WHAT IS HR

ANALYTICS?
 INTRODUCTION
The question “what is HR analytics?” is asked by a lot of HR
professionals who want to get started with analytics. In this
tutorial, we will explain what HR analytics is and how it will shape
businesses in the future.

Human Resource analytics (HR analytics) is about analyzing an

organizations’ people problems. For example, can you answer the
following questions about your organization?

- How high is your annual employee turnover?

- How much of your employee turnover consists of regretted loss?
- Do you know which employees will be the most likely to leave
your company within a year?

You can only answer these questions when you use HR data.
Most HR professionals can easily answer the first question.
However, answering the second question is harder.

To answer the second question, you’d need to combine two

different data sources. To answer the third one, you’d need to
analyze your HR data.

HR departments have long been collecting vast amounts of HR

data. Unfortunately, this data often remains unused. As soon as
organizations start to analyze their people problems by using this
data, they are engaged in HR analytics.
 PAGE 1

THE SCIENTIFIC DEFINITION

What is the scientific definition of HR analytics? HR analytics is the systematic identification and
quantification of the people drivers of business outcomes (Heuvel & Bondarouk, 2016).

In other words, it is a data-driven approach towards HR.

Over the past 100 years, Human Resource Management has changed. It has moved from an operational
discipline towards a more strategic discipline. The popularity of the term Strategic Human Resource
Management (SHRM) exemplifies this. The data-driven approach that characterizes HR analytics is in line
with this development.

By using HR analytics you don’t have to rely on gut feeling anymore. Analytics enables HR professionals
to make data-driven decisions. Furthermore, analytics helps to test the effectiveness of HR policies and
different interventions. By the way, HR analytics is very similar to people analytics but there are some
subtle differences in how the terms are used.
 PAGE 2

HOW HR ANALYTICS HELPS

HUMAN RESOURCE
MANAGEMENT

Like marketing analytics has changed the field of marketing,

HR analytics is changing HR. It enables HR to:

- Make better decisions using data

- Create a business case for HR interventions
- Test the effectiveness of these interventions
- Move from an operational partner to a tactical, or even
strategic partner

Today, the majority of HR departments focus on reporting

employee data. This doesn’t suffice in today’s data-driven
economy.

Just keeping records is often insufficient to add strategic

value. In the words of Carly Fiorina: “The goal is to turn
data into information and information into insight”. This also
applies to HR.

Doing this enables HR to become more involved in

decision-making on a strategic level. The picture below
shows how this works in practice.
 PAGE 3

A FEW EXAMPLES

To get started with HR analytics, you need to combine data from different HR systems. Say you want to
measure the impact of employee engagement on financial performance. To measure this relationship, you
need to combine your annual engagement survey with your performance data. This way you can calculate
the impact of engagement on the financial performance of different stores and departments.

Key HR areas will change based on the insights gained from HR analytics. Functions like recruitment,
performance management, and learning & development will change.

Imagine that you can calculate the business impact of your learning and development budget! Or imagine
that you can predict which new hires will become your highest performers in two years. Or that you can
predict which new hires will leave your company in the first year. Having this information will change your
hiring & selection procedures and decisions.

If you want to read more about how data can change hiring practices, check out Laszlo Bock’s book ‘Work
Rules’. Laszlo Bock was the senior VP of People Operations at Google. In his book, he describes how
hiring practices changed at Google after they started to analyze their recruitment data.

We’ve published some very practical case studies in the past that show a step-by-step approach to
analytics. Three of them I’d recommend, are:

Key Drivers of Retail Reducing Workplace Accidents How we Determined

Sales Performance Using People Analytics Optimal Staffing Levels
 PAGE 4

HOW TO GET STARTED WITH

HR ANALYTICS

Organizations usually start by asking simple questions. An example is: “Which employees are my high
potentials?” You can answer this question using quite simple statistics. Doing this helps to quantify the
relationships between people’s abilities and organizational outcomes. This way analytics helps companies
track absenteeism, turnover, burnout, performance and much more.

An even better way to get started is following a professional course in HR analytics. In the HR analytics
academy, we offer three courses.

HR Analytics Strategic HR
HR Analyst
Lead Metrics

The HR analytics lead course is for people who are heading an analytics department and teaches all the skills and tools
needed to do this successfully.

The HR Analyst course is for HR professionals who want to learn how to work with HR data using simple tools like Excel
and PowerBI.

And finally the strategic HR metrics course: Metrics are a starting point for analytics. If you think you’re not ready for
analytics because you’re not yet working with the right metrics, this is the course for you.
 PAGE 5

Analytics makes HR (even more) exciting. Its insights are input for strategic decisions and optimizes day-
to-day business processes.

In addition, if you know what makes your employees tick, you can create a better work environment and
identify future leaders. Imagine that you can predict which employees are most likely to leave the
company. This information helps your succession management and benefits strategic workforce planning.
A notable example of a company doing this is "Credit Suisse".

After asking the right question, you have to select data from your different systems. This data is then combined, cleaned
and analyzed. This analysis leads to insights.

Not all insights are equally interesting. That’s why you should ask questions about things you can change. For example,
you can’t change an employee’s gender. However, you do have influence over your management styles and
engagement levels. Asking the right questions leads to actionable insights.
 PAGE 6

HOW DOES HR ANALYTICS

SHAPE THE BUSINESS?

You can imagine that HR analytics holds an enormous value for an organization. These examples are
only the beginning. Indeed, analytics enables companies to measure the business impact of people
policies.

By applying complex statistical analyses, HR can predict the future of the workforce. This enables
managers to measure the financial impact of Human Resource practices. To read more about the tools
used for these analyses, check our overview on the "top HR analytics tools".

Measuring the impact of HR on bottom line performance is the “holy grail” of HR analytics (Lawler III,
Levenson & Boudreau, 2004). This is often done by calculating a Return on Investment (ROI). It is the
most powerful way for HR to increase its strategic influence.

Aforementioned examples have an impact on both the cost and the revenue side of the business.

Knowing the impact of HR policies will also help HR to become a strategic partner and get rid of its ‘soft’
image. It helps HR to align its strategy with business goals and to quantify the value it adds to the
business. It takes the guess-work out of HR.

So, how do we at Analytics in HR define HR analytics? We think it is about identifying the people-related
drivers of business performance. It takes the guesswork out of employee management and is, therefore,
the future of HR. Or, to put it in the words of Edwards Deming: “Without data you’re just another person
with an opinion”.
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