Organizations are increasingly looking at HR analytics to develop a data-driven talent strategy. We examine the top three trends driving the demand and adoption of HR analytics and key challenges limiting the efficacy of HR analytics.
Intelligent use of data has been touted as the path to success for all business units including marketing, sales and finance, and even the HR function.Traditionally, data mining in HR was limited to compliance and regulatory requirements, but for organizations looking to stay ahead of the curve today, this is no longer enough. High-performance companies are putting people at the center of their business through an approach that takes the intuitive power of HR and adds data evidence to support key business decisions, make strategic investments and drive continuous improvement.
Nielsen uses HR data to identify internal mobility as its key to retention:
One of Nielsen’s businesses tapped its People Analytics team to understand why it was losing talent. By analyzing fives years of people data, they identified the factors highly correlated with attrition. The key finding suggested employees who had a change in job responsibilities via promotions or lateral movement were much less likely to leave. Using this insight, Nielsen’s leadership focused on making it easier for employees to pursue jobs internally and proactively providing at-risk high performers with opportunities.
- There was an 8x increase in internal mobility in the initiative’s first year.
- Most groups achieved a 5-10% increase in annual retention of their at-risk employees.
- The analysis caught the attention of other business leaders and has since been replicated for other Nielsen units.
Three key trends driving the demand for HR analytics:
- Improvement in the quantity and quality of HR Data: Organizations today have access to a greater quantity and quality of internal and external data than ever before. Large-scale digital transformation initiatives across the board are beginning to provide organizations with accurate, reliable, and integrated data that had been previously unavailable. Organizations are leveraging analytics and AI to move beyond engagement and retention analysis, to gain deeper insights into management and operational issues that can help improve organizational performance. Â
Challenges to overcome: According to a study by Bersin, only 15 percent of surveyed organizations rated themselves high on data accuracy. Major issues in data reporting include duplication of data, data validity, and poorly defined metrics (for instance, what are all the costs associated with an organization’s â€œcost per hireâ€ metric?). These limitations can make data interpretation very challenging for the key stakeholders.
- Large-scale proliferation of HR tech: The rapid increase in the adoption of SaaS (â€œcloudâ€) HCM solutions have expanded HR technological capabilities within organizations. Better user experience and interfaces have helped drive implementation and enhanced the overall customer experience and help achieve business goals. Inability to generate analytics with older HR tools is one of the major reasons why organizations are seeking new HR technologies.
Challenges to overcome: HR teams need to have the right the right skills to analyze, measure and draw insights from the data. **Just having access to data is not enough. Data is pretty much useless if HR professionals cannot understand or interpret it in a strategic way to address potential problems**. A reportOpens a new window on digital HR found that one-quarter of organizations surveyed rated their HR teams as poor in terms of their analytics skillset. Only eight percent of the organizations felt confident about the state of their HR analytics capabilities. Â
- A renewed focus on performance management: Most organizations have realized that conventional performance review systems are outdated and are of little help to employees. **The lack of real-time performance analysis and delayed feedback makes it difficult for HR teams to act in time on possible red flags**. Performance analytics tools help HR identify the high performers and at-risk employees, driving higher retention and engagement rates. Predictive performance analytics can also help organizations hire better quality talent during recruitment.
Challenges to overcome: Organizations often take a siloed approach to performance management and analytics by preventing HR data to be integrated with data points on other determinants of productivity and performance. Therefore, organizations find it challenging to glean insights that examine the role of HR related factors while controlling for other relevant factors.
Going forward, we could expect to see a sharp rise in the number of data sources for HR teams, leading to a fusion of external and internal data in talent management. Organizations looking to retain their talent advantage will integrate HR analytics across different organizational functions, rather than consider it as a separate source of information. **An integrated approach to HR analytics, coupled with the right skill set will define future business success**.