HR Analytics, Evolution of HR Analytics

HR analytics is the process of collecting and analyzing Human Resource (HR) data in
order to improve an organization’s workforce performance. The process can also be
referred to as talent analytics, people analytics, or even workforce analytics.

This method of data analysis takes data that is routinely collected by HR and correlates
it to HR and organizational objectives. Doing so provides measured evidence of how
HR initiatives are contributing to the organization’s goals and strategies.

HR analytics provides data-backed insight on what is working well and what is not so
that organizations can make improvements and plan more effectively for the future.

Utilizing data relevant to HR strategies enables HR leaders to identify successful

practices and pinpoint weak areas in need of improvement. HR analytics enables
strategic decision-making that can drive business solutions through improving:

●​ Productivity
●​ Engagement
●​ Retention

Implementation

●​ Create a plan. Determine the business issues to focus on, ranking the
most pressing ones first. Include a detailed breakdown of the HR
functions and how to adjust them to improve the business problems.
Identify metrics to use that will promote results and elevate HR functions
to reach long-term goals.
●​ Involve data scientists. Welcoming data scientists into the process
enhances HR analytics immensely. Data scientists can monitor the
quality and accuracy of the data and help HR professionals implement
the data to their benefit; using the information to prove a point or
support a game plan is a crucial aspect of HR analytics. Furthermore,
data scientists can coach and instruct employees through the nuances
of the HR analytics process.
●​ Prepare HR personnel. Request that HR personnel evaluates the
current analytics level of the company. Once they cultivate an
awareness of their standing and determine what they need to do to
reach the next level, they can take steps to progress.
●​ Educate HR professionals. Analytics brings an abundance of AI that
challenges the status quo at work, so HR professionals must equip
themselves with the knowledge to ride the oncoming tech waves. HR
 leaders can help HR generalists and business partners adapt to the
digital transformation by facilitating their analytics education. In this way,
employees can gradually acclimate to the rise of analytics in the work
culture.
●​ Ensure legal compliance. Explain the legal guidelines to managers,
executives, and HR personnel to avoid breaching employees’ rights and
privacy. It’s crucial to behave with transparency concerning the type and
amount of data that the company collects. HR leaders should consult a
specialist in employment law to assist them in following regulations and
implementing bylaws.

Evolution

1.​ 1978

An article titled ‘The measurement imperative’ proposed the idea of measuring the
impact of HR activities with collected data on the bottom line of the business. The
proposed activities included staff retention, staffing, compensation, competency
development, etc.

The idea marks the beginning of the data capturing activity in HRM and its application in
organizations.

2.​ 1990

With growing development in the field of and HR measurement integration with more
business dimensions, the predictive and assessment models became a subject of study.
But still, the field of HR analytics remained unknown to many organizations and they
couldn’t realize its potential.

The developments leading to the concept of ‘Bench-marking’ to compare the HR

measurement data in various functions and with other companies. Though companies
soon realized that while in theory ‘Bench-marking’ promises to provide strategic
business insights, in real business scenario it fails to do the same and Bench-marking
lost its recognition by early 2000.

3.​ 2000

The emergence of HR accounting and utility analysis was witnessed and this added
new dimension and measurement data to quantify HR. Researchers not only drew the
inference from business firms but from other sources too. One such research is on the
metric model adopted by Billy Beane, the general manager of the USA baseball team to
select team members.
The study led to a breakthrough metric-based selection model development called as
‘Moneyball’ concept in 2003 and found its adoption at large scale by organizations since
2006.

Early Adopters

Though HR Analytics found its growth by late 2000, many organizations were still
confused with its adoption and its implementation. Some known MNCs were able to
foresee its potential of HR analytics and its benefits to the organization and took
initiatives to deep dive into this field.

1.​ Google

In 2009, Google started ‘Project Oxygen’ to find the qualities and attributes of an
effective manager. The project gained global recognition in 2011 when it published the
data-based findings and was found to very relevant and effective across different
industries.

The success of the project boosted research regarding the benefits of analytics in
workforce management. Around 20 articles were published on topics of Talent and
workforce analytics by Harvard Business Review, Wall Street Journal, Forbes, Fortune
magazines, etc.

The articles not only supported the application of analytics in workforce management
but also found some shortcomings of the ‘Project Oxygen’ like positive co-relation
between academic grades and employee performance. But ‘Project Oxygen’ laid the
foundation for a dynamic shift from traditional metrics-based HR measurement to
Predictive analysis of HR analytics.

2.​ IBM

IBM acquired an employment and retention service company, Kenexa in 2012. With its
cloud-based solutions combined with Oracle, Tableau, and SAP, IBM discovered ways
for talent management by analyzing the voluminous big data of HR.

Potential Realized

With organizations observing the benefits of HR analytics in business strategic

decisions, many have implemented HR analytics within the organization. Some known
players in the industry are:

1.​ Microsoft
Microsoft found the employee attrition as a major challenge across its various business
units. It deployed HR analytics tools to generate a statistical profile of employees who
were likely to leave the organizations.

The company found that majority of these profiles were of the direct college hires and
those who had not been promoted even after being with the company for 3 years.
These insights allowed Microsoft to take several HR interventions like the assignment of
mentors, changes in stock vesting, and income hikes to better manage the employee
and control attrition.

To observe the effectiveness of these interventions, Microsoft implemented them only in

two business units with high attrition rates and observed a significant reduction in
attrition rates by more than half in both the business units.

2.​ Mindtree

Mindtree is using HR analytics to make strategic decisions about:

●​ Employee Turnover
●​ Risk assessment
●​ Profile management
●​ Productivity index

With HR analytic tools, Mindtree can predict employee turnover for the next 90 days
from employee data. This has enabled them to generate insights from data analysis and
fed those insights into forecasting models for employee hiring.

Using analytic tools, HR also manages high-risk employees and uses the data to make
better management decisions.

3.​ ConAgra Foods

ConAgra Foods Inc. saw many of its key employees leaving the organization. The
company then deployed predictive analytics software to predict the likeliness of an
employee leaving the organization. With this data, the company then created a model to
identify the factors behind employee attrition, and around 200 factors were fed into the
model.

The analysis reflected that pay isn’t among the top 10 significant factors contributing to
employee attrition while it is internal recognition that is having a high correlation with
employee attrition.
 4.​ Wipro Ltd.

Wipro is using HR analytics to boost employee retention and combined with social
media analytics, it is also finding new skills and talent through Human Capital
Management. With labor mobility, Wipro has transitioned from a cloud-based oracle
system to its own Wipro HR sprinter for augmenting talent management. Using this HR
analytics software, Wipro can see the trends of each employee, the data of employees,
and their predicted behavior with just a click.

Human Resource Information System (HRIS)

In the contemporary scenario of modernization and globalization, organizations
heavily rely upon technological advancement and innovation in the field of
Information Technology.

Advancements in the field of IT has opened up newer avenues for the

organizations and provided a competitive advantage by using innovative and
customized solutions. It has become an integral part of the organizational
functioning and all the departments depend on integrated systems for organizing,
storing, retrieving and reviewing data. Today Internet and automation has
facilitated accessibility, reliability and accuracy of information; improved
organizational effectiveness and provided a leadership edge by applying
technology in various operations.

Human Resource Management function is fast evolving and the application of

Information Technology has revolutionized the way in which organizations
operate.

The field of Human Resource Management has been continuously evolving and
the HR in today’s scenario is playing a strategic role than merely a support system.
Human Resource function primarily deals with the employees, employers and all
the people who are related with the organization. It is designed to improve
employee productivity, performance and align the workforce with the business.

The HRM functions in an organization deals with people related issues like
Recruitment & Selection, Compensation, General Administration, Employee
Welfare and Involvement, Communication, Organizational Development,
Performance Management, Employee Motivation, Rewards & Recognitions and
Training & Development.
HRIS or Human Resource Information System, is a customized software solution
designed for helping the organizations to automate and manage their HR,
payroll, management and accounting activities. HRIS affects the performance of
the people, processes and key organizational strategies by automating key HR
processes like recruitment, training, manpower planning, performance appraisal
and job analysis & design.

HR software mechanizes the day to day general and administrative functions

performed by the HR department, enhances overall employee productivity and
performance. HRM applications can be used for updating and recording employee
information, its usage can make the recruitment process more robust and
effective.

HRMS facilitates applicant tracking, interviewing and confirmation process. Apart

from this, the workforce administration strategies can be streamlined and it can
generate various cost advantages to the organizations by streamlining various
functional operations.

Human resource management system or HR Package (HR solutions) can be used in

training processes, tracking employee performance and participation
(performance management system), payroll management system and accounting,
benefits and leaves.

In a nutshell, HRMS offers distinctive advantages to the organizations by

automating various functions of HRM, thereby reducing the workload of the HR
department and increasing the efficiency of the department by standardizing key
HR processes.

According to Parry (2010), HRIS can serve as a vital strategic tool as it shares
crucial data with the management related with recruitment and retention
strategies which can be aligned with the overall corporate strategy for realizing the
organizational objectives of growth. Additionally, by using HR applications, a
company can calculate the overall costs incurred per employee and it’s effects on
the business as a whole (DeSanctis, 1986).

Evolution of HRM and HRIS

Historical data reveals that the evolution of HRIS can be traced back in 1950’s and
1960’s when the first automated systems (payroll system) was introduced
(Martinsons 1997). Kavanagh et al. (1990) shared their insights on historical
evolution of HRIS by introducing the historical eras in human resource from the
pre-World War II period to the 1980s and how the evolving HR practices had its
effect on the HRIS.

With the increasing importance of IT applications in HR, the functioning of HR

department has been undergoing a radical change from mere administrative and
support functions to a more active participant in the strategic decisions of the
organization.

Historical eras in HR (Source: Kavanagh et al. 1990, Pp: 7)

During 1990’s, extensive studies were undertaken on the advantages of the

introducing HRIS in the organization and its influence on the overall human
resource strategies and business planning. Several theorists advocated the
advantages of using HRIS and the organizations were considered to be more
competitive if they had a well-equipped HRIS to support HR functions.

Essential Features of HR Software

Key features which an HR application must have are:

 ●​ Employee Database is the most important feature in any human
resource software. This involves filling in all the employee details
and relevant data. It can be revised or updated as per the
requirements.
●​ A robust HR software must include Salary related details as well and
the software that supports this reduces half of the burden of the HR
professionals. The features might vary but nowadays a lot of
software are adding time tracking and attendance too into this
feature.
●​ The option of self service in the software saves a lot of time of the
human resource personnel in big organizations where most of their
time is spent on several HR tasks. With the help of this feature, the
staff members may have an access to the software for updating
their won details, without interrupting with the work of the HR
employees.
●​ Any HR software should have a module on Performance
Management. The software includes certain parameters and
scoring system for evaluating the performance against certain
criterions or parameters and shares the complete performance
report. Good HRIS software also tracks training status and
professional development; which may help the HR professionals in
implementing strategic initiatives for boosting employee
performance and developing their skills through T& D initiatives.
●​ Administrative benefits are also availed from the software, as it
generates reports across various levels and equally of individual
employees.
●​ HR software should also have provisions for publishing the jobs,
listing of job and should support the overall hiring process by
producing quick user friendly reports about various applicants and
job descriptions, etc.
●​ HR software should have ease of accessibility which means it should
be accessible through any gadgets. This provides flexibility in using
the software HR information systems Data Sources

Recruiting. Recruiting data gathered from the Applicant Tracking System (ATS) is the
first common data source in the HRIS. This includes the number of candidates who
applied, their CVs and other characteristics, as well as data about the recruitment
funnel, recruitment sources, selection, and so on. This system is the most common
input for recruiting metrics.
Demographic data. Another key data source is HRIS employee records. This includes
the employee ID, name, gender, date of birth, residence, position, department, cost
center specifications, termination date, and so on. These demographic data are often
included in an analysis as control variables. Also, when data is combined manually, this
is often the database that is enriched with data from other systems by matching the
employee’s ID as a unique identifier.

Learning management. The learning management system (LMS) is another source of

HR information. The LMS contains a course offering and registers employee’s progress
through different programs. Not all learning data is stored in the LMS. Often finance
holds the information of expenditure on external courses while learning impact and
effectiveness is often measured using surveys.

Performance management. The performance management system (PMS) is part of

the HRIS and contains information about performance management. This includes
employee reviews and performance ratings.

Job architecture. Job architecture, also referred to as global grading or job leveling, is
a framework that serves as a foundation for remuneration. Different roles are put into
salary scales that have bands and grades with maximum reward levels. Different roles
apply to different salary scale levels.

Succession planning. Succession planning schemes are also part of the HRIS. The
amount of data depends on the maturity of the organization’s succession planning
practices. Example data includes leadership development data, managerial bench
strength, and data about which people are next in line for positions.

Compensation & benefits. To keep employees engaged, they are compensated.

Compensation and benefits data are also stored in the HRIS. These include
remuneration details but also secondary benefits.

Talent development. Talent development data is a bit of a weird one out. Talent
programs often consist of courses and workshops that are often included in the learning
management system. However, the broader approach to developing talent is another
key piece of information that can be retrieved from the HRIS.

Exit interview. Depending on the organization, exit interview information may also be
stored in the HRIS. This provides information on the reasons why employees have left
the organization. This data can be used for analyses aimed at reducing employee
turnover.

HR Metrics and HR Analytics

HR metrics are measurements used to determine the effectiveness and efficiency of HR
policies.

Metrics help compare different data points. For example, if turnover was 5% last year
and is now 7.5%, it has increased by 50%. The former are data points, the latter is the
metric.

Metrics don´t say anything about a cause, they just measure the difference between
numbers.

HR analytics, also called people analytics, is the quantification of people drivers on

business outcomes. Analytics measures why something is happening and what the
impact is of what’s happening.

HR metrics are indicators that enable HR to track and measure performance on different
aspects and ultimately predict the future. However, not all HR metrics are created equal.

How to get from metrics to analytics

Now you have a basic understanding of the difference between metrics and analytics,
we’ll finish with how to get from metrics to analytics.

●​ Start with your data: As you know now, metrics are the relations
between data points. In order to start with metrics, you need to have
your data right. Smart HR system design and high data quality are key
components to improve before you invest into getting your metrics ready
for HR reporting
●​ Getting the metrics right: This step sounds easier than it is. Measuring
basic data is easy but keeping track of more complicated metrics, like
the % of unwanted turnover, is something a lot of companies are
struggling with, as it requires them to combine multiple systems (their
main HRIS and their performance system in this case).
●​ Select the relevant KPIs: The second step is to select the HR Key
Performance Indicators that matter most for your business. These KPIs
should be connected to business goals. For each KPI a target score
should be specified.
●​ Identify areas where analytics adds value: You can leverage the data
and metrics to add value using analytics. This starts by identifying a
business case that, when solved, would add value to the business. This
means that your outcomes need to be actionable.
●​ Implementation of results: Once you’ve completed your first analytics
project, you can implement the results in the organization. At this point,
 you’ve leveraged your HR data to create value for the organization and
you’ve added to the organization’s strategic goals.

Example:

Time to hire (time in days)

An important metric for recruitment is the ‘time to hire’. This measures the number of
days between a candidate applying for a job, and them accepting a job offer. Time to
hire gives insights into recruiting efficiency and candidate experience.

Recruitment efficiency measures the speed at which HR processes a candidate

assessment, interview, and role acceptance. If your organization has a long time to hire,
it reflects that your processes are inefficient. Having a long time to hire, reflects on
candidate experience. Candidates may drop out of the recruitment process if it is long.
Wouldn’t you rather wait two weeks than two months to start a new job? The best
candidates are in demand and do not need to wait.

Cost per hire (total cost of hiring/the number of new hires)

Like the time to hire, the ‘cost per hire (CPH)’ metric shows how much it costs the
company to hire new employees. This also serves as an indicator of the efficiency of the
recruitment process.

Cost per hire can be time-consuming to work out. There used to be a huge variation in
how companies calculated this metric until The Society of Human Resource
Management and the American National Standards Institute agreed on a standard
formula.

Early turnover (Percentage of recruits leaving in the first year)

This is arguably the most important metric to determine hiring success in a

company. This early leaver metric indicates whether there is a mismatch between the
person and the company or between the person and his/her position.

Revenue per employee (Revenue/Total number of employees)

This metric shows the efficiency of the organization as a whole. The ‘revenue per
employee’ metric is an indicator of the quality of hired employees.

Performance and potential (the 9-box grid)

The 9-box grid appears when measuring and mapping both an individual’s performance
and potential in three levels. This model shows which employees are underperformers,
valued specialists, emerging potentials, or top talents. This metric is great for
differentiating between, for example, wanted and unwanted turnover.

Billable hours per employee

This is the most concrete example of a performance measure, and it is especially

relevant in professional service firms (e.g. law and consultancy firms). Relating this kind
of performance to employee engagement or other input metrics makes for an interesting
analysis. Benchmarking this metric between different departments and
managers/partners can also provide valuable insights.

Engagement Rating

An engaged workforce is a productive workforce. Engagement might be the most

important ‘soft’ HR outcome. People who like their job and who are proud of their
company are generally more engaged, even if the work environment is challenging and
pressure can be high. Engaged employees perform better and are more likely to
perceive challenges as positive and interesting. Additionally, team engagement is an
important metric for a team manager’s success.

Intuition versus Analytical thinking

The analytical style of thinking is step-wise and logical. It usually attempts to break a
problem or issue into its constituent parts both to understand and to address or solve it.
It is usually very methods-driven, following thought-through (and sometime
research-derived) models and frameworks. Examples of these are the real options
analysis for planning technology investments, and business model canvas, used during
new business development).

On the other hand, the intuitive style of thinking is driven more by gut-feel and
confidence derived from experience. It does not follow a prescribed set of analytical
steps, but draws on observed indicators and trends from the internal and external
organisation environment to reach strategic decisions. Since specific explicitly available
formulae are not followed, it relies on the individual’s ability developing their own
internal modes of making sense of strategic issues.

There are advantages attributable to these different styles of thinking. For instance, an
analytical approach to a certain matter will normally be open and allow objective
contribution of multiple individuals allowing them to work together based on a commonly
understood model or framework. An intuitive approach is normally fast and efficient. It
relies on the mental and experiential capacity to read meanings into observed patterns
and derive solutions very quickly.
Of course, there are flip sides to these advantages, and the downsides to each
approach are often easy to observe. When faced with complex problems, analytical
approaches often breakdown, unable to cope with the range and levels of variables.
The reliance on models also means that it requires specialist knowledge, e.g. the
understanding and use of the Black-Scholes model for real options valuation.

Intuitive approaches are very individual, and rely on tacit knowledge that is not often
easy to share. Bringing others on board to agree on a decision often would rely on the
power of persuasion, and sometimes the making links between influencing factors that
stakeholders may find tenuous and difficult to accept. Decisions can very easily be seen
as subjective or, worse, political in nature.

Intuition is how your Heart/Soul communicates to you. It is connected to all things

through time and space and most of the time, doesn’t make sense. It’s the ability to
observe what is obvious at the given moment in time.

Analytical Thinking is you trying to rationalise something, to make sense of it.

Intuition is said to be that inspirational “aha” moment of thought, before your rational
mind kicks in, which ultimately sabotages the true message.

Old people are great intuitive thinkers thanks to their years of life. But I will not rely
solely on them to make decisions for the present and future. Rather, I prefer to
approach the decision strategically, using the intuitions of the seniors as a valuable
input only.
Analytics frameworks like LAMP
People analytics is helping HR shape their strategies in regard to hiring, training, and
employee management to help create a solid, stronger workforce. But HR is one of the
last business departments to start fully embracing data analytics. Most organizations
with departments that use analytics are using it to increase their customer engagement
and grow their sales numbers, like marketing, customer service, and sales teams.
Accounting and finance departments often use them to help identify trends that can be
applied to business strategy.

Businesses are starting to understand how analytics can improve their HR processes
and ultimately help them improve their business. While HR analytics aren’t
customer-focused, they are people-focused and can help HR better hire, manage, and
support the people who will help shape the organization and grow it towards its goals.

Building an HR analytics framework, however, is the first step to being able to apply and
use analytics in your HR endeavors. Here are several steps to take to begin or improve
your HR analytics journey.

Predictive analytics is an upcoming trend in Human Resources (HR). Recruitment tools

predict high performers, and increasingly companies are able to predict which employee
is likely to leave. In this article, we will explain what HR predictive analytics are and how
they can be a real game-changer for HR departments.

Predictive data analytics are everywhere. It is in its essence a technology that learns
from existing data, and it uses this to forecast individual behavior. This means that
predictions are very specific. In the movie Moneyball, predictive analytics were used to
predict the potential success of individual baseball players.

HR analytics: HR analytics specifically deals with the metrics of the HR function, such
as time to hire, training expense per employee, and time until promotion. All these
metrics are managed exclusively by HR for HR. People analytics: People analytics,
though comfortably used as a synonym for HR analytics, is technically applicable to
“people” in general. It can encompass any group of individuals even outside the
organization. For instance, the term “people analytics” may be applied to analytics about
the customers of an organization and not necessarily only employees. Workforce
analytics: Workforce analytics is an all-encompassing term referring specifically to
employees of an organization. It includes on-site employees, remote employees, gig
workers, freelancers, consultants, and any other individuals working in various
capacities in an organization.

Logic

This is the step that helps companies to know where to look for insight and connect data
points to meaning in order to make better decisions. The connection between the
numbers and effects and outcomes is vital in understanding the “why”. Are there
connections between employee health and wellness and employee turnover, for
instance? Where are the connections in your business practices and your employee
performance? This what the logic step of an HR analytics framework can help you
understand. IT notes that “This framework depicts the connections between HR and
management practices, which affect employee attitudes, engagement, and turnover,
which then affect the experiences of customers, which affect customer-buying behavior,
which affects sales, which affect profits.” Companies who are able to understand the
connections between their HR practices and people’s issues and how they impact the
business are the most successful in implementing changes that matter. Analytics helps
to highlight the connections.
Measures

Good analytics systems built from a solid framework help make sure what you’re
measuring is meaningful to your specific organization and business needs. It also helps
make sure that what you’re measuring is accurate and meaningful data. Inform IT notes,
“Factors such as employee turnover, performance, engagement, learning, and absence
are not equally important everywhere. That means measurements like these should
focus precisely on what matters. If turnover is a risk due to the loss of key capabilities,
turnover rates should be stratified to distinguish employees with such skills from others.
If the absence has the most effect in call centers with tight schedules, this should be
very clear in how we measure absenteeism. Lacking a common logic about how
turnover affects business or strategic success, well-meaning managers draw
conclusions that might be misguided or dangerous, such as the assumption that
turnover or engagement have similar effects across all jobs.” It’s important to know why
you’re measuring what you’re measuring and understand accurately how it affects your
business.

Analytics

Analytics is really how data can provide answers. You may have data that suggests that
your employees are engaged in their work based on employee feedback surveys; you
may also have customer surveys that indicate they are satisfied with their interactions
with your brand. You may believe that more engaged employees work in a way that
produces higher customer satisfaction and more loyalty. That may very well be true, but
analytics software and systems will help you identify the relationship and let you draw
more accurate insights. Analytics allows you to dig deeper with a more holistic
approach. It reveals the right conclusions from the data and transforms information into
relevant, meaningful knowledge.

Process

This refers to the change management process within an organization. If an

organization has used HR analytics to support their employee management, that means
that they can create changes based on that data. This is one of the most important
steps in the HR analytics system going from data and information to meaning and then
decisions.

The approach to data in HR is the key to solving people problems. It also helps
meaningful data and analysis from that data in front of business leaders who can
actually affect and support needed changes. IT says that leader needs to “buy into the
idea that human capital decisions have tangible monetary effects, they may be more
receptive to greater sophistication” and other changes to their employee performance
management that are needed to help support business success.
HR Scorecard
Human Resources or HR was viewed as a support function whose primary role was to
take care of payroll, time tracking, and disputes between the unions and the
organizations.

Indeed, in the manufacturing era, the term used for HR functions was personnel
management and industrial relations wherein the job of the personnel manager was to
ensure that salaries are paid on time, mediating between the unions and the
organizations, and otherwise being peripheral to the other functions such as production,
operations, sales and marketing, and strategy formulation.

It was only with the advent of the services sector that the role of the erstwhile personnel
manager transformed into “human resources” management and later on, to people
management and people enabling and people empowerment.

Note the emphasis on resources and people as the services sector relies on human
capital as the key asset and hence, the HR managers were expected to contribute to
strategic goals and objectives.

In other words, the HR function evolved and transformed into one where it was no
longer peripheral or a support function, and instead of times when human resources are
viewed as sources of sustainable strategic advantage, the role of the HR manager was
to aid and enable such resources to contribute effectively and meaningfully to the
organizational strategies.

Concomitant to these developments was the evolution of the initiatives such as HR

Scorecard which are tools to measure how well the HR function is aligned to the overall
strategic goals of the organization.

In other words, HR now was expected to align its recruitment, compensation, and
employee retention strategies to the organizational strategies.

What this means is that in contemporary organizations, the HR managers have a “seat
at the leadership table” or to put it simply, they have to be aligned with the larger
organizational strategies.

Towards this end, the HR Scorecard works by providing decision-makers with data and
inputs about how much the employee recruitment and retention processes cost and
what are the benefits of the same.
For much of the 20th century, it was commonly understood that these costs are part of
the overall organizational costs and there was no way to measure the benefits of such
expenses in “tangible” ways.

In other words, what this means is that an HR Scorecard provides the organizational
leaders with metrics and data in tangible terms about the payoffs and the benefits from
HR processes and activities.

Benefits of HR Scorecards

The key benefit or the relevance of tools such as HR Scorecards is that it aligns the
broader organizational strategies with the HR strategies and the convergence of
organizational goals with the HR goals brings the HR function in line and tune with the
overall organizational ecosystem.

For instance, how this works in the real world is that if an organization identifies
superlative customer service as a strategic goal, the HR scorecard helps in measuring
the benefits of initiatives such as training the customer service representatives and the
associated staff costs involved in hiring and retaining such key personnel.

At the end of the year, the benefits of the initiatives as measured by customer feedback
surveys are tallied to the costs of the initiatives so that organizational decision makers
and more importantly, the HR Managers have an idea about the effectiveness and
efficacy of their hiring and retention strategies and their usefulness and relevance to the
broader organizational goals and objectives.

In other words, the HR function is no longer a “silo” that stands apart in “splendid
isolation” and is instead, aligned with the overall organizational ecosystem of goals and
objectives.

The premise for an HR scorecard is that HR can and should develop metrics to
demonstrate how HR activities impact profitability:

●​ Identify the critical deliverables for Human Resources.

●​ Identify HR’s customers (for the deliverables).
●​ Define HR activities that provide the critical deliverables (such as
high-talent staffing or a retention initiative).
●​ Conduct a cost-benefit analyses of activities that provide deliverables.

The HR Scorecard has five key elements:

●​ The first element is what we called Workforce Success. It asks: Has the
workforce accomplished the key strategic objectives for the business?
 ●​ The second element is we called Right HR Costs. It asks: Is our total
investment in the workforce (not just the HR function) appropriate (not
just minimized)?
●​ The third element we describe as Right Types of HR Alignment. It asks:
Are our HR practices aligned with the business strategy and
differentiated across positions, where appropriate?
●​ The fourth element is Right HR Practices. It asks: Have we designed
and implemented world class HR management policies and practices
throughout the business?
●​ The fifth element is Right HR Professionals. It asks: Do our HR
professionals have the skills they need to design and implement a
world-class HR management system?

Scorecards include current data and comparisons to previous time periods, such as the
previous quarter or year, and historical data to show improvements toward goals.

Costs

Human resources costs that are measured and reported on through scorecards include
adherence to budgets, recruiting costs to attract and hire staff and costs of benefits
such as group health insurance. Tracking costs through scorecards enables managers
to plan human resources goals and expenditures and control costs in specific areas and
set realistic budgets.

Hiring

Hiring is tracked in human resources scorecards by numbers of employees hired by

department, business unit or location. Hiring goals, position vacancies and time to fill
positions are other hiring indicators tracked in scorecards. This information gives
managers a way to see how well human resources fulfills the company’s need for new
personnel, and where HR may benefit from extra resources to increase or improve
hiring practices.

Turnover

Turnover is the rate at which a company gains and loses employees and is commonly
compared to the rate of industry turnover. Turnover costs companies money to recruit
staff and in lost productivity and low morale amongst other employees. High employee
turnover indicates employees are unhappy due to issues such as work environment,
lack of opportunities, management conflict or compensation. Low employee turnover
indicates employee satisfaction, making lowering turnover a significant goal.

Alignment with Corporate Goals

Businesses use human resources scorecards to measure human resources processes
and effectiveness, and to align human resources with corporate goals and strategies.
Human resources scorecard practices involve both financial and nonfinancial aspects,
measuring actual costs as well as other areas of value such as turnover rate and what it
means and performance management data. Scorecards must measure elements that
are in corporate goals and strategy to be a tool for alignment. For example, if a key
corporate goal is to improve customer service in the upcoming year, customer service
training and customer service staffing should be part of the human resources

Workforce Scorecard
The Workforce Scorecard is a component of a larger company-wide scorecard that
facilitates the measurement and communication of human resources objectives and
performance across the enterprise. Following the basic tenets of scorecard theory, KPIs
within the Workforce Scorecard are used to evaluate how well employees are carrying
out the internal initiatives necessary to serve their customers, how those initiatives are
associated with the financial and strategic goals of the organization, and how efficiently
and effectively all employees in the organization are performing. Used in this manner as
an organizational and communications tool, the Workforce Scorecard supports the shift
of the human resources function from an administrative entity to a key strategic partner.

The Workforce Scorecard argues that to maximize the strategic contribution of the
workforce, organizations must meet three challenges: view their workforce in terms of
its potential contribution rather than as a cost to be minimized (the perspective
challenge); replace benchmarking metrics with measures that differentiate levels of
strategic impact (the metrics challenge); and hold line managers and HR professionals
jointly responsible for workforce quality and strategy execution (the execution
challenge).

To make this happen, our main thesis in The Workforce Scorecard is that managers and
leaders need a strategy for the business, a strategy for the workforce, and a strategy for
the HR function. As a result, they also need a series of metrics and measures for each;
a balanced scorecard, a workforce scorecard, and an HR scorecard, respectively.

Designing such a system begins with a clear understanding of the unique processes
through which the workforce creates value in each business. The Workforce Scorecard
offers a framework that identifies and measures the outcomes, behaviors,
competencies, mind-set, and culture required for workforce success and reveals how
each dimension impacts the bottom line. The lynchpin of this perspective is an
emphasis on looking at the role of human capital from the “outside in” (or customer
back), not from the “inside out” (starting with the HR function).

Some benefits of using the Workforce Scorecard are:

 ●​ Linking human resources KPIs to corporate-wide objectives using an
Enterprise Scorecard approach.
●​ Quickly comparing current company practices to internal historical
measures and external benchmarks.
●​ Measuring and aligning your human resource initiatives within a
business framework.
●​ Accurately determining and tracking the composition and deployment of
the workforce.
●​ Enabling easy access to information by distributing reporting results
through the internet.

Integrations

The Workforce Scorecard is part of the Recruiting, Development, Deployment, and

Reward business processes.

The Workforce Scorecard works in conjunction with Scorecard and the Workforce Data
Mart. The Workforce Scorecard uses Scorecard’s tools to provide a current
representation of how the company is meeting its human resources objectives. The
Workforce Data Mart provides details and analysis of how and why these trends are
occurring.

Data flows through the Scorecard application based on a defined frequency.

Transactional data is provided to PeopleSoft EPM where it is transformed using the
Scorecard analysis tools. The system displays analysis results through the Workforce
Data Mart to users who can use this information to analyze trends or take actions as
necessary. For example, you can analyze details such as job demographics, personal
demographics, and compensation.