Understanding the business benefits of HR data creates opportunities to make meaningful gains in areas like employee retention and engagement.
Given that 78% of all companies are having recruitment difficulties, employers are turning to technology-driven HR data to create happier, more productive employees and an improved bottom line.
What is HR data?
To understand the benefits of HR data, and how it could help HR navigate one of the tightest labour markets in decades, we need to understand what HR data is.
Also known as people analytics, it’s the process of gathering and analysing data about employees. The data it provides can help HR put in place strategies to improve the employee experience.
Maximising the employee experience is a key strategy to boost employee retention. This can reduce high turnover and minimise recruitment costs.
That’s because having specific data about why employees leave provides invaluable insights into how to increase retention. Armed with this data, HR teams can make informed, data-driven decisions that can have a positive impact on the organisation’s bottom line.
A data-driven way to solve business challenges
The business benefits of HR data become clearer when we take a deeper dive into how the data is collected and analysed.
It goes without saying that the more evolved the capacity for acquiring and analysing HR data, the greater the business benefits of HR data become.
Let’s break it down:
1. Descriptive analytics
Most organisations have the capacity to perform descriptive analytics. This is data that pinpoints a specific problem at a precise moment in time.
2. Predictive analytics
Taking descriptive data HR can create a predictable model for the future.
3. Prescriptive analytics
This is where the benefits of HR data really come into their own. Here, the results of predictive and descriptive analytics are used to recommend specific courses of action.
The CIPD also breaks down the data into:
- Quantitative data: Data that can be described in numbers.
- Qualitative data: This is subjective. For example, performance appraisals.
- Correlation: Where a link exists between two pieces of data.
- Causation: When something causes something else to happen.
As we can see, people analytics is something of a science. It goes far beyond simply monitoring employees and collecting statistics.
The move to people-focused HR
Ever since Google used analytics to pioneer people focused HR thinking, this employee-first approach has infiltrated HR on a global scale.
Google itself stands by the notion that people analytics allows for more accurate management decisions. As a result, Google has been rewarded with more engaged employees with an average participation rate of 90%.
Many forward-thinking companies have followed suit. Cisco, Amazon and Microsoft are just some examples.
Before we take a deeper look at what each of these benefits are, let’s revisit the core principles of HR data.
Core principles of HR data
The whole concept behind people analytics is to use data acquired to constantly improve and enhance the employee experience.
Data can be collected on often neglected areas of the employee life cycle, like onboarding and offboarding. Understanding why people leave, what drives engagement, and how to reorganise a company to get the best out of employees is essential.
One of the business benefits of HR data is that it allows HR teams to assess the effectiveness of different solutions in a specific area that needs improvement. This is crucial if leaders are to get the best ROI on HR strategies.
Research by the CIPD shows that employee wellbeing and happiness hold the key to a thriving and successful business. This highlights the importance of succeeding in employee wellbeing.
Benefits of HR data
Let’s explore the business benefits of HR data in greater depth.
1. Streamline talent acquisition and the hiring process
In 2020, The Consultancy Group conducted a survey of HR professionals from the world’s largest economies. They found that 50% had made bad hiring decisions and suffered the consequences. In the UK, that figure was a whopping 62%.
It’s estimated that the replacement costs for a bad hire come in at around £115K. But let’s not forget that the effects of bad hires are not just financial.
A Pulse article on LinkedIn reveals wide-ranging consequences of poor hiring decisions in detail, including:
- Lost productivity
- Financial costs
- Low employee morale
- Reputation costs
Using people analytics in your hiring process can help you avoid these costly mistakes. For example, using algorithms, analytics can sift through many more potential candidates than an HR team can.
This can make finding the right hire easier. Furthermore, analytics software can:
- Shortlist candidates
- Compare candidate skills with those of your existing top performing employees
- Accurately match prospective hires to suitable roles
People analytics don’t replace the role of HR, but they do save time, allowing recruiters to play a more strategic role.
One of the many companies that use people analytics in recruiting is Unilever. By using AI-driven assessments in recruiting, Unilever achieved £1M annual cost savings, a 90% reduction in time to hire, and a 16% increase in hiring diversity.
2. Improve candidate and employee experience
Statistics from research by McKinsey & Company found that 60% of employees would consider leaving their current job without the prospect of a new one.
This startling statistic means organisations have to work extremely hard to retain talent. One way of doing this is by focusing on improving the employee experience.
Employee wellbeing has become something of a buzzword, but the positive impact of employees with high levels of wellbeing speaks for itself.
Actively working towards a more positive employee experience has a beneficial effect on retention rates. In addition, even when employees do leave, they’re more likely to speak highly of their experience. This can enhance your organisation’s brand and reputation.
3. Identify skill gaps to avoid burnout
Another business benefit of HR data is in identifying skills gaps and training.
Skills gaps can negatively impact employee morale. This is because undue stress is often placed on existing employees to fill those gaps. If left unresolved, this can heighten the risk of burnout among employees.
The impact of burnout on the workplace has been in the spotlight ever since the pandemic. Employee burnout will ultimately have a negative impact on productivity. Where burnout is a consequence of skill gaps, then it’s possible to avoid it.
By using analytics to identify these skill gaps early on, it’s possible to prevent the spiral of negative consequences that occur when these gaps go unrecognised for too long.
HR data can help by analysing your team’s skills and comparing them with ones you require. This allows HR to quickly and accurately identify employees that are most suited to areas where gaps have been identified.
In addition, one of the benefits of HR data is allowing HR to identify employees who are ready to upskill in a certain area.
This has the knock-on effect of reducing recruitment costs, decreasing turnover rates and boosting the potential and overall working experience of existing employees.
4. Build a benefits package that employees will engage with
Research by Willis Towers Watson found that 75% of employees are likely to stay with their employer because of their benefits program. According to Glassdoor, a further 80% of employees would choose additional benefits over a pay rise.
Great benefits packages drive recruitment, reduce turnover and improve retention.
But putting great benefit packages in place is only half the story. Measuring their engagement and ROI among your workforce is crucial.
Using analytics HR can ensure that the benefits offered are the ones that offer the best ROI both for the organisation and for its employees.
Without a quantified link to value, new offerings may not show early gains or build momentum. Analytics can help HR make sure that they do.
5. Reach DEI targets
Data can be used to improve DEI by identifying existing gaps and biases so that strategic plans can be made to close them.
It’s not just ethical to improve diversity; it also makes good business sense. The benefits of HR data to improve diversity can manifest in a several ways:
- Improve diversity retention
- Build equitable compensation structures
- Identify diversity gaps and groups that are underrepresented
Financial wellbeing brings business benefits too
Not to be confused with simply collecting statistics, HR data can be a powerful tool in solving today’s organisation challenges to drive business benefits. That’s because HR data delivers a level of understanding that allows HR leaders to plan, strategise, and take decisions that offer the best ROI.
Part of that strategy involves using data to offer benefits packages and perks that drive recruitment and promote retention. According to the CIPD, 65% of employees want a financial wellbeing policy at work.
The employee perk that’s free for employers
Yet, the CIPD also found that financial wellbeing is one of the most overlooked areas of the employee experience. That’s why here at Openwage, we’ve built a platform that promotes financial wellbeing in a meaningful way that has zero cost and zero impact on employers’ cashflow.
Openwage enables employers to easily and securely roll out earned wage access to their employees. For employees, Openwage gives them instant access to their earnings.
The financial flexibility that on-demand pay brings helps reduce employee financial stress that drains their productivity. Learn more about the business benefits of on-demand pay or request a demo.