UNIT - 03

Basics of HR Analytics and Predictive Analytics:

Basics of HR Analytics, what is Analytics, Evolution, Analytical capabilities,
Analytic value chain, Analytical Model, Typical application of HR Analytics.
Predictive Analytics: HR analytics. Steps involved in predictive analytics:
Determine key performance indicator, analyse and report data, interpreting the
results and predicting the future. Metrics and Regression analysis and Causation.
1. Basics of HR Analytics:
Over the last few years, companies have been increasing their focus on HR
analytics. HR organisations are forming analytics groups that focus entirely on
identifying- through structured, deep analysis-opportunities for plan design, process,
or practice changes that lead to service improvements and/or cost savings.
HR analytics is the go-to approach whenever leaders need accurate statistics or fact-
based predictions in order to make better business decisions. In a growing number
of organisations, this analytic approach is beginning to permeate every aspect of the
HR function.
By establishing systems and methodologies for understanding and linking measures
on the people side of the business to key performance indicators, the potential for
identifying how HR policies, procedures, systems, and interventions drive
organisational performance is greatly enhanced.
1.1 What is HR Analytics:
Analytics is the scientific process of discovering and communicating meaningful
patterns which can be found in data.
It is concerned with turning raw data into insight for making better decisions.
Analytics relies on the applications of statistics, computer programming, and
operations research in order to quantify and gain insight to the meaning of data. It is
specifically useful in areas which record a lot pf data or information.
Analytics provides us with a meaningful information which may otherwise be
hidden from us within large quantities of data. Analytics changes everything, not
just in the world of business, but also in science, sports, health care and just about
any field where vast amounts of data are collected.
1.1. a) Levels of HR Analytics:
1) Descriptive: Descriptive HR analytics reveal and describe relationships and
current and historical data patterns. This is the foundation of your analytics
effort. It includes, e.g., dashboards and scorecards; workforce segmentation; data
mining for basic patterns; and periodic reports.
2) Predictive: Predictive analysis covers a variety of techniques (statistics,
modelling, data mining) that use current and historical facts to make predictions
about the future. It is about probabilities and potential impact. It involves, e.g.,
models used for increasing the probability of selecting the right people to hire,
train, and promote.
3) Prescriptive: Prescriptive analytics goes beyond predictions and outlines
decision options and workforce optimisation. It is used to analyse complex data
to predict outcomes, provide decision options, and show alternative business
impacts. It involves e.g., models used for understanding how alternative learning
investments impact the bottom line (rare in HR)
1.2. Evolution of HR Analytics:
The evolution of HR Analytics has come a long way since it was introduced and organisations today
have the ability to track all kinds of metrics to ensure that their people analytics are accurate.
Most large global organisations now utilise sophisticated HR Information Systems, such as workday
or success factors. As a result, the HR profession is now in the exciting position of being able to
leverage data to inform strategic workforce decisions in a way that has not previously been possible.
HR Analytics, enables the allocations of HR time to talent issues that have the highest impact, rather
than spending time on projects and activities that deliver less value.
First , analytics should be used more often for forecasting and generating predictive models.
Participants also strongly endorsed the need to enhance data-driven decisions throughout the
organisation not just keeping it at the highest levels, but driving it down to front-line generalists as
well. This will require more training to front line HR staff, and shifts in attitudes and beliefs towards
data-driven decisions, especially regarding the ability to make good decisions even with incomplete
data. Including HR analytics and HR data in annual reports- and most participants believe this will
happen soon- would also effectively spread the HR analytics gospel. Finally, participants agreed that
organisations and HR professionals could be better at sharing and developing a common language
and standards; this would speed HR analytics maturation as a discipline.
1.3. Analytical Capabilities:
Data can be viewed in two ways - structured or unstructured. Structured data similar to financial
data, and unstructured data typically economic or less tangible data. In practice, structured and
unstructured data can be merged into a mixture, amalgam, or fusion. In short, it will be what some
now call it hybrid data. While hybrid data will be essential for future analysis, it will also make the
process much more complicated. This is precisely why analysis is essential.
When a situation is a complex mixture of objective facts and subjective beliefs, there is no way other
than through logical inquiry and statistical treatment for us to comprehend what is not readily
apparent. Analysis has its genesis in descriptive data that tells us what has happened up to the
present. But prediction and prescription are concerned with what can or preferably could happen and
how to make it happen. All three levels are necessary. Throughout the twentieth century, we look
descriptive data and mentally extrapolated it into the future through presumed trends.
Prediction is vitally necessary for any company that desires to sustain or grow market share and
profitability in the new millennium.
1.4. Analytic Value Chain: Financial Outcomes
Income Statement
Strategic Business Plan Revenue
Innovate Strategy Execution Expenses
Produce
Sell Balances Sheet
Service Assets
Descriptive Prescriptive
Liabilities
Predictive
Customer- Analysed Customer Responses
Needs Number Contracted and Number
Price
Quality
Responding Conversion Rate and
Service Spend Satisfaction Level, Return Rate

Operational Outputs
Unit Cost-Cycle Time Quantity:
Operations
Output/Input
Planning, targets:
Process Times Quality: Error Rates,
Product Quality Shrink, Rework
Output Volume

HR Services
Talent Management Workforce and Succession plan Hire
Workforce Planning- Hiring Cost-Time to Fill-Quality Pay and
Deploying-Compensating Benefits Cost L&D spend-
Developing-Engaging Sustaining Engagement
Program Retention Support
1.5. Analytical Model:
Analytical model defines structure to analytics, i,e., more than simply running a statistical analysis.
The first step to analysing any problem is to ask questions. The five – step process of data analytic is
as follows:
1) Organising
2) Displaying
3) Relating
4) Modelling
5) Evaluating
1.6. Typical Applications of HR Analytics:
Following are the typical applications of HR analytics:
1) Employee Retention
2) Employee Performance
3) Employee Recruitment
4) Employee Development
5) Employee Engagement
6) Developing Compensation programmes
2. Predictive Analytics:
Predictive Analytics is an area of data mining that deals with extracting information
from data and using it to predict trends and behaviours patterns.
For Example: Identifying suspects after a crime has been committed, or credit
card fraud as it occurs. The core of predictive Analytics relies on capturing
relationships between explanatory variables and the predicted variables from past
occurrences and exploiting them to predict the unknown outcome.
According to Nyce and Eckerson, “Predictive analytics- sometimes used
synonymously with predictive modelling – encompasses a variety of statistical
techniques from modelling, machine learning, and data mining that analyse current
and historical facts to make predictions about future, or otherwise unknown,
events”.
 Predictive Analytics
Time

Data Reporting/
Monitoring Predictive Analytics
Analysis

What happened? What is going to happen in

Why that happened? What is happening now?
future?

Action
2.1 Steps involved in Predictive Analytics:
Steps Involved in Predictive Analytics

Determine Key Performance

Indicator
Formatting the Data Analysis

Analyse and Report Data

Relationships, Optimization,
and Predictive Analytics
Interpreting the results
Predicting the Future
3. HR Analytics Tools:
1) Metrics:
Metrics are measures of quantitative assessment commonly used for comparing, and tracking
performance or production. Metrics can be used in a variety of scenarios. Metrics are heavily relied
on in the financial analysis of companies by both internal managers and external stakeholders.
generally, a group of metrics will typically be used to build a dashboards that management or
analysts review on a regular basis to maintain performance assessments, opinions, and business
strategies.
Executive use them to analyse corporate finance and operational strategies. Analysts use them to
form opinions and investment and recommendations. Portfolio managers use to guide their investing
portfolios.
Types of Metrics:
1) Efficiency Metrics
2) Effectiveness Metrics
3) Impact Metrics
2) Regression Analysis:
Regression analysis is a set of statistical methods used for the estimation of relationships between a
dependent variable and one or more independent variables. It can be utilized to assess the strength of
the relationship between variables and for modelling the future relationship between them.
The process of performing a regression allows you to confidently determine which factors matter
most, which factors can be ignored, and how these factors influence each other.

According to Blair, “ Regression is the process of the average relationship between two or more
variable in terms of the original units of the data”.
Example:
you finding a relationship between the revenue and temperature, with a sample size for revenue as
the dependent variable. In case of multiple variable regression, you can find the relationship between
temperature, pricing and number of workers to the revenue. Thus, regression analysis can analyse the
impact of varied factors on business sales and profits.
3. Causation:
Causation or Causality, is the capacity of one variable to influence another. The first variable may
bring the second into existence or may cause the incidence of the second variable to fluctuate.
Causation is often confused with correlation, which indicates the extent to which two variables tend
to increase or decrease in parallel. However, correlation by itself does not imply causation. There
may be a third factor, e.g., that is responsible for the fluctuations in both variables.
It is the combination of descriptive and prescriptive analytics that we call causal analysis. Professor
Nick Bontis, is one of the earlier practitioner of human capital causal analysis, called causal
modelling. He explained that with causal modelling we can find a hidden toot cause of a problem or
make a business propositions for a human capital investment.
Example: In-Bontis learning-impact model he points out that the success of training is not a function
only of the courseware and trainer delivery. It is very much the result of the perceived value of the
training by the trainee.
THANK YOU