HR analytics software boosts employee retention, lifts bottom line

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Forrester stresses link between analytics in HR and business results

In this Q&A, a Forrester Research analyst explains how using analytics can uncover connections between people management and business outcomes and improve areas such as hiring, retention and training.

In a new report, Forrester Research says that people analytics is critical for running a successful business and that HR needs to become more skilled and creative about using data to make decisions about talent. The report describes four types of analytics in HR and gives examples of more than 30 vendors with different areas of focus.

Claire Schooley, a principal analyst at Forrester Research and lead author of "Use HR People Analytics to Drive Business Results," discussed the findings with SearchFinancialApplications.

What is your best advice for HR when launching an effort to use analytics in HR?

Claire SchooleyClaire Schooley, principal analyst
at Forrester Research

Claire Schooley: HR should be much more integrated with the business and understand what the business wants. HR needs to ask, "What is the business looking for? What kinds of people and what kinds of skills do we need to drive value to the business?" Data should be used to drive the best value to the business.

The report notes that HR lags behind other areas of the business when it comes to making decisions based on data. What are some of the biggest obstacles to using data in HR?

Schooley: HR needs more people that are interested in data. There is so much data and there is a demand for people who can analyze it. HR needs people who want to do more in data analysis and get some training so that they are able to interact better with the business. Organizations might be able to find good data analysts in finance, for example, who might be interested in HR and people. Someone in finance might be more energized dealing with people issues.

A lot of this also is driven by the leader. You need to have a VP for HR who is a business person, who understands the business and is equal to other leaders in different lines of business. That is what a lot of organizations are doing -- making sure they have a strong HR leader who is a business person as well.

Is there any evidence that HR is becoming savvier in the use of analytics?

Schooley: Yes. In a 2012 survey sponsored by KPMG, only 15% of respondents said that their HR organizations did a good job with workforce analytics. But the tide is turning. In 2014, that percentage jumped to 23%. As the report notes, a growing number of HR leaders are recognizing that good people analytics helps companies hire strong new employees, retain valued employees, [ensure] career growth and save money by reducing the number of failed hires.

Talent management vendors such as Cornerstone OnDemand, IBM Kenexa and SAP SuccessFactors have HR analytics as part of their talent suites. Does this make it easier for companies to obtain people analytics?

Schooley: Yes, especially if they are early in using analytics in HR. The talent suite vendors provide recruiting, performance management, learning management system, succession planning and maybe career development and compensation. It is helpful for organizations to acquire analytics at the same time they are getting some of these other functions. The suite vendors can provide reporting and some predictive analytics that will focus on the data a company has on performance management or learning, for example. They understand that analytics is important and that they need to help their customers do some work in the area. The analytics from the suite vendors may not be as sophisticated as some of the standalone vendors, but the suite vendor can help people get going.

How can a company choose the best technology for analytics in HR?

Schooley: Application development and delivery [AD&D] professionals understand technologies and by working in partnership with HR, AD&D pros can help make crucial decisions on selecting the best-fit analytics tools. AD&D and HR should also work together to ensure that data feeding the analytics is accurate, including identifying, cleaning up and integrating all sources of data on people in the organization and modernizing processes needed to produce analytics and reports.

Your report does a good job of describing the four types of analytics in HR -- reporting, analysis, predictive and prescriptive. What is the status of each?

Schooley: Most companies do the first one, reporting. Reporting looks at metrics such as employee turnover rate, time-to-hire, learning completion rate or average performance appraisal rating. A business also wants to see analysis that brings together information from different data sources and finds correlations between people management and business outcomes. This could include summarizing metrics from data sources and drawing conclusions such as comparisons of learning completion rates with employee tenure to determine if longer tenured employees are continuing to build their skills with training. An on-staff analytics professional can help in this regard. Most companies do straight, basic reporting, but at the next level, some of the analysis can be very sophisticated. Predictive analytics, including flight risk of top performers, is the next step. A lot of organizations are not there yet, but this area will continue to grow. Prescriptive is the most sophisticated and most HR teams are just scratching the surface here. In this case, the technology would offer a prescription to prevent the flight of a top employee such as a promotion, a training program or a change in work location.

Why are more companies using algorithmic software in recruiting? Is it because of the massive amounts of data in LinkedIn and other social media, so you need machines to find the best applicants?

Schooley: Yes. Algorithms are helpful in identifying candidates. There is an awful lot of data out there. It's very, very difficult to sort through all the applicants. Gild, based in San Francisco, has used algorithms to find software engineers for companies to possibly recruit. TalentBin, which was purchased by Monster Worldwide, has algorithms that look at forums or groups of IT professionals to help fill a need for organizations.

Forrester leads in influencing analysts

Forrester Research has the most  influence on technology analysts based in the U.S., according to a recent study that looked at Twitter followers.

Of 1,212 industry analysts on Twitter, 23.7% follow Forrester Research, ranked No. 1 among "influencers" on the social media site including No. 3 Gartner, 22.3%, and No. 6 IDC, 17.5%, just ahead of Bill Gates, at 17.3%.

The 25-page report by Apollo Research, based in the U.K., included only analysts and influencers who use Twitter.

Apollo said it was unexpected that Forrester, which is based in Cambridge, Mass., would be in first place among the 6,761 influencers, which include media organizations, analyst firms, technology organizations, executives and individuals who are followed on Twitter by two or more of the analysts in the sample of 1,212. Apollo said it believed a news feed would be first.

Ray Wang, principal analyst at Constellation Research, was ranked as the top analyst followed by other industry analysts. George Colony, CEO of Forrester Research, was ranked No. 2 among analysts and Charlene Li, principal analyst at Altimeter Group, was No. 3.

"Among a group of individuals where knowledge and expertise are the principal qualities that customers value, it is considerable endorsement for Wang to be followed by more of his peers than any other technology analyst," the report said.

Wang is prolific on Twitter, producing 60 to 90 tweets a day, while Colony rarely tweets and Li tweets about once a day.

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