HR plays a pivotal role in the workplace, owning everything from sourcing talent to overseeing performance management and boosting retention. To gauge the success of these efforts and identify areas for improvement, businesses need HR analytics.
By analyzing key HR metrics, human resources teams can use data to refine processes, leading to enhanced workforce performance and significant cost savings. Yet, while 90% of companies in one survey said their chief human resources officers believe people analytics is a core component of HR strategy, only 42% said that their companies currently have a data-driven HR culture.
To help your company get the insights it needs to remain a competitive employer, you must invest in HR data analytics. Below, we’ll take a closer look at everything you need to know to get started with HR analytics — and unlock its benefits.
What is HR analytics?
Human resource analytics is the process of analyzing HR data to empower more informed workplace decision-making. By delving into data relating to recruitment, employee turnover, performance, compensation, and benefits, businesses can gain valuable insights into HR efficiency and effectiveness. This analytical approach enables companies to identify areas for improvement, optimize processes, and make data-driven decisions, ultimately helping to reduce costs, enhance efficiency, increase productivity, and improve business metrics.
HR analytics can also be called talent analytics, workforce analytics, and people analytics. While these terms are often used interchangeably, they do differ slightly:
- HR analytics only analyzes data and key metrics from HR functions.
- Talent analytics focuses on optimizing hiring, development, and retention processes.
- Workforce analytics aligns a workforce with current and future strategic business objectives and needs.
- People analytics encompasses a holistic view of organizational data (rather than just HR data) related to employee behavior, performance, and wellbeing.
How is HR analytics used?
HR analytics is used to understand and optimize various HR processes and functions within an organization. Of course, in order to discover juicy and actionable insights, your business first needs to know where to look.
Here are two examples that give a closer look at how analyzing key HR metrics and data sets can help a business identify underlying issues and make timely improvements that drive HR efficiency.
Assessing Recruitment Efforts
Analyzing key recruitment metrics empowers businesses to improve talent acquisition processes and drive better recruitment outcomes. Here are a few ways.
- Candidate Source: This data can help organizations determine whether certain channels tend to attract higher quality talent, helping talent teams better allocate their budgets and resources.
- Time-to-Hire: Examining time-to-hire can help unveil bottlenecks in recruitment workflows, while also establishing realistic hiring timelines for specific roles. This can help better align hiring managers’ and candidates’ expectations to ensure they are on the same page regarding the hiring process.
- Candidate Experience: Collecting feedback through candidate surveys can enable talent teams to refine their recruitment practices and deliver an enhanced candidate experience.
By tracking these metrics, businesses can build a more efficient recruitment process, enhancing the candidate experience and enabling their organization to secure top talent more quickly.
Improving Compensation Factors
Say a business’s latest engagement survey reveals that its employees don’t feel properly compensated for their work and experience. After identifying compensation as a potential issue, the business might decide to conduct a pay equity audit or compare current salary ranges against compensation benchmarks to better understand how its compensation practices compare to other companies across job levels, locations, and departments.
By doing so, the business can identify disparities, make informed adjustments, and ensure fair and competitive compensation for its employees. This can not only boost engagement among existing employees, but it can also help the company become a more competitive employer and have an easier time attracting top talent.
Benefits of HR Analytics
HR data analysis provides data-based insights into the workforce and workplace, enabling people teams to optimize their efforts, resources, and human capital to drive better business outcomes. Here’s a closer look at how.
- Supports HR Strategy
HR analytics measures the impact of HR on employee productivity, performance, compensation, engagement, workforce retention, talent acquisition, and diversity, equity, inclusion, and belonging (DEIB). It’s a crucial part of how people teams and HR leaders make data-driven decisions and optimize processes that reduce costs and drive business performance.
- Improves HR Operations
Your HR data shouldn’t be spread across spreadsheets and disparate systems. HR analytics is particularly powerful when partnered with HR software. Solutions like human resource information systems (HRIS) and human capital management (HCM) platforms centralize HR data, making it easier for people teams to analyze and interpret their data. Of course, these platforms also automate manual tasks and streamline processes, empowering HR professionals to take quick action on their findings to refine existing initiatives, resolve issues, and create new programs to drive organizational success.
- Delivers Actionable Insights
HR analytics provides visibility into core HR metrics and enables people teams to support high-performance workplaces that deliver on the business’s objectives and key results (OKRs). For HR departments, identifying patterns of employee engagement, discovering opportunities to improve workforce performance, and forecasting talent trends provide the core insights needed to help HR build a better workplace culture, improve employee performance, and, ultimately, reduce HR-related costs.
Sources of Data for HR Analytics
HR data originates primarily from systems supporting workforce and business operations. This data covers a wide range of factors, including demographics like age and ethnicity, as well as performance metrics such as sales performance and review ratings. Here’s a closer look at some of the systems and solutions businesses can use as data sources for HR analytics:
Human Capital Management (HCM)
HCM and HRIS software solutions centralize and streamline HR-related processes and data points. They contain a wealth of information and historical data that can be invaluable for HR analytics, like:
- Employee demographics, including employee data on age, gender, race, location, education level, and more
- Employee engagement or scores and responses from past employee surveys
- Time and attendance, including records of employee attendance, time off requests, and hours worked
- Turnover and retention, like employee turnover rates, departure reasons, and retention strategy performance
Together, this data can help businesses monitor patterns, track productivity, identify trends, and take action to address underlying issues.
Learning and Development Platforms
Learning and development platforms store records of employee training programs, certifications, and skill development activities. This data can help assess the effectiveness of training initiatives and identify skill gaps within the workforce. Businesses can leverage this data to upskill employees, gain insights into workforce competencies and career goals, and inform strategic decisions regarding workforce planning and talent management initiatives.
Applicant Tracking Systems (ATS)
Applicant tracking systems store data from the entire recruitment process, including candidate information, sourcing, assessment scores, and pipeline status. They often also offer high-level recruiting metrics like:
- Time-to-fill
- Cost per hire
- Offer acceptance rate
- Candidate experience scores
These insights can empower HR teams to make more informed decisions about where they post open roles and how they engage applicants. By doing so, they can optimize budget and resource allocation, ultimately increasing the likelihood of attracting top talent.
Performance Management Systems
Performance management systems can share information like employee ratings, goals, feedback, and development plans. This can help your business identify high-performing employees and see how their experience differs from their lower-performing peers. It can also help identify skill gaps and areas of improvement.
Benefits and Compensation Systems
These systems store data on employee compensation, including salaries, bonuses, incentives, and benefits packages. Using this information, you can help ensure your business is building fair and competitive compensation practices.
Employee Survey Software
Subjective, employee-reported data from pulse, onboarding and exit, and engagement surveys — plus open-ended comments from feedback surveys — can also help HR teams better understand the employee experience. For example, the objective data on employee turnover speaks to how many people are leaving the company, and whether those departures are voluntary or involuntary. Subjective data on turnover could come from an exit interview and can provide greater context about why an employee is leaving — critical information for the company if they want to stem the flow of departing employees.
Collecting data from myriad sources within the employee lifecycle provides a more comprehensive and realistic view of workforce performance, and allows HR to better craft and adjust people strategy to help the organization meet and exceed its goals.
6 Key HR Analytics Metrics and KPIs to Track
Powerful analytics platforms provide the ability to track almost limitless people-related metrics. While this allows human resources professionals to creatively view and filter data for unique insights, there are some enduring metrics and key performance indicators (KPIs) that HR should prioritize. These include:
1. Employee Engagement Analytics
Employee engagement is not a single KPI, but rather an analysis of several. The top most commonly measured employee engagement metrics are Net Promoter Score (NPS), employee Net Promoter Score (eNPS), and employee sentiment, but organizations with more sophisticated data analytics capabilities are likely to consider other metrics, like performance and absenteeism, too.
Employee engagement KPIs can offer information such as how productive an employee is likely to be and how likely they are to stay in their role. In general, these metrics indicate how dedicated the workforce is to their work, and how attached employees are to their jobs.
NPS and eNPS are classic engagement metrics that human resources can easily obtain by surveying employees. Employee sentiment — how employees feel about the organization and how it’s run — can be trickier to measure. AI-powered insights from people analytics software like Lattice use algorithms to continuously scan comments and intelligently parse open-ended responses on surveys to track employee sentiment over time.
2. Diversity, Equity, Inclusion, and Belonging (DEIB) KPIs
Diversity, equity, inclusion, and belonging metrics provide insights that help organizations remain accountable to their DEIB goals. DEIB metrics should track the diversity of candidates, interviews, hires, promotions, and pay increases by demographics like gender, age, race, ethnicity, and sexual orientation. Voluntary turnover by demographic group is also an important DEIB metric to keep track of.
HR teams will want the ability to view the demographic breakdown of each department, as well as the recruiting numbers for each department. It’s also important to be able to view the diversity breakdown of leadership positions and the C-suite.
3. Absenteeism Data
The absenteeism rate reflects unplanned absences over a given period of time. Sick days contribute to the absenteeism rate, but manager-approved planned vacations or holidays do not.
Absenteeism is linked to employee engagement, and high absenteeism can impact productivity and your business’s bottom line. Data on unplanned employee absences can also provide insight into mental wellness at your company. According to a 2021 research article on the topic, “mental health has a significantly larger effect than physical health” on employee absenteeism. For these reasons, HR teams can use employee absenteeism data to decide what initiatives might be most helpful to their workforce.
4. Human Capital Risk
Human capital risk is not a single metric but an analysis of several. Human capital risk draws together data to provide insight into talent-related liabilities, like flight risks, potential labor or skills shortages, or leadership pipeline shortages.
It also encompasses basic metrics like employee turnover rate, attrition rate, and leading termination reason. Companies should track both objective and subjective metrics related to turnover and attrition rates and their key drivers. The number of people leaving says a lot about your organization; why they’re leaving says even more. People teams should analyze data gleaned from exit interviews alongside turnover rate when reviewing talent initiatives and developing strategy.
5. Cost Per Hire
The cost per hire is the average cost of hiring a new employee. Cost per hire is a metric that relays the cost-effectiveness of your hiring process and the performance of your recruiting team. It’s used to analyze the company’s hiring expenses and allows an organization to benchmark its hiring expenses against those of other companies.
6. Offer Acceptance Rate (OAR)
The OAR reflects the quality of your hiring process and the competitiveness of your compensation and benefits packages. The number of candidates who are presumably interested in employment with the company when extended an offer but later decline can tell you a lot.
The OAR gives human resources teams a starting point for investigating why candidates turned down an offer. Perhaps the candidate received a better offer from a competitor, or maybe they experienced a breakdown in communication once the offer was made. OAR is a must-track HR metric for any competitive employer.
Predictive analytics helps HR better plan for the future.
When it comes to maximizing the impact of the human resources department and the central benefits of HR analytics, predictive capabilities are key. The best people success platforms on the market are built with these capabilities at their core.
How Predictive Analytics Works in HR
Predictive methods rely on AI-powered algorithms that use large amounts of data to forecast patterns of behavior and future likelihoods. For instance, predictive analytics can alert HR teams to employees who are at high risk of leaving the company.
To do so, the system would use data like the current and historical metrics related to employee engagement, performance, absenteeism, and more to judge the likelihood that an employee is considering departing the company. Using predictive analytics, HR can then take preventative actions to mitigate the loss of time and money that results when an employee leaves. HR may be able to encourage the employee to stay, for instance, or begin the search for a replacement in advance.
Uses of Predictive Analytics in HR
Predictive analytics can be used for other matters related to future talent needs, like anticipating skills shortages or managing succession planning. Human resources teams can also leverage these AI-powered analytics to identify top candidates for an open role, reduce bias in the recruiting and hiring process, and forecast future performance, among other use cases.
Predictive analytics can help HR teams make data-driven decisions related to future developments, like talent shortages or DEIB goals, and “enable people analytics teams to analyze and explore practical options for management action,” according to a 2020 article by McKinsey & Company. As HR teams continue to work toward growing and supporting high-performance workplaces, predictive analytics is a vital tool.
HR analytics platforms must provide visibility at a glance.
Since human resources data comes from various sources, people teams benefit from HR analytics tools that pull data into a single place to visualize trends and make it easy to interpret and work with. While many everyday workplace tools, including spreadsheets, can technically be considered HR analytics tools, most of these create the additional work of having to visualize the data before it can be interpreted; the numbers alone don’t create a story with actionable takeaways.
People success platforms with visualization dashboards, like Lattice, do this best. By using AI to analyze HR data faster, they give people teams the flexibility to pull and centralize data, run reports, and generate clear and intuitive charts and graphs across a host of key HR metrics. Dashboards also enable human resources professionals to easily share insights and convey data across all levels of the organization, from the C-suite to line managers, as well as with their HR colleagues.
While the data contains the facts, people teams need simple and intuitive ways to discern the story behind the numbers. Tech tools and platforms that provide dashboards make it easy to visualize data so human resources teams can interpret, communicate, and leverage data for HR strategy and initiatives with greater impact.
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Human resources teams can make better decisions with better data. That's precisely where people and HR analytics shine.
By leveraging analytics-first solutions like Lattice, your company can gain access to invaluable data-driven insights that you can use to drive organizational success. These insights provide a foundation of accurate and actionable information, enabling smarter people strategy, better resource allocation, and more effective human resource management.
Ready to partner with an analytics-first people success platform? Get a product tour of Lattice today and see how it can help drive organizational success at your company.
