Analytics in HR: A No-Nonsense Guide to Making Analytics Work for You
Although 58 percent of HR professionals believe HR analytics are very important, only 16 percent believe they’re actually experts at using HR data. So how do you turn your data into valuable insights? And how do you know those insights are reliable?
While analytics in HR might feel overwhelming, tracking and analyzing just a few metrics can help you drive effective change and improve your workplace. Let’s discuss the basics of what HR analytics are, why they matter, and how you can adopt and use them to make smarter people and business decisions.
What Are HR Analytics?
Also referred to as “people analytics,” “HR analytics” means collecting and studying workforce data to enhance employee and organizational outcomes.
The goal of HR analytics consists of two parts:
Identifying issues: Analytical tools, such as employee Net Promoter Score (eNPS) surveys and a centralized reporting system, can help your team identify low-hanging fruit to address right away as well as substantial issues that will require additional exploration and careful, long-term attention.
For example, if an employee satisfaction survey reveals that the bathrooms on the second floor always run out of soap during the day, that’s low-hanging fruit you can remedy immediately. A more complex problem would be something like high employee satisfaction but with low individual performance, which would take further analysis and extended action to fix.
Identifying solutions: As you analyze your people data, you also need to map out possible solutions to alleviate the problems you find.
To continue with the example above, finding the right way to motivate satisfied yet underperforming employees to change requires additional data gathering, including these potential steps:
- Rereading all employee comments in satisfaction surveys to understand the problems they’re experiencing.
- Consulting managers to see if employees bring up specific problems during one-on-one meetings.
- Reevaluating processes and policies, both in specific teams and at the company level.
- Looking at external stressors (e.g., natural disasters, pandemics, inflation), and finding ways to mitigate them (e.g., more paid time off, flexible work hours, etc.).
Why Do HR Analytics Matter?
HR data analytics allow employers and HR teams to assess the health of their workforce and deliver actionable, data-driven decisions—decisions that will help employees and the company be more productive and successful.
And that’s not just a matter of opinion. Getting friendly with your HR data improves outcomes across the board:
- Hiring teams who leverage analytics are two times more likely to improve recruitment efforts and three times more likely to reduce costs and increase efficiency.
- Organizations with a quality HR analytics process financially outperform their competitors.
How Can You Use HR Analytics?
Here are five key areas where analytics can be especially useful:
- Performance management
- Employee satisfaction
Read on for real-life examples in each of these areas to help you identify tangible ways to incorporate HR analytics and create meaningful changes.
How do you strategically compete for top talent? HR analytics can improve your hiring process, so you can give your team the highest chance of recruiting the best of the best.
Specifically, recruitment analytics can help monitor key metrics such as:
- Time-to-hire: The time between a candidate sending their application and receiving an offer.
- Source quality: The percentage of quality hires made from a specific source (e.g., job board, referrals, etc.).
- Offer acceptance rate: The percentage at which a selected candidate accepts the job offer.
You can also dive deeper into more specific characteristics, such as:
- Geographic locations: Where is your target talent pool located?
- Migratory patterns: How often does your talent pool move and where to?
- Competitor information: What are some recruitment strategies your competitors lean into? What do they offer that you don’t?
- Diversity, equity, and inclusion: Are your hiring practices fair for all applicants? Do you capture a broad and diverse enough pool to add to your culture?
Example: B/E Aerospace
B/E Aerospace wanted to improve its recruitment efforts to find talent in the highly competitive aerospace engineering industry, particularly aiming for candidates willing to relocate to Seattle. Their talent team tracked:
- Market data to monitor the availability and moving patterns of their target talent across different cities
- Competitor data to help reshape their talking points when speaking to candidates about relocation
By leaning into data and analytics, B/E Aerospace prioritized its recruiting investments and spent its advertising dollars in the right markets.
There are various key indicators of performance, such as:
- Increase or decrease in a team’s profitability
- Level of customer and client satisfaction
- Number of development programs and activities (e.g., lunch and learns, mentoring programs, etc.) an employee pursues each quarter
- Self, manager, and peer assessments
These different levels of feedback allow leaders to compare evaluations and establish an effective roadmap for improvement. And when these assessments are coupled with a centralized performance management system, you can receive timely insights that employers and employees can act on together.
Example: International Scholarship and Tuition Services (ISTS)
The staff at ISTS was struggling with cumbersome and time-consuming biannual performance reviews. Jennifer Fisher, the director of people and culture, used BambooHR® Performance Management software to automatically track and organize performance data.
By pairing HR metrics (goal progress and employee performance via assessments) with centralized performance software, Fisher was able to identify points of employee disengagement and misalignment. From there, she and her team have been able to identify ways to bolster development and performance.
Not to mention, leveraging analytics in performance management saved ISTS nearly 40,000 dollars a year.
When done right, compensation can positively impact your recruitment and retention strategies. Employees know what they’re worth—they’ve done the research already. If you aren’t paying them fairly, they’ll take their talents elsewhere.
Some analytical approaches to measure and optimize your compensation efforts include:
- Gender or racial pay audit: This looks into whether there are gender or racial pay gaps in specific job titles, promotion rates and frequencies, bonus eligibility, and more. Employers can retrieve insights from industry research every year to see how their data compares.
- Compa-ratio: This metric measures how competitive one’s salary is. More specifically, it divides an employee’s pay by the midpoint of their market salary range. This ratio can help employers assess how their numbers compare to market data. If the difference is over five percent, then your business is likely over- or underpaying employees.
Example: Slack and Salesforce
Before COVID-19, software company Slack primarily paid employees based on local market data in New York and San Francisco (their former two main offices). Once COVID-19 hit and their employees moved to working remotely, Slack shifted their salary benchmarks, so the numbers were more aligned with the new geographic locations of their team members.
Gender Pay Audit
Salesforce tapped into industry data, which revealed a pay disparity for women at the company. Salesforce CEO Marc Benioff compared the industry data to his organization’s data and spent six million dollars to fix the company’s gender, race, and ethnicity pay gaps.
To further improve the gender pay gaps, Benioff also looked into the percentage of women leaders in meetings and set a goal that at least 30 percent of participants in meetings should be female leaders.
How do you use data to bolster employee satisfaction? One of the most common and effective ways to measure employee satisfaction is by using eNPS.
An eNPS survey asks employees how likely they are to recommend their company as a place to work on a scale of zero to 10. Based on employee responses, business leaders then divide employees into three categories:
The eNPS system offers a high-level view of the health of your business. It can also help your team assess whether particular teams or departments require extra attention.
IT company ProntoForms wanted to take their good workplace culture and make it ever better. To get relevant data and reveal blindspots, VP of people and culture Lisa Scian rolled out an employee satisfaction survey with BambooHR® Employee Satisfaction.
The employee satisfaction analytics showed Scian what really mattered to ProntoForms employees, especially during the COVID-19 pandemic. Even though the company’s workforce suddenly had to switch to working remotely, Scian and the leadership team relied on the feedback they received on the employee satisfaction surveys to maintain ProntoForms’s culture and support employees through a time of crisis.
Here are a few HR analytics you should be reviewing right now to help you keep your employees around for the long haul:
- Turnover rate: The number of employees who leave the company within a time period, divided by the number of total employees.
- Retention rate: The number of employees who stay at the company within a time period, divided by the number of total employees.
- Retention rate per manager: The retention rate broken down by manager or team.
- Employee satisfaction: You can adopt the eNPS to determine which areas need improvement to bolster employees’ happiness and encourage people to stay with your organization.
Nielsen, a global information firm, established a predictive model that looks at why employees might leave and identifies possible ways to retain key talent. They created 20 employee data points, including age, tenure, manager rating, and more. Nielsen eventually added more variables like commute time, participation in company programs, promotions, and lateral moves.
Over time, Nielsen identified variables that do and do not play a role in employee tenure. For example, they learned that although promotions are critical to retention, lateral moves are also strong motivators for people to stick around.
As a result, Nielsen:
- Transferred 40 percent of “flight-risk” team members to new roles
- Improved the chances of these “flight-risk” employees staying at the organization by 48 percent
Use Technology for Better HR Data Analytics
Eighty percent of HR professionals believe incorporating HR software into their strategy improves employees’ attitudes toward their organization. And that’s because the right technology helps you gain insight into what’s going right and what’s going wrong. More importantly, you can make changes that keep your workforce engaged.
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Marie-Reine Pugh is focused on making HR simpler for HR professionals and workplaces a better place for everyone. She pulls from her previous experiences as an educator and six years of writing and researching to explore how to create inclusive company cultures that help businesses succeed.