Chapter 7

HR Metrics and Workforce

Analytics

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 TOPIC AND CHAPTER OBJECTIVES
 Why Metrics is a HOT topic
 Metrics vs. Workforce Analytics
 The need for decisions making in order for Metrics to be
effective
 The limitations of the traditional HR metrics
 The role of benchmarking
 Understanding: data mining and other related Workforce
Analytics activities and presentations
 HR Dashboards
 The needed Organization Impact of Metrics and
Workforce Analytics.
 What HRIS does to support Workforce Analytics/Metrics

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 Brief History of Metrics

• Days of “Scientific Management“ – Taylor, and

Organizational Psychology – 1911-13
• Saratoga Institute List / SHRM
• Kaplan Nortan – “Balanced Scorecard”
• “Lean Manufacturing”
• Six Sigma

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 MAIN OBJECTIVE OF HR METRICS AND
WORKFORCE ANALYTICS
– HR metrics and analytics comprise an information
system
– Managers make different and better decisions as a
result of information
– Decisions have impact on company’s strategy and
goals
– Causes demand for more metrics

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 25 of 30 suggested HR METRICS –
SARATOGA/SHRM (table 7.1 in Text)
– Revenue Per Employee
– Expense Per Employee
– Compensation as a Percentage of Revenue
– Compensation as a Percentage of Expense
– Benefit Cost as a Percentage of Revenue
– Benefit Cost as a Percentage of Expense
– Benefit Cost as a Percentage of Compensation
– Retire Benefit Cost Per Retiree
Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 25 of 30 suggested HR METRICS –
SARATOGA/SHRM (table 7.1 in Text)
– Retiree Benefit Cost as a Percentage of Expense
– Hires as a Percent of Total Employees
– Cost of Hire
– Time to Fill Jobs
– Time to Start Jobs
– HR Department Expense as a Percentage of Company
Expense
– HR Headcount Ratio—HR Employees: Company Employees
– HR Department Expense Per Company Employee
– Supervisory Compensation Percentage

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 25 of 30 suggested HR METRICS –
SARATOGA/SHRM (table 7.1 in Text)
– Workers’ Compensation Cost as a Percentage of Expense
– Workers’ Compensation Cost per Employee
– Workers’ Compensation Cost per Claim
– Absence Rate
– Involuntary Separation
– Voluntary Separation
– Voluntary Separation by Length of Service
– Ratio of Offers Made to Acceptances

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 USING HR METRICS AND WORKFORCE
ANALYTICS
– Metrics are data that reflect descriptive detail
about organizational outcomes or processes
– Analytics refer to strategies for combining data
elements into metrics for examining relationships
– Understanding these combinations help managers
make more informed and better decisions

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 Limitation of metrics
• Many derived soley from Accounting Systems
• Focus on costs – Limited value to strategy
– If managers are only provided information about costs, with
little or no information about benefits, costs are likely to
become the primary driver of managerial decisions. This
perpetuates the still common perception of HR as a “cost center
• Tended to aggregate data to the level of the
organization. As such, they offer limited information that
could be used to identify and diagnose within-
organization differences.
• “After the Fact”
– This results in slow responses to problems or opportunities.
Because they provide data “after-the-fact”, these are
described as “feedback” metrics.

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 HR metrics and Workforce Analytics

• Major Distinction between them:

– Metrics are data (numbers) that reflect some detail
about given outcomes, e.g., success in recruiting new
employees.
– Metrics reflect characteristics of the organization’s HR
programs and activities.
– Analytics refer to strategies for combining data
elements into metrics and for examining relationships
or changes in metrics.

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 Workforce Analytics

• Workforce analytics refer to strategies for combining

data elements into metrics and for examining
relationships or changes in metrics. Understanding these
combinations is done to inform managers about the
current or changing state of human capital in an
organization in a way that can impact managerial
decision making.
 The importance of this view is that the analytics an organization
needs depend on the problems and opportunities that currently
face its managers. Understanding what opportunities and
problems managers face suggest relevant analyses that can
support better decisions. These analyses then determine what
metrics that the organization needs in order to compute these
analyses and how those metrics should be calculated.

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 HR ACTIVITIES AS PART OF METRICS
AND ANALYTICS USAGE
– Reporting
– Dashboards
– Benchmarking
– Data Mining
– Predictive Analyses
– Operational Experiments
– Workforce modeling
– Better Problem Solving and Decision Making

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 Benchmarking
• The Saratoga Institute’s benchmarking efforts were the first to
develop information on standard HR metrics regarding the
use and management of human capital. Benchmarking data is
useful in that it provides insights into what is possible.
• However, a challenge in using HR metrics as benchmark data
is that an organization’s human resource practices and the use
of its HR staff reflect current challenges facing that
organization. As a result, most organizations have an HR
department, but the specific functions performed by these
departments vary widely across organizations.
• Consequently, direct comparisons of HR benchmarking data
from one’s own organization to data from other organizations
may not provide realistic guidelines for either goal setting or
forecasting the potential effectiveness of remedial actions an
organization might undertake.

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 “Big Data”and Data Mining
• Data mining refers to efforts to identify patterns that exist within data and that
may identify unrecognized causal mechanisms that can be used to enhance
decision making.
• To identify these causal mechanisms, data mining uses correlation and
multiple regression methods to identify patterns of relationships in extremely
large datasets.
• Data mining has a number of important applications, but the caveat with its
use is that it can also uncover spurious and nonsensical relationships (e.g.,
taller employees make better leaders; older employees have longer tenures).
• Current interest in Big Data reflects efforts to analyze the extremely large data
sets created by many transaction systems. Often these datasets can be many
terabytes (210 gigabytes) or more.
• Many web based applications and transaction sites, like those generated by
Amazon.com, Google, and many social media sites generate large numbers of
transactions.
• Efforts in Big Data reflect attempts to mine these very large data sets for
patterns that can provide addition insight for managers about customer
preferences or process characteristics that managers can use to drive greater
sales, higher customer satisfaction and reduce costs.

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 Predictive analysis/Scorecards
• Predictive analysis involves attempts to develop models of
organizational systems that can be used to predict future
outcomes and understand the consequences of hypothetical
changes in organizations
– For example, if the organization discovered a correlation between employee
job satisfaction and turnover, HR could use this data to suggest
modifications to the employees’ work situation or their benefits.
• Efforts to develop balanced scorecards are examples of
elementary predictive systems. They involve identifying leading
indicators of important organizational outcomes and the nature of
the relationships expected to lead to them.
• Engaging in efforts to test the assumptions in these models over
time can lead to enhancements in the quality of the models’
underlying predictive analyses, either by identifying additional
leading indicators or better specifying the nature of the
relationships between predictors and outcomes.

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 Operational Experiments
• The evidence-based management movement argues that managers should base
their decisions on data drawn from the organization and evidence about the
actual functioning of its systems rather than using personal philosophies or
untested personal models or assumptions about “how things work.” One of the
most effective methods for developing the evidence on which to base decisions
is through operational experiments conducted within the organization.
• Google uses operational experiments to test the effectiveness of the ad words
used on its Web site. Rather than simply relying on intuition or “expert judgment”
about which ad wording is more effective, it creates an experiment. It configures
its site to alternate the presentation of competing ad text to visitors to its site and
then tracks the number of “click-throughs” on the ad for a period of time. Given
the large number of daily hits, Google can get objective data on the effectiveness
of the various ads in a relatively short time and then adopt the ad wording
demonstrated to be most effective

Michael J. Kavanagh and Richard D. Johnson - Human Resource Information

Systems: Basics, Applications, and Future Directions, 3e © 2012 SAGE
Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
Publications, Inc.
 Workforce Modeling

• Workforce modeling attempts to understand

how an organization’s human capital needs
would change as a function of some expected
change in the organization’s environment. This
change may be a shift in the demand for the
organization’s product, entry into a new market,
divestiture of one of the organization’s
businesses, or a pending acquisition of or
merger with another organization.

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 Dashboards and Infographs
• Dashboards are a component of reporting.
Dashboards reflect efforts to align real-time analysis
of organizational and HR processes as well as an
increased capacity to aggregate organizational data.
• In many instances, pictures can provide a more
compelling way to present the story resulting from
an analysis, particularly when that story is based on
complex analyses that build upon insights from a
number of different data sources.. Infographs
combine a number of data elements often
incorporating pictures, figures, tables, and text to
help tell a story more effectively than can be done by
any of these elements.

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 Figure 7.3 – Employee Dashboard

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 Figure 7.4 – Sample Infograph

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 USING METRICS AND ANALYTICS FOR
MEASUREMENT
– Getting Started – Determine problem &
organizational outcomes
– Identify the “why” of addressing problem
– Put HR metrics and analytics in context
– Reporting results to managerial decision-makers
• Push methods
• Pull methods

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 Remember:
• Don’t “Do Metrics”
• Bigger Is Not Always Better
• HR Metrics and Analytics Is a Journey—Not a
Destination
• Be Willing to Learn
• Avoid the Temptation to Measure Everything
Aggressively

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.
 The future? Is NOW
• A definite Competitive Advantage
• Tools exists TODAY
• Computing Infrastructure is in place
• Cloud makes it accessible all the time
• Vendors are building better templates of Dashboards
• Vendors integrating metrics in standard product deliverables
• By using HR metrics and workforce analytics, decision
makers will acquire the ability to more effectively manage
and improve HR programs and processes as well as to
improve the effectiveness of HRIS use. Using this acquired
ability, managerial decision makers may be able to modify
entire employment systems to manage the company’s
human capital more effectively.

Kavanagh, Human Resource Information Systems, Third Edition© 2015 SAGE Publications, Inc.