4 Benefits of Using HR Analytics in Enhancing Business Performance

Although HR is a people-facing role, it is not all about subjective feelings and relationships. HR professionals are also responsible for gathering data and drawing insights about human capital, which can enhance business performance. 

Why HR analytics are important

Tracking HR analytics is perhaps the best way to use data to visualize how well a business is performing. Without proper analytics, businesses are not equipped to make data-driven decisions about how they manage their human capital.

For example, if a business is deciding whether to outsource operations or not, it should make the decision and monitor results based on trackable performance indicators. It’s best to know as much about your staff and their performance as possible before making changes – otherwise, you cannot tell what works and why. 

With a proper understanding of internal processes relating to functions like payroll, hiring, onboarding, employee performance, and satisfaction, companies can more easily identify strong points and areas to confuse. For example, if numbers reveal that miscommunication is an issue, you could invest in tools like a visual voicemail app to foster a smoother work experience and increased job satisfaction. 

By taking away the elements of guesswork and hearsay, HR analytics can significantly enhance business performance.

4 benefits of using HR analytics

square list:-employee experience-training programmes-employee retention-recruitment

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1. Improved employee experience 

By monitoring various data sources, businesses can get an idea of employee sentiment. They can then make decisions to improve workplace culture and create a positive environment, leading to more engaged employees. The more you engage employees, the more likely they are to stay loyal to the company throughout their career progression. So, not only are they more satisfied at work, but they also perform better. 

2. More effective training programs 

Armed with data about employee performance and satisfaction, managers can tailor training regimes to enhance business functions. Then, they can measure the impact of the training, its cost, and efficiency. If businesses do not have figures to back up their approach, they may well be wasting money on training programs that have no tangible benefit.

3. Increased employee retention 

Customer retention is an important business KPI, so much so that businesses might even build up their own customer retention call center dedicated to dealing with particularly unhappy clients. It is, however, equally important to retain loyal and satisfied employees. If a business is experiencing high churn, this is expensive and detrimental to performance. 

However, retention is difficult to gauge unless you’re specifically tracking relevant metrics. By looking at talent management data, you can conjure a more concrete image of employee sentiment. The goal is to address morale issues in the workplace and find ways to keep top talent within the company. 

4. Enhanced recruitment processes

Many of the analytics we’ll cover are useful for measuring and improving recruitment and hiring processes. With the right data, you can identify weak points and find ways to move candidates more quickly through the stages of the hiring cycle. Additionally, a data-driven approach to hiring helps to remove human bias from the equation. 

Key HR analytics

Now you know why tracking HR analytics is important, here are ten examples of KPIs to track success and enhance business performance. 

illustrated checklist titled 'KPI key performance indicator'

Free to image from Pixabay

Revenue per employee

Divide a company’s total revenue across a set period by the number of employees in the company. The number you’re left with is the revenue per employee. Businesses use this as an indicator of efficiency, as it tells you the average revenue generated by each employee. So, the higher, the better.

Time to fill

Time to fill refers to the amount of time between advertising a job opening and hiring someone to fill that position – usually measured in days. By keeping an eye on this metric, recruiters can identify areas that are slowing them down and alter their strategy accordingly.

Time to hire

Similarly, time to hire is about the number of days between approaching a candidate and the candidate’s acceptance of the job offer. If this is slow, it’s possible that more communication is needed to seal the deal – consider a video call online to put faces to names and encourage the applicant to join the team. 

Voluntary turnover rates

This is a measure of the number of employees voluntarily choosing to quit their jobs or move elsewhere. Companies analyze voluntary turnover rates to glean insights into employee retention and the factors which affect it. High turnover rates can be a sign of one or more problems (likely a combination of several), such as insufficient pay, poor company culture, or limited opportunities for growth.

To calculate the voluntary turnover rate, divide the number of voluntary leavers in a given period by the average number of employees at the company in that period. Multiply by 100 to get a percentage rate.

Involuntary turnover rates

In contrast, the involuntary turnover rate tracks the number of employees who did not choose to leave their jobs but were subject to layoffs or termination. A high involuntary turnover rate suggests a problem with recruitment – are the right candidates being brought on for the position? Additionally, it could indicate issues with workforce management and conflict resolution.

Illustration of a line of figures walking downstairs carrying briefcases. One figure is red and being pushed by the finger of the boss, to indicate being fired

Free to use image from Pixabay 

As before, divide the number of employees terminated from their positions over a given period by the average number of employees at the company in the same period. Multiply this by 100, and you have your involuntary turnover rate as a percentage.

Offer acceptance rate

This is another hiring metric measuring the success of the recruitment team. If the team gave out 30 job offers in a year and received 15 formal acceptances, then the offer acceptance rate would be 50%.

A low offer acceptance rate might mean that the hiring process needs to be adjusted. You want to approach individuals who are genuinely interested in joining the company rather than wasting time moving unqualified people through the recruitment process. 

If lots of candidates are declining job offers, then there may be an underlying cause. Where possible, ask for feedback to find out what changes need making. For example, candidates may be suspicious of a company that does not have a reputable online presence. Attract top talents with a domain name from Only Domains and a proven record of treating employees with respect. 

Training expenses per employee

Work out the training expenses per employee by dividing the total training expense by the total number of employees who received training. This is a useful number to keep in mind when we think about training efficiency.

While it’s tempting to keep expenses as low as possible, the priority should be efficiency. Don’t leave employees underprepared and confused just to keep costs low. 

Imagine you are starting a new job working from home. You would expect to be trained in company software and tools needed to set up your workstation – not be left googling “remote desktop MAC download” and working out how to proceed without instruction. 

Training efficiency

This is a more complicated metric, drawing from the analysis of multiple data points. These could be test scores, performance improvement, output, customer satisfaction, or the progression of employees through the ranks of the organization following training.

If these various sources suggest that training has been successful, then you may decide that high training expenses per employee are nonetheless efficient in achieving results. You want to set employees up for success while ideally keeping expenses low in comparison.

If training expenses are high, but the results are insubstantial, then you may conclude that this is not an efficient use of resources, and you need to re-evaluate the training expenses per employee.

Whiteboard of key words. learning, experience, knowledge, skills, ability, training, growth, competence

Free to use image from Pixabay

Absence rate

Absenteeism is a productivity metric. It is measured by dividing the number of unplanned absences by the number of possible workdays in a set time period. This does not include approved time off.

For example, say there were 20 possible workdays in a month. An employee, Anna, booked two days of planned vacation time. This means she has 18 possible workdays in this period. If she calls in sick or doesn’t show up on 5 of those days but comes to work on 13, then she has worked about 72% of the time. This gives her an absence rate of approximately 28%.

Absence rate is a key performance indicator and is especially important to track in positions like retail, where individuals often call out of work. A high absence rate could also point to employee health and happiness problems – perks like wellness programs for companies can do a lot of good. 

Human capital risk

Human capital risk analysis examines several KPIs – such as turnover rate, employee satisfaction, and absences – to conceptualize the amount of risk inherent to managing the workforce. For example, do you have enough employees to fill demand? Are there succession plans if key workers leave the company? What about the absence of specific skills? Are there qualified employees to fill leadership positions if called upon?

Final thoughts 

In conclusion, keeping track of analytics like turnover rate, offer acceptance rate, training efficiency, and more can have a huge impact on how an organization operates. Using HR analytics to understand current key performance indicators, you can make strategic data-driven decisions to enhance business performance going forward.

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