HR analytics: a revolution for human resources?

After Big Data, which is pushing candidates to adapt their personal branding, this week we turn our attention to the role of HR analytics in human resources. Still rarely used, HR analytics make it possible, thanks to the analysis of an ever-growing volume of data, to predict HR needs, turnover, and the talent that will be required in the future.

With the use of HR analytics, is it time to stop relying on HR’s “gut feeling” and let the numbers speak? Black Hills Corporation, a company that has worked in commodities for 130 years, doubled its workforce following an acquisition. As is the case for many companies in this sector, a combination of challenges (a workforce approaching retirement, the need to hire highly specialized profiles, and so on) created a significant talent-management risk.

To meet this challenge, the company used HR analytics. Its goals: to calculate the number of employees retiring each year and to identify the worker profiles likely to replace them. The result: a massive workforce plan with dozens of action plans aimed at addressing the potential talent shortage.

Definition of HR analytics

Why did Black Hills Corporation successfully use HR analytics? Born in the 1980s, this methodology was used in finance and marketing. Both of these fields use the data available to them to analyze it through statistical models.

The challenge of analytics for human resources is identifying which data should be used and how to use it. The data obtained through HR analytics should make it possible to simulate and predict the skills the company must acquire for an optimal return on investment (ROI). The aim, in particular, is to establish relationships between phenomena that have no obvious connection: such as the effects of where employees live on absenteeism or work overload.

Different functions of HR analytics (source: http://www.intellika.in/blogs/post/making-your-hr-analytics-enabled-from-data-enabled)

To do this, HR analytics draw on an astronomical amount of data of very different kinds, ranging from highly structured data (for example, sales figures) to semi-structured data (such as the results of a satisfaction survey) and unstructured data (such as comments on social media).

Thanks to the reliability of this data, which is constantly increasing and therefore likely to play a key role, and thanks to the fact-based nature of the decisions made by relying on it, HR analytics help restore credibility to HR and can indirectly enhance the employer brand.

HR analytics on the rise

Currently, according to the study by Bersin by Deloitte, only 14% of the organizations surveyed have put advanced or predictive analytics models in place to make decisions about human capital. 56% of the companies surveyed have remained at the first phase of HR analytics, that of “operational reporting”: companies act more on the opinion and “feeling” of HR professionals, relying, for example, on their experience, rather than on reliable HR analytics. The lack of in-house skills and the lack of data reliability, or company culture, largely explain this lag.

The challenges of a widespread

rollout of HR analytics (source: KPMG)

But the adoption of HR analytics is expected to grow, driven in particular by the ever-increasing capacity to store and process data about employees and candidates. According to a September 2014 survey by audit firm KPMG of more than 375 executives, two-thirds of whom hold an HR position, 82% expect their organization to expand its use of HR analytics over the next three years.

The stakes are high: according to a KPMG study, 3 out of 4 executives believe that human resources policies based on data analysis will improve companies’ profitability over the next three years.

The outlook for HR analytics (source: KPMG)

Some sectors will be more affected by the use of HR analytics. According to an international study by KPMG and the Economist Intelligence Unit, nearly two-thirds of the executives surveyed in the IT and technology sector (64%) anticipate an increased use of data analysis in order to boost their profitability by more than 10% over the next three years.

HR analytics restore legitimacy to HR

While HR must not succumb to the dictatorship of numbers and must use HR analytics wisely, that is, ask the right questions to get the right answers, HR analytics could bring HR back to the forefront within the company. The use of HR analytics could restore credibility and legitimacy to HR in the eyes of management teams, who generally prefer analyses based on numbers.

By relying on HR analytics, HR can, for example, identify companies’ skills needs over the next five to ten years, establish a recruitment strategy and new types of profiles to look for. Their use also serves in the context of training, requalification, or professional mobility paths to address future challenges.

For Luk Smeyers, CEO of predictive-analytics company iNostix, the use of HR analytics thus makes it possible to identify, more reliably than before, the profiles likely to represent high-potential employees, or should enable HR to predict which candidate profiles carry a higher risk of leaving the organization or will underperform relative to their colleagues.

The value of HR analytics for the employer brand

Companies that use HR analytics can thereby indirectly enhance their employer brand, which refers to all the image-related issues a brand faces with regard to its employees or potential employees.

The use of HR analytics indeed allows an organization to stand out, for example, through the accuracy of the profiles selected. This data is important for the company’s stakeholders (such as shareholders), because a good hire means positive Key Performance Indicators (KPIs) for the HR staff tasked with optimizing the recruitment budget. Internally, employees thus feel that they belong to a well-defined group where the performance of collective work is highlighted and better measured.

Externally, the happier employees are and the more they feel that their work is taken into account, the more they will be able to promote their company. The bond between the employee and their employer is indeed reciprocal: the trust of one reflects positively on the other. And being among the “top employers” is a powerful tool for attracting, retaining, and engaging the best talent: the flow of candidates depends directly on the company’s attractiveness.