Insight on Redefining HR with HR Analytic
Widespread digital and cultural changes in the modern workplace have started to redesign and redefine both the culture of the workplace along with the structure of the organization and, in various cases, the work itself. Organizations are now depending more heavily on data to search, hire, and manage talent more than ever before. Traditionally, a considerable amount of work in HR is based on intuition hence it has no measure of success. However, HR Analytic has the potentiality to change all of this. Plenty of HR issues can be resolved by becoming more data-driven and analytical savvy and nowadays organizations are progressively adopting this modern HR concept.
HR Analytic is about analyzing an organizations human resource problems through the use of data. It is the use of statistical methods and analysis of factors affecting employee in order to enhance business outcomes. The term HR Analytic is also used synonymous with people analytic, workforce analytic or talent analytic, although there are some subtle dissimilarity in how these terms are being adopted. HR Analytic enables HR practitioners to make data driven decisions which will assist them to attract, manage and retain top talent in the organization. It enables HR department to answer critical questions about their organization and maximize employee productivity. HR departments have been accumulating massive quantities of HR data for quite some time, however, this immense data have not been used for decision making process in HR issues. Once organizations begin to analyze their human resource issues by utilizing those data, they are involved in HR analytic. HR analytic is a data driven approach towards human resource management, which will enable HR professionals to cease making decisions based on hunches and intuition.
A major focus of most HR departments is solely on reporting employee data and this is not adequate enough in modern data driven economy as merely maintaining records is insufficient to add any strategic value to the organization. As Carly Fiorina, former CEO of Hewlett-Packard famously said “The goal is to turn data into information and information into insight”. This statement is also relevant in HR sector and accomplishing such analysis empowers HR department to be more associated in decision making of the organization in a strategic level.
Since HR Analytic facilitates HR professionals to enhance their operations and decision making with the use of data, organizations are now comprehending that their success is built on human resources and HR Analytic can illuminate the path from intangible theory based decision to ROI. If an organization wants to take maximum advantage of HR Analytic, it has to connect the HR data with the organization’s strategic objectives. The application of HR analytic results in a wide array of strategic and operational advantages to HR department such as:
- Better HR decisions: HR Analytic increases the performance of the human resources, and in addition provides a better understanding of what motivates employees to increase their work productivity and how organization culture affects job performance. One of the essential roles of HR Analytic is to provide access to critical data insights related to the organization’s workforce which can be then analyzed for making better decisions.
- Recruitment: Using HR Analytic, organization can match the right candidate to the right job by detecting the traits that differentiates top performers. Prospective candidates can be matched against a list of predictors of performance generated from existing employee data. The use of machine learning algorithms on candidate’s data allows organizations to ascertain the best matching talent for a vacant position, consequently improving the quality of hire.
- Retention: According to the research conducted by SHRM, the replacement cost of an individual employee can be as high as 50% to 60% with overall costs ranging anywhere from 90% up to 200%. Hence, employee retention is a top priority for the HR department and HR Analytic can be a vital means which assists to identify the departments affected from the high attrition and the reasons causing high attrition. Further by the use of employee data, recruiters can identify a pattern of high performing employees and appropriately alter their hiring and retention strategy. It can also support the HR department in ascertaining the activities which have the highest impact on employee engagement allowing the organizations to invest in such activities.
- Performance: As competent candidates become more challenging to search and retain, improvements in performance appraisal can be extremely valuable. HR Analytic leverages the employee performance data to ascertain who the best and worst performers are, as per the factors like previous work experience, length of employment, and their reporting authority. Career advancement is also an essential element to monitor since employees are far more likely to switch jobs if they are not satisfied with their career path. Leadership traits may materialize in some employees which can help the organizations determine which characteristics associates with prospective leaders. HR department can then nurture this potential which can result in long-term ROI for the organization.
- HR as a strategic partner: The implementation of HR Analytic can offer a unique advantageous position to HR department to validate its importance and its function as a strategic partner in a business performance. HR professionals can present business leaders with verifiable data to defend their talent hiring, engagement and retention policies.
For organizations to be successful, its workforce decisions should be supported by data. For instance, Google’s People Analytic team is perhaps the most famous example of implementation of HR Analytic with exceptional results. At an early stage Google recognized the worth of creating a people analytic department to optimize the HR functions based on data insights. Almost entire decision the company takes is data driven. Through a combination of employee surveys and productivity analytic, they discovered that essentially effective managers have eight key behaviors and they developed a management training program that incorporated these eight behaviors which led to better and more productive managers.
Likewise, ConAgra Foods Inc. applied predictive analytic software to figure out which key talent were more likely to leave and why. They observed operations with high attrition and those with low attrition and analyzed 200 factors which have likely contributed towards employees quitting their jobs. In addition, they discovered that salary was not even one of the top ten factors. Rather, the number of internal recognition employees obtained during the employment period was more strongly correlated with employee retention.
Similarly, the Wall Street Journal published an article entitled “The Algorithm That Tells the Boss Who Might Quit”. This article examined how Credit Suisse, a global financial services company, was capable of predicting employees who had high chance of leaving the company. Moreover, they could also detect why these employees might leave the company. This information was submitted to the managers in order to decrease turnover risk factors and retain their employees better. Furthermore, special managers were trained in order to retain the high performing employees with high risk of attrition. This pro-active approach to employee retention saved Credit Suisse approximately $ 70,000,000 a year.
Even though analysis of HR data is essential for data based decision making, managing human resources data of an organization is not a simple task. The numerous HR tools being used in modern day produces a massive amount of data every single day, but the lack of clarity on how that data can be beneficial for a specific decision making process, it is tough to access into the true power of HR Analytic. There are numerous challenges that organizations must overcome in order to harness the benefits of HR analytic:
- Integrating data: There are numerous HR tools serving different HR functions in an organization, so there are several sources of data working in isolation. The various HR data sources like HRIS, applicant tracking system, attendance & payroll system, performance management system or any other HR tools generates its own data and integrating it with the other sources of data is a major challenge for HR professionals. While making strategic business decisions HR professionals cannot use the data from only one source, rather it has to be organized to gain insights for better decision making. The data has to be obtained, cleaned, consolidated, and analyzed from several departments along with multiple business functions.
- Lack of analytic skills: Many organizations are now promoting the application of analytic in HR functions, but in reality the analytical abilities of most HR professionals are limited. A majority of them need appropriate training on application of analytic to learn the art of translating data into meaningful insights. This particular lack of skill creates the successful application of HR Analytic a challenging and complex task in most organizations. Taking into consideration the technical aspects involved, most HR professionals hesitate to learn and implement the skills required for HR Analytic. The HR professionals would significantly put their faith on their human intellect and understanding than receiving training on HR Analytic tools.
- Lack of resources: Data analysis needs a significant IT resources for its implementation. A large number of smaller firms simply don’t have the required infrastructure for implementing analytic programs.
Hence, one could conclude that the human resources analytics is implemented with the intention to validate the impact that an HR department has on the organization along with facilitating to acquire strategic insights. It also advances the skills to model how workforce trends impacts revenue and profits efficiently. Therefore, a modern HR department must be data-driven, business-integrated, agile and highly skilled in attracting, developing, and retaining high performing employees. These essentials demand not merely a new organizational model for HR itself, but also an immense retraining of HR professionals. In addition, they also generate an unprecedented opportunity for HR professionals to play a prominent role at the topmost levels of business strategy.