HR analytics: definition, best practices & examples

HR analytics: definition, best practices & examples

March 5, 2024
by Talenteer Editorial Team
New approaches to Human Resource (HR) management have transformed the day-to-day activities of HR professionals. In addition to operational and administrative tasks, they have to deal with large volumes of information and make strategic decisions about the teams’ dynamics. This is where the use of data analytics in HR has become essential.
In this article, we’ll review the principles and purpose of HR analytics tools and explore how modern HR analytics can transform the workplace.

What is HR analytics?

HR analytics is a set of practices that simplify performance management. It applies various techniques of data analysis to HR functions, helping to rely on facts and clear metrics instead of opinions and assumptions. Such data-based insights contribute to informed decision-making.
HR specialists can use analytics platforms at any stage. These tools make it simpler to organize the hiring process and onboarding, improve employee engagement and productivity, and mitigate risks in due time. Another way to use analytics solutions is by evaluating HR interventions and predicting the impact of specific decisions.

Key HR analytics metrics

What’s the main advantage and power of using HR analytics services? It is an opportunity to measure any processes and their effectiveness. Through numbers, business analytics can show the areas of improvement, the potency of leadership tactics, and employee satisfaction scores. Let’s review the most common metrics usually included in HR reports.

Employee turnover

It is a percentage of people who left the company within a year or another period. This metric contains two elements: voluntary and involuntary turnover.
  • Voluntary turnover shows how many people decided to leave the company. It generally represents the quality of retention, talent management, and the specifics of employee experience.
  • Involuntary turnover indicates the number of terminated employees. Roughly, it indicates the quality of the recruitment strategy and business decisions.

Revenue per employee

To calculate this metric, the yearly revenue is divided by the total number of employees. It shows the average amount of money each person produces and can represent business profitability and efficiency.

Absenteeism

Absenteeism is calculated by dividing the number of absent days (with or without reason) by the total number of workdays. It is meant to evaluate both productivity and employee satisfaction with their job.

Time to fill and time to hire

Time to hire shows the duration of communication with one particular candidate, from the first contact to accepting an offer. On the other hand, time to fill shows the whole timeline from posting a vacancy to filling the position.

Offer acceptance rate

This metric is a ratio between the given offers and accepted ones. It may show how appealing the offers are, what the candidates’ level of interest in the company is, and whether the talent acquisition strategy should be reconsidered.

Cost per hire

This is one of the most important metrics when it comes to data-driven recruiting. It shows the cost of hiring one employee. The expenses depend on various factors: whether hiring managers use internal or external sources of recruitment, how long it takes to make an offer, the use of referral bonuses, and more.

Training expenses and training effectiveness per employee

These metrics usually go hand in hand. If the effectiveness of training does not correlate with expenses, the whole program can be re-evaluated and restructured.

How HR analytics helps human resource management

The main purpose of HR analytics is to enhance human resource operations and optimize other processes within the organization. Here are a few examples
  • Identifying the time to hire and time to fill. These assess the effectiveness of recruitment processes.
  • Analyzing employee turnover, both voluntary and involuntary. This information may help find the blockers and motivations and consequently improve employee experience.
  • Improving workforce planning. HR analytics tools allow for precise presentation of the company’s demographics, including prognosis for career growth, retirement, or prolonged leaves for personal reasons. All this can help find needed professionals and bridge the gaps faster.
  • Assessing the effectiveness of talent acquisition, current HR policies, and various initiatives.
  • Creating targeted development plans. Analytics provide insight into employees’ potential and career aspirations. Then, HR professionals can help align these goals with the company’s business needs.
Overall, data-oriented HR reporting contributes to improved transparency and efficacy. When employees feel heard and recognized, they thrive in their own responsibilities and embrace cross-functional collaboration to achieve shared goals.

Pros and cons of HR analytics

Like any methodology, HR analytics has advantages and drawbacks. While improving some areas, it may cause challenges in others. Let’s have a closer look below.

Advantages of HR analytics

The impact of HR metrics and analytics is in creating the foundation for evidence-based decision-making. Talent management initiatives become more effective because it’s possible to measure the success of any interventions. People analytics and prompt response to problems allow recruiters to address skill gaps faster, implement training programs, and improve employee retention.
HR analytics tools also make it simpler to monitor the hiring process and enhance it. It becomes easier to forecast workforce needs and evaluate leadership effectiveness and workplace culture.

Potential disadvantages of HR analytics

While the objectives of HR analytics focus on the overall improvement of employee experience, it’s natural to face resistance to change. It may take time to fully implement new HR tools, address technical issues, and agree on a budget needed for particular software.
It’s also important to pay attention to data privacy. All the HR analytics processes should comply with standards and regulations, such as GDPR.

Using data in HR: how to get started with HR analytics

There is a variety of HR analytics software for enterprises, so, to make a correct choice, it’s crucial to start with identifying the goals. Different analytics platforms focus on different operations, so decide what requires the most attention: the hiring process, talent management, etc. Knowing your objectives will allow you to use the tools and dashboards that align with business goals and cultivate cost efficiency.
The next step is to select the most valuable metrics. With the evolution of HR analytics, you can measure almost anything within your organization, but you may need only a few specific metrics to evaluate the situation. It is wise to start small and use visualization from the very beginning. This will help you get a better understanding of whether your strategy is efficient or if you need another approach to improving HR operations.

Overcoming common challenges in implementing HR analytics

To reap the benefits of HR analytics, it’s essential to set up all the tools and processes correctly. Here are a few recommendations:
  • Collaborate with other departments. Make sure you know what other teams expect to spot in the HR reports and focus on those points.
  • Educate HR specialists. High-quality HR analytics requires strong critical thinking, attention to detail, communication skills, and many others. Provide training to HR professionals to enhance their technical and soft skills needed for analytical operations.
  • Educate other employees. Tell the staff about the new analytics software you are using and how it can help improve the workplace and their careers.
  • Share the results. Discuss the outcomes and impact of HR analytics initiatives and use clear visualization. This will help improve engagement and reduce resistance to change.

How HR analytics shape the business

HR analytics make recruitment tactics more proactive and help predict the results of different initiatives. Moreover, the analytics of HR performance help find better ways to engage and retain employees. By influencing productivity and career development within the company, these solutions contribute to the company’s success and profitabilit
The role of HR analytics is better observed through real cases. For example, Talenteer, a solution for streamlining internal talent flow, brings benefits to both employers and staff. With the help of this platform, a software testing company closed 50% of open vacancies with in-house employees and cut maintenance costs in half. Ultimately, various HR analytics programs drive growth due to new opportunities, cost-effectiveness, and data-based decisions.

In conclusion

HR analytics solutions are a powerful tool that enables data-driven decisions regarding workforce and organizational success. These tools and processes work in multiple directions at once. These include an improvement in talent management, employee engagement, and business tactics. By using trends in HR analytics, your company can gain a competitive advantage, while increased productivity will contribute to new achievements.

FAQ

What are common data sources for HR analytics?

What skills are required to do HR analytics?

What is predictive HR analytics?

What are the four levels of HR analytics?

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