Measuring Human Capital - Applying Analytics to Human Resources

Human Resource (HR) Analytics strike the balance between leading and lagging indicators as they enhance more traditional metrics.  Tying these analytics with financial analysis takes human capital management to the next level by empowering business leaders with the workforce information required to attract, develop, and retain the best people. 

The three critical categories of HR Analytics that make up Talent Management: 1. Recruiting, 2. Development, and 3. Separation will be the focus of this post. While Talent Management is an ongoing activity for HR professionals in an organization, its importance to sustainable change management strategy is critical and often overlooked.

1. Recruiting:

By monitoring workforce analytics to ensure that they coordinate with recruitment and retention objectives, employers can minimize the drivers of employee turnover while maximizing those of talent and performance.

Value Propositions:

• Assess which applicant selection methods yield the highest quality hire results (performance, potential and flexibility).
• Perform a correlation analysis of retention by source in order to improve recruitment value.
• Compare industry standard and economic metrics, such as Cost-to-Hire and Time-to-Fill with Unemployment, to presage trends.

Analytic Examples:

Pipeline Analysis

Analysis of workflow volumes and stage cycle time presents the opportunity to asses process bottlenecks.  This analytic can be run at the organization or position level.

Quality of Hire

Critical to the recruiting process is the acquisition of superior talent, however defined by an organization.  This analytic can be run at the vendor or department level.

Prospects vs. Staff Profile

A comparison of key employee variables to the prospect pool can surface process strengths and weaknesses.  This analytic can be run at the organization or position level.

As part of a comprehensive change management strategy, these metrics should be incorporated in a Change Management dashboard for project sponsors and key stakeholders.

2. Development:

New models and methods are necessary to remain competitive.  By leveraging an analytics tool set in areas such as skill gaps, succession planning and training, insight can be gained into managing costs while still addressing the new skills and leaders needed to support the organization’s strategic initiatives.

Value Propositions:

• Determine where the existing courses have content overlap and where developmental gaps occur in the training of mission critical employees.
• Reorganize the HR measurement system to control the vast amounts of data available into key performance indicators.
• Applying analytic logic to determine the hidden costs associated with events such as economic recession or recovery where staffing levels can be mismatched with needs.

Analytic Examples:

Training Effectiveness

Value analysis of the programs and courses used to develop human capital can yield opportunities for improvement. This analytic can be run at the individual, position, and departmental level. Kirkpatrick’s Four Levels of Training Effectiveness is generally the best practice to evaluate training on an ongoing basis and tie back to business goals. Most change management plans fail to address more than the first level in this model.

Succession Planning

Properly applied, targeted skill enhancement can supplement a workforce plan designed to address future needs.  This analytic is usually run at the position level. Analytics are a crucial component of succession planning but often are overshadowed by relationships and tenure.  Truly successful succession plans balance quantitative and qualitative criteria.

Compensation Comparison

Cost creep needs to be contained through a variety of methodologies focused on total human capital expense.  This analytic can be run at the department or organization level. When changing the technical, process, or organizational landscape, companies can take the opportunity to re-level set compensation expectations and set the company up for success in the future environment.

 3. Separation:

The knowledge of which variables are predictive in determining retention and reducing absence costs is essential in the support of any high performance human capital enterprise.  Separations are natural during large scale transformation efforts and it is important to remember that not all attrition is bad. However HR professionals and change management practitioners need to identify those resources that are critical to retain through the transition and into the future state.

Value Propositions:

• Comparing skill sets to tenure can assess which training needs are required to address skill set depletion.
• Comparing skill sets against performance metrics in the future state can assess which training needs are most critical and identify vulnerable employees.
• Performing churn analysis can identify and forecast separation both voluntary and involuntary.
• Demographics such as location, age, skill level and appraisal score can help to determine key employee vulnerability.

Analytic Examples:

Skill Depletion

Effective organizations need to beware of gaps in the knowledge and abilities required to execute fully.  This analytic can be run at the department or position level.

Termination Distribution

A correlation between key variables can identify both opportunities and threats in a business.  This analytic can be run at the organization or department level.

Turnover Assessment

A clear understanding of retention trends across the company can prepare a firm for strategic headcount variances.  This analytic can be run at any variable level.

Conclusion:

HR Analytics examine the intersection of inputs and throughputs in terms of a desired output.  Simply stated, HR Analytics help organizations leverage their data to help improve performance, especially as the demand for talent increases. In a time when organizations need to be nimble, they can use HR Analytics as part of their organizational change management strategy to ensure their key transformation efforts are successful and sustainable.