Why HR Analytics?
HR analytics is often referred to as people analytics, workforce analytics or talent analytics. Human Resource analytics is about analysing an organisations’ people problems using data. It enables you to answer critical questions about your organisation. For example:
What is our headcount and how is it evolving over time
How high is our annual employee turnover?
How much of our employee voluntary turnover consists of high performers?
Do we know which employees will be the most likely to leave our company within a year?>/p>
These questions can only be answered using data. Most HR professionals can easily answer the first and second question.
Answering the third question is more tricky: You will need to combine two different data sources. Your Human Resources Information System (HRIS) and your Performance Management System. To answer the fourth question, you will need even more data and extensively analyse it. HR teams have long been collecting vast amounts of HR data. Unfortunately, this data often remains unused. As soon as organisations start to analyse their people problems by using this data, they are engaged in HR analytics.
HR Analytics and People Analytics
There is often some confusion about the difference between Metrics, Analytics and People Analytics; how they relate and how they add value to the practice of Human Resource Management.
HR metrics are measurements used to determine the effectiveness and efficiency of HR policies. Metrics help compare different data points. For example, if voluntary turnover was 5% last year and is now 7.5%, it has increased by 50%. The former are data points, the latter is the metric. Metrics don´t say anything about a cause, they just measure the difference between numbers. It's interesting and important, but really just tell a story about what happened.
HR Analytics is a historical view of your HR metrics, meaning analysing your metrics over time. Looking at the list of voluntary terminations, grouped by business unit, for a specific time period are your input metrics. Looking at the trend over time, analysed by job family or termination reason is your HR Analytics.
People Analytics is the quantification of people drivers on business outcomes. Analytics measures why something is happening and what the impact is of what’s happening. People Analytics is often interchanged with HR Analytics, but is a quantifiable combination of HR Analytics with other metrics, such as finance and financial analytics in particular. If you have voluntary termination for the last 6 quarters and a decline in sales revenue for the last 6 quarters, and you can prove that there is a correlation between the two, you have People Analytics.
While the greatest benefit is in People Analytics, you need to have the basic HR Metrics and HR Analytics in place as a prerequisite for achieving success with People Analytics. In other words - do not try to achieve too much in one go and take a few leaps forward at a time.