What Is HR Analytics?

As the business world gets more connected, analytics plays an important role in human resources. Read this guide to get a clear definition of human resources analytics and discover why it's important. Explore four types of HR analytics, learn about benefits and challenges, and learn how to begin using this important tool.

What is HR analytics? 

HR analytics involves examining employee-related data as a tool for improving a company's performance. Businesses use HR analytics to inform best practices for hiring decisions, talent recruitment, employee training, staff retention, salary standards, and policy making.

Why HR Analytics is important?

HR analytics provides companies with accurate and measurable data. This valuable information offers greater insight into employee behavior and improves employee management. It also helps companies operate within legal standards and requirements.

Read more: What is Human Resources (HR)? Description, Duties, and Jobs

Types of HR analytics

To understand HR analytics better, it helps to learn about different types. Explore four types of analytics used by human resources departments.

Operational reporting

Operational reporting involves looking at a company's historical data—events that have already happened. In HR, historical data might involve any of these elements and more:

• Absenteeism

• Employee tenure

• Employee turnover rate

• Employee advancement rate

• Revenue per employee

• Training completion rate

By examining this data, operational reporting allows companies to reflect on current personnel policies and procedures and make changes if needed.

Advanced reporting

Advanced reporting involves looking into a company's future by studying relationships between variables. Examples of variables a company could study include: 

• Whether a professional dress code affects sales

• How a longer lunch break affects worker satisfaction

• Whether a health club membership affects employee absenteeism

With the help of analytics software, companies can automate advanced reporting. In the examples above, a company could track sales after the institution of a temporary dress code, tabulate employee surveys asking questions about work breaks, and monitor the work attendance of employees who currently belong to a health club.

Strategic analytics

Strategic analytics involves gathering and interpreting data to help develop better employee policies and problem-solving strategies. For instance, a company might use the data gathered in the above-mentioned section to implement a permanent professional dress code, keep lunch breaks as is, or provide a corporate health club membership as a company benefit.

Predictive analytics

Predictive analytics involves using a combination of data analysis methods to make predictions and plan for the future. Examples of predictive analytics might include:

• A restaurant using past customer data to predict how many staff to have on hand over a holiday weekend 

• An HR team brainstorming management-level qualities and using their list as a model for future promotions

• A supervisor analyzing personnel data to reduce future attrition like the regularity of raises and employee recognition or rewards

How an HR department benefits from analytics

Successful businesses continually seek to improve, and the HR department offers a good place to start. Incorporating analytics into HR enhances decision-making, improves employee retention, and boosts productivity.

Enhances decision-making

The use of HR analytics allows company leaders to make better, data-driven decisions affecting all areas of human resources, from hiring and employee benefits to training methods. Ways analytics can enhance decision-making include:

• Predicting events before they occur for more strategic decision-making

• Analyzing employee experience, skills, and education to make better hiring decisions

• Automating some tasks to free up time for more important, decision-dependent tasks

Improves employee retention

Losing employees can cost companies valuable time, money, and talent. Analytics can help improve employee retention by:

• Explaining why employees leave (lack of training, staff issues, irregular raises, etc.)

• Analyzing feedback from employee surveys and evaluations

• Identifying high-performing employees and promoting them or having them train others

Read more: Your 2024 Guide to Employee Retention

Boosts productivity

In many companies, success relies on employee productivity. Ways analytics might boost productivity include:

• Tracking worker output (like reports written, sales made, etc.) instead of hours worked

• Using data to create better work processes

• Analyzing employee work patterns with time-tracking software 

Potential HR analytics challenges

Although your HR team can benefit from using analytics, it's important to know some challenges you could face. These might include:

Limited analytics skills

Members of your HR staff may not be as knowledgeable about analytics as the employees in your IT department. Therefore, you may want to incorporate data analysis into your HR training program. 

Access to enough data

Predictive analytics requires large sets of relevant data. Therefore, smaller HR departments may have a harder time using data to make predictions.

Employee privacy issues

Your employees may have concerns about how you're using the data you're collecting. You can quell employee concerns by using these best practices:

• Be responsible and ethical when collecting employee data.

• Be transparent by explaining to employees how you'll use their data.

• Know about any legal risks involved with employee data collection.

• Invest in high-quality data protection tools.

How to create an HR analytics plan for your business

When incorporating analytics into your HR program, it helps to have a plan. Consider using this basic HR analytics strategy:

1. Define your objectives.

Identify what HR challenges your company faces and consider how analytics might help. Some common challenges in HR include:

• Disciplinary issues

• Inability to recruit qualified talent

• Inability to keep qualified talent

• Problems with workplace safety

• Reduced productivity

2. Decide what types of data you want to collect.

The types of data you collect depend on the problem you're addressing. For instance, if your problem has to do with employee retention, you may want to collect data involving:

• Employee satisfaction

• Employee retention rate

• Employee turnover rate

If your problem involves lower annual sales, you may want to collect data involving:

• Goal tracking per sales agent

• Work performance assessments

• Revenue per agent

3. Gather the tools you'll need.

A variety of software programs help companies track HR data. Choose software that addresses your particular issues and look for platforms that offer free trials or demos so you can get a feel for the software's capabilities. 

Common brands of software used for HR include:

• ADP Workforce Now

• Crunchr

• DreamTeam

• Qualtrics

• Tableau

• Visier

4. Analyze the data, and make changes as needed.

Once you've collected the data you need, examine it carefully. Use what you learn to make a plan for correcting your problem.

Next steps on Coursera 

To build your analytics knowledge, consider taking Human Resources Analytics on Coursera, offered by the University of California, Irvine. You'll have the opportunity to learn about the HR metrics lifecycle and explore three types of HR metrics. Then, you'll get an overview of human resources as a whole to discover how gathering HR data helps improve strategic planning in business. Each of the four modules takes about one hour to complete, and when you're finished, you'll receive a shareable certificate.