Staffing.org Research Library Article

11/11/2016

HR Analytics: Right Path or Wrong Path?

David Earle

Summary Three papers on HR analytics, including a blueprint for comprehensive recruiting metrics and two studies of how even sophisticated analytics efforts can fail to deliver business results. 


Description
People are the single largest operating expense in most businesses averaging 60% or more of costs in large corporations and 50-70% in small businesses


About a decade ago, the analytics of managing those costs began an astonishing transformation. In recruiting, for example, companies began to view their simplistic time and cost metrics through the lens of deep analyses of external talent supply, which, it turns out, could be managed through increasingly sophisticated marketing and branding strategies adapted from consumer marketing. Even more significant, “internal” HR metrics began to be “externalized” so that businesses could see more clearly how personnel decisions played out in business outcomes.  

Is your department using advanced analytics to

  • Define knowledge, skills and capability requirements for executing business strategy?
  • Determine headcount and FTE capacity requirements by job assignments and locations?
  • Retain valued talent?
  • Understand collaboration and knowledge sharing?

 

 

This transformation, while well underway, is far from complete and progress has been uneven. HR analytics maturity still varies a great deal, even among companies that are considered industry leaders. Broadly speaking, there are three levels of maturity:


Traditional departments still work with HR metrics that haven’t changed much in the past decade. The focus remains primarily on recruiting, with the emphasis on efficiency (time to hire, cost per hire, and so forth).


Transitional departments have begun to add metrics that quantify things like talent supply, the effectiveness of marketing communications and employer branding, performance management, talent retention, and talent optimization. Emphasis has shifted from hiring efficiency, which is always a relatively small number on the corporate P & L, to hiring effectiveness, which is always a much larger number grounded in talent retention, optimization and performance. These departments represent the middle of the metrics maturity bell curve, or about 60% of all companies. Maturity levels very considerably.

 

Advanced departments have developed expertise across most or all HR metrics domains and are now focused on refinement: sifting and analyzing their human capital data to reveal the most powerful drivers of corporate performance. Metrics emphasis has shifted once again, from effectiveness to business performance. Even for these advanced players, there is no “end of the road”, just continuous evolution.

Our three pieces of research speak to each of these groups:


Talent Analytics for Dummies will be useful to traditional departments. It’s a tightly written, well organized summary of how traditional departments need to think and act if they are to begin developing the analytical tools that have become so critical to success in today’s talent marketplace.


Getting Smart About Your Workforce is for transitional departments that should be assessing what’s been done, or is currently planned, against what really ought to be done. The question it raises is whether data-related investments are actually affecting the corporate P & L. Are senior managers using the data to run the business better? Are they still supportive? Are they willing to move to the next level? Although written in 2009, this paper lays out the key issues that advanced analytics programs are supposed to, but frequently fail to, address. 


HR Analytics: It’s not a fad, it’s the future, by Thomas Rasmussen and Dave Ulrich, speaks to the transition from “inside-out,” HR-centric, academically focused metrics to “outside-in” metrics that are driven by non-HR departments like finance, IT, and marketing. They observe that in advanced enterprises, HR analytics is gradually being taken out of HR and becoming part of end-to-end business analytics. And they argue that this is a good thing because these other departments are more mature in their analytics journey, and also because the end-to-end approach to data is the surest way to ensure that it has the greatest organizational impact.

 

Research Sources

Talent Analytics for Dummies

Getting Smart About Your Workforce

HR Analytics, Not a Fad



 

 


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