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How HR Analytics Can Bring More Sense to Your Business Decisions

Oct 01, 2019


  • EDITORIAL TEAM Talent Management Institute
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Global HR Analytics Market is growing at a CAGR of 13.6% and will reach USD 3.9 Billion by 2025. The C-suite world over has reasserted a clear correlation between HR analytics and the organizations’ long-term success and taking cognizance of this fact, 45% of large companies and 51% of mid-sized companies are raising their budget for HR technology. LinkedIn’s 2017 report The Rise of Analytics in HR says in North America over 22% of organizations have included HR analytics in their system and 11% have a dedicated role for HR analytics specialist. This ratio alters to 19% and 12% in the EMEA countries.

HR Analytics is Not People Analytics or Workforce Analytics:

Any technology’s optimum use begins with a clear understanding of its functions and benefits, not to mention, its core purpose. Though HRs have been increasingly using the term HR analytics, there is a striking ambiguity in their understanding of it. They have been using the terms HR analytics, people analytics and workforce analytics interchangeably. The three, however, differ remarkably in their applications. While HR analytics is used to manage internal employees and to measure time to hire, training expenses, etc. people analytics is used for a larger umbrella of operations i.e. to manage both internal and external stakeholders. Workforce analytics is used to manage the entire gamut of the workforce (internal customers, gig workforce, consultants, freelancers and all).

Given the scope and the relevance of it, HR analytics can be the most vital tool not only for the HRs but also for the managers who can furnish exclusive and strategic insights to the C-suite and aid their decision-making.

How HR Analytics is Remodeling the HR function?

HR analytics paves a roadmap for the talent journey. It improves hiring efficiency by at least 30%. Talent managers can sift through thousands of CVs and create a concrete base for the first-rate talent. Because the decisions are data-backed so they are unlikely to go biased or redundant. Hence, it significantly cuts the costs associated with bad hires. With better insights into the cultural environment, technological environment and physical environment, HRs can markedly improve the employee experience. They also can:

  • Recognize the pattern of high performing employees and accordingly modify their employee hiring and retention strategy.
  • Draw parallels between the prospective hire and the best performers.
  • Pinpoint the departments with maximum attrition and the potential reasons for those attritions.
  • Identify activities that have maximum influence on employee engagement and divert investments accordingly.
  • Improve operational efficiency and profits.
  • Standardize systems and process across departments.

Common Metrics

Brad Orluk, strategic alliances manager at Nintex, a workflow automation provider said: “HR groups can now capture the metrics needed to understand how their employees engage with certain content and tools, and more importantly, why”. These metrics pave the way:

Revenue per employee: It is calculated by spreading the organizations’ total revenue over the total number of employees. Revenue per employee indicates the average revenue each employee generates.

Training efficiency: Calculated by measuring performance improvements, test scores and change in employee roles post-training.

Turnover rate (both voluntary and involuntary): Voluntary turnover rates are calculated by dividing the number of employees who left voluntarily by the total number of employees. Involuntary turnover rates are calculated by dividing the total number of employees who were terminated from their positions by the total number of employee in the organization.

While C-suite may not be keen in knowing the voluntary turnovers, they’ll surely be interested in knowing how many of these were functioning in strategic positions or were exceptionally skilled. And, how long they stayed in the organization and the reasons for their move, the cost of their replacement and its impact on the overall organizational performance.

Time to hire and time to fill: Time to hire is the number of days passed between the first employee contact and the offer acceptance. Time to fill is the time elapsed between floating a vacancy and hiring someone to fill that position.

Absenteeism: It is calculated by dividing the number of working days missed by the total number of workdays.

Offer acceptance rate: The number of job offers accepted divided by the total number of job offers made.

Training expenses per employee: Training expense per employee is calculated by dividing the total training expenses by the number of employees who received training.

Human capital risks: Absence of specific skill, absence of employees to fill leadership roles, no clear succession plan, probability of an employee to leave the job based on compensation, relationship with the reporting manager and all.

How to Lay Your HR Analytics Plan?

To set up a sustainable and fully functional data department within your organization, you will need:

Chief Data Officer: CDO should establish the enterprise data policy and governance plan and identify the suitable tools and technology. She should also lay the future strategy and communication plan.

Data Scientists: Data Scientists create logic that facilitates varied data solutions. These professionals derive the perfect synergy of algorithms, AI, machine learning and predictive modeling and analysis.

Analytics Specialist: These professionals combine real-time data from several different sources and try to derive insights from it.

Data Management professionals: These professionals maintain a conducive environment for the smooth functioning of data operations.

Parting Two Cents:

HR Analytics is a must for organizations. If your company and its leadership team haven’t bought in HR analytics and are continuing with their conventional processes, your organization is likely to reach a bottleneck soon.

John Boudreau 2017, in his article, HR must make people-analytics more user-friendly, says “progress in HR analytics has been glacially slow though industrial surveys suggest a stunning rate of anticipated progress.”

Most prominent use of HR analytics is projected in the Banking, Financial Services and Insurance (BFSI) vertical. Legal companies are also quick to adopt HR analytics. Construction, manufacturing and recreation and travel are lagging behind but are expected to pick the pace soon.

Data transformed marketing, and now it is set to transform human resources. Are you ready?

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