How analytics can slim down the HR machine
As employees age and technology improves, companies are using business intelligence software to better manage their workforce.
In Summary:
| • | Changes in workforce composition require a more holistic view of your staff. |
| • | Business intelligence software tools deliver an integrated view of data so you can spot trends faster. |
| • | Companies use analytics to study turnover, retention, and training issues. |
Fearing a loss of intellectual capital when its baby-boomer employees begin to retire, the Tennessee Valley Authority embarked on an analysis of workers age 45 and older. The TVA's human resources staff wanted to understand just how badly the public utility would be affected by the loss. On a scale of 1 to 5, they rated every position in which the employee was older than 45 by the level of the risk of losing that employee. Then they multiplied these numbers to calculate what they called the "attrition factor."
 | "When most companies look at the projections of employees' ages, the information is so generalized that it doesn't give them a clue as to where to act. |  | | Mary B. Young
Senior researcher,
The Conference Board | |
|
After they tallied the jobs with the highest attrition factors, they asked three questions: What specific knowledge would be lost, what were the business consequences, and what could be done? The analytics they applied showed how much of a problem the TVA really had: Of the 4,000 jobs analyzed, only 40 posed what the utility termed a "significant threat."
The TVA's experience shows why using business intelligence software tools to conduct HR analytics is so important, says Mary B. Young, a senior researcher with The Conference Board, a New York City-based business research firm. "When most companies look at the projections of employees' ages, the information is so generalized that it doesn't give them a clue as to where to act."
But the information that companies can derive from using business intelligence software in their human resources departments extends far beyond just knowing who is retiring and when. According to experts such as Young, analytics can help uncover trends in turnover, employee satisfaction, training and certification, and recruiting.
A changing workforce demands analytics
HR departments at many companies are looking to business intelligence software tools and data warehousing because they recognize that their workforces are changing dramatically. Young cites a number of factors driving the trend (see "Building the data warehouse" for more information):
| • | A maturing workforce: Like the TVA, companies face the impending retirement of workers with years of experience. |
| • | Globalization: With an increasingly diverse and dispersed workforce, companies need data consolidation to understand how trends play across the business. |
| • | Different types of workers: Contractors, outsourcing firms, and temporary workers comprise a larger slice of the workforce than ever before. |
| • | M&A analysis. As companies consolidate, they use HR analytics to judge not just headcount but talent and how to integrate it. |
Top areas to study
As with any business intelligence software project, you should map HR analytics to high-priority business questions, says Bill Minneman, an associate in the human capital practice of Costa Mesa, California-based Resources Global Professional, a professional services firm focusing on staffing and HR issues.
Companies are using business intelligence software analytics to look not just at turnover rates but at which individuals have been best at filling vacancies and who has hired the greatest number of people with tenure beyond three years, experts say.
In fact, the analysis options span a variety of areas:
| • | Hiring. Traditionally, hiring statistics convey how quickly jobs have been filled and the related costs, says Michael George, product evangelist at HR software developer Vurv Technology, based in Jacksonville, Florida. "We're moving off the quantity metric to a quality metric, measuring performance against goals and objectives". The net effect, he says, is that you can find out if you've made a bad hire sooner, and respond with training and development. |
| • | Turnover. Tracking turnover statistics is important, because too much can be as bad as too little. A professional services firm may be hobbled by 50 percent turnover, but 3 percent turnover may also be a problem, because new talent frequently brings new ideas. |
| • | Retention. Tracking retention has its advantages as well. The Conference Board's Young recalls a bank that discovered by analyzing its data that employees with the most tenure also generated the most revenue. "It found that increasing retention of certain high-value employees for an extra year translated to US$40 million in revenues," she says. |
| • | Training and certification. One of the most difficult HR facets to measure is the value of training programs. This is especially important in industries where safety and compliance are critical, such as mining and manufacturing. Minneman recommends tracking safety statistics both before and after training classes. "This will help you see whether vendors are offering an effective training regimen," he says. |
| • | Employee satisfaction (or lack of it). It's also important to benchmark divisions and locations, says Chris Hagler, national managing director of strategic services at Resources Global Professionals. "Use surveys to track employee engagement, and figure out where in your company it's being done well," she says. The opposite is also true: Tracking why people leave may point to a problem with a specific manager. "You can either retrain the manager or assign that person to an individual contributor's role," she says. |
The competitive advantage of HR analytics
Midsize companies that implement HR analytics can gain a considerable advantage simply because it's not being done frequently, even among large enterprises. "In our client base, companies have been slow to implement the HR modules of their ERP systems," says Hagler. "They've focused on financial and supply chain issues first."
Young concurs. "Very few companies are far along in this," she says, adding that even the leading companies she has studied believe they'll be further along in their efforts a year from now. But the impact of figuring out the critical relationship between who you're hiring, where you're finding them, how well you train them, and how long they're staying will bring companies a competitive advantage in a world with an increasingly diverse talent pool.
 | Silicon Valley-based freelancer Howard Baldwin writes regularly for the Microsoft Midsize Business Center. His work has also appeared on AllBusiness.com and in CIO. |
