HR ANALYTICS UNIT –I

“The future of Human Resources is going to involve

analytics. It has to. The whole world is focused on data,
data sources, and the analytics and insights you can get
from it”

JONATHAN FERRAR
VP, Smarter Workforce
BIG DATA
Data from many sources that can be integrated into useful
information to support tactical, operational and strategic HR
decisions.

EXAMPLES:
Financial data
Compensation data
HRMS demographic data
Satisfaction data from internal surveys
Performance management data
Customer satisfaction data synced to individual servicing employees
 DATA ANALYTICS:
The process of using data to attain actionable insight and influence operational and
strategic organizational decisions.

USE : By applying custom measures to support HR functions and decisions

NEED: Organizations operate in complex employment markets, employ multi -cultural
work forces and compete in global settings.

 OPERATIONAL IMPACT:
Reduce recruiting costs over time
Tracking more than turnover rates

STRATEGIC IMPACT :
Enables HR managers to provide evidence-based recommendations to organizational
leaders
Supports HR managers in making tactical and operational decisions based on timely
information

HR CREDIBILITY AND PROFESSIONALISM:

Ability to communicate in objective terms
Increased credibility through evidence-based recommendations
 
Combining data along with custom measures to support
operational and strategic HR decisions.

OPERATIONAL:
 Revenue Per Employee (RPE) (Data sources –Financial and HR systems)

STRATEGIC :
 Time to Hire (Elapsed time between advertisement and initiation of on-
boarding)
 Employee Churn Rate (What groups are being effected most and least)
 BIG DATA AND DECISION MAKING:

Using a powerful and expansive statistical framework to derive critical

information to make strategic decisions.

EXAMPLES:
 Combining multiple sources of data – broader sources than many ERPs provide,
customer services data and HRMS data – all integrated to provide the power of Big Data

 Integrating HRMS Dashboards with a mix of Big Data sources for operational and
strategic decisions

 Merging performance management data and customer satisfaction data to identify

potential management development candidates

 Supporting corporate-level HR strategy recommendation based on robust, substantive

data
 
 
 SAMPLE BIG DATA MEASURES TO CRUNCH HR DATA:

 Time to hire
 Compensation and benefits
 Training and development
 Engagement
 Employee separation
 
RECRUITMENT: Operational Data

MEASURE: Time to hire

FORMULA: Time to hire – Elapsed time between time of posting and time to
start

IMPACT:
 Credibility for HR organization from hiring manager’s perspective
 Credibility for organization from candidate’s perspective
 Credibility for HR organization from overall employee perspective
 
 ENGAGEMENT-STRATEGIC MEASURE:

MEASURE: Survey data (climate, leaders, intent to leave, satisfaction, etc.)

FORMULA: Select internal or external engagement survey
 High engagement scores are typically linked to high financial performance
 Caution: measure of employee engagement is insufficient to draw conclusions on overall
morale - but it is a place to start
IMPACT:
 STRATEGIC: Provides leadership a general understanding of employee attitudes and
opinions relative to the firm
 
EMPLOYEE SEPERATION-OPERATIONAL MEASURE:

MEASURE: Employee churn rate

FORMULA: Total number of leavers/average number employed x 100
IMPACT: (Visibility)
 STRATEGIC: Identifying parts of the company with high churn
 TACTICAL: Identifying first and second line supervisors with highest numbers of departures
 OPERATIONAL: Allocating recruiting and training costs to exact area of the organization
responsible for losses
 HR ANALYTICS- VARIED DEFINITIONS

 Analytics in human resource management has been around for years. For
example the notion of measurement in human resources can be traced
back to the early 1900s (Kaufman, 2014)
 
 HR Analytics, more generally, as either an analysis process or decision-
making process.
 
 Analytics is first a mental framework, a logistical progression, and second a
set of statistical operations.
 
 Other names: ‘Talent Analytics’, ‘Workforce Analytics’, ‘People Analytics’
 
 HR Analytics, either specific analyses (Harris, Craig, and Light 2011) or
specific practices (Falletta, 2014).
 
 HR Analytics can be considered both as ‘systematically reporting on an
array of HR metrics’ or more sophisticated solutions, based on ‘predictive
models’ and ‘what-if scenarios’ (Bassi2011)
 
 HR Analytics represent statistical techniques and experimental approaches
that can be used to show the impact of HR activities (Lawler et al. 2004)
 
 HR Analytics ‘is an evidence-based approach for making better decisions on
the people side of the business; it consists of an array of tools and
technologies, ranging from simple reporting of HR metrics all the way up to
predictive modeling.
 
 HR Analytics as demonstrating the direct impact of people on important
business outcomes (Mondare, Douthitt, and Carson 2011)
 COMMONALTY OF DEFINITION
 
 First, HR Analytics is not HR Metrics. It involves more sophisticated analysis of
HR-related data.

 Second, HR Analytics does not focus exclusively on HR functional data, and

involves integrating data from different internal functions and data external to
the firm.

 Third, HR Analytics involves using information technology to collect,

manipulate, and report data.

 Fourth, HR Analytics is about supporting people related decisions.

 Finally, HR Analytics is about linking HR decisions to business outcomes and

organizational performance.
 HR ANALYTICS:
“ A HR practice enabled by information
technology that uses descriptive, visual, and
statistical analyses of data related to HR
processes, human capital, organizational
performance, and external economic
benchmarks to establish business impact and
enable data-driven decision-making.”
 NEED FOR HR ANALYTICS
 Globalization and changing business dynamics present increasing
challenges to HR and line management on how best to develop and
deploy an agile and highly-competency workforce while maintaining cost
efficiency.
 
 As worldwide economic and political conditions continue to concern
business leaders, their attention turns to the various levers that can foster
success in uncertain times.

 Employee salaries make up close to half of many organizations’ operating

expenses and can be even higher in some industries such as financial
services, so the contribution of the workforce to organization success is
perhaps the most important lever to competitive advantage.

 The challenge of containing costs while developing a high performing

workforce is a primary challenge facing most companies today.
 Cont…..

 Organizations need to know enough about their workforce to optimize the

workforce lever

 Organizations struggle to understand their complex existing and potential

workforce and how to use each effectively.

1.Which applicants should they recruit?

2.Which of their hires do they wish to retain for their performance and
productivity?
3.Who amongst their internal talent do they wish to groom for career
advancement?
4.What are the most effective compensation, benefits and development
options that will optimize the organization’s competitiveness in the marketplace?
5.Do we need to retrench again or pursue growth?
In addition to the most obvious one: what is our headcount?
 LEVELS OF ANALYTICS
Analytics is divided into three levels:

1. Descriptive:

 Traditional HR metrics are largely efficiency metrics (turnover rate,

time to fill, cost of hire, number hired and trained, etc.).

 Primary focus : Cost reduction and Process improvement.

 Descriptive HR analytics reveal and describe relationships and current

and historical data patterns.

 Foundation of your analytics effort.

 It includes, for example, dashboards and scorecards; workforce

segmentation; data mining for basic patterns; and periodic reports.
 Cont…
2. Predictive:

 Predictive analysis covers a variety of techniques (statistics, modeling, data mining)

that use current and historical facts to make predictions about the future.

 It’s about probabilities and potential impact.

 It involves, for example, 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 optimization.

 It is used to analyze complex data to predict outcomes, provide decision options, and
show alternative business impacts.

 It involves, for example, models used for understanding how alternative learning
investments impact the bottom line (rare in HR).
DATA MAP
ANALYTICAL COMPETENCIES NEEDED FOR HR PROFESSIONALS:

 Research design

 Survey design
 Quantitative data collection and analysis

 Data preparation
 Basic data analyses

 Intermediate data analyses

 Basic multivariate models

 Advanced multivariate models

 Root cause analysis
 CONTRIBUTION OF HR ANALYTICS
 It is now possible for organizations to excel at answering workforce-
related questions using workforce analytics.

 We can know whether to bolster training programs, tweak our benefits

and compensation plans, or hire into or terminate from key talent pools.

 We can sift through far more data and crunch many more numbers to
determine who is performing well, who will be needed, where will they
be needed, with what skills, and at what cost?

 We can look at which individuals are achieving their performance goals

and see which of them have the competencies needed for today and
tomorrow to build a competitive workforce.
 Cont……

 Workforce analytics enables not only a view of the workforce today

but offers true insights that can drive talent-related decisions and
actions, resulting in improved performance in the future.

 Human Resources Analytics provides organizations detailed

analysis on HR programs and workforce performance.

 It integrates critical data from across the enterprise value chain

transforming silos of information into relevant, timely, and
actionable insight.
 
 For example, managers can better understand the impact of
compensation on employee performance by correlating
compensation with employee performance and turnover metrics.
 APPROACHES TO HR ANALYTICS:
HR ANALYTICS APPLICATIONS

HR PERFORMANCE :
 Correlate financial measures with key workforce metrics to demonstrate HR’s strategic value in
the organization and quantify the return of investment on HR and the workforce.
 
OPERATIONS:
 Provide core data foundation for HR reporting and analysis in headcount, attrition, diversity and
headcount movement.
 Provide workforce planning with easy visibility into global staffing, retention, contingent labor
usage, and improved workforce performance by focusing on internal mobility and talent
development.
 Monitor workforce diversity compliance.

COMPENSATION :
 Monitor total payroll costs, e.g. payroll costs, overtime spend, and variable compensation.

 Analyze employee compensation with performance

 Reward and retain high performers with potential.
 Cont….
RECRUITING:
 A complete set of metrics measure the efficiency and effectiveness of the entire
recruitment lifecycle including new hires’ post-hire performance.

 Better measure quality of hire, optimize candidate sourcing, analyze recruitment

pipeline and ‘hire-to-retire’ process efficiency, monitor vacancies and reduce time to
fill.
 
LEARNING MANAGEMENT:
 Assess learning offerings and how those programs affect employee performance and tenure

 Monitor program enrollment and completion to understand how activity and completion affect
quality of workforce.
 

LEAVE AND ABSENCE:

 Monitor planned and unexpected absence events to gain greater insight into lost
productivity

 Measure absence events over time to highlight trends and exceptions.

 LEADING PRACTICES FOR IMPROVED
ORGANIZATIONAL PERFORMANCE:

 Role and responsibility-based access to relevant, timely and accurate

data within the context of the individual’s business processes.
EG: A call center manager, using business intelligence and workforce
analytics, can see average cost per call and abandonment rates, with and
without additional training, and can use them to optimize daily call
center performance.

 Interactive drill-down and analysis from integrated data extracted from

multiple sources to derive insight.
EG: With integrated workforce and financials data displayed on a
dashboard, executives can determine if voluntary turnover is increasing
and whether groups that deliver highest financial value are at risk of
leaving.
 Cont………

 Predictive analysis of possible actions that shows potential outcomes of

actions, supports optimal decision making, and facilitates immediate
action.
Continuing the example above, managers can proactively manage at-risk
top performer turnover and conduct impact analysis to understand the
potential effects of salary actions, in order to select those actions that
optimize turnover, expenses, and financial results.

 Enabling action to be taken both outside-in and inside-out.

Outside-in actions might start with access to a dashboard which guides
you through an analytic workflow to drill down to details in your core
system of record, where you can take action, perhaps by recording a salary
increase determined to be needed.
 ROLE OF HR ANALYTICS IN BUILDING
ORGANIZATIONAL CAPABILITIES:

HR analytics can help an organization improve its profitability through

more effective workforce cost control, balancing the lowest effective
headcount while ensuring satisfactory service delivery.

THE PRIMARY METRIC CATEGORIES INCLUDE:

1) Cost, Revenue and Profit Optimization
2) Recruiting and Hiring
3) Leadership and Development
4) Productivity and Performance
5) Compensation and Benefits
6 ) Mobility and Career Development
7) Turnover and Retention.
 
ANALYTIC WORKFLOW EXAMPLE:
 TYPES OF HR METRICS:
 Efficiency metrics
 Effectiveness metrics and
 Outcome or impact metrics

EXAMPLES:
1.EFFICIENCY METRICS:
 Cost per hire
 HR expense per employee
 Yield ratios
 Time to fill the open positions
2.HUMAN CAPITAL METRICS:
 Absent rate
 Expense factor: operating expense/total full-time equivalent (FTE)
 Profit per employee: revenue – operating expense/total FTE
 Labor cost factor: compensation + benefit costs/FTE
 Human capital value added revenue: operating expenses –compensation + benefit
costs/FTE
 Involuntary and voluntary separation
 
 Examples (cont….)

3.EFFECTIVENESS OR COST BENEFIT METRICS:

 Firm salary/competitor salary ratio
 Number and quality of cross-functional teams
 Progression of employees through development plans
 Percentage of total salary at risk

4.IMPACT OR STRATEGIC METRICS:

 Demonstrating a relationship between a particular HR metric and other
metrics in the organization.