Unit 6 HR Analytics

Module - 6
Prof. Vijay K S Bapuji B-Schools, Davangere

Some of the HR Metrics Examples
• HR Metrics example in Recruitment and Selection
• Time to hire
• Cost per hire (total cost of hiring / the number of new hire)
• Early turnover (percentage of recruits leaving in the first year)
• Time since last promotion(avg time in months since last internal promotion)

• HR Metrics Related to Revenue
• Revenue per employee (revenue/total number of employees)
• Performance and potential (the 9-box grid)
• Billable hours per employee
• Engagement rating

Potential GEM
Average PerformerRisk
High PerformersCore PlayerInconsistent Player
High Potential Star
Solid Performer
Low
Low
High
High

• Other HR Metrics
• Cost of HR per employee (e.g. $ 600)
• Ratio of HR professionals to employees (e.g. 1:60)
• Ratio of HR business partners per employee (e.g. 1:80)
• Turnover (number of leavers/total population in the organization)
• Effectiveness of HR software
• Absenteeism (absence percentage)

Assessing HR Program, engagement and Turnover
- What is the degree of efficient and effective utilisation of human resources
in order to achieve goals of the organisation?
- It is important to assess how well and how far employees of the
organisation have been utilised in achieving the organisational goals.
- Ideally each of the HRM functions needs to be performed successfully and
then objectives of HRM will be achieved.
- Achievement of the objectives of HRM will lead to achievement of the
strategic goals of HRM that will lead to achievement of the generic purpose
of HRM.

Why Assessment is Important?
• is to know whether HRM functions are performed in good way.
• is to ascertain whether the HRM schemes being implemented contribute to
achieve the strategic objectives, mission and vision of the organisation.
• What is the impact of HRM on achieving the strategic objectives of the
organisation?
• Is there a significant impact?
• If so, how much is it? Is the degree of impact increasing over the past years?
• is to promote the importance of HRM within the organisation.
• Justifying the costs involved in implementing HRM programmes is a reason for
HRM evaluation.
• Also evaluation results can be used to identify strengths and weaknesses of the
HRM systems and then take remedial actions to improve the efficiency and
effectiveness of the HRM systems.

four purposes of evaluating the HRM function.
1. To justify HRM’s existence and budget.
2. To improve the HRM function by providing a means to decide when to drop
activities and when to add them.
3. To provide feedback from employees and operating managers on HRM
effectiveness.
4. To help HRM make a significant contribution to the organization’s objectives.

With the increasing emphasis
placed on strategic contribution, competitiveness, and cost
control, there has been a greater
need to justify the existence of human resource practices,
activities, and programmes

Three Dimensions of evaluation of HR
1. Evaluating the quality and the quantity of each HRM function
- whether each function has been performed in the appropriate way
2. Attainment of the HRM objectives and strategic goals
- evaluating the degree to which the HRM objectives and strategic
goals have been achieved
3. Evaluation of the department for human resources in the organisation
- how well and how far the HR Department of the organisation has
performed

Finding money in Analytics?
Are you finding money-making data insights fast
enough?
- How Fast?
- How Much Accurate?
- How Much Relevant
- How it relates to the business outcome?

Finding money in Analytics?
Sources:
- Recruiting costs (associated with turnover)
- Training Cost (In-terms of ROI)
- Reducing overtime and other types of payroll
(through better planning and management)
- Top-line growth that comes from better sales
performance
- Span of control analysis and absence management

Operational performance
- Is it the satisfaction of your customers?
- Sales?
- Cost reduction?
Measuring all business objectives and metrics is vital to
streamlining operational efficiency.
Every company needs to have clear what are the top metrics,
what is usually known as the scorecard, but also what are the
dimensions, metrics and information that they want to be able
to understand deeper.

Need to know the Operational performance
Knowing the operational Performance by measurements of management
are needed when dealing with customer satisfaction, internal processes
and activities directed at improvement and innovation in the organisation,
which lead to future financial returns.
Manufacturing performance, which encompasses part of the operational
performance previously mentioned, is commonly used in the field of
operations management. This type of result takes into account the
company’s performance in reaching its basic objectives, that is,
productivity, quality and service.

Effect of HRM on aspects of operational performance
Such as
- the hours of labour required to manufacture a particular product
- the percentage of programmed time that the production line is in
operation
- the defects rate
- the percentage of production that meets the required quality
standards
- defects costs
- degree of utilization of equipment
- minimization of waste
- product quality and in-time delivery

Effect of HRM on aspects of operational performance
Irrespective of the type of operational result on which they are
focused, show the introduction of high-commitment HRM practices
to have an impact not only on the plant’s productive system
performance but also on business performance.
Hence date driven decisions on HRM Practices has got lot of
relevance in improving the operational performance.

HR Data and stock performance
- Human capital investments have a positive causality to stock
performance.
- The fact that human capital investments affect stock performance
is important for investors to know when taking investment
decisions, which is a sort of practical contribution
- Need for new guidelines and regulations about how human capital
should be disclosed in financial reports. So that investors can take
better investment decisions.
- Human capital is only one of many valuable intangible resources
that are excluded in financial statements and thereby is difficult to
value.

HR Data and stock performance
- The research proves that human capital is a valuable resource for
companies and can increase financial performance, and that
information about investments in human capital is important for
investors and shareholders
- In a society where knowledge becomes more and more important
it is clear that information about human capital has to be included
in the valuation of companies to decrease market-to-book values.
Source:
The Causal Relationship between Human Capital & Stock Performance - A quantitative study on the Stockholm
Stock Exchange
Authors: Daniel Larsson & Anton Mörling
Supervisor: Catherine Lions

Creating HR Scorecard
- Five Step Process
1. Create an HR strategy map.
2. Identify HR deliverables.
3. Creation of HR policies, processes, and practices.
4. Aligning HR systems.
5. Creating HR efficiencies.
Source:
https://www.analyticsinhr.com/blog/hr-scorecard/

- Five Step Process
• To identify how HR can connect to this business outcome,
one can create a strategy map.
• The strategy map helps to identify how HR is driving these
business outcomes.
• The question here is: what HR practices drive the strategic
goals of the company?

- Five Step Process
• You’ll find an example below, which was created specifically
for the recruitment function.
As you can see, the company’s
strategic goal is on top. Next, HR
has identified its recruitment
contribution to this goal.

- Five Step Process
• To measure this, HR deliverables or KPIs are created.
• This HR scorecard example shows how these strategic goals
can be measured.
• For example, the lead time is measured as the ‘time to hire
in days’, which is currently 38, but has to be decreased to 25,
a 34% improvement!

- Five Step Process
Because of these very clear indicators, the HR department knows that an increase in those two HR deliverables
will lead to the company’s goal of becoming more innovative, giving HR a very strategic role.

- Five Step Process
3. Creation of HR policies, processes, and practices.
• Policies: A strong employer branding policy will help in
building a strong reputation that will help in becoming a top
employer
• Processes: Key to decreasing lead time will be an
optimization between how recruiters and managers
communicate.
• Practices: This looks at the specific practices that help HR
achieve the aforementioned deliverables.Prof. Vijay K S Bapuji B-Schools, Davangere

- Five Step Process
4. Aligning HR systems.
• System alignment is not about software systems. Rather, it is
about aligning the different HR practices to create synergy.
• For example, the employee branding efforts should focus on
the type of workers that the employer is actually looking for.
• In addition, decreasing lead time by rushing through the
process may lead to a lower quality of hire, resulting in a
mismatch between what HR is doing, and some of the goals
it tries to achieve.

- Five Step Process
5. Creating HR Efficiencies
• Traditionally, HR has focused a lot on creating efficiencies.
When it comes to creating an HR scorecard, some
efficiencies have to be thrown out of the window.
• The simple reason here is that to get, for example, a higher
quality of hire, your cost to hire someone might go up. In our
example, the quality of hire is a strategic HR measurement.
Investing money into increasing the quality of hire is well
worth it. This justifies investments in assessments, employer
branding projects, and other HR initiatives that boost the
main HR deliverables.Prof. Vijay K S Bapuji B-Schools, Davangere

The HR balanced scorecard
- A common misconception is that there is an HR balanced scorecard.
The HR balanced scorecard is a mix-up of the HR scorecard and the
balanced scorecard.
- The balanced scorecard was first published about by Kaplan and
Norton in the early ‘90s. In 1996 the two published a book that bore
that title.
- The balanced scorecard is a strategy performance management
tool. The scorecard lists financials goals, customer goals, internal
business goals, and innovation & learning goals. These four goals give
a good overview of what the company tries to achieve, i.e. the
company strategy.

As we know, the HR strategy follows the business
strategy, so the HR scorecard is heavily influenced
by the business scorecard. Indeed, the HR
scorecard takes the strategy as defined in the
balanced scorecard as the starting point and then
identifies the HR deliverables that drive these
outcomes. However, do keep in mind that both are
different documents!

Develop an HR measurement system
• Select Correct HR Measures and Deliverables
• Establish high performance HR Work System
• Alignment measures to check consistency
• HR Efficiency Measures
• Cost efficiency measures – Significant expenditure items like
benefit and salary cost etc.
• Strategy efficiency measures Cost per new hire, HR Expenses
per employee.

Guideline to implement HR scorecard
• Keep track of early success.
• Maintain investment in the Scorecard.
• Build on continuous learning about what is working and what is
not working.
• Adapt to changing conditions.
• Celebrate progress.
• Integrate with other work.
• Learn from experience.

Thank You

Unit 6 HR Analytics

More Related Content

Unit 6 HR Analytics