool to support or come up with such scenarios, I would propose you to start with MS Excel. Yes, Excel is a very good tool and can be a starting point to build a dashboard or metrics highlighting core indicators.
Once you share excel-based analytics from time to time explaining the details to the management, I am sure you will be able to build a robust business case to invest in a tool.
Attend HR tech and Data Analytics conferences, talk to people in the HR community and learn from their experiences how analytics have supported their business to move forward, curb the costs and helped them to achieve a very good return on the investment made in the field of HR Tech.
It is high time that you think through how you can get your arms around on all the moving parts of your organization, come up with solutions and provide more strategic support to the business.