Basics of HR Analytics

HR analytics, also known as people analytics, is the use of people-data in analytical

processes to solve business problems. HR analytics uses both people-data, collected by HR
systems (such as payroll, absence management) and business information (for example,
operations performance data). At its core, HR analytics enables HR practitioners and
employers to gain insights into their workforce, HR policies and practices, with a focus on
the human capital element of the workforce, and can ultimately inform more evidence-based
decision making.

Metric + Insights = Analytics

The factsheet examines the importance of HR analytics in understanding if an organisations

workforce is generating value. It provides an overview of the quantitative and qualitative
forms of HR data, including the cause and effect relationships between data sets. The
factsheet looks at the main levels of HR analytics capability and considers the key people
responsible for HR analytics in a workplace. It examines the aims of an HR analytics strategy
and the nine steps of the HR analytics process, from planning to evaluate. The factsheet
concludes by looking at several examples of HR analytics in action.

HR analytics is both a strategic and operational concept that enables organisations to

understand and articulate important aspects of their workforce through using data and
evidence. It is a growing discipline that continues to gain considerable traction across the
profession, but our research has shown that the skills and confidence to conduct people
analytics is low. Therefore the HR profession should view data and analytics as an emergent
HR capability, and one that requires further investment.

Organisations which follow good practice should have up to date, clearly defined data which
is robust and of high quality, and which is used in a consistent way by skilled experts able to
complete analytics activity and communicate it to business and HR stakeholders in regular
and accessible reports.

What is HR Analytics?

One recent evidence assessment of HR analytics defines it as ‘a number of processes, enabled

by technology, that use descriptive, visual and statistical methods to interpret people data and
HR processes. These analytical processes are related to key ideas such as human capital, HR
systems and processes, organisational performance, and also consider external benchmarking
data’. It’s also known as ‘people analytics’.

Analytics may be used to look at the traits of the workforce, in particular its human capital:
the value of individual knowledge, skills and experience of individuals and teams. This is
also known as human capital analytics. When an organisation reports on the insights gathered
through HR analytics, it’s often known as human capital reporting.
Our research report Human capital analytics and reporting: theory and evidence summarises
key academic concepts for practitioners to apply through HR analytics strategy.

Why is HR analytics important?

HR analytics enables HR and their major stakeholders to measure and report key workforce
concepts, such as performance, well-being, productivity, innovation and alignment. This in
turn enables more effective evidence-based decisions by strategic business functions. HR
analytics enables HR teams to demonstrate the impact that HR policies and processes have on
workforce and organisational performance, and can be used to demonstrate return-on-
investment and social-return-on-investment for HR activity. Business managers are
increasingly interested in how to use HR concepts more effectively, and so HR analytics is an
important way in which HR teams can evaluate and improve people and business
performance.

What is HR Data?

HR data is information about any aspect of employees or the HR management system. Data
comes in many forms, and may be quantitative or qualitative.

Quantitative data can be measured and illustrated through numbers

 Objective
 How many? How much?
 Facts are value-free / unbiased
 Measurable
 Report statistical analysis. Basic element of analysis is numbers
 ‘Counts the beans’
 Examples: number of employees, remuneration rates, productivity

Qualitative data can’t be measured and are often subjective assessments representing an
individual’s view of something.

 Subjective
 What? Why?
 Facts are value-laden and biased
 Interpretive
 Report rich narrative, individual; interpretation. Basic element of analysis is
words/ideas.
 Provides information as to ‘which beans are worth counting’
 Examples: employee opinion survey feedback, appraisals and performance reviews,
learning and development outcomes

For example, a fondness for chocolate is qualitative data as it relates to an individual’s

preference towards chocolate, while the dimensions of a chocolate bar is quantitative data as
it relates to its numerical size (length, width and height). In HR, an individual’s age or
performance rating is quantitative data, whereas their engagement data (such as job
satisfaction) is qualitative.

Data is held in many places in an organisation but ideally should be managed by a specific
data owner who is responsible for maintaining it, keeping it secure and ensuring management
in line with the data protection policy. Only those responsible for the HR data should be able
to change any aspect of the HR data itself (for instance changing terminology or definitions
for specific HR indicators). Find out more in our data protection factsheet.

Correlation and causation

HR analytics can help identify cause and effect relationships, by investigating the relationship
between two sets of data to be investigated, and determining whether the relationship is
correlational or causal.

Correlation is when two or more things or events happen around the same time which might
be associated with each other, but they aren’t necessarily related in a cause-effect
relationship. It implies a mathematical relationship between two things which are measured,
and is often described numerically with a value between 0 and 1, where 0 is no relationship
and 1 is a fully predictive relationship. For example, there is a 0.01 correlation between eye
colour and height, so knowing someone’s eye colour does not mean you know how tall they
are. They are virtually independent. But there is a 0.8 correlation between smoking and
incidence of lung cancer, so it's possible to say that smokers are more likely to develop lung
cancer. However, this doesn’t necessarily imply smoking causes lung cancer in every case.

Causation is when one event or thing happens and as a result of it happening, another event
or thing happens. If the first event did not happen, then the second does not happen. There is
not a mathematical/probabilistic relationship between the two, but instead a time-based
cause-effect relationship.

Just because two things correlate, it doesn't necessarily mean there's a causal (or cause-effect)
relationship between them. For example, an increase in sales in a team which also has high
engagement does not necessarily mean that engagement causes more sales. Other factors,
such as improved training, or increase in customer-facing staff, may also be causing an
increase in sales. Therefore, it's important to analyse as much data as possible before drawing
conclusions.

How does HR Analytics work?

HR analytics uses workforce or HR data, either qualitative or quantitative, to investigate a

certain concept with the help of computer programmes and modelling techniques. There are
three main levels of HR analytics capability. Most organisations are able to do level 1 only,
very few are able to complete level 3 analytics:
Level 1a– descriptive analytics: Uses descriptive data to illustrate a particular aspect of HR,
for example recording absence, annual leave, and attrition and recruitment rates. At level 1,
no analysis is applied to the data beyond using it to describe a certain concept, or illustrate its
change over time (sometimes called trend analysis). See our factsheets which give
commonly-used absence measures and measures of turnover and retention.

Level 1b – descriptive analytics using multidimensional data: Combines different data sets, or
types of data, to investigate a specific idea can help to uncover interesting relationships
between different HR activities and processes. Using two different types of data to create an
analytics output is known as multidimensional analytics (for example, combining leadership
capability data with engagement scores to measure leadership effectiveness).

Level 2 – predictive analytics: Uses data to predict future trends can help HR professionals to
plan for future events and scenarios, and ensure they are able to deliver to the business.
Predictive analytics for forecasting requires high quality and robust data, and specialist
technology and capability.

Level 3 - prescriptive analytics: Applies mathematical and computational sciences to suggest

decision options to take advantage of the results of descriptive and predictive analytics.
Prescriptive analytics specifies both the actions necessary to achieve predicted outcomes, and
the interrelated effects of each decision.

Who is responsible for HR Analytics?

Approaches differ across organisations and sectors with businesses developing individual
approaches to how they conduct HR analytics. Large organisations often build their own
central HR analytics team to own and manage the HR analytics process and provide insights
to customers/users in the business. Some organisations prefer to base individual HR analysts
within small centres of expertise to explore specific concepts (for example, the impact of
L&D activity may be based in the L&D team) and deliver outputs from a de-centralised
model. Others prefer to outsource analytics to external experts who can use HR data to
provide insights and guidance from an independent expert perspective.

Organisations tend to move between approaches according to their HR operating model. As

such, different combinations of HR analytics technology and management can co-exist at one
time.
HR Analytics Strategy and Process

HR analytics strategy

HR managers running analytics activity should tie the outputs of their analytics process into
both the HR strategy and the business strategy. Taking a strategic and planned approach to
HR analytics, for example tackling a specific business issue, is likely to create the most value
for the business and create further demand for HR insights.

Connecting HR data with the strategic objectives of the business can help HR managers to
demonstrate the return on investment (ROI) of HR. The type of data used will depend on the
strategy and operations of the organisation, so for example a sales-driven organisation is
more likely to collect performance data such as sales per employee to differentiate between
employees and reward them accordingly.

The HR analytics strategy should have three aims:

1. Connect HR data with business data to demonstrate a particular aspect of the

organisation that business leaders should be informed about to help them make
decisions.
2. Enable HR leaders to design and implement HR management activity in an efficient
and effective manner.
3. Allow the business and HR to measure the effectiveness of HR in delivering against
its objectives.

HR analytics process

The HR analytics process should follow nine steps from planning through to the evaluation of
the process:

1. Plan: Develop the goals and purpose for the analytics activity. Map the requirements of
the customer and plan questions/queries which will be answered by the analytics process.
2. Define critical success factors: Define the measures that will show if the project has been
a success. Examples of what these can be based on include: delivery on time, impact of
project, feedback from users.
3. Data audit: Map the data which is currently available and grade its quality. This will
illustrate where any gaps in data may be, which should be filled before progressing.
4. Design the process: Define roles and set objectives for team members. Define resource
requirements and map stakeholders for the project.
5. Design the data collection strategy: Design the collection and processing stages of the
analytics activity.
6. Data collection: Collect data from data sources. This can be from drawing on established
data sets (for example. absence records) or running new data collection processes (for
example, engagement survey).
7. Analyse data: Depending on the customer requirements, analyse the data and develop
insights in the form of recommendations and guidance for the users of the data.
8. Report data: Report in a clear and simple way illustrating a solution to their issue, or
further areas of investigation if further data is required.
9. Evaluate: Review the data-analytics-insights process and evaluate impact. Review and
update process as required.