Digital Transformation » Half of businesses are failing to exploit HR analytics

Half of businesses are failing to exploit HR analytics

Companies need to capitalise on HR insights from artificial intelligence (AI), says Laura Timms, product strategy manager, of MHR Analytics, a provider of business intelligence, analytics and financial performance management.

Almost half of companies are failing to use valuable insights from analytics in their HR operations, according to a YouGov survey commissioned by MHR Analytics.

The poll of 500 HR decision makers found that 44 percent do not have a main focus on HR analytics – technology and processes that use ‘people data’ to solve business problems and make financial and business decisions.

The good news is that the finance and accounting sectors are leading the way when it comes to using this technology to improve business performance.

A quarter of respondents in the finance industry (25%) are using analytics to obtain predictive insights, with 42% conducting strategic or financial planning within HR.

Other research has supported this trend; a Deloitte study revealed that finance departments are most often found to have invested in analytics technology (79%).

The MHR Analytics poll also found that finance and accounting sectors are implementing the most sophisticated HR analytics, especially for advanced analysis, with 31% planning to use predictive analytics in the next year compared to the 15% average across all industries.

The survey showed that businesses embracing big data are seeing advantages, with 40 percent stating they use it for regular operational reporting, 29 percent using it for financial workforce planning, 23 percent for improving the accuracy and simplicity of reporting, and 14 percent using it to predict employee retention, compliance and workforce growth.

When asked what was preventing teams from delivering analytics, 35% said it was not having the right knowledge or skills. Almost a third (30%) said the biggest barrier was the lack of quality of data currently collected in the business.

People – an organisation’s biggest cost, yet its dearest asset

Most organisations agree that people are the biggest expense on their monthly income statement, accounting for up to 70% of operating costs in some cases.

In a cycle of low economic growth, where profits are hard to come by, managing people costs is a top priority for many organisations.

This is where HR analytics plays an essential role in financial decision making for organisations.

Costs like maternity pay, pensions and recruitment fees must all be given continued consideration in line with other key areas to provide financial efficiency that supports long-term growth – and with additional factors like political uncertainty and changing customer needs in the mix, it’s never been more important to manage this effectively.

On the other side of a very finely balanced pendulum, is the need for organisations to equally recognise employees as the assets that they are.

Research has shown that employees’ skills account for 85% of a company’s assets. The 2004 Harvard Business Review noted that intangible assets such as skills and talents are “worth far more to many companies than their tangible assets”.

To increase the ROI of their people, businesses need to understand their employees and ensure that their organisation nurtures their potential.

Failing to realise this can cost companies dearly in the long-run.

Research has shown that it costs an average of £30,000 to replace an employee who leaves an organisation, with other research estimating that replacing exited roles costs employers around 400% of their annual salary.

Experts also claim that workplace absence is costing the UK economy £18 billion per year and predict this will increase to £21bn in 2020, reaching £26bn by 2030.

The challenge: Managing people as both costs and assets

These different interests compete with one another like two opposing forces. Organisations have the challenge of paying full attention to each, whilst putting the right systems in place to ensure that there is balance between the two.

Research by PwC found that at least 60% of UK CEOs plan to increase their headcount, and this very same proportion wish to reduce their people costs.

This task is inevitably difficult for organisations who rely on manual methods to manage their people data.

Understanding employee behaviour and the financial state of your organisation is something that has to be constantly observed, and can’t be achieved by manually inputting data into spreadsheets.

Analytics puts organisations in control of their people data by freeing them from the limitations of intuition-led decision-making and helps them understand what’s really happening in their business.

The technology is working to give businesses a significant advantage against the competition by providing full visibility of the root causes of business obstacles, as well as the necessary tools to anticipate future scenarios and prepare for them in advance.

Experts agree we’ve entered the fourth industrial revolution – the era of big data. As the world becomes more and more driven by data, the use of analytics is quickly emerging as a catalyst for the future of HR, steadily becoming a practice that organisations must adopt to remain competitive.

MHR Analytics has been working with Dr Max Blumberg, founder of the people analytics think tank, the Blumberg Partnership, on a series of educational videos about HR Analytics. He affirms the business case, commenting: “Gaining insights into the performance of the workforce and associated resources enables faster, more accurate decision-making and delivers savings to the bottom line. Investing in analytics technologies pays dividends by supporting the management of salaries, payroll and performance measurement, helping companies compete.”

Our HR analytics report, called A Practical Guide to the Future of HR, uncovers the current state of analytics within the UK’s HR departments in various sectors, and the practical steps businesses can take to adopt analytics and stay ahead of the curve.

What are the benefits of HR analytics?

Many studies demonstrate the financial benefits of HR analytics.

According to the high-impact people analytics industry study carried out by Bersin by Deloitte, organisations that use people analytics to support business decisions see 82% higher three-year average profits than their low-maturity counterparts.

Furthermore, a survey by MIT and IBM also reported that organisations with a high level of analytics had 8% higher sales growth, 24% higher operating income and 58% higher sales per employee.

One of the world’s most successful computer and electronics companies, Hewlett-Packard (HP), provides a bottom line example of utilising HR analytics. HP had the issue of high management turnover which was leading to revenue loss.

Insights from HR analytics informed and enabled HP to identify the key risk factors of employee attrition so they could develop strategies to retain their employees, allowing HP to directly save approximately $300 million that would have otherwise been lost.






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