Introduction to hr analytics

MODULE 1
 What is HR Analytics ?
 HR analytics, also referred to as people analytics, workforce
analytics, or talent analytics, involves gathering, analyzing,
and reporting HR data.
 It enables your organization to measure the impact of a
range of HR metrics on overall business performance and
make decisions based on data.
 In other words, HR analytics is a data-driven approach
toward Human Resources Management.
Definition of hr analytics

 According to Heuvel & Bondarouk, 2016, HR analytics is the

systematic identification and quantification of the people drivers
of business outcomes.
Evolution of hr analytics
Meaning & definition of hr measurement:

 HR Measurement refers to determining the value of HR for

achieving organizational goals.

 Bratton defined HRM evaluation as ‘the procedures and processes

that measure, evaluate and communicate the value added of human
resource management practices to the organization’.
 Need of evaluation:-
 Determine future investments in HR.
 Improve HR processes.
 Identify alignment of HR with business strategies.
 Build intellectual capital within the organization.
 Stop doing what isn’t effective.
 Be accountable to stakeholders and ensure employee and
management accountability.
 Reflect on and improve the overall climate and health of
the organization.
 Lead the organization in keeping employees motivated and
productive.
 Improve HR’s image within the organization by showing
how much it contributes to organizational success.
 Benefits of hr evaluation:

 - The promotion of change by identifying

strengths and weaknesses;
 - An assessment of the performance of the HR
function
 - A demonstration of the bottom-line
contribution of the HR function through, for
example, reduced turnover;
 - A demonstration of the function’s role in the
achievement of organizational goals.
 What to evaluate?
 -What should be evaluated- the overall HR
effectiveness or only the effectiveness of the HR
function?
- What should be evaluated- HR practices, the HR
department or HR professionals?
- What should be evaluated- HR activities and
practices, or the impact of the HR policies on the
organization and the employees
-What should be the level of analysis in HRM
evaluation within the organizational structure?
-What criteria should be used to assess the effectiveness
of the HR function & department?
Overview of Human Resources Metrics

 Neha is the human resources manager of Allied Manufacturing.

 The HR department at Allied Manufacturing generates costs but does not
generate any revenue. Because of this, Neha’s department is constantly under
pressure to demonstrate its value to the organization.
 She has been tasked with the challenge of justifying the amount of money that
the company spends on the human resources function.
 Neha will use human resources metrics as a tool to justify the expenses that
her department incurs.
What are HR metrics?

 Human resources metrics are different

measurements that are used to show the
value that the human resources function
provides to the organization.
 These measurements demonstrate how
effective the efforts of the human
resources department are, to the overall
success of the organization.
 There are three types of human resources
Types of HR metrics:

Metrics Metrics that measure the effectiveness of

the human resources function

Metrics that measure the efficiency of the

human resources department

Metrics that measure the effectiveness of

the employees within the organization
Examples of HR metrics:-

Time to hire:
Cost per hire: Time since last promotion:
The number of days between a
How much it costs the company to A straightforward metric that can
position opening and a candidate
hire new employees. show why top employees leave.
signing the job contract.

Performance and potential:

Revenue per employee:
Shows which employees are
Shows the amount of revenue
underperformers, valued
brought into the company per
specialists, emerging potentials or
employee.
top talents.
Examples- Continued

Ratio of HR business partners per

Ratio of HR professionals to employees: employee:
Also shows HR’s cost efficiency. "An Similar to the previous metric, enables HR
Cost of HR per employee: organization with fully developed analytical to measure and predict the impact of HR
Indicates the cost efficiency of HR capabilities should be able to have a smaller policies, helping HR be more efficient and
number of HR professionals do more," reduce the number of HR professionals to
employees, saving the firm money.

Timesheet and scheduling match:

Turnover:
Helps determine how closely the number of
Shows how many workers leave the
hours scheduled are in line with the number
company in a given year; tracks the
of hours worked, providing insight into
company's attrition rate.
understaffing or overstaffing.
Importance of HR Metrics:-

 HR metrics is important because it allows organizations to make the connection between the value
of what HR is doing and the outcomes of the business
 If HR Professionals do not measure their function’s effectiveness and do not provide decision
making leaders the data they need, HR will continue to be undermined and eventually sidelined,
when it comes to having a seat in the table.
 Therefore, many experts urge HR professionals to use the data they have in front of them and
understand how metrics and analysis could give HR an advantage as an overall better strategic
partner. This will allow them to help business leaders solve the people problems that matter to the
organization.
 More importantly, metrics enable leaders and decision makers in organizations towards more
efficient and better delivery of HR services.
 Strategic Financial Operational Customer
perspective perspective perspective perspective
Organizational culture Compensation and Training cost/employee Employee perspective of
survey benefits Attrition rate HRM
HR Budget Turnover cost Time to fill vacancies Employee perspective of
Competency levels Sales/employee the company as an
Average employee tenure employer
Change management Profit/employee in the comapny
capability of the
organization

How can the HR department assess if they

have been successful?
DEVELOPING
MEASUREMENT
METRICS
HR Measurement approaches

Measurement approach Example measures

1. Efficiency of HR operations Cost per hire

Time to fill
Training costs
Ratio of HR staff to total employees

2. Effectiveness of HR practices Merit based pay

3. HR Dashboard or “customers, financial markets, operational

HR Scorecard excellence, and learning.“

4. Causal chain Models link employee attitudes to service

behavior to customer responses to profit.
Characteristi 1. Strategic.
cs of
2. Simple.
developing
effective 3. Owned.
metrics 4. Actionable.
5. Timely.
6. Referenceable.
Characteristi 7. Accurate.
cs of
8. Correlated.
developing
effective 9. Game-proof.
metrics- 10. Aligned.
Continued
11. Standardized.
12. Relevant.
Balanced
Scorecard
Overview:-

 A balanced scorecard is a performance metric used to identify, improve, and

control a business's various functions and resulting outcomes.
 It was first introduced in 1992 by David Norton and Robert Kaplan, who took
previous metric performance measures and adapted them to include nonfinancial
information.
 The balanced scorecard involves measuring four main aspects of a business:
learning and growth, business processes, customers, and finance.
Balanced Scorecard
 Introduction to Balanced
Scorecard
Overview:-

 The Balanced Scorecard (BSC) is a business framework used for tracking

and managing an organization’s strategy.
 The BSC framework is based on the balance between leading and lagging
indicators, which can respectively be thought of as the drivers and outcomes of
your company goals. When used in the Balanced Scorecard framework, these key
indicators tell you whether you’re accomplishing your goals and whether you’re
on the right track to accomplish future goals.
 With a Balanced Scorecard, you have the capability to:
 Describe your strategy.
 Measure your strategy.
 Track the actions you’re taking to improve upon your results.
Origin:-

 In 1992, David P. Norton and Robert S. Kaplan started a working

group to examine the challenge of reporting only on financial
measures.
 In for-profit organizations, financial measures provided
a lagging report (i.e. they told you what happened last month,
quarter, or year), but they were not able to look forward.
 Norton and Kaplan wanted to specifically look at what measures
that look forward in time and act as leading indicators might look
like and how that could affect an organization’s strategy.
 Scorecard lingo:-

 If you build a Balanced Scorecard, you’re going to hear the words “objective,”
“measure,” “initiative (or project),” and “action item” frequently.
 You have a high-level goal in mind, which is your objective.
 The measures say, “How will I know that I’m achieving the objective?” (In other
words, they allow you to see if you’re meeting your goals.)
 The initiatives are put in place to answer the question, “What actions am I taking
to accomplish the objective?”
In theory, these are the places you’re spending money or putting forth effort to
improve your performance.
 Action items help delegate out small jobs that will allow you to complete your
initiatives.
Perspectives of BSC:-

 Throughout the process of creating the BSC, Norton and Kaplan realized an
organization must first begin with goals that can be broken down into four distinct
perspectives that are uniquely connected:
 Financial goals—“What financial goals do we have that will impact our
organization?”
 Customer goals—“What things are important to our customers, which will in
turn impact our financial standing?”
 Process goals—“What do we need to do well internally, in order to meet our
customer goals, that will impact our financial standing?”
 People (or learning and growth) goals—“What skills, culture, and capabilities
do we need to have in our organization in order to execute on the process that
would make our customers happy and ultimately impact our financial standing?”
Implementation of BSC
Strategy map:-
Link for HBR Article on Balanced
Scorecard
 https://hbr.org/1992/01/the-balanced-scorecard-measures-that-drive-performance-
2
Video Case study- BSC in South-West Airlines
HR Scorecard
Balanced Scorecard- Revisit
 • HR Scorecard is a strategic HR measurement system
that helps one measure, manage and improve the
strategic role of the HR department.
• The scorecard consists of measurements of:
Overview:-  HR deliverables
 HR policies, processes and practices
 HR System alignment
 HR efficiency
Definition:-

• Measures effectiveness and efficiency of HR functions in producing the employees’

behaviors required to achieve organizational strategic aims
Origin:-

The HR Scorecard
Linking People, Strategy and Performance

Becker, Huselid and Dave Ulrich

2001
Developing HR scorecard

• The development of an HR scorecard must be done with four perspectives in mind:-

 Financial perspective
 Customer perspective
 Internal business perspective
 Learning and growth perspective
Implementation of HR Scorecard by following Seven
Step Model
• Clarifying the business strategy
• Developing Human Resource architecture
• Creating a strategy map of the firm i.e. business indicators and the results
• Identifying Human Resource deliverables in the map
• Aligning Human Resource architecture with the HR deliverables
• Designing the Human Resource scorecard
• Execution and implementation of the HR scorecard and the analytics
Create HR Scorecard
Financial Perspective
INTERNAL CUSTOMERS
Hr Internal process
Learning & Growth
Creating a
strategy map
for HR
Identifying HR deliverables:-
Concept of KRA & KPI
Meaning of KRA & KPI
What Are Key Result Areas?

• The term Key Result Areas (KRAs) refers to a short list of overall goals that guide how an
individual does his/her job, or general achievement and progress goals for an organization
or one of its divisions.
• KRAs help define the scope of a job or a department or an organization’s goals and define
the optimum outcomes and results of daily work. KRAs are the items that are critical for
an organization or employee to be successful.
What Is a Key Performance Indicator?

• A key performance indicator (KPI) is any metric that measures whether an organization is
meeting certain objectives and goals that are set to help the organization succeed.
• KPIs might involve sales figures, product performance, return on certain organizational
investments or a wide range of other areas. KPIs are often the measurements associated
with the general goals outlined in a Key Result Area.