Applying HR Analytics for Competitive Advantage
One of the key indicators of organizational success is employee performance and HR analytics is an ideal tool for identifying and understanding this relationship. A number of leading firms have embraced this approach, gathering and examining employee management data and applying analytical tools and processes to gain competitive advantage.
For example Google's program known as 'People and Innovation Lab' focuses on employee management best practices in areas such as recruitment, attrition, performance, and their association with organization goals. Similarly, Lockheed Martin has instituted an HR based program that links employee performance with organizational objectives. Best Buy has a similar initiative focused on understanding the correlation between employee engagement and store sales, while Sysco's analytics enabled employee retention program has helped the firm reduce hiring and training costs.
The process for establishing an HR analytics initiative broadly involves the following steps:
i. Establish relationship between employee performance and organization success by formulating and testing various hypotheses and converting them into analytical models.
ii. Deploy and monitor analytical models in organization decision process.
iii. Feedback decision outcome into the analytical system and update the models.
The key to developing a successful HR analytical system is to build it around employees (peer quality, work pressure, growth opportunity, and performance) in alignment with firm's mission. The idea is to remove guesswork from the decision process by applying high-quality input data. This is enabled by analyzing, confirming and deploying best talent management practices (for example - building models to understand relation between employee background and skill set on performance).
Once deployed and embedded in various organizational processes, such models can support business leaders in making decisions in scenarios such as:
- What would be the impact on financial performance if employee engagement score increases by 1%?
- Based on performance appraisal, which employees are ready to take up leadership role and which would need additional training?
- How does attrition impact project profitability?
- How many employees are required for next two quarters based on plan, industry trends and other socio-economic factors?
- Why and when do employees leave a company and what can be done?
- How to manage employee workload during product launch?
Employee capability, motivation and performance are source of high quality data which managers need to have access to for making better business decisions. Decision making based on employee insights is a model that is difficult to replicate, making it a potential source of competitive advantage and a key lever in attracting and retaining best talent to foster growth.