18 Benefits of HR Analytics For Your Business [With Examples]
HR analytics helps HR professionals make data-based decisions that play a pivotal role in an organization’s success. Over 70% of executives consider people analytics a main priority in their organization. The HR analytics market is set to grow by 90% to $3.6 billion over the next three years. If your HR department isn’t using harnessing the benefits of HR analytics to improve the efficiency of your business, you risk being left behind as more organizations continue to invest heavily in digitization.
In this article, we’ll briefly recap what HR analytics is and the main benefits of HR analytics for your business.
Contents
What is HR analytics?
HR analytics benefits
1. Practicing evidence-based HR
2. Improving recruitment and talent acquisition
3. Managing employee performance and productivity
4. Helping build equitable compensation and benefits packages
5. Enabling effective workforce planning
6. Easily conducting skills gap analyses
7. Boosting learning and development, upskilling and reskilling
8. Preventing turnover
9. Improving candidate and employee experience
10. Identifying inefficiencies
11. Saving money
12. Supporting internal mobility
13. Preventing workplace misconduct
14. Improving workplace safety
15. Uncovering trends
16. Supporting your DEIB goals
17. Allowing organizations to be proactive
18. Adding value to the business
What is HR analytics?
HR analytics involves collecting data and key metrics on your workforce and organization to gain valuable insights and better understand their effectiveness. With this data, you can spot weaknesses across the business and improve these to boost efficiency, productivity, retention rates, training effectiveness, and more—all of which will benefit your bottom line.
HR analytics benefits
1. Practicing evidence-based HR
Traditionally, HR management was always based on trends, biases, or temporary fixes. There will generally be inconsistencies between what HR professionals believe to be suitable and effective and what data proves to be effective. Evidence-based HR centers on making decisions supported by evidence from internal data, research findings and studies, expert judgment, real-life experience, values, and concerns. This approach enables HR professionals to base HR decisions on facts and evidence rather than relying solely on a gut feeling.
One example of this is when PNC bank’s HR team used HR analytics to better understand the risk of their incentive plans. This helped them better understand the nature of certain roles. Then, they created a framework to mitigate that risk rather than scrapping their bonus policies altogether.
Another example is when Kraft Heinz launched a hostile takeover bid of Unilever in 2017. Unilever’s HR team used analytics tools to analyze networks in the organization and create models for potential cost reductions. They were also able to track employees’ moods and attitudes and gauge how employees were reacting to Unilever’s defense strategy. That helped them make key decisions during this time of crisis. Ultimately, they were able to show they were in a better position than Kraft Heinz to leverage the strengths of their business.
Enrolling in a People Analytics Certificate Program will equip you with skills, knowledge, and hands-on experience to start capitalizing on the benefits of HR analytics at your organization.
2. Improving recruitment and talent acquisition
You gain valuable insights into your hiring process by tracking data pertaining to key recruitment metrics such as cost per hire, application completion rates, quality of hire, quality of source, and candidate experience. This allows you to see what’s working, what needs improvement, and make changes accordingly, which will positively impact the business.
One of the biggest problems organizations face is finding the right people to fit the right roles. What’s more, early attrition rates can cost a business significant amounts of money. A staggering 66% of CFOs have confessed they have poor cultural fit decisions when hiring for their organization. Therefore, it’s vital to know who to hire to ensure optimum performance and productivity in your business and reduce your turnover rates and recruitment spending.
HR analytics can sift through all the information and skills in new candidates’ applications, compare this with the skills and behaviors of your current top performers, and make a shortlist of the best potential candidates using algorithms. For example, tailored situational judgement assessments can ensure candidates have the right competencies to thrive in a specific role. This saves your recruiters time and your business money and increases your chances of making the right hire the first time around.
Rolls-Royce enlisted the help of Aon to reduce their drop-out rate by implementing a shorter and more engaging assessment that identified the candidates with the most talent and potential. As a result, 98% of applicants that registered for online tests completed all of them.
3. Managing employee performance and productivity
With HR analytics and key performance indicators (KPIs), you can assess the ROI of all employees. It helps you identify your top performers (and use these as a benchmark when making new hires) and those who are struggling (and offer them support). A better understanding of motivation, productivity, and efficiency can help all employees improve their performance and contribute to the bottom line.
Analytics can offer insight into interactions between employees and collaboration between departments. It can also show you how employees interact with certain applications and how this affects their productivity. Through this, you can optimize internal processes and streamline employees’ workflows to boost performance, collaboration, and productivity. For example, if an organization can analyze the productivity levels of its remote workers, then it can use these findings to shape its remote working policies accordingly.
Best Buy found that a 0.1% increase in engagement results in over $100,000 in annual operating income per store. This finding led Best Buy to increase the regularity of their employee engagement surveys from annually to quarterly.
4. Helping build equitable compensation and benefits packages
Analyzing compensation data allows you to spot any pay disparities and fix them to ensure you’re achieving internal and external pay equity. It can also help you determine which benefits are most valued by your employees. Then, you can adjust your compensation and benefits packages accordingly. Plus, you can decide if an additional bonus percentage leads to improved retention or performance or whether it makes no noticeable difference. That can ultimately save you money.
An article by Employee Benefit News shows how employees at Staples.com feel about their compensation packages. 62.3% of them stated they would accept a lower salary in exchange for better perks at work. In addition, the survey found that the list of must-have benefits and benefits that would convince an employee not to leave the company were almost identical. They included flexible hours, remote work options, and paid insurance premiums all in high demand. Insights such as this can help you tailor your offering to boost morale and retention.
5. Enabling effective workforce planning
HR analytics also enables companies to remain ahead of the game by forecasting and preparing for future workforce demands. For example, predicting attrition rates helps organizations improve their workforce planning, particularly for critical roles within the business.
IBM used data on recruitment, tenure, performance, role, salary, promotion history, and location to reduce their turnover rates in critical roles by 25% over four years.
Analytics can also help measure over- or understaffing. For example, a Zimbabwean mining company found that a 22.5% increase in activity calls is required to justify each additional hire to maintain workloads and avoid burnout.
6. Easily conducting skills gap analyses
The richness and depth of HR analytics software mean it can use algorithms to identify skills and knowledge gaps within your current teams. Your team’s existing skills can be plotted on a grid against the skills you need. That can help you identify weak spots and propose a plan to bridge these. Gaps like these often harm employee engagement, morale, and turnover rates if left unresolved.
You can analyze current skill sets, performance, education, and experience to identify which of your employees are most suited to upskill in a specific area. This means that HR doesn’t need to recruit new talent instantly. Instead, they can look internally to fill talent and skills gaps before looking elsewhere. Overall, this reduces recruitment costs by utilizing the potential of your current workforce, improves turnover rates, and can build a stronger culture.
7. Boosting learning and development, upskilling and reskilling
Data can show you where your employees need upskilling or reskilling, if they’re utilizing training opportunities, and if the training is relevant for them. This helps you create relevant learning and development programs that help upskill and reskill your employees, boost performance, achieve organizational goals, and save time and money.
For example, analytics can help you understand which of your employees prefer on-the-job learning and which prefer classroom learning. It can also show you which employees are more likely to seek additional learning and what character traits they possess.
Fujitsu used HR analytics to determine whether their peer coaching program was effective and should be continued. They found a strong correlation between peer coaching and business results and continued the program.
A large Dutch FMCG retailer used people analytics to analyze the effectiveness of training. They found that training shop personnel positively impacted the shop’s financial performance, which they measured through A/B testing. The ROI of their training program was 400% in the first year.
8. Preventing turnover
Another of the benefits of HR analytics is that they can help you understand:
- which employees are leaving and why,
- your retention rate,
- which departments have a higher than average turnover,
- early attrition rates for new hires,
- and which employees are most likely to leave in the future.
This data enables organizations to prevent losses before they happen, reduce their turnover rate by understanding the root cause, and then design targeted strategies to improve retention.
Shoe retailer Clarks used analytics to determine a clear link between employee engagement and the subsequent impact on individual and company performance. They found that a 1% improvement in engagement led to a 0.4% increase in business performance. The length of tenure of a store manager also turned out to be a strong indicator of performance. With this data, Clarks created a template for high-performing stores and a toolkit on engagement for managers to help boost the performance of their employees and store.
Similarly, at Credit Suisse, analytics enabled the HR team to predict who might quit their job and why. Managers received this information to reduce the risk of turnover and improve retention. They were also provided training to help retain high-performing employees who might be at risk of leaving. Overall, this program saved the company approximately $70,000,000 a year.
9. Improving candidate and employee experience
A study found that 56% of applicants encounter some form of a technical issue during the job application process. These can lead to abandoned applications and missing out on top talent. Providing an engaging and flawless recruitment and onboarding process where candidates have a positive experience leads to improved retention, a boost to your employer brand, and future talent acquisition.
HR analytics can help you analyze the candidate experience during the recruitment process and your employees’ experience at work day-to-day. For example, how strong their sense of belonging is, where they perform best, how they feel about every aspect of their job, and how they can continue to grow in their role and the organization. This information can help you improve the daily experience of your employees and create a better working environment and company culture.
For example, at E.ON, people analytics helped the company discover that their higher than average employee absence rate was increased by a lack of a long holiday at some point during the year or not taking a day or two off every so often during the year. These findings were communicated to managers to improve holiday approval policies. Ultimately, it led to a more positive employee experience and reduced absenteeism rate.
10. Identifying inefficiencies
HR analytics will help HR professionals look outward into business processes and operations, but also internally to shine a spotlight on areas that can be improved within HR itself. For example, systems that don’t communicate well, a reliance on manual paper-processes where digital software could save time and money.
Through data, HR can identify processes that aren’t helping the business achieve desired results or are inefficient and redesign these. More efficient HR processes can lead to a significant boost in the overall vitality of an organization.
11. Saving money
Analytics can help an organization use its budget more effectively by demonstrating the potential value of each dollar spent. Software can unite HR and finance departments and offer one single source of truth, enabling both teams to have a strong understanding of metrics, including ROI numbers and salaries.
For example, suppose data shows you that one of your L&D programs is helping employees perform better and boosting your bottom line. In that case, it makes sense to invest in this program and cut spending on any programs that aren’t delivering the same value. Similarly, if one particular source continually brings you top-performing candidates, it makes sense to allocate the majority of your recruitment budget on that channel rather than ones bringing in mediocre candidates.
12. Supporting internal mobility
Data on your employees’ skills help an organization utilize its talent in the most effective way. Plus, allowing employees to have different experiences, gain new skills, and advance in their career within the company can contribute to their short and long-term goals. It will also help save time and money on external hires, improve diversity and innovation, and lead to better retention rates. All of this positively impacts your bottom line.
LinkedIn’s Global Talent Trends report shows that employees are likely to stay 41% longer in an organization that regularly hires from within. Gartner reports that employees are 27% more likely to put in more effort at work in an organization with greater internal mobility.
Furthermore, AI solutions can help you map out internal career paths for employees. For example, if an employee wants to take the next step in their career but is unsure what to do, AI can make a recommendation based on the data it has. This helps employers and employees make more informed decisions together and reduce attrition rates.
13. Preventing workplace misconduct
Another significant benefit of HR analytics software is the data it collects from incident reports. This information can help identify trends in misconduct such as workplace harassment and bias. The data enables organizations to make tactical plans to anticipate and combat these issues and improve workplace conduct across the business.
In response to the sexual harassment scandal at Fox News, the company has since created the “Fox News Workplace Professionalism and Inclusion Council”. It consists of two HR executives and four independent members who will use data from employee surveys to provide reports to company directors and publish findings on its website.
14. Improving workplace safety
Workplace safety is a priority for all organizations. A safe workplace means fewer injuries at work for employees and also saves the company money in injury-related costs and compensation. In the US alone, work injury costs exceed more than $170 billion each year. In fact, most of these incidents are preventable. Using your safety incidents data, you can prevent future workplace injuries and create a safer work environment for all your employees in the process.
At Shell, analytics found that employee engagement was linked to better business performance through improved safety practices. A 1% increase in employee engagement resulted in a 4% drop of ‘recordable case frequency’. Also, safety performance was directly related to business performance.
You can also check out our tutorial on how to use Association Rules to analyze safety data and prevent future safety incidents.
15. Uncovering trends
The majority of HR analytics platforms today utilize machine learning to spot patterns that the human eye easily misses. Such a platform can also help produce reports on areas and issues that may otherwise go overlooked. Patterns related to behavior, performance, commute times and recruitment source quality can all be observed and reflected on.
An example of uncovering trends is when Cisco used demographic data to decide the best location to open new offices. They combined data on current usage rates of office space, cost and availability of talent, and availability of graduates from universities. The analysis enabled them to open offices in locations where fewer large players were competing for the same talent.
16. Supporting your DEIB goals
A report published by McKinsey & Company found that ethnically diverse companies were 36% more likely to outperform competitors. Meanwhile, research by Harvard Business Review has found that organizations with greater cultural diversity have higher market valuations and produce higher quality intellectual property.
HR analytics allows organizations to track diversity on all levels of the company—from entry-level to management all the way through to leadership teams. You can also track how candidates pass through your selection process to ensure you’re increasing the diversity of your workforce and track the progress you’re making along the way.
Analytics can help organizations map out their current organizational culture. They compare it with their ideal company culture, gain insight into where the gaps are, and then take conscious steps towards bridging these.
17. Allowing organizations to be proactive
Through continual insights, feedback, and analysis of results, organizations can be proactive in their approach rather than reactive. It helps them stay ahead and anticipate and prevent future problems.
Comparing past and present data enables organizations to make logical predictions, foresee the future needs of the business, and prepare accordingly. That way, business can implement scenario-based planning and prepare for multiple futures.
18. Adding value to the business
As you can see, HR analytics not only enables you improve HR but also helps you improve the business’s overall operations through hiring, training, and retaining your top performers. Analytics can help you maintain an accurate record of progress, compare this over time, and observe any fundamental changes.
Data also helps HR gain a seat at the table by aligning hard facts with business goals and objectives. HR practitioners can demonstrate to leadership teams how proposed strategies will help the business thrive and lead to higher revenue. Business decisions that involve structural change or organizational development always benefit greatly from solid HR advisory. Therefore, HR analytics offers HR teams a golden opportunity to become true business partners by educating business leaders and designing and implementing new strategies and processes that help drive the company forward.
Over to you
HR analytics is becoming an indispensable tool for organizations to make better decisions. That’s why every HR professional must have a good level of data literacy to help their organizations reap the benefits of HR analytics.
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