Far beyond simply focusing on HR tasks in a more restricted sense, HR leaders need to be concerned with the productivity, goals, and efficiency of their team. Among many other challenges, one of the biggest is adopting strategies to ensure the productivity and development of the team in a context that demands constant and rapid adaptation.
The era when HR only performed operational and bureaucratic tasks is a thing of the past. Today, the sector plays a strategic role in companies. After all, human capital is the most important capital of organisations. That’s why human resources need to know how to get started with hr analytics.
This process began with the digital revolution in the business world, which changed the demands of the sector and also the way it is viewed by the organizations’ management. Furthermore, technology has enabled HR teams to focus more on people management and less on administrative processes.
A recent study by Deloitte found that 56% of HR leaders are redesigning processes to include digital tools as a way to optimize and increase the sector’s productivity. In this context, within the new reorganization of HR tasks, data analysis has taken on a fundamental role, especially in facilitating decision-making and developing the competitive potential of companies.
With this in mind, the central objective of this article is to reflect on how to get started with hr analytics to improve people management in a company. Furthermore, the challenges involved in using data in HR and the main trends in this area will also be addressed.
What is the importance of data in HR?
In a survey, InfoJobs found that 61% of HR professionals already make decisions based on data. In this survey, 95.5% of respondents consider data important or very important for improving processes. The same study showed that 48.1% of companies already use technological tools to analyse HR indicators.
In general, companies collect large amounts of data from employees as a way to generate valuable input for making strategic decisions and improving business results. In fact, data analysis is one of the most relevant aspects of digital culture. It’s no coincidence that The Economist classified data as: “The world’s most valuable resource” .
Indeed, the importance of data in HR lies, especially, in the ability to understand HR patterns and trends, and to predict what will happen — whether to avoid a problem or to seize an opportunity. Some issues, such as recruitment and selection, organizational climate, talent retention, engagement, and productivity, can be resolved more effectively and strategically through data analysis.
How to collect data in HR
People Analytics is the area of human resource management that analyzes data on behaviors, metrics, and trends related to employees. The goal of this methodology is to offer a strategic perspective on the roles played by people and the organizational culture.
Collecting data ethically and legally is a fundamental part of People Analytics. This involves identifying relevant data sources such as HR systems, employee surveys, and performance records.
What types of data analysis are used in HR?
The main types of data analysis in HR are:
Descriptive analysis
Descriptive analysis consists of a description of the facts. In other words, it is a historical account that shows what happened through data. Descriptive analysis does not reflect on the data; it only describes it.
Why was the data above or below average? What might have influenced employee turnover? These are not questions that descriptive analysis seeks to answer.
Diagnostic analysis
Diagnostic analysis is a more in-depth analysis of descriptive analysis. So, generally speaking, it’s a reflection on the data that the previous analysis revealed. Therefore, if the turnover rate in 2022 was 12%, the diagnostic analysis will seek to understand why. To do this, a survey on employee satisfaction and engagement can be conducted.
In this way, you will come across new data, such as the fact that salaries and benefits are below market average or that people feel a lack of opportunities for development.
Prescriptive analysis
Prescriptive analytics, in turn, is a data analysis approach that aims to predict what will happen in the future and recommend specific actions to optimise desired outcomes. For this reason, it includes some forecasts, optimisations, and recommendations for action based on data, to empower decision-making.
One example of this is price optimization and resource allocation to improve efficiency and achieve organisational goals.
What are the main HR indicators?
A major challenge for people in human resources is correlating investments in the area with the organisation’s strategic goals. Therefore, People Analytics indicators are not limited to just looking at people. Often, the indicators relate to the organisation’s performance in other areas, such as sales, customer relations, finance, and so on.
In general, the main People Analytics indicators are:
- Recruitment and selection;
- Learning management;
- Career plans;
- Talent Development;
- Individual productivity management
- Offboarding;
- Organizational culture and climate surveys;
- Absenteeism;
- Turnover;
How to start analyzing data in HR.
Given the importance and benefits of data analysis in HR, you might be wondering, “How exactly do I start analyzing data in my company?” To answer this question, it’s important to understand that, while tools matter, the most relevant aspect is developing teams to have this data-driven and technology-driven perspective.
In any case, after establishing a database in HR, it’s essential to know how to use it. In this scenario, some steps can help with this process, such as:
- Define the core objectives of data analysis in HR teams;
- Invest in the right tools;
- Develop HR teams’ data analytics skills;
- Collect data in People Analytics;
- Define metrics, KPIs , and monitoring indicators;
- correlate data and indicators;
- Find trends and make projections.
Tools for data analysis in HR.
Like other company strategies, there is no single recipe for developing data analytics in a business. Data analysis tools in HR can vary widely. In practice, it all depends on the specific objectives and needs of the organization.
An important factor in this choice is what data the company wants to collect. After all, there are different types of data that may be interesting for a more detailed analysis, such as sales and financial data So, the first step in choosing a tool is understanding the organization’s objectives. It’s important to choose a tool that can integrate and correlate different data.
Without a doubt, it’s difficult to find one that understands 100% of the data. Therefore, it’s essential to choose tools that complement each other and have compatibility for data integration in HR. Remember, however, that having a lot of data is not always a sign of quality. Some data is more relevant than others, depending on the purpose of the analysis.
Not to mention that uncorrelated data may not translate into valuable information. Therefore, many companies are also investing in tools with machine learning and artificial intelligence to develop the analysis itself.
What are the benefits of using data in HR?
Within this context, there are many benefits to using data in HR departments, mainly to align people management with the strategic goals of the business.Therefore, some of the main benefits are:
- Making more assertive decisions based on data, not mere assumptions;
- Greater operational efficiency , thanks to the possibility of automating bureaucratic tasks;
- better allocation of resources;
- Increased talent retention rates , based on insights into the key factors affecting turnover;
- More effective recruitment and selection, based on predictive analytics that help identify candidates with a higher probability of success;
- Greater talent development , starting with the identification of opportunities;
- Promoting diversity and inclusion through monitoring and analyzing data related to these topics;
- Improving performance management , based on individual performance analyses of people;
- strategic HR planning;
- cost reduction and reduction of resource waste;
- greater competitiveness in the market;
- greater engagement from employees;
- Greater personalisation of HR strategies based on the individual needs of employees.
Data privacy considerations in human resources.
Despite the many benefits, there are some challenges in using data in HR processes. The truth is that everyone is still learning and assimilating the impacts that this technology can bring. Like all innovative tools, data analysis brings many new features and, for that reason, also demands a lot of care, as well as requiring a period of experience and adaptation.
And the first point is that the new tools require technical skills. As the McKinsey & Company article rightly points out, technology is only one part of this process. The other part depends on training people to work with the technology and the new processes, through reskilling and upskilling strategies .
In other words, data is important for generating greater productivity and efficiency in processes. However, employees need to be prepared to work in alignment with this technology. Finally, the implementation of this tool in company processes must also consider all ethical implications. The main issues identified include:
- Algorithmic bias: Data algorithms can be biased and perpetuate prejudiced and discriminatory behaviors in society. The company must stay informed about all processes and ensure that this does not happen.
- Data privacy: the company must guarantee the privacy and security of employee data, especially sensitive data — such as health information and financial data.
What are the trends in data analysis in the human resources sector?
Human resource management practices have been improving in recent times. And, increasingly, technological tools are involved in these processes. By all indications, the outlook will not change in this regard. The trend points in a single direction: it is nowhere near the time for technology to retreat. On the contrary, technological solutions are coming on strong in all HR subsystems .
In any case, using data management software is only the first step towards strategic decisions within HR. Furthermore, it’s necessary to create a culture of analytical data among employees and leadership.
Therefore, it is essential to invest in developing the digital skills of employees so that they can handle data analysis in their roles.
Get your questions about HR data answered.
What is a database in HR?
A database in HR is an organized system that stores and manages information related to employees, candidates, and human resources processes It contains data such as hiring history, salaries, performance reviews, training, benefits, and contact information, facilitating access, analysis, and efficient management of this information for decision-making and administrative operations.
What happens when you don’t adopt data analytics in HR?
By not adopting data analytics in HR, the company misses opportunities to improve decision-making, optimize recruitment and retention processes, quickly identify trends and problems, and increase operational efficiency.
This can result in decisions based on intuition rather than evidence, a higher risk of errors, reduced competitiveness, and difficulty in measuring and improving employee performance and satisfaction.