International Journal of Trend in Scientific Research and Development (IJTSRD)

Volume 5 Issue 4, May-June 2021 Available Online: www.ijtsrd.com e-ISSN: 2456 – 6470

The Evolution and Growth of HR Analytics:

ROI Based Approach
Supriya. P. Inamdar1, Dr. Shinu Abhi2
1Research Scholar, Management Studies, Reva University, Bangalore, Karnataka, India
2Director, Reva Academy for Corporate Excellence, Reva University, Bangalore, Karnataka, India

ABSTRACT How to cite this paper: Supriya. P.

Human resources (HR) analytics has recently developed an enormous Inamdar | Dr. Shinu Abhi "The Evolution
curiosity in most organizations still they find challenging to move from and Growth of HR Analytics: ROI Based
operational reporting to strategic reporting analytics. Organizations are Approach" Published
becoming more data-focused by utilizing employee data to reach their in International
strategic goals. Recent research studies have shown increased attention on HR Journal of Trend in
analytics and its impact on business results. This paper is a conceptual study, Scientific Research
with twofold objectives; firstly, to provide evidence of implementation and and Development
growth of HR analytics from the literature review; second, to study the impact (ijtsrd), ISSN: 2456-
of HR analytics-focused with Return on Investment. The purpose of applying 6470, Volume-5 | IJTSRD41225
HR analytics is to give better decisions on utilizing HR metrics and predictive Issue-4, June 2021,
models which optimizes performance and better return on investment. The pp.1733-1737, URL:
study indicates that conceptual and empirical studies in HR analytics resulted www.ijtsrd.com/papers/ijtsrd41225.pdf
in a greater return on investment when compared to case-based studies.
Additionally, the study indicates that talent acquisition and learning and Copyright © 2021 by author (s) and
development are the main HR functions that generate the highest return on International Journal of Trend in Scientific
investment. This paper concludes that Choosing the right purpose and the Research and Development Journal. This
right tool for the right moment of the intervention of HR analytics impact is an Open Access article distributed
optimum organizational performance. under the terms of the
Creative Commons
KEYWORDS: HR analytics, Return on Investment, HR metrics, HR Functions, Attribution License
Decision making, strategic reporting analytics (CC BY 4.0)
(http: //creativecommons.org/licenses/by/4.0)

I. INTRODUCTION
The extensive implementation of the internet has changed related decisions to improve individual and organizational
the game in the stream of Human resources (HR) and the performance (Handa, 2014). A trend in HR has started when
rate of adoption for HR analytics is becoming wide, as data HR-focused to be a strategic partner, then organizations
can be collected easily and shared. The recent trend in many identified in rapid development in technology that makes
organizations is to make data drove and evidence-based easy collection and interpretation of data and finally
decisions (Holsapple, 2014). Nearly 71% of organizations increased awareness of practicing evidence-based HR (Fitz-
use people analytics as a high priority to their organization's Enz, 2014). With rapid changes in information technology,
success (John Boudreau, 2017). For the HR department, it is traditional HR metrics seems to be not suitable to derive the
the time of experiencing opportunities and challenges on HR right insights (Handa, 2014). The usage of data in HR used in
transformation, which plays a crucial role in achieving interchangeable terms like HR analytics, talent analytics,
competitive advantage (Kapoor B. &., 2014). Certain new people analytics, and workforce analytics. This paper used
technologies like Artificial Intelligence, Machine Learning, the term HR analytics since it is an emerging technique used
and Visualization tools are guiding organizations in the in the field of HR. Many practitioners and researchers define
systematic adoption of HR analytics (HRA). Fitz, a human HR analytics in various meaningful ways, here are a few of
resources expert says that HR professionals need to learn to them which would be relevant to our study as Vihari says “it
speak in terms of numbers, in qualitative and quantitative is the application of refined data mining and analytic
terms, storytelling or to express the activity in value-added techniques used in the field of HR” (Vihari, 2013) , Kapoor
terms (Fitz-Enz, 2014). Soundarajan, (2016) said, the focus (2012) said, “it is the processes to collect, transform and
of Human resources has moved away from basic manage key HR-related data and documents; to analyze the
measurement to the scorecard, engagement surveys to gathered information using business analytics models; and
strategic planning. to disseminate the analysis results to decision-makers for
making intelligent decisions”. Recently, Boudreau (2017) led
For a long period, HR has been striving to become a strategic
an evidence-based review of HR analytics and defined it as
function in any organization either service or production-
“An HR practice enabled by information technology that uses
based, to get its place along with finance, marketing, sales,
descriptive, visual and statistical analyses of data related to
and operations functions (Bose, 2018). In a multidisciplinary
HR processes, human capital, organizational performance,
approach, HR analytics plays a role in every aspect of HR
and external economic benchmarks to establish business
functions like recruiting, training and development,
impact and to enable data-driven decision-making” Marler
employee engagement, compensation and benefits,
and Ben-Gal (2019). A review of literature highlighted
succession planning to improve the quality of employee-

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 International Journal of Trend in Scientific Research and Development (IJTSRD) @ www.ijtsrd.com eISSN: 2456-6470
through the traditional benchmarking system it's quite (Bersin, 2016). Consecutively, employees in the organization
challenging for organizations to give weighted results, also need to have expertise in the use of advanced
whereas HR analytics is a reactive and evidence-based technologies and software. Many descriptive and empirical
decision-making system that supports organizations for investigations have examined that, HR Professionals'
better results (Marler, 2017). In simple terms, it is an analytical skills and abilities positively impact individual
application of statistics using numerical data, modeling, and performance... Overall HR professionals must have the ability
analyzing employee-related factors to improve Human to analyze and translate results into understandable and
Resources performance and business outcomes (King, 2016). actionable insights (Marler, 2017). There was an article in
It guides HR professionals to make data-driven decisions to Business standards, dated 21 May 2018 on the growth of HR
attract, manage, and retain employees which improves analytics. It highlighted the adoption of HR analytics by
Return on Investment and profitability (Fitz-Enz, 2014). The Information technology (IT) firms, professional services,
first goal of HR analytics is to collect and retain employee financial services, and insurance companies (2018). From its
data for forecasting future results, second is to provide study, it states that from the past five years there is a 70
effective insights in managing employees to achieve percent increase in analytic professionals in India
organizational goals (Kapoor B. &., 2014) and third, HR A study by the Massachusetts Institute of Technology (MIT)
Analytics can be utilized to examine the correlation between explains "top-performing organizations use analytics five
initiatives and strategic goals (Kapoor B. S., 2012). The times more than the low performing organizations". A
current emphasis on HR Analytics is, it creates a better work systematic review was analyzed of 25 articles from 2010-
environment and maximizes employee productivity (Lawler 2020 and identified that there is a shift from traditional HR
III, 2004). HR leaders align HR data and initiate the strategic practices to evidence-based decision making with systematic
goals of the organization. HR professionals can gather data use of tools like HR analytics and organizations hopes for
from various sources like employee surveys, attendance best results with better ROI (Bersin, 2016). Ben has
records, demographic data, and employee work history, classified three periods on growth and development of HR
salary and promotion history, recruitment process, analytics in his paper ‘An ROI-based review of HR analytics:
employee database, etc. (Bose, 2018). practical implementation tools’ first is incubation period,
II. LITERATURE REVIEW incremental growth, and substantial growth, which explains
To understand the adoption, implication, and future impact the growth and importance of analytics (Ben-Gal,
of HR analytics on organization performance, authors have 2019).Earlier HR analytics was people and process
accessed information on literature reviews and studied using perspective by using technical aspects, but recent studies
several books, journals (EBSCO, Emerald, Science Direct, show that HR analytics is practiced in managerial and
ProQuest, research gate) , websites related to management strategic perspective (Ben-Gal, 2019).
studies and commerce, social science, HR-related journals,
From the above literature review, it was observed four
white papers, and others. To get the relevant information,
trends in exploring HR analytics. First, HR analytics by way
certain keywords like HR analytics, HR metrics, decision of a strategic management tool that produces high ROI to the
making in HRA were used.
organization on continuous improvement, talent
Growth and Implementation benefits of HR analytics in an management, performance management, employee
organization engagement, and others. The key challenge with this trend is
Jack Fitz-end (1978) in his article "The Measurement answering the factors involved in specific strategic measures
Imperative" proposed the concept of measuring HR activities (Ben-Gal, 2019) (Marler, 2017) , like cost reduction, handling
like staff retention, compensation, performance appraisal, critical talent issues, and others. Figure1 (Clarke, 2017)
competency development, etc. In the year 1990 comparing explains HR operational and strategic level concerns and
data with HR function became popular and that concept was their impact on the business outcome. Second, evidence-
called 'Benchmarking'. The idea of benchmarking was based approach that yields high ROI on predicting individual
supporting organizations in providing insights and and organizational performance with relevant data on using
comparing business performance with others. Davenport et suitable tools (Ben-Gal, 2019). The key challenge here is on
al. (2010) have published an article on Talent analytics in choosing a suitable tool to predict the future. Many firms lag
Harvard Business Review which opened the eyes of many in adopting suitable methodological and technological tools.
organizations and researchers across the globe. However The third movement in HR analytics study is an effective
data collection, storage, and interpretation became decision-making tool and ROI connected by providing
challenging, but still, organizations believe that analytics will efficient decisions (Fitz-Enz, 2014). The key challenge is on
answers questions on what has happened? How? Why? What collecting and analyzing data to prove decisions effectively
may happen in the future? This will also help to make and efficiently (Ben-Gal, 2019). And forth one, several
evidence-based decisions. Bersin has shown in their study research articles on the future of HR analytics highlighted
that only 10% of the Fortune 500 companies are using challenges of implementing HR analytics, i.e. many
advanced analytics, out of which 6% of organizations are still researchers discussed that should HR be an ‘HR function’ or
using statistical techniques for HR analytics and 4% of the role of HR professionals (Huselid, 2015).
companies using Predictive and prescriptive analytics
Figure 1: HR analytics functions impact on the operational and strategic basis
HR analytics
Operational Strategic
functional impact
HR Functional Dashboards Transactional HR, HR process Talent life cycle, Reward, Performance
concerns improvement management Employee experience
Workforce driven operational effectiveness Cost reduction, M&A, restructuring, strategic
Business Concerns
Operational workforce planning workforce planning, critical talent issues
Source: (Clarke, 2017)

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 International Journal of Trend in Scientific Research and Development (IJTSRD) @ www.ijtsrd.com eISSN: 2456-6470
HR Analytics is a methodology that provides insights on systematic study on investment returns from various
Investment in human capital assets that contribute to an literature reviews. Besides studying the growth of HR
organization's success. EIU research found that already 31 analytics and its impact, it was also found that there was
percent of organizations plan to invest in data analytics and précised scientific evidence to help HR professionals or
around 55 percent of respondents believe in metrics that decision-makers to know effectiveness and efficiency and
define success in the current HR scenario that will change in impact on ROI (Rasmussen, 2015). Our intention to study
future years as said in KPMG study 2012. To understand the had two ideas firstly, impact on ROI by use of HR analytics
difference between metrics and analytics, metrics describe and secondly, to explore standardized ROI framework
measures of past performance while analytics use those developed for HR programs in figure 3. John (2017) in their
measures to gain insights or predict the future. Bersin study introduced "LAMP framework" which stands for (a)
(2016) explains most firms use HR metrics and scorecards logic - connecting logical measures and relevant business
but HR needs analytics to describe the measurement that outcomes, (b) analytics - analyzing relationships between
matters which includes statistics, tools, models, use of data, measures, and outcome (c) measures - identifying and
appropriate data, analyzing the data, and applying statistical ensuring high-quality data, and (d) process - it's a process of
and scientific standards to evaluate results and those results incorporating the insights from rigorous analytics into
which guide for the business. Most organizations are business decision making (John Boudreau, 2017). The
adopting HR analytics tools and methodology for better ROI concept of ‘LAMP’ on ROI suggests that allocating monetary
and organization performance. Organizations like Accenture, resources for HR programs should consider firstly, the
Phillips, Google, and Wipro such high performing inflow of returns generated by that allocation. Secondly, the
organizations adopt HR Analytics to identify high balancing outflows of resources should make an obligatory
performers, control attrition and altogether perform better investment. Thirdly, to measure inflow and outflows in the
(Fitz-Enz, 2014). future period. These factors produce and direct for better
ROI and its logical framework guides investment decisions
III. USAGEOF HR ANALYTICS
(John Boudreau, 2017) refer to figure 3.
The HR analytics tool will help in providing the right data
and the right tools to run the process effectively. HR Figure 3: Measurements for better ROI
initiatives are designed in such a way that it supports the
organization to reach its goals. To determine the need for
such initiatives, HR professionals need to understand the
current state and problem caused by KPI's and also various
factors affecting these KPI's. It is also essential to look at the
historic data, cause-effect analysis of past decisions, and
‘what if’ use cases in any decisions. When HR professionals
collect and gather the data in figure 2 (Helical) ; HR Analytics
feeds the same data into sophisticated data models, tools,
and algorithms to gain actionable insights. Such tools will
provide insights in the form of a dashboard, visualization,
and reports for the improvement of data gathering, data
cleansing analysis, evaluate goals and KPI creates an action
plan based on analysis and thus executes the plan.
Figure 1 the process of HR Analytics

Source: Authors
Organizations have identified the need and trend on
measurement and evaluation to examine the progress of
return on investment (Phillips, 2012). To measure the HR
effectiveness and its impact on ROI, specific HR measures are
recorded like turnover costs, employee retention rates, and
others. Sometimes investments in HR programs for
employee productivity keep watching for their investment
returns. They often provide intangible results like employee
morale or employee satisfaction, which does not provide
measurable revenue nor shows the percentage increase in
productivity. Therefore calculating the return on investment
delivers HR professionals to provide tangible results and
their strategic contribution to the organization. Donald
Kirkpatrick in 1959 published an idea on training evaluation.
Source: (Helical) 2018 Authors have used the above framework to evaluate a
training program and its impact on ROI (Angrave D. C.,
ROI based HR analytics: An Analysis
2016): For example, the main idea of ROI is to measure the
We explore the return on investment developed by the
impact of training investment on organizational
organization on using HR analytical tools, which assists
performance i.e. bottom line (Charlton, 2005).
organizations in insights and for better decision making. Our
need to explore ROI based approach was fulfilled by a

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 International Journal of Trend in Scientific Research and Development (IJTSRD) @ www.ijtsrd.com eISSN: 2456-6470
For example, HR professionals need to analyze training analytics helps in identifying the activities that have
effectiveness based on a few questions: maximum impact on employee engagement and reasons
causing attrition which leads to making better decisions.
Reaction and planned action: Data represents a reaction to
the program and planned action by trainees Case studies:
In 2011 Hewlett Packard applied HR data analytics to
Whether participants were satisfied?
predict employee turnover, they observed that employees
Did the training fulfill the needs requirements? who were paid high and promoted and better performance
ratings were negatively correlated with someone who
Can you apply training skills in future work?
received a promotion but did not receive a pay rise is likely
Learning: Guides and participants’ knowledge and skill to leave a job. It’s called "Flight Risk Score". The company
acquired, was losing its talent, therefore considering five years of
people data, and with a hypothesis, they identified that most
Did trainees gain knowledge and skill?
of the factors were highly correlated with attrition. The
What skills have been upgraded from the training sessions? reason was found that employers with a job change,
responsibility due to promotion or lateral movement which
Application and implementation: How Trainees apply their resulted in more attrition (Soundararajan, 2016).
gained knowledge and skill from the training programs
Cisco case study on predicting and preventing employee
Did the training impact work activities? attrition with HR analytics: To maintain its competitive
Can trainees share knowledge gained from the training advantage, the company needs to retain its highly skilled
program? employees, therefore HR analysts have to understand how
these employees think and feel for the company. Cisco
Business Impact: Measures the effect of the application of wanted to understand the satisfaction level of engineers on
knowledge and skill by trainees for a better impact on different styles of leadership and the reason for employees
business. The Measure includes job contribution, success to leave the organization and finding better ways to retain
rate, absenteeism, job engagement, and others. them. Cisco’s HR team has used advanced HR analytics to
Did the training impact business goals? assess employee satisfaction, causes for attrition, and
develop retention models. The company managers say a
What changes happened in business on employee training? promotion or providing a high salary is not always the idea
Return on Investment (ROI): at this step, comparing for retention, sometimes giving more holidays, flexible
program benefits to the costs, working hours boosts employee's job satisfaction. Like these
were the predictions from the collected data (Jackson, 2009)
Did the investment succeed?
IV. CONCLUSION
Did the training investment provide a positive return on Many industry experts have predicted that HR Analytics will
investment? be used by many organizations in the coming years.
HR Analytics value: Organizations have to adopt new practices to survive in the
HR analytics is transforming from operational access to the business field; due to change in globalization, competition,
strategic center of excellence, companies are creating more availability of technology, and information. It has been
and more data relevant for the present and future use and observed that industries must possess predictive analytics, if
focusing more on people. HR analytics through alight from not then it is challenging to survive in the long run. In the
intangible theory based decisions to the actual ROI by competitive era of HR professionals, they need to generate
practicing task automation, improved employee work and have greater analytical knowledge and abilities. This will
experience, decreased retention, better hiring practice, make better HR professionals when they generate new
improved workforce planning, identifying attrition and its insights, better communication with leaders, make better
causes, identifying best-performing talent, to improve HR decisions. During the literature study, it was observed that
performance, predict in-demand skills and positions which most of the studies explain that there is an increase in
are needed to improve business performance and very organizations implementing new data analytics tools. For the
important it transforms the role of HR into a strategic successful implementations of HR analytics, academicians
partner. The use of data analytics helps in making decisions can help to minimize previously discussed problems through
based on facts and it allows the HR Team to find actionable the application of HR analytics programs successfully. The
insights and focus on people and departmental programs to role of HR analytics focuses on both the operation of HR
drive better results. Analytics will also determine employee functions and the strategic tasks of the organization. The HR
wants and needs, by creating a better social and work team can take advantage of HR analytics as a value-adding to
environment and increasing employee retention, which in the department in an organization. In ROI based review
turn improves company culture. Analytics creates data study it was observed that there is a need for greater
transparency, by which it benefits employees to view their scientific empirical research in the field of HR analytics and
performance data and fill the skill gaps, organizations have to focus on ROI based approach for better
performance. To sum up, HR analytics can be used for
To explain in detail with an example, the benefits of HR individual and organizational performance but not prove the
analytics in recruitment is algorithms on jobseekers data HR worth.
allows HR professionals to identify the best matching talent
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