HR Analytics

HR analytics, also referred to as people analytics or workforce analytics, involves gathering, analysing, and reporting
HR data. It enables your organization to better understand your workforce, measure the impact of a range of HR
metrics on overall business performance, and make decisions based on data. In other words, HR analytics is a data-
driven approach to Human Resources Management.

Although the term “HR analytics” is widely used, there is a growing trend of referencing “people analytics” as well.
HR analytics originates from data housed within Human Resources and is aimed at optimizing HR functions. People
analytics expands beyond HR to incorporate data from other sources within the organization, such as marketing,
finance, and customer statistics, to address a wider scope of business issues.
Analytics enables HR professionals to make data-driven decisions instead of relying solely on instinct and opinions.
Furthermore, analytics helps test the effectiveness of HR policies and interventions.

Types of HR analytics:
There are four types of HR analytics:

1. Descriptive HR Analytics:
 Focuses on summarizing historical data to provide insights into past events or trends within the organization.
 Utilizes metrics such as turnover rates, employee demographics, and performance metrics to understand
historical patterns.
 Helps HR professionals identify trends, patterns, and areas of concern or improvement within the workforce.
 Examples include analysing annual turnover rates to identify trends over time and comparing departmental
performance metrics to identify areas for improvement.

2. Diagnostic HR Analytics:
 Seeks to understand the underlying causes and drivers behind past events or behaviors observed in descriptive
analytics.
 Analyzes historical data in more detail to uncover root causes and contributing factors to specific outcomes.
 Helps HR professionals identify the reasons behind trends or anomalies observed in descriptive analytics.
 Examples include investigating unplanned absence data to identify common reasons for absenteeism, such as
poor management practices, work-related stress, or health issues.

3. Predictive HR Analytics:
 Uses statistical models and forecasting techniques to predict future behaviors, trends, or events based on
current and historical data.
 Focuses on identifying patterns and correlations in data to make predictions about future outcomes.
 Helps HR professionals anticipate future workforce trends, challenges, and opportunities.
 Examples include using recruitment data to predict which candidates are most likely to succeed in a particular
role based on historical performance data and skills assessments.

4. Prescriptive HR Analytics:
 Goes beyond predicting future outcomes to provide recommendations for action to optimize HR processes and
outcomes.
 Utilizes advanced analytics techniques, such as machine learning and optimization algorithms, to generate
recommendations.
 Helps HR professionals make data-driven decisions and take proactive measures to address potential challenges
or capitalize on opportunities.
 Examples include developing algorithms to recommend personalized onboarding plans for new hires based on
their experience, skills, and role requirements.
"The Third Wave for HR value creation" as described by Dave Ulrich, signifies a transformative phase in the
evolution of Human Resources (HR) within organizations. It represents a shift from HR's traditional role as an
administrative function to a strategic partner focused on driving organizational success and creating value. In this
wave, HR professionals align their initiatives with the broader goals and objectives of the organization, emphasizing
talent management, data-driven decision-making, and an external focus on stakeholders. This evolution reflects a
recognition of HR's pivotal role in shaping organizational strategy, fostering a culture of innovation, and contributing
to sustainable growth and competitive advantage.

1. Wave 1: HR Administration:
 HR in Wave 1 primarily focused on administrative tasks such as managing terms and conditions of work, payroll,
and regulatory compliance.
 The emphasis was on operational efficiency and ensuring compliance with labor laws and regulations.
 HR Administration was considered a support function, responsible for maintaining employee records, processing
payroll, and managing benefits.
 While necessary for organizational operations, HR Administration in Wave 1 was limited in its strategic impact
and value creation.

Wave 2: HR Practice:

 In Wave 2, HR shifted from a purely administrative role to a more proactive stance focused on designing and
implementing innovative HR practices.
 This wave saw the emergence of new HR practices in areas such as recruitment, training and development,
performance management, and employee engagement.
 HR professionals in Wave 2 sought to develop best practices and improve efficiency and effectiveness in HR
operations.
 The emphasis was on innovation and integration of HR practices to support organizational goals and objectives.

Wave 3: HR Strategy:

 Wave 3 marked a significant shift towards strategic HR, where HR professionals aligned their work with
organizational strategy and objectives.
 HR Strategy involved linking HR initiatives such as talent management, leadership development, and culture-
building to business outcomes.
 HR professionals in Wave 3 acted as strategic partners to senior leadership, providing insights and
recommendations on workforce planning and talent development.
 The focus was on driving organizational performance and competitive advantage through effective HR strategies
aligned with business goals.

Wave 4: HR Outside-in:

 The fourth wave, HR Outside-in, represents HR's response to changing external business conditions and
stakeholder expectations.
 In this wave, HR goes beyond internal strategies and practices to align its work with external stakeholders such
as customers, investors, and communities.
 HR from the Outside-in involves considering external contexts and stakeholders in HR decision-making, such as
involving customers in training program design or aligning performance management with customer
expectations.
 This approach recognizes that the business of HR is the business itself, and HR professionals must adapt to
external business conditions to drive organizational success.

Key aspects of the Third Wave for HR value creation:

 Strategic Alignment: HR shifts from administrative tasks to aligning HR initiatives with organizational strategy
and objectives.
 Value Creation: HR focuses on driving organizational success and creating value through effective talent
management, leadership development, and culture-building.
 Data-Driven Decision-Making: HR leverages data and analytics to make informed decisions and measure the
impact of HR initiatives on organizational performance.
 External Focus: HR goes beyond internal strategies to align its work with external stakeholders such as
customers, investors, and communities.
 Continuous Learning and Adaptation: HR embraces a mindset of continuous learning and adaptation to stay
relevant in a rapidly changing business environment.

THE HR MEASUREMENT JOURNEY:

The HR Measurement journey aligned with the HR maturity journey is a strategic approach that recognizes the
evolving role of HR within an organization and the corresponding need for increasingly sophisticated measurement
and analytics practices. It involves progressing through different phases of HR maturity, from foundational to
strategic, while concurrently enhancing the organization's ability to measure HR performance and impact.

There are 4 phases in HR Maturity Journey:

1. Personal Department:
 In the initial phase, HR is primarily focused on administrative tasks related to personnel management, such as
payroll processing, benefits administration, and compliance with labor laws.
 Measurement in this phase is often limited to basic HR metrics such as headcount, turnover rates, and time-to-
hire.
 The primary objective is to ensure compliance with regulatory requirements and maintain accurate employee
records.

2. Operational HR:
 As organizations progress to the operational HR phase, there is a shift towards more strategic HR activities
aimed at improving efficiency and effectiveness.
 Measurement practices become more sophisticated, with a focus on tracking key HR metrics related to
workforce productivity, performance, and engagement.
 HR begins to utilize HRIS (Human Resource Information Systems) and other technology solutions to collect
and analyze data more effectively.

3. Integrated Talent Management:

 In the integrated talent management phase, HR adopts a more holistic approach to managing talent across
the entire employee lifecycle.
 Measurement practices evolve to include a comprehensive set of HR metrics aligned with organizational
goals, such as talent acquisition, development, retention, and succession planning.
 HR begins to leverage advanced analytics techniques to gain deeper insights into workforce trends and to
inform strategic talent management decisions.

4. High Impact HR or Strategic HR:

 In the final phase of HR maturity, HR becomes a strategic partner to senior leadership, actively contributing
to organizational success and driving high-impact HR initiatives.
 Measurement practices are closely aligned with business objectives, with a focus on demonstrating the
impact of HR initiatives on key business outcomes such as revenue growth, customer satisfaction, and
employee performance.
 HR leverages predictive analytics and other advanced analytics techniques to anticipate future workforce
trends and to inform strategic workforce planning decisions.
Measurement of Jounrey:

1. Organize the Data:

 Begin by gathering and organizing HR data from various sources such as HRIS (Human Resource Information
System), performance management systems, payroll systems, and employee surveys.
 Standardize data formats, eliminate duplicates, and ensure data integrity to create a reliable and
comprehensive dataset.
 Implement data governance processes to establish rules and procedures for managing and maintaining HR
data quality over time.
2. Display the Data:
 Once the data is organized, visualize it using charts, graphs, dashboards, and other visual tools to make it
more accessible and understandable to HR stakeholders.
 Choose appropriate visualization techniques based on the nature of the data and the audience's
preferences, ensuring clarity and relevance.
 Design visually appealing and informative dashboards that provide insights into key HR metrics and trends,
allowing stakeholders to monitor performance and make data-driven decisions.

3. Relate the Data:

 Analyze the relationships and connections between different HR metrics and variables to uncover insights and
patterns.
 Use correlation analysis, regression analysis, and other statistical techniques to identify meaningful associations
and dependencies within the data.
 Relate HR metrics to broader organizational goals and objectives, demonstrating the impact of HR initiatives on
business outcomes such as employee engagement, productivity, and profitability.

4. Model the Data:

 Develop predictive models and forecasting techniques to anticipate future HR trends and outcomes based on
historical data.
 Utilize machine learning algorithms, time series analysis, and other advanced analytics techniques to build
accurate and reliable predictive models.
 Incorporate external factors such as market trends, economic conditions, and industry benchmarks into the
modeling process to enhance predictive accuracy and relevance.

5. Evaluate the Data:

 Assess the quality, accuracy, and reliability of HR data through ongoing evaluation and validation processes.
 Implement data quality metrics and performance indicators to monitor data integrity and identify areas for
improvement.
 Conduct regular audits and reviews to ensure compliance with data privacy regulations, security standards, and
best practices in data management.

6. Org. System:
 Establish a robust organizational system for managing HR data and analytics capabilities effectively.
 Define roles, responsibilities, and governance structures to support data-driven decision-making and
collaboration across HR and other functions.
 Invest in training and development programs to build analytical skills and competencies within the HR team and
foster a data-driven culture throughout the organization.
Lean System: Definition

A Lean system describes a business or business unit that holistically applies Lean principles to the way it plans,
prioritizes, manages, and measures work. The goal for any Lean system is to maximize customer value. While Lean
thinking can greatly improve the productivity and function of a team or department, Lean implementations that
spread across the entire organization have the greatest impact on the customer. Lean systems use a Lean approach
to identify and eliminate waste. They systematically discover and act upon opportunities to improve.

These are two of the fundamental concepts of Lean:

 Eliminate anything that does not add value to the customer.

 Work systematically and continuously to create more value for the customer.

The Five Lean Principles:

1. Value Definition:
 Lean principles emphasize understanding and defining customer value, which is what the customer is willing to
pay for.
 It's crucial to identify customer needs through techniques like surveys and interviews to ensure alignment with
customer expectations.

2. Value Stream Mapping:

 Value stream mapping involves identifying all activities that contribute to delivering value to the customer.
 The aim is to eliminate or minimize non-value-added activities (waste) to streamline processes and improve
efficiency.

3. Flow Creation:
 Once waste is identified, the focus shifts to creating smooth and uninterrupted flow in processes.
 Strategies like breaking down steps, leveling workload, and cross-functional training help optimize flow and
reduce delays.

4. Establish Pull:
 Pull-based systems aim to produce items only when needed, reducing inventory and work in process.
 By aligning production with customer demand, organizations can reduce waste and improve efficiency.

5. Pursue Perfection:
 Wastes are prevented through the achievement of the first four steps: 1) identifying value, 2) mapping value
stream, 3) creating flow, and 4) adopting a pull system. However, the fifth step of pursuing perfection is the
most important among them all.
 It makes Lean thinking and continuous process improvement a part of the organizational culture. Every
employee should strive towards perfection while delivering products based on the customer needs.
 The company should be a learning organization and always find ways to get a little better each and every day.

Locating the HR challenge in the system:

1. Recruitment & Onboarding:

 Challenge: Lengthy recruitment cycles, excessive paperwork, and disjointed onboarding processes can lead to
delays in filling positions and inefficiencies in integrating new employees.
 Lean Perspective: Lean encourages streamlined processes and minimizing waste. HR should focus on identifying
bottlenecks in recruitment and onboarding, standardizing processes, and eliminating unnecessary steps to
improve efficiency and reduce lead times.

2. Performance Management:
 Challenge: Traditional performance management systems often involve cumbersome annual reviews, complex
rating systems, and limited feedback, leading to disengagement and demotivation among employees.
 Lean Perspective: Lean promotes continuous improvement and respect for people. HR should shift towards
more frequent, feedback-rich performance conversations, empowering employees to set goals, track progress,
and develop their skills in alignment with organizational objectives.

3. Training and Development:

 Challenge: Inadequate training programs, lack of alignment with organizational goals, and limited opportunities
for skill development can hinder employee growth and productivity.
 Lean Perspective: Lean emphasizes the importance of investing in employee development to build capabilities
and drive continuous improvement. HR should collaborate with business units to identify skill gaps, provide
targeted training interventions, and create a culture of learning and knowledge sharing.

4. Employee Engagement and Recognition:

 Challenge: Low employee engagement, lack of recognition for contributions, and poor communication channels
can lead to disengagement and turnover.
 Lean Perspective: Lean values respect for people and recognizes the importance of engaging employees in
problem-solving and decision-making. HR should focus on creating a supportive work environment, promoting
open communication, and implementing systems for recognizing and rewarding employee contributions.

5. Talent Management and Succession Planning:

 Challenge: Inadequate succession planning, talent shortages, and siloed talent management practices can
undermine organizational resilience and agility.
 Lean Perspective: Lean encourages cross-functional collaboration and talent mobility to build a flexible and
adaptive workforce. HR should develop robust talent management strategies, identify high-potential employees,
and facilitate talent development and succession planning processes aligned with business needs.

6. HR Administration and Compliance:

 Challenge: Manual and paper-based HR processes, redundant administrative tasks, and compliance burdens can
consume valuable time and resources.
 Lean Perspective: Lean advocates for streamlining processes and eliminating non-value- added activities. HR
should leverage technology solutions, automate routine tasks, and standardize processes to reduce
administrative overhead and ensure compliance while freeing up HR resources for more strategic initiatives.

INTANGIBLE SOFT DATA AND TANGIBLE HARD DATA

In HR analytics, both soft and hard data are valuable for gaining a comprehensive understanding of the workforce,
identifying trends, patterns, and areas for improvement, and making data-driven decisions to optimize HR practices
and strategies. Integrating both types of data allows HR professionals to develop holistic approaches to talent
management, employee engagement, and organizational development.

Soft Data:

 Soft data refers to qualitative, subjective, and non-quantifiable information that is difficult to measure using
traditional metrics.
 This includes aspects such as employee attitudes, perceptions, behaviors, and culture.
 Examples of soft data include employee satisfaction, engagement levels, leadership effectiveness, organizational
culture, and employee morale.
 Soft data is typically gathered through methods such as surveys, interviews, focus groups, and observation.
 While soft data may be more challenging to analyze and quantify, it provides valuable insights into the human
aspect of organizations and can inform strategic HR decisions.

 Employee Engagement: Soft data includes metrics related to employee engagement, such as job satisfaction,
morale, and commitment to the organization. This data is typically gathered through employee surveys, focus
groups, and interviews.
 Organizational Culture: Soft data also encompasses information about organizational culture, including values,
norms, and beliefs shared by employees. Cultural data can be collected through observation, interviews, and
cultural assessments.
 Leadership Effectiveness: Soft data may involve assessing leadership effectiveness through measures like
employee perception of leadership, leadership style, and communication effectiveness. Feedback from
employee surveys and performance reviews can provide insights into leadership quality.
 Team Dynamics: Soft data includes information about team dynamics, collaboration, and communication within
teams. This data can be obtained through team assessments, peer evaluations, and observation of team
interactions.

Hard Data:

 Hard data, on the other hand, refers to quantitative, objective, and measurable information that can be easily
quantified and analyzed.
 This includes tangible metrics such as turnover rates, productivity levels, absenteeism rates, revenue per
employee, and training costs.
 Hard data is often obtained from HRIS (Human Resource Information Systems), payroll systems, performance
management systems, and other data sources.
 Hard data provides concrete metrics that can be used to track performance, monitor trends, and assess the
effectiveness of HR initiatives.
 While hard data is valuable for measuring tangible outcomes and tracking progress, it may not capture the full
complexity of human behavior and organizational dynamics.

 Turnover Rates: Hard data includes quantitative metrics such as turnover rates, which measure the percentage
of employees who leave the organization over a specific period. Turnover data can be obtained from HRIS and
used to track retention trends.
 Productivity Metrics: Hard data encompasses productivity metrics such as output per employee, sales per
employee, or revenue per employee. These metrics quantify the level of output or performance achieved by
employees and can be tracked using performance management systems.
 Absenteeism Rates: Hard data includes metrics related to absenteeism, such as the percentage of days lost due
to employee absence. Absenteeism data can be collected from attendance records and used to monitor
employee attendance patterns.
 Training Costs: Hard data involves quantifying training costs, including expenses related to employee training
and development programs. These costs can include expenses for training materials, instructor fees, and
employee time spent in training sessions.

A Short History of Analytics Adoption

The adoption of analytics in HR has evolved from basic data reporting to advanced predictive modelling and strategic
workforce planning, reflecting a growing emphasis on data-driven HR decision-making and the increasing recognition
of human capital as a critical driver of organizational success.

1. Early Years (Pre-2000s):

 In the early years, HR primarily relied on manual processes and traditional methods for data collection, storage,
and analysis.
 HR departments focused more on administrative tasks such as payroll processing, benefits administration, and
compliance management rather than strategic workforce planning or data-driven decision-making.
 Limited technology infrastructure and lack of sophisticated analytical tools hindered the ability to leverage data
for HR insights.

2. Emergence of HRIS (2000s):

 The emergence of Human Resource Information Systems (HRIS) in the 2000s facilitated the digitalization of HR
data and processes.
 HR began to transition from paper-based systems to electronic databases, enabling more efficient management
of employee records, timekeeping, and basic HR transactions.
 While HRIS provided a foundation for data collection, reporting, and automation, analytics capabilities were still
limited, and HR remained predominantly focused on transactional activities.

3. Rise of People Analytics (2010s):

 The 2010s witnessed a significant shift towards people analytics, driven by advances in technology, increased
availability of data, and growing recognition of the strategic value of workforce insights.
 Organizations started investing in dedicated HR analytics teams, tools, and platforms to analyze large volumes of
data and extract actionable insights.
 People analytics expanded beyond basic HR metrics to include predictive analytics, workforce planning, talent
acquisition analytics, employee engagement analysis, and performance optimization.
 HR professionals began leveraging predictive modelling, machine learning, and other advanced analytics
techniques to anticipate workforce trends, identify high-potential employees, and optimize HR interventions.

4. Integration with Strategic HR (Present and Future):

 Today, HR analytics has become an integral part of strategic HR management, guiding decision-making processes
across the employee lifecycle.
 Organizations are increasingly integrating HR analytics with broader business analytics to align HR strategies with
organizational goals and drive business outcomes.
 The future of HR analytics is expected to focus on real-time analytics, personalized employee experiences, ethics
and privacy considerations, and leveraging emerging technologies such as artificial intelligence and natural
language processing.