A Beginner's Guide to HR Analytics

HR analytics can seem overwhelming at first, especially when you're not sure where to begin. To help you get started, we've created this beginner’s guide to HR analytics, covering the essential concepts you need to know. Let’s dive in!

What is HR analytics?

HR analytics is the process of collecting and analysing HR data to improve organisational performance.

Also known as people analytics, workforce analytics, or talent analytics, HR analytics uses statistics to assess employee-related factors, such as recruitment and employee experience. This analysis helps leaders make informed decisions to drive business improvements.

In simple terms, HR analytics provides valuable insights into employee data, enabling organisations to make better decisions and plan for the future.

By leveraging this data, organisations can attract, manage, and retain talent while fostering a productive and positive work environment.

Why should you use HR analytics?

The key to understanding workforce analytics is that it’s not simply about making HR better; it’s about making the entire business better.

Yes, organisations routinely collect data, but often this collection of data goes unanalysed, making meaningful data redundant when they don’t take the opportunity to capitalise on it.

When an organisation implements HR analytics, however, it enables leaders to make stronger, evidence-based decisions in relation to their workforce so that they can better manage employees, improve work environments, and maximise employee productivity.

From recruitment and training to employee engagement, performance, compensation, people planning, and retention, the benefits of "big data" can be applied to many areas within your business, ultimately transforming the efficiency of your organisation.

Aside from keeping your organisation aligned and informed, HR analytics also helps to keep your organisation competitive by looking beyond the numbers to extract critical information.

Without HR analytics, companies risk losing valued employees and potential business revenue.

What key HR metrics should you focus on?

Contrary to what some people think, HR analytics and HR metrics are not the same thing, but they do work together to provide organisations with meaningful data.

While HR analytics focuses on why something is happening and what the impact is, HR metrics focus on the what, measuring the effectiveness and efficiency of current business processes and initiatives (i.e., turnover, training, ROI) and tracking past and current data to influence future decision-making.

Some key metrics your company could focus on include:

1. Recruitment: Tracking and measuring the time that it takes for your company to hire a new employee allows you to better understand how your recruitment team is performing. Not to mention, knowing how much time it takes to hire a new employee also helps to narrow down the cost of hiring employees, allowing your company to find areas for future cost savings.
2. Turnover & Retention: Measuring employee turnover can help your business discover whether your retention strategies are working. If they’re not, you can use HR analytics to better understand why and come up with suitable tactics to combat potential losses.
3. Employee Performance: By conducting routine appraisals and performance reviews, you can measure and track how employees are conducting themselves over set periods of time and whether they’re likely to improve or grow within the company. For the best results, leaders should act on the information they gather from their employees as soon as possible, such as opportunities for training. Reviews that gather dust are no good to anyone twelve months out.
4. Employee Absences: Time-tracking employee absences gives a good indication of how efficient your current workforce is. While this metric can’t tell you how productive employees are during their working hours, it can tell you how many hours they’re putting in, helping you to identify any pitfalls in performance so that they can be addressed immediately.
5. Employee Engagement: It’s good to keep on top of how your employees are feeling at work through outlets such as employee surveys, for example. By tracking the employee engagement metric, you’ll gain insight into which employees are putting their best foot forward. You’ll also have the opportunity to discover and fix areas where job satisfaction might waver.

HR metrics on their own don't say much because they simply measure the difference between numbers. Once paired with people analytics, though, you can track the effect, efficiency, and impact of metrics in relation to business performance and align them strategically with your organisation’s objectives.

What steps should be taken to implement HR analytics?

It's important to follow a structured approach for every HR analytics project. This ensures clarity on the analysis's purpose, its progression, and the next steps to take.

Although each project and challenge may differ, having a general process in place will guide you in uncovering the insights you need.

If you're unsure how to implement HR analytics effectively, don't worry! We’ll guide you through a simple, step-by-step approach to get HR analytics up and running.

Here are five steps to successfully implement and leverage workforce analytics in any organisation:

1. Understand and Define

The first step to getting started with HR analytics is having a thorough understanding of what questions you want to answer within your organisation, and to define them accordingly. Questions you might ask include:

• What is the business issue we want to address?
• What internal and external business factors should we be aware of?
• What are the anticipated outcomes of this data analysis?
• Will the results of this analysis lead to any significant or meaningful changes?
• Who will be impacted by the results?
• Are we asking the right questions?

2. Identify, Collect, and Cleanse

Identifying, collecting, and cleansing data to answer your questions is perhaps the most vital step to properly implementing HR analytics, but it can be a challenge. Measuring basic data is easy, but tracking more complex metrics is where companies tend to struggle.

The key is to make sure that the data you have at your disposal is the right kind of data—high-quality data—collected from the appropriate sources (i.e., exit interviews or engagement surveys) and cleansed of any unnecessary and incorrect figures.

Your data collection should extend to various areas of the business, not just the area a particular HR analytics project is focused on.

Gather important metrics from finance and marketing, for example, so that you can look at numbers related to employee turnover, sales performance, money spent on training, and so on so that you can compare as necessary.

3. Analyse and Extract Data 

You should take extra care to be sure that you have the right team of people with the appropriate skill set to manage, analyse, and extract your company data so that your data is being measured effectively and so your results are accurate.

Analysis in relation to HR analytics is about generating the answers you need from big data, and extraction is about determining which answers—or results—are meaningful, ultimately providing direction for future business decisions.   

4. Communicate, Evaluate, and Implement

Once you have the results from an HR analytics project, you’ll want to communicate those findings with the appropriate business leaders so that they can assess their value and potentially include those findings in business operations.

When HR analytics starts producing tangible results, it’s in any organisation’s benefit to start implementing changes in order to thrive.

If, for instance, you focused on analysing employee turnover, and the data implies that your organisation’s rates are higher than the industry average, then you can look at rebuilding your workplace tactics to better retain your employees.

This could include creating more opportunities for discussions about career development in the workplace, employee benefits, or even additional training opportunities.

Whatever the case may be, to communicate effectively, you need to draw a line between your business and its HR data results to show why they’re actionable and how actioning them will benefit your business.

5. Perform Routine Analysis

It’s always best to circle back and check in on past issues to determine whether changes made are remaining effective or whether those changes are causing new issues.

HR analytics is like any other regimen; if you don’t keep on top of it, you effectively miss out on the benefits—staying in one place or running on a decline.

That’s why it’s essential to implement a routine schedule for data analysis of any current and new workforce data so that any pressing workplace issues that can be analysed through HR data can be met with a solution.

Want to find out more about HR Analytics? Download your free CIPD course guide here!