HR Analytics for Business Decision - Part 3 of a series

Author: Nipsy Jhamb | Categories: Analytics, HR Management

In Part 2 of this series, we learnt about the working of HR Analytics for business decision.

How it helps in taking business decisions

According to a 2014 MIT SMR-SAS research, “58% of the managers who participated strongly agree that HR analytics can improve organizational performance.”

Managers expect their organizations to adopt analytics in the business decision-making process. While HR analytics has been creating quite some waves in HR circles, its true ingenuity lies in the fact that it enables business leaders to make smarter business decisions. On face value, the HR analytics process seems similar to all other HR practices, which have proven to be less effective and more costly. But that is certainly not the case. From on boarding effectiveness to succession planning; from work life balance initiatives to HR strategy development, HR analytics enables integrated HR solutions to be executed across different verticals in the organization. This is possible because unlike other archaic HR processes and strategic tools, HR analytics offer –

• Data relevant to top-down approach towards business issues

All or just about any employee data can’t be of interest to the organizational objectives. Therefore, before collecting data on employees' backgrounds, their behavior, productivity and opinions, it is important to define the need for that data. The top-down decision-making approach is thus a necessary part of the planning phase of HR analytics. Only relevant employee data is collected and processed to generate information that is directly imperative for decision-making.

•    Cause-effect relationship analysis

The primary reason that HR analytics contributes to business decisions is that it helps in conducting a cause-effect analysis. Unlike the statistical analysis approach adopted by most HR executives, HR analytics is not driven by establishing a mere correlation between dependent and independent variables. Nor is it a more complicated version of regression analysis where more than one variable are studied for their impact on business performance.

With HR analytics, causal factors that contribute to effects like better company sales performance, lower attrition, better employee engagement, higher customer satisfaction, faster penetration of markets, leadership development, etc. can be determined. Once the cause of such organization-centric factors is determined, it becomes easier for business leaders to decide where to invest and which strategies to leave behind.

HR analytics 

                                              Source: MITSloan 

•    Direct impact of HR strategies on ROI

Business decisions are taken with the sole objective of determining Return on Investment (ROI) of a project or a process and then improving it. The problem with HR processes is that, while they can indicate the benefits reaped by employees; they can rarely ever indicate a direct impact on the organizational ROI.

With HR Analytics, employee data is analyzed and interpreted to understand the direct impact of HR strategies on ROI. Companies that are effectively using HR analytics are two times more likely to have top quartile financial performance. So the business leaders considering adoption of strategic pathway proposed by HR Analytics know for sure, how much the business will gain from these. How investment in new recruitment practices can directly improve company turnover, how a change in performance appraisal practices can improve employee productivity and how specific pieces of training can result in higher profitability; HR Analytics gives all these questions an empirical monetary value.

•    Qualitative and compelling information aimed at transformative action

Business leaders are aggressively overloaded with business data 24x7 and they are always on a lookout for information that is meaningful and compelling. With HR Analytics, a large amount of data is processed and transformed into qualitative information. This information, in turn, enables business leaders to take steps in the direction of making a business strategy change.

"It is not enough to be busy; so are the ants. The question is: What are we busy about?" - Henry David Thoreau

•    Defined actionable and their expected monetary returns

In addition to providing intelligent insights into the health of the organization, HR analytics also offers various options in terms of ready solutions. Companies adopting HR analytics are making business decisions five times faster than the competition and execute these thrice as fast as the latter. As the application of analytics effectively determines the underlying cause behind business problems, the process also helps in defining corrective actions. And since analytics delivers this information after some serious number crunching, every proposed solution or action has an expected monetary return attached to it.

The global trends indicate that investments in HR analytics are increasing by 72% - BusinessWire India.

Business leaders are learning to rely on data analytics to take talent acquisitions, training, engagement, employee attrition and HR strategies related decisions. Despite all these quantifiable benefits, companies are still learning to just invest in HR analytics. The existing HR vertical in majority organizations is afraid of using data sciences. And since they can’t really crunch the employee data to supply business decisions, companies are in dire need of external expertise. Unless this acceptance is there and a conscious effort is made towards hiring the right analytical talent, the true potential of HR analytics can never be realized.

It is time for the next generation of HR professionals to welcome this scientific evolution of HR data with open arms and employing it to become strategic business partners in the truest sense.