Published by MBA Skool Team, Published on November 18, 2013
Does an HR really understand the ROI of their investments in human resource? Can we quantify the impact that an HR has on business performance? Since ages Human Resource is being considered to be a softer department of any organization which is just a cost centre. It was assumed to work for the overall wellbeing of the employees and had no role in the business performance and business decisions of an organization.
But the picture is changing now. HR is responsible to provide the best talent job fit for achieving business objectives. Justifying the softer aspects of business is important now hence even HR has to talk in numbers. Based on a Research paper “HR Metrics and Analytics: Use and Impact”, 66% of the organizations who participated in the survey stated that their focus currently is on aligning strategy with business units to contribute equally in business decisions which can be done with the help of data analysis.
As per Gartner’s report an average company has more than 10 HR applications & everyday employees generate petabytes of data about themselves. Big Data Analytics is the biggest thing now in all the business domains and HR can also leverage it like other functions. HR Analytics is the process of crunching and analysing data about employees to make performance driven, positive business impacting decisions. It aims at improving process by making informed decisions.
It collects the data from various data sources (like the HR management tools, internal social networking portals, feedbacks, performance management tools etc.). Then it processes the data to filter the relevant information and make it understandable. The final step is to analyse this data to spot the trends, correlations, cause & effect to make an intelligent decision for the business.
It can help in getting a generalised trend to a specific need of investment and predictive analysis. For eg. We can understand the turnover trends, individual’s behaviour, assess HR policies, and identify factors leading to attrition. It helps understand the impact of previous decisions on business performance.
Human resource department is currently facing few challenges like shortage of skilled labour, aging workforce, competition for superior talent, retention of skilled workforce, change management, leadership development. The employee salaries are making 50% of the overall operational expenses, says Josh Bersin, an HR analyst hence high performance is the only competitive edge.
HR analytics makes the organisation proactive instead of reactive. Its direct benefit is that it helps in succession planning decisions to find the best fit for the leadership position based on the past employee data. The other benefits can be in compensation decisions, employee ranking and benchmarking, industry comparisons, process optimization and strategy development.
Google is using “People Analytics” to manage their human resource. As quoted by Dr John Sullivan, managing the people cost efficiently has helped Google become the 3rd most valuable firm in the world.
Although there are numerous practical benefits of HR Analytics, there are certain challenges like resistance to change and integration of systems which are restricting organizations to implement this approach. HR still being the cost centre, getting the buy-in for budgets is a huge hurdle to cross.
We can conclude by saying that an Organization can gain numerous benefits by implementing HR Analytics. The field is still in a budding phase but it will soon be the strong pillar for any successful organization.
The article has been authored by Shilpa, TAPMI Manipal
Views expressed in the article are personal. The articles are for educational & academic purpose only, and have been uploaded by the MBA Skool Team.
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