HR Analytics: Creating Competitive Advantage

Tim Ringo

HR analytics has been, for the last 10 years, a hot topic for discussion at senior levels in most successful organizations. That’s the good news.

The not-so-good news is that this discussion has been at the expense of doing. Few organizations have moved from discussion to implementing effective HR analytics solutions that help the business improve performance, and better yet, create competitive advantage.

Pressure has been steadily building on HR functions to improve their capabilities to develop accurate insights from people data for business-critical decision making. Many HR functions have tried to dress up HR metrics as HR analytics and have therefore struggled to show real value and gain traction among senior leadership for their efforts.

HR metrics are important and useful, but they are one-dimensional and only inputs to the broader requirement of using data to glean meaningful analysis and model potential future scenarios and trends: turning KPIs/metrics into HR analytics.

  • KPIs/metrics: Focus on the present and look backwards in time; tend to focus on the immediate short-term impact of business conditions.
  • HR analytics: Analytics and insights that focus on the present and look forward in time; create insights to current and future business imperatives; use predictive modeling to support the overall company, help shape the organization strategy and create competitive advantage.

Emerging trends

As the approach to HR analytics evolves, a number of key themes/trends are emerging in developing an effective capability:

  • Senior management push to use people data to solve specific critical business issues
  • HR software-as-service (SaaS) technology makes it easier to create insights into people data
  • Increased regulatory requirements and risk management
  • Better management of costs and productivity in variable and uncertain business conditions

Additionally, there are four main camps of thinking organizations fall into on the subject of developing an effective HR analytics approach:

Organic evolution: One where an HR function has become adept at tracking and measuring KPIs/Metrics and uses this foundation, over time, to start to create deeper and deeper insights into people data. Tends to be an evolution with periodic refinement of process and technology in key business units, spreading to other business units as value is realized.

Technology-driven approach: Over the past five to seven years, a proliferation of new HR technologies has been introduced, mainly driven by the development of SaaS HR technology based on the idea that people data is at the core of the functionality, creating sophisticated, automated HR analytics modelling tools. Many organizations start with a SaaS HR system and build an effective HR analytics capability on the back on the technology.

Business model-driven approach: Organizations that have had the most success in recent years in creating advanced and effective HR analytics are those whose business model are very labor- and/or knowledge capital-driven, such as:

  • Professional services firms
  • Airlines
  • Industrial (oil, resources, etc.)

These organizations’ profit and productivity rely heavily on getting the right people with the right skills in the right place at the right time. Therefore, they have developed sophisticated HR analytics processes, technologies, and capabilities to manage their core businesses.

Hybrid approach: This is the least common approach taken to develop an effective HR analytics capability; however, it is the recommended approach in most cases. A hybrid combines all of the approaches above into an intentional and cohesive strategy for implementing effective HR analytics technology, processes, capabilities, and best practices. It usually starts in order to address and solving a specific critical business issue, for example: reducing attrition, workforce deployment and planning, or recruitment of key skills. As a result, the hybrid approach builds on the success of solving a particular business challenge, which helps the organization understand the value and creates a pull for the approach.

To access a new HBR report, “HR Analytics: Busting silos and delivering outcomes” and to learn more about how SAP SuccessFactors Workforce Analytics can help HR become a valuable player in strategic decision making, visit hereYou can also learn more from customers and experts at SuccessConnect in Las Vegas taking place August 29-31 at The Cosmopolitan. Register here.


Tim Ringo

About Tim Ringo

Tim Ringo is Vice President of Human Capital Management (Europe, Middle East, and Africa) at SAP.