Human resources is a critical piece of the puzzle that makes up the people and processes within an organization. While HR is an important business function, it isn’t always viewed in the best light. It is often thought to be heavily administrative in nature and is typically associated with the negativity that comes with workplace investigations, addressing performance issues, and handling terminations. While it is true that those are common aspects of human resources, it really is so much more than that. HR is about people, strategy, data analysis, and taking a look at the bigger picture within a company. A successful Human Resources department uses data to connect the dots between its people, processes, and planning to help a company achieve its goals.
What is HR Analytics?
When thinking of analytics most people automatically go to finance, sales, and spreadsheets. While I love a good spreadsheet, you can analyze all types of information in a variety of formats. It is even true that sometimes the process of how you gain information might even result in some good data and allow for further breakdown. The following is just a sample of the metrics HR might review and use when completing analyses. Every company is different, depending on the specific business and its goals, so the metrics you’ve chosen to evaluate may vary.
HR Metrics
| Employee Engagement | Turnover Rate |
| Compa-ratio | ROI |
| Utilization Rates | Net Promoter Score |
| Variable Pay Scale | Cost to Hire |
The process of HR analytics means taking information and identifying what it means for a specific aspect of the business. Once you collect the data that coincides with the metrics pertinent to your business needs, you need people devoted to making sense of it. Analysis of HR metrics provides insight into what is working and what isn’t, allowing management to identify areas for improvement and take appropriate action based on data-driven decisions.
Examples of HR Analytics
Let’s take a look at some of the metrics provided above, and what HR analytics looks like in relation to them.
Employee Engagement
A measure of how many employees are committed to the company. The analysis provides insight into overall employee alignment to company values and their commitment to work toward business goals.
Utilization Rates
A calculation of the number of billable hours for an individual versus the total number of hours worked over a specific period of time. Most companies have an expected utilization rate based on different roles, and changes may be prompted by a comparison of actual utilization rates and expectations.
Return on Investment
ROI is used to evaluate the performance and efficiency of an investment. It can apply to a number of aspects within a business; from individual employees, to softwares and programs, to products. If you’ve hired an employee with a high compensation rate, but they are not performing, you have a poor ROI and will want to address this.
Cost to Hire
A total of the dollar amount associated with hiring a new employee. It takes into consideration cost of internal resources, outside vendors, softwares, assessments, onboarding time, training time, and other expenses the business accrues. This number is critical to understanding the investment a company makes when hiring and influences what the recruiting process looks like.
Why is HR Analytics Necessary?
It might not be glaringly evident but HR analytics is useful for the majority of businesses. Data analysis provides information that management might not otherwise have available to them. Most businesses have so many moving parts that some oversight is inevitable, which can lead to a disconnect between expectations and reality. The right HR professionals and management team can provide that insight needed through the analysis of HR metrics and the building of appropriate protocols and procedures that can help bridge the gap between reality and expectations.
For example, how does a company know when to hire? If a department waits to be behind before looking to hire, they are in a rush and may fall farther behind while going through the recruitment process. Understanding the business needs, employee retention rates, compa-ratio, and timeline for employee training is insight that can be provided by human resources professionals. That insight will feed into triggering the business to hire at the right time, for the right position, within budget. Those results all stem from the improved process built from HR metrics and analytics.
Pros and Cons of HR Analytics
As with any aspect of business, there are pluses and minuses to HR analytics. In the grand scheme of things, the positive impact the pros can have far outweigh the negativity associated with the cons. The pros include a savings of both time and money, a greater understanding of key business components, and the data provides the standards against which future metrics might be measured against. The cons stem from the natural human aversion for change and the initial investment of time and money that comes with completing the HR analytics needed to build successful systems and protocols. However change is a necessary evil and it allows for growth and improvement, which is a key component to success.
| Pros | Cons |
| Insight to increase efficiency | Initially time consuming |
| May provide long term cost savings | May be costly in the short term |
| Instigates change | Change makes people uncomfortable |
| Allows for improvements | Brings flaws to the forefront |
| Provides good business understanding | |
| Helps set standards |
Are You Analyzing HR Metrics?
Who is managing your company’s HR function? Who is responsible for the HR functions and are they analyzing HR metrics? Do you know what metrics are important for your business? These questions might instigate some panic, but take a deep breath. If you have the internal capabilities it’s not too late to implement some protocols for data collection and analysis. If you do not have the capacity or are looking to supplement your internal ability to complete HR analysis Red Clover can help. We can not only help you conduct the research, data collection, and analysis, but work with you to turn that information into updated processes that benefit your business.
