Why HR Analytics Can Help Improve A Company’s Bottom Line

By Paul Slezak - Apr. 20, 2015
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Human Resources (HR) analytics falls under the umbrella of “big data,” a popular buzzword in the software and technology space.

Everybody seems to be talking about it.

I’m not kidding here, but while walking over the Golden Gate Bridge last weekend, I seriously overheard 3 different couples discussing big data while jogging past me.

(OK so maybe the likelihood of joggers talking about big data is somewhat higher in San Francisco!)
We’ve posted about big data in the past, and we’ve also published several posts about important recruiting metrics.

During my years managing recruitment teams, I always encouraged my recruiters to keep a close eye on a specific set of metrics. At the same time we always made sure we knew what metrics our clients were measuring. These often included:

  • Time to hire
  • Cost per hire
  • Employee retention
  • Completed employee trainings
  • Employee productivity
  • Employee diversity
  • Competitive compensation
  • Competitive benefits

It’s all well and good to measure these stats or talk about the importance of these metrics. But what do recruiters and hiring managers actually do with all the information?

Given how little research has actually been done on just how analytics impacts key HR and recruiting metrics, our colleagues over at Software Advice (an online reviewer of recruiting technology) recently conducted a seven-day online survey, and gathered over 100 responses from a random sample of  businesses across North America.

The report explains how for less tech-savvy companies, HR analytics may be as simple as a formula in a spreadsheet. For example, a sales team manager might calculate the number of orders the company receives per day to determine how many new salespeople need to be hired next quarter.

Alternatively, these analytics can be more sophisticated. For example, some companies may leverage data collected by their human resources teams, which often includes completed trainings and performance reviews for individual employees. This data can help identify common skills and attributes among the company’s strongest performers in order to look for similar candidates when hiring.

In both examples, HR analytics is used to improve a company’s bottom line. This occurs either by ensuring there are enough employees to bring in maximum revenue, or that new hires have similar skills and attributes to the company’s most successful current staff. The second example, however—which involves using software to aggregate data and identify trends—is the type of HR analytics the report from Software Advice focused on.

I wanted to share some of the key findings.

1. Companies using HR analytics software outperform companies that do not

Believe it or not, less than half of global companies use analytics to make talent-related decisions.

This is a pretty scary concept since it means that more than half of the talent-related decisions being made in businesses today may still be totally reactive and often still be based on gut feel.

This can be very dangerous.

The survey findings showed that when it comes to the common recruiting metric of time to hire, those respondents using HR analytics software reported significantly better performance than non-software users: a combined 86 percent report “good” or “very good” performance, while only 58 percent of non-software users report the same.

Looking at these findings, how would you rate your own performance?

HR Analystics software users

2. Nearly 30% of small businesses are most likely to be using some form of an HR analytics solution

If HR analytics software clearly has a positive impact on a company’s hiring success, why don’t all companies use it?

Does your business have an HR analytics solution?

Business sizes using analytics

If not, what are you doing to keep track of your talent attraction, selection and retention strategies? And more importantly, why are you not incorporating an HR analytics solution in your human capital practices? Perhaps you will find your answer below.

3. Budget is the greatest obstacle to implementing HR analytics software

As a recruiter I can’t tell you how many times I have heard the excuse “we can’t afford to pay a [traditional] recruitment fee“. (Fortunately there’s a very easy solution for any hiring manager or internal recruiter who feels that way!).

So it didn’t surprise me to read that the perceived cost of implementing an HR analytics tool was the greatest obstacle for most (53%) of the businesses surveyed.

Reasons for not using analytics

Perhaps you can relate to one or more of these reasons. However despite the initial investment, HR analytics software can help any organisation save critical funds by making smarter hires. Thus, it may be in the best interests of any business planning to grow their employee base to thoroughly evaluate the return on investment of implementing an HR analytics solution.

As the team at Software Advice point out, in the end, the decision to invest in an HR analytics solution will depend on your company’s unique situation.

The first step in successfully using HR analytics software is having a data collection process in place. Then after an HR analytics software solution is purchased, it then needs to be integrated with any current systems in place used to track employee data.

Once they gain confidence in the use of their reporting tools, companies can then begin to use their analytics software to make better hiring and performance management decisions.

Cofounder and CEO at RecruitLoop. I've been a hands on recruiter, manager, trainer, coach, mentor, and regular speaker for the recruitment industry for nearly 25 years.


Paul Slezak

Cofounder and CEO at RecruitLoop. I've been a hands on recruiter, manager, trainer, coach, mentor, and regular speaker for the recruitment industry for nearly 25 years.

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