Numbers tell a story, and with analytics at the center of decision-making, businesses are increasingly turning towards data to uncover insights. When it comes to people, organizations are warming up to people analytics to find insights that go beyond operational efficiencies. Although workforce analysis in HR
has become a coveted skill, can its insights be concrete enough to inform major business decisions?
The Crucial Role of HR Data and Analytics in Business Decision-Making
As the role of HR expands from being mere record keepers to helping organizations achieve business objectives, uncovering human resources metrics becomes critical. Achieving synergy between HR goals and organizational objectives is crucial. Key HR metrics can benchmark performances, identify KPIs, forecast requirements, predict employee tenure, and design new initiatives. In addition, they can be used to secure more resources for HR initiatives.
“Hiring is still a very subjective process, and one size does not fit all.”
- Arran Stewart, Co-Founder and CVO
5 Strategic HR Metrics to Follow Closely
The right people metrics can reveal critical gaps and even uncover patterns that need to be corrected. In addition, key HR metrics can inform senior leaders about the overall health of HR practices.
Time to Hire
According to SHRM, 42 days is the average time it takes to fill a vacancy and costs $98 per day on average, in addition to other recruitment costs. Needless to say, time to hire has a crucial impact on costs. Improving the time to hire will have a cascading effect on the entire hiring process, including candidate experience, talent sourcing, and even training.
Time to Productivity
Time to productivity is the time it takes, on average, for your employees to become accustomed to their roles. The lower it is, the better it can mitigate the damage done by employee turnover. When a new hire joins an organization, they are not completely hands-on yet. This impacts the team’s performance as other team members have to fill the gap.
Considering how expensive it can be to hire an employee, losing them is just as costly, whether they are high performers or simply the wrong fit. Bad onboarding practices
, culture, and low engagement are some of the reasons that create flight risk. Improving retention rates
can have a dual impact on both hiring and turnover, which can save millions of dollars.
Many organizations continue to consider employee absences as part of their business. However, this keeps them from understanding the direct and indirect impacts of absenteeism. Tracking the nature of absenteeism will help design better leave policies.
Revenue per Employee
In the end, running an enterprise is all about revenue. The revenue per employee metric quantifies the quality of the hired workforce. An Expert Market
report revealed that tech giant Apple ranks first, making an impressive $1,865,306 per employee. This demonstrates the organization’s productivity quotient in a tech economy.
What C-Suites Can Achieve by Entwining Finance and HR
A synergy between HR and finance isn’t unknown, although in most organizations, it comprises finance shooting down HR’s spending requests. By opening up association channels between the two departments, C-suites can make the most of workforce intelligence
and important HR metrics. It can help reveal critical gaps in process costs and the impact of HR strategies on financials.
By monitoring strategic HR metrics
and adopting a data-driven approach, HR teams can connect with finance teams about business strategy. The key is to demonstrate the value of different types of HR metrics. According to a Gallup study, high employee engagement directly impacts profitability with a 21% increase. It also improves productivity by 17%.
Such important HR metrics build a compelling case for finance to approve investment in employee engagement software
Conclusion: Making a Business Case with Important HR Metrics
Building a business case is a matter of communicating in the language of finance: numbers. Insights into workforce intelligence can be used in many ways. For instance, data analytics firm Nielsen used HR analytics
to decode the organization’s employee retention metrics. It conducted a financial impact study that found every percentage point decrease in its employee attrition rate could save the firm $5 million in business costs. The organization then got to work devising impactful retention initiatives that resulted in a 2% decrease in employee turnover and a corresponding savings of $10 million in costs.
This is just one example of how HR teams can bring finance teams on board to develop HR initiatives and align with business strategies.
Frequently Asked Questions
How can an organization measure the importance of HR strategies?
A combination of mapping important HR metrics and using predictive analytics for forecasting their effectiveness can help HR build a compelling case for the effectiveness of their strategies.
What are the different types of HR metrics?
The three types of key HR metrics include recruitment, performance, and HR cost.
What is the most effective way to use HR metrics?
Human resources metrics can be used to get insights but can also be used for benchmarking and predicting future performance and strategies.