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HR Analytics E book

How to Use HR Analytics to Make Smarter Business Decisions

If you’re a busy HR executive, keeping track of HR analytics is not always first on the to-do list. But as your company grows, data increasingly gets lost, and you lack the insight you need to make effective decisions. Not only does this impact your HR team’s efficiency, but every employee’s performance, and company bottom line.

In this post, we’ll share 6 ways that you can use HR analytics to improve business performance, and how to automate it so it works like clockwork.

  • What is HR analytics?
  • What are the key HR analytics metrics?
  • 6 ways HR analytics can help you make effective business decisions
  • Why you should optimise your HR analytics with software
  • How to choose the best HR analytics software

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What is HR analytics?

HR analytics is the process of collecting, interpreting, and using data from every HR function, to highlight what is and isn’t working in a company. This empowers HR executives to strategise based on evidence rather than guesswork, improve workforce planning, and more accurately budget for the future.

HR teams are experiencing constant changes in workforce conditions, such as the shift to remote and hybrid working, and the use of automation. Utilising HR data is becoming increasingly important to navigate and adapt to these changes, and future proof your HR team and wider business in an otherwise uncertain world.

What are the key HR analytics metrics?

First off—ask yourself and other key stakeholders what exactly you need to know to improve business performance. Then make sure you can track and measure these accurately (hint: you can use a reliable and customisable HR software to help with this!)

Here are some of the most important HR analytics metrics that you should be tracking:

  • Recruitment metrics like time to hire, cost per hire, sourcing channel quality
  • Retention rate, employee turnover, and cost of turnover
  • Training costs per employee and ROI of training
  • Holiday leave, sick leave, and absenteeism
  • Employee value metrics like ROI per employee, feedback, and performance against goals
  • Diversity makeup of the workforce

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6 ways HR analytics can help you make effective business decisions

1. Streamline hiring processes

HR analytics can show you the traits and skills of your highest-performing and longest-term employees, which you can then use to highlight the ideal characteristics of future employees. This saves your recruiters a heap of time, as they can easily eliminate unsuitable candidates, and focus on those who are more suited to company culture, mission, and goals. It also helps managers to work with team members who are more likely to thrive and aids overall company success.

You can also use HR analytics to see which hiring processes are and aren’t efficient, and where time and money is being wasted. You can use this data to streamline processes for the future.

2. Improve retention rate

Keeping track of HR analytics allows you to identify early on when churn gets high, which is an important warning sign for your business.

There are many reasons for employee turnover, such as underperformance, lack of morale, and bad cultural fit, and HR analytics gives you the metrics you need to narrow down the specifics. You could use HR software to gather this information through employee surveys, exit interviews, and performance reviews, to identify any wider issues that are affecting employee engagement and happiness. Once you’ve identified these, you can set strategies to proactively target the problems, help to retain staff, and avoid future costs associated with rehiring and retraining.

You can also use HR analytics to create profiles of employees who are at risk of leaving, when, and why, and use these profiles to proactively prevent churn.

3. Boost productivity

It’s essential to accurately track the productivity of employees to help the business reach its goals. HR analytics can help you monitor productivity through metrics like leave days, projects/tasks completed, and progress towards goals.

Data will show employees who are underworking or underperforming, and so might be in need of additional support or training. It also provides evidence that could be useful when having an initial conversation with a particular employee, and in a dismissal should it come to that. You can identify whether the company has a larger problem with absenteeism, and make strategies around how to combat this.

Equally, you can spot when employees are overworking to help reduce leavism and presenteeism, which have become increasing challenges for HR executives post-pandemic, as employees struggle to keep their work and home life separate.

You can easily recognise high-performing employees, and plan reward and recognition schemes to help increase employee engagement (here’s our handy employee satisfaction survey template to help track this!)

4. Demonstrate HR’s business value

We know it’s not always easy as an HR executive to get recognition for you and your team’s efforts. And getting sign-off for anything that costs money can feel like a constant battle.

To get what you need, you have to talk the language of leadership—data, budgets, and ROI. HR metrics and analytics reports not only enable you to have conversations based on evidence but mean you can educate and inform leadership of important facts about the business. You can prove the impact of previous project successes, and propose future strategies with justifiable predictions of the impact on ROI, to get the buy-in you need for sign-off.

Gathering business intelligence will also support you as an HR professional to develop your analysis and decision-making skills, helping you move into a more strategic role, and gain the ability to influence company-wide business decisions.

5. Optimise learning and development

HR analytics can show you how effective your training programmes are—cost per employee, ROI, the impact on business outcomes, and whether employees learnt new skills to support their success. Then you can evaluate whether training was worthwhile and whether it should be repeated.

Professional development is essential to hiring and retention, as it demonstrates your company’s commitment to its employees, establishes a culture of care, and drives motivation and productivity. Plus, training upskills employees and encourages them to develop the competencies they need to be successful in their role.

Data will also enable you to forecast who is going to be a high performer, and spot talent early on, which helps you decide whether they should have specific training to accelerate their development.

All in all, data can be used to identify employee skills gaps, make sure employees are in the right roles, and maximise the skills that exist in the organisation.

6. Increase company bottom line

All of the above help cut costs, in the short and long term, and so have a direct impact on increasing company revenue.

Plus, HR analytics gives you the visibility you need into exactly what is being spent and where, and how cost-efficient every HR process and function is. This helps to identify where the business is wasting valuable money, and where savings can be made in future.

Having this visibility into what is and isn’t working means you can put budget, time, and effort into the projects that increase employee engagement and productivity, driving future revenue and business success.

Why you should optimise your HR analytics with software?

HR analytics is transforming the world of HR, and so it’s becoming increasingly vital to not just use it, but maximise what you get out of it. However, collecting and analysing business intelligence through data can be time-consuming, and if you lack the skills it can be difficult. So why not use HR software which can do all the hard work for you?

By automating the admin work, you and your team get time back to focus on the tasks that have a real impact. Plus, using easy and effective software, like Factorial HR, means you don’t have to be an analytics professional to master data and harness the power of HR analytics. Having one tool also provides a single source of truth, which minimises confusion, saves time, adds to a culture of collaboration, and strengthens relationships between business units.

How to choose the best HR analytics software?

There’s a whole heap of tools to choose from, so to make things easy for you, we’ve narrowed down the most important features to look for in a tool. Make sure it:

  • Is easy to adopt and fun to use, so your team will actually utilise it
  • Is customisable to your company, allowing you to add in the metrics you want to track, and group your data by team and office
  • Integrates with your favourite tools
  • Allows you to send surveys, so you can gather direct employee feedback quickly and easily
    Measures the key metrics mentioned earlier in this article—staff turnover, holiday and sick leave, training costs, ROI per employee, etc
  • Trusted by other companies
  • Has high-security features, and protects your data and documents through encryption

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