HR Analytics: The Key to Effective Human Capital Management

Posted by LPA Software Solutions on Jan 30, 2021 12:53:15 AM

Organizations large and small are experiencing substantial shifts during the pandemic. To effectively manage a remote workforce and respond to the fast changing business environment, HR departments have to quickly adjust their approach to human capital management.

HR professionals are under pressure to maximize the use of resources and budgets. They need to make faster and smarter data driven decisions that often have a significant impact on their companies' bottom lines.

The good news is that the methodology and technology needed to solve  HR challenges is out there and is already being used by  your colleagues. AI powered data analytics has already been adopted by finance, marketing, procurement, and other business functions to drive accurate decision making and improve operational efficiency.

You can now access analytics platforms designed specifically for HR professionals to effectively leverage the large amount of existing employee data at your disposal. Read on to learn how to connect the dots, pull together the right data, and gain timely insights.

What are HR Analytics?

HR analytics refers to the process of applying statistical methods to derive insights from HR, talent management, financial, and operational data. It's also referred to as talent analytics, people analytics, or workforce analytics.

HR analytics provide insights to facilitate human capital management decisions, such as to optimize  investments and allocate human capital assets to improve workforce performance, generate more revenue, minimize expenses, mitigate risks, and execute strategic plans.

HR analytics derives insights from employee information, such as demographic data, performance ratings, pay scale information, attendance rates, and employee satisfaction ratings. It uses key metrics including revenue per employee, training efficiency, turnover rate, time to hire, absenteeism, offer acceptance rate, training expense per employee, and human capital risk (e.g., attrition and retention rates) to help measure the effectiveness of HR strategies.

The Benefits of Using HR Analytics

The use of AI powered analytics is revolutionizing decision making in human capital management. Here are some key areas in which data is helping HR professionals become more effective and efficient:

1. Reduce Attrition Rate

Studies found that it costs an average of six to nine months’ salary to replace an employee. The long term financial implication is even higher if you lose a highly valued staff member. Reducing the employee attrition rate can significantly lower operating costs associated with rehiring, on-boarding, training, benefits, and administrative tasks.

HR analytics can help identify employees who are at risk of leaving the company by analyzing employee data. It can also provide insights on what the company can do to retain these employees and reduce turnover.

2. Improve Talent Acquisition

As many organizations tighten their budgets, it's more important than ever to hire the right person for the right position at the right time so you can maximize revenue per employee. 

Besides finding the most qualified external candidates, data analytics can help you identify high performing employees, provide them with the right training, and promote them internally to the right position or projects to maximize their contribution. This can also promote employee growth, improve job satisfaction, and increase retention rates.

3. Optimize Resource Allocation


Many organizations have been reducing headcount

HR analytics ensures that the right people in the right seat while making sure that nobody is sitting on the bench,  maximizing operational efficiency, saving on costs, and increasing revenue per employee.

4. Improve Employee Experience

Employees who are satisfied with their jobs are more likely to be productive and stay with the company. However, it's more challenging to gauge employee sentiment  when remote working is reducing in person interactions.

HR analytics can help  assess employee happiness by deriving insights from performance data and feedback. This  allows you to identify problems early and take action to prevent employee attrition.

5. Turn from Reactive to Proactive

During the pandemic and resulting economic fall out, many organizations have been forced to furlough or lay off employees. As vaccines are rolled out and infection rates fall,  business is projected to bounce back. Many HR professionals are seeing upticks in budgets and recognize the importance of proactively projecting their resource needs before the rehiring process is underway.

Instead of being reactive or going by instinct, smart companies are using analytics to generate insights and forecast resource needs.

6. How to Implement HR Analytics

While analytics is highly beneficial to supporting human capital management, some hurdles can prevent organizations from fully tapping into the power of data:

  • The lack of statistical and analytical skill sets needed to work with large datasets
  • The inability to effectively aggregate and compare data due to different reporting systems within the organization
  • Not having access to high quality and current data, which can affect the accuracy of the insights
  • Not having the right analytics and reporting tools to utilize the data collected and share insights with management
  • Privacy and data governance issues, which are common when data is collected from many disparate sources

How to overcome challenges to get the most out of HR analytics:

  • Get leadership buy-in: To collect the most current and accurate data, you need cooperation from various departments.
    • Endorsement from leadership (e.g., CFO and department heads) can help ensure that you're getting the budget and internal support you need
  • Identify and track the right metrics: Define specific objectives and associated KPIs so you know exactly what data to collect and how to derive key insights that will help achieve organizational goals such as increasing revenues and lowering costs
  • Ensure data integrity: You should ensure the integrity of information consolidated from disparate sources to increase "trust in data" by using the right tools and implementing a data governance policy
  • Use an HR  analytics platform: Using  analytics software designed specifically for human capital management gives you a proven, end to end framework to accelerate data mapping and ingestion. With built-in data cleansing, machine learning models, data visualization, and other features that can be customized to meet your needs, you can hit the ground running right away without a large team of data analysts.

HR Analytics: the Future of Human Capital Management

Companies are relying more on HR capabilities and functionalities during Covid and beyond to make informed decisions on resource management. Yet, many HR departments are feeling the crunch to do more with less. 

It is more important than ever to make accurate data driven decisions by tapping into the power of analytics -- which is designed to augment and support the work that people are already doing with data driven insights.

Ready to experience the smart way to do HR?

Download our checklist of key steps and practice to help you effectively implement HR  analytics in your organization.

HR Analytics


Topics: Planning Analytics, HR