The importance of HR analytics: Everything you need to know

HR analytics with HRMS

Last Updated on March 30, 2023 by user

The importance of HR analytics: Everything you need to know

Data is the key to business success. Businesses are generating an increasing amount of data without always using it to its full potential. This is true, especially in Human Resources. But what is HR analytics, and how can it help your business? 

What is HR analytics?

HR analytics is all about analyzing an organization’s ‘people problem’ through data. HR analytics can help HR professionals and executives understand the impact of their human capital strategies on business performance and make data-driven decisions.

HR analytics can be applied to a wide variety of business processes to enhance productivity and efficiency. The following are the most common:

  1. Recruitment

Searching for the ideal candidate to fill an open position is usually time-consuming, expensive and frustrating. Integrating data analytics within your recruitment process allows you to identify platforms that are driving the best talent and analyze profiles that have the highest likelihood of becoming successful new hires. Recruitment analytics also provide insights into how your recruitment functions are working and provide actionable solutions to refine the recruitment process.

  1. Employee performance

HR analytics can also give you accurate insights into who your best and worst-performing employees are. For example, running analysis on promotion rates, wait times for a promotion, and the quality of work of employees allows HR departments to make data-driven decisions and eliminate bias when deciding on who to promote.

  1. Compensations and Incentives

Compensation and benefits are one of the most critical decisions an HR department makes. HR analytics can be used by organizations to analyze a large amount of employee data and ensure packages offered are on par with industry averages. Exit surveys and declined offers can be investigated to understand what enhancements could be made to provide better incentives to employees. For example, analyzing how much a C-level employee gets paid and what bonuses are offered to them in other companies can help your company attract and retain top talent.

  1. Employee Retention

For any company, losing an employee can prove to be costly. This is due to additional training/onboarding, lost productivity, recruitment costs, and additional visa costs. HR analytics can improve retention by analyzing data points such as current churn rates, employee attrition, and attributes of employees who leave within a year. It can help you spot why employees tend to leave your company so that new policies can be put in place to solve the issue altogether. For example, an employee may not be performing well as he or she feels underpaid. An analysis of productivity along with market-value salaries can narrow the reason’s down.

  1. Time and Attendance

It is imperative to analyze work schedules and manage time and attendance for all your employees. By using HR analytics, businesses can manage the scheduling processes for all employees to remain in compliance with regulatory procedures. HR professionals can also study patterns of absenteeism that might adversely affect company productivity and growth.

The benefits of Human Resource Data Analysis

There are several benefits to HR analytics. When used correctly, you can create numerous long-term advantages and strategically position your business for success. With HR & Data analysis, your business can:

  • Minimise employee churn rate by fully understanding where the issues lie and improve retention rates with proper solutions.
  • Create a more attractive and effective hiring process that finds the right talent and gives new hires a smoother onboarding process.
  • Boost employee productivity by creating a more functional performance management system that develops talent.
  • Strengthen employee communication and trust.
  • Save money by streamlining and improving processes.

Your company culture can benefit from all of the above. You’ll create a more caring work environment, and your employees will be happier and more productive as a result. 

Why is HR analytics important in the UAE market?

UAE has changed rapidly in the past decade. The region’s business environment has transformed and become more modern. Companies operating in the region have needed to fulfil many high-skilled roles with talent from elsewhere. All these conditions have led to a much more difficult HR environment to navigate. 

The ability to use HR analytics tools is crucial for continued business growth. If the region’s organisations want to survive and thrive, then they must attract the right talent. What’s more, businesses must learn to keep the talent and promote it further on. In a MetLife report, 56% of UAE employees said they were considering changing jobs within the next 12 months! 

These high churn rates can be detrimental to the region’s growth, not to mention the future success of individual companies. With HR analytics, businesses can get to the root of the problem and improve their business standing. 

The importance of HR analytics

Getting started with human resource analytics is easy with a few simple steps. Your organization should: 

  • Identify all employee data. You should start by identifying and understanding all the HR data you’re already collecting. This refers to recruitment information, work hours, performance reports, succession systems and so on. 
  • Centralise employee data to a single repository. Accessing data from a single location will make it easier to monitor and use different data points.
  • Identify the HR tools you need to monitor, manage and control your data. You want to include your HR managers in the process early on and get their insight into the right analytics tools to use. 
  • Educate your workforce on your chosen tools. You want to ensure employees are trained on your new systems. 
  • Identify goals and objectives. HR analytics is the most effective when it serves a purpose. Be mindful of how you want to use your data and what you want to achieve with this new information. 

The key metrics in HR analytics for organizational development

As you implement HR analytics and get to the bottom of the question of what HR analytics is all about, you uncover a number of vital metrics. Your business’s ability to adapt to changes is an essential component of business success. If you want to ensure you’re benefitting from HR data analysis to the fullest, you must track the right metrics. 

The most commonly tracked metrics that have a real impact on creating a solid organizational foundation are:

  • Revenue per employee – The figure can be calculated by dividing the total business revenue by the number of employees your company has. The figure allows you to understand the efficiency of your organization and the performance of your hires. 
  • Offer acceptance rate – Refers to the figure you get when you divide the total accepted formal job offers by the total number of offers given in a specific time. You typically want this rate to be as high as possible.
  • Training expenses & efficiency – Training expenses should be measured per employee, with training efficiency requiring the analysis of other data points on top of the cost. These can be test performance and upward transition within an organization compared to cost.  
  • Voluntary & involuntary turnover rate – Voluntary turnover rate refers to employees who decide to leave their jobs, while the involuntary turnover rate is when an employee is terminated from that position.
  • Time to fill positions & time to hire – Time to fill is the number of days between posting an open job position, making a hire, and filling the open position. Time to hire refers to the total number of days it takes to approach a candidate and have them accept an offer. 
  • Absenteeism – Also known as a productivity metric, the figure can be calculated by dividing the number of days an employee is absent by the total number of scheduled work days. It can be a powerful metric in identifying employee well-being and happiness.
  • Human Capital Risk – The figure relates to employee-related risks such as the absence of skills, how many qualified employees are available for leadership positions, and the potential of losing employees. 

The above are some of the primary metrics to consider tracking. There are many others, and each business can have unique priorities. It is a good idea to view the most critical metrics for your business by examining your HR needs and business objectives. 

What data does a Human Resource analytics tool need?

Your chosen data analytics tool needs to collect data from internal and external sources. The core system should have information on employee tenure, compensation and performance. The data should be centralized, which means a cloud-based system is often the best choice. You also want to be able to control who has access to information and what information people can view. 

The tools should also gather external data. This means things like historical data and financial data from across the organization as well outside of it. You want to place your employee information on a bigger picture – for example, understand how things like the pandemic might have influenced your hiring processes. The good news is that UAE is at the forefront of innovating in HR technology. In a recent survey, 67% of HR leaders said they had experienced the digital transformation of HR. 

Read : HRMS: What Human Resource Management System

How can HR management use HR metrics to drive performance & ROI?

As you identify the relevant metrics for your business, you can start gathering the information that will transform your business. The HR & Data analytics will provide you with the tools to make more strategic decisions. The important thing is to ensure you don’t rely solely on the HR analytics tools! You must understand that you need to:

  • Track the right metrics
  • Use the right tools
  • Check and test your goals

Your business must be strategic in analytics use. You want the information to be clearly identified and centralized. If your data isn’t consistent, then your results will also be inaccurate. Furthermore, ensure you train your HR professionals on the use of your Human Resource Analytics. You need them to understand any HRMS software you’re using and the data you’re gathering. Finally, it is crucial to understand that as your business grows and changes, your data needs and usage can also differ from the original. Your workplace is, after all, a living, breathing space. Your HR analytics won’t be the same at the start of your project to six months or two years from now! Modify and adjust your tools and metrics as you go along. 

There is enough evidence to support that more robust analytics can give accurate insights to HR professionals into what aspects of their processes are working and where improvements can be made. Implementing suitable HR software can help you extract the correct data and help your company make decisions based on payroll, benefits, work schedules, hiring and more.