The human resources (HR) department is among the most human-centric departments in every organization, primarily focusing on supporting and developing the workforce that ensures long-term growth and viability of businesses. This is why HR is a key area where data is particularly valuable.
Data is an integral part of the HR landscape. Its data repository captures the dynamics of the organization’s people and their workplace interactions. HR data can help organizations uncover more effective strategies for team management, enhance overall company performance, and yield improved business results, especially during times marked by uncertainty and change.
A 2022 report by Harvard Business Review Analytic Services found that progressive organizations utilize people data beyond the HR department, and they often combine this people data with business data to deliver critical insights to their decision-makers.
"The dynamic of today's workplace has shifted dramatically, leaving many organizations on their heels," said Alex Clemente, Managing Director of HBR Analytics Services. "Our report found that while people typically represent the largest expense within an organization, most organizations are unable to connect these people investments with business outcomes–and, more specifically, understand how to manage workforce effectiveness to drive profitable growth for the business. Meeting this challenge should be the focus of every modern organization, particularly given the uncertainty in the economy and the labor market."
HR Analytics drives organizational transformation
In the recent research conducted by McKinsey on how businesses can best organize for the future, it is indicated that future-ready companies exhibit three defining characteristics: a clear sense of identity and purpose, a strong focus on agility and simplicity, and a commitment to growth through learning and innovation.
Imagine: What will be the role of HR in the transformation of these three central points? How significant would the impact of HR analytics be when linked with and contributing to the nine imperatives that stem from these characteristics, namely: purpose, culture, value, decision-making, structure, talent, learning, platform, and ecosystem?
HR analytics can help align the workforce with the organization’s mission by identifying committed employees who excel not only in their technical skills but also embody the company’s purpose. HR analytics come into play to parse, measure, and compare various data points, including performance evaluations, project involvement, leadership behavior, and employee engagement ratings. This data-driven approach enables organizations to select and nurture employees who share a similar level of commitment to the company’s mission, paving the way for the achievement of their broader vision.
People analytics is increasingly being used to measure and understand the abstract concept of culture. How do firms tangibly demonstrate the effect of organizational culture on revenue or financial performance? What are the factors within an employee’s journey that have a positive effect on their productivity? How do managers determine which employee pulse survey results to address first?
HR analytics can recognize trends and patterns in key cultural factors such as collaboration, employee engagement, employee retention, and customer satisfaction. By extracting these insights, firms can identify and develop strategies to enhance their organizational culture leading to increased revenue growth. Analytics tools can pinpoint areas for improvement, enabling HR, coaches, and leaders to implement targeted programs to foster a more inclusive and positive culture.
Several methods exist through which talent and structure can benefit from the contributions of HR analytics. By understanding the elements that influence employee turnover, productivity, engagement, and satisfaction, organizations can design and implement effective interventions to retain and motivate their talent. HR analytics can also help automate certain HR processes, thus freeing up HR professionals to focus on more strategic initiatives, such as talent development and retention.
HR analytics and employee learning and development are interdependent forces driving professional growth, upskilling, and engagement. Analysis of employee performance data, competencies, and learning preferences informs customized learning journeys for employees.
Backed by real-world examples and emerging trends, the rise of HR analytics promises to transform talent management and set new benchmarks for organizational excellence.
HR analytics in action
Due to the acceleration of digital transformation, HR departments have increasingly embraced the utilization of workforce data for making evidence-based decisions in recruitment and selection, performance evaluation, diversity and inclusion, and workforce planning. This practice of leveraging workforce data to augment decision-making has been synonymously termed by scholars as HR analytics, people analytics, talent analytics, human capital analytics, and workforce analytics. Regardless of the terminology used, both in academia and practice, there’s a shared understanding of the strategic significance of HR analytics. It equips organizations with data, information, and insights to make well-informed, evidence-based decisions effectively.
In their study ‘An Evidence-Based Review of HR Analytics,’ Marler and Boudreau (2017) defined HR analytics as “an 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.”
HR analytics involves gathering, cleaning, investigating, and interpreting this data, particularly data related to HR metrics and KPIs, including employee productivity, turnover rate, absenteeism rate, customer service ratings, employee satisfaction ratings, training completion rates, diversity metrics, and compensation structure efficiency. These are just a few examples of measures that can directly shape business outcomes.
In her 2018 article published in the Human Resource Management journal, Dana Minbaeva argued that developing a human capital analytics framework as an organizational capability requires working with its three critical dimensions: high quality, analytical competence, and strategic ability to act. She also advised that performance-led HR is the future, and human capital analytics “is one vehicle that could bring you into the future.”
HR practitioners with an analytics skillset don't make changes solely based on speculation; they provide organizations with data-backed insights. Similarly, businesses that embrace a data-driven approach deliver more accurate judgments. Strategic comes into play when insights trigger actions and are acted upon.
The HR function has the potential to emerge as a leader in analytics. HR analytics not only enhances HR as a field but also elevates it to a function of strategic significance.
As published in The Manila Times, dated 01 November 2023
