Module 1: HR Decision making and HR Analytics

Evolution of HR Analytics

HR analytics has been in existence since Frederick Winslow Taylor’s classic The Principles of
Scientific Management in 1911, where he used statistical methods to manage people. It evolved
over the years, with great advancements starting in the year 2008, when it reached a position of
importance and big corporations such as Google and Microsoft started using it very widely.
Modern advancements in prescriptive analytics have further widened its scope and it now
encompasses almost every aspect of HR and even small and medium sized businesses stand to
benefit from it.

HR Analytics – Meaning and Definition

Human resources are a people-oriented function and is so perceived by most people. But
for those who think that the HR team’s contributions are limited to extending offer letters and
onboarding new hires, human resource analytics (HR analytics) can prove them wrong. When used
strategically, analytics can transform how HR operates, giving the team insights and allowing it to
actively and meaningfully contribute to the organization’s bottom line.

In the past century, Human Resource Management has changed dramatically. It has shifted
from an operational discipline towards a more strategic one. The popularity of the term Strategic
Human Resource Management (SHRM) exemplifies this. The data-driven approach that
characterizes HR analytics is in line with this development.

Being able to use data in decision-making has been growing in importance throughout the
global pandemic. Moving towards a post-pandemic world, there are many changes happening in
employment – whether it is the growing popularity of hybrid work or the increased use of
automation. In this age of disruption and uncertainty, it is vital to make the correct decisions in
order to navigate our new realities.

HR analytics (also known as people analytics) is “the collection and application of talent
data to improve critical talent and business outcomes. HR analytics leaders enable HR leaders to
develop data-driven insights to inform talent decisions, improve workforce processes and promote
positive employee experience”.
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 “HR analytics is a methodology for creating insights on how investments in human capital
assets contribute to the success of four principal outcomes: (a) generating revenue, (b) minimizing
expenses, (c) mitigating risks, and (d) executing strategic plans.

Benefits of HR Analytics

1. Improved Decision Making

Organizations can make better decisions based on data available on their workforce, which, more
often than not, delivers better results by employing HR analytics.

To better understand the workforce, organizations employ HR Analytics, which helps them
identify areas of improvement, calculate adequate compensation and training costs to enhance
employee performance and turnover, and improve their overall work satisfaction levels and other
HR-related metrics.
2. Reduced Employee Turnover

With the help of HR Analytics tools, collecting and analyzing data on employee turnover becomes
easy. This helps the companies recognize trends and patterns to increase employee retention and
reduce employee turnover.

With the help of HR Analytics, understanding the reasons behind increased employee turnover
becomes easier. This enables the companies to take appropriate steps to correct the issue, create
strategies to reduce the same and create a more positive and satisfying work environment.

Some strategies to correct employee turnover could be providing better training and developmental
opportunities and addressing existing management and company culture issues.

3. Cut Down on Recruitment and Training Costs

Organizations need to streamline the recruitment and training processes by using HR Analytics to
cut down costs.Organizations need to reduce the time and resources spent on workforce
recruitment and training and use them on other important areas.

4. Identify Best Practices

HR analytics can help organizations identify best practices.

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Best practices in the industry and the most effective HR policies can be recognized by collecting
and comparing data in competing companies and employing them in one’s organization. This
could help the organization in staying competitive and improve overall performance.

5. Improve Employee Performance

Using HR Analytics, HR professionals can collect and analyze data on employee performance,
identify high-performing employees and invest in additional training and development
opportunities to improve employee performance in the company.

Using HR Analytics to improve employee performance can help organizations retain top talent
and gain an edge over competitors.

6. Enhance Workforce Planning

With the help of HR Analytic tools, organizations can be helped to plan and identify future
workforce shortages or surpluses.

Organizations can gauge their workforce more accurately if they analyze the data relating to their
employee demographics, their career progression, and their job performances using HR Analytical
tools to ascertain whether more employees are to be recruited or further training and development
opportunities should be provided to the existing workforce to develop a more effective and
efficient workforce.

7. Improve Compliance

Employee data needs to be analyzed by organizations to see that all their aspects comply with the
relevant government laws, bylaws and regulations, which include work safety regulations, equal
employment opportunity laws and other legal requirement laws.

Employee data analysis using HR Analytics can help determine areas at risk of non-compliance
with the legal requirements to take remedial steps to address the issue well within time.

8. Increase Employee Engagement

Employee engagement data analysis can help organizations identify areas of employee
disengagement and take appropriate steps to remedy the situation quickly.

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Employee engagement is a vital indicator of employee satisfaction and motivation levels, directly
related to employee turnover in the organization.

Employee engagement can be enhanced by working on better communication with the employees
and providing them with better training and development opportunities.

9. Better Risk Management

Organizations can identify potential risks by analyzing employee data and taking steps to mitigate
them. This can include developing contingency plans, providing additional training and
development opportunities, or taking other steps to minimize risks, such as compliance issues,
workforce shortages, or surplus issues.

10. Better Communication and Collaboration

By analyzing employee data, organizations can identify areas where communication and
collaboration with the workforce can be improved, which will positively enhance organizational
performance in the short and long run by reducing turnover and improving workforce performance.

Building better communication channels with the workforce, collaborating on a more significant
level, and competitively better training and development opportunities are some steps to enhance
organizational performance as a whole.

11. Helps build equitable compensation and benefits packages

HR analytics helps build equitable compensation and benefits packages by providing data-driven
insights into employee performance, market trends, and industry standards. This enables
organizations to make informed decisions regarding salary structures, incentives, and benefits,
ensuring fair and competitive compensation practices.

12. Improves recruitment and talent acquisition efforts

HR analytics improves recruitment and talent acquisition by leveraging data to identify the most
effective recruitment channels, assess candidate fit, and optimize hiring processes. It enables
organizations to measure the success of their recruitment efforts, identify areas for improvement,
and make data-backed decisions to attract and retain top talent.

13. Easier to conduct skills gap analysis

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With HR analytics, conducting skills gap analysis becomes easier as it allows organizations to
assess the existing skill sets of employees, identify areas for development, and design targeted
training programs. This helps align employee skills with organizational goals, bridge competency
gaps, and promote continuous learning and development.

14. Improved workplace safety

HR analytics plays a vital role in improving workplace safety by analyzing safety incident data,
identifying patterns, and implementing proactive measures to mitigate risks. It enables
organizations to monitor safety metrics, track compliance with regulations, and make data-driven
decisions to create a safer work environment for employees.

15. Adds value to the business

HR analytics adds value to the business by providing insights and metrics that enable strategic
decision-making. It helps HR professionals and organizational leaders identify areas for
improvement, measure the effectiveness of HR initiatives, and align HR practices with overall
business objectives. By leveraging data, organizations can optimize workforce productivity, drive
employee engagement, and ultimately contribute to the overall success and growth of the business.

Importance and significance of HR Analytics

1. Make Informed Decisions

First, it can help the organization to make data-driven decisions that are based on evidence rather
than intuition or guesswork. With HR analytics, you can identify the factors that influence
employee turnover, engagement, productivity, and satisfaction. By understanding these factors,
you can design and implement effective interventions to retain and motivate your talent.

2. Measure the Impact of HR Policies

Second, HR analytics can help measure the impact of HR policies and practices on business
outcomes. It can help to evaluate the return on investment (ROI) of learning and development
programs, recruitment strategies, performance management systems, and employee benefits.

Ultimately, it is possible to quantify the value of HR initiatives, justify the spending, and allocate
the company’s resources more efficiently.

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3. Anticipating the Trends

The third reason why HR analytics is important is it can help shape the future of work by
anticipating and responding to emerging trends and challenges. HR analytics can forecast the
demand and supply of skills, assess the readiness and adaptability of the workforce, and optimize
the use of technology and automation.

By leveraging data and insights, organization can stay ahead of the curve and gain a competitive
edge in the market.

Additionally, the significance of HR analytics to a business are as follows:

➢ Using HR metrics and analytics, descriptive, predictive, and prescriptive reports can be
prepared which help in minimizing employee attrition/churn rate
➢ Analytics can help businesses get to the bottom of employee turnover rates and identify
severe lapses to improve their retention rate
➢ The indulgence of AI and automation in hiring and virtual onboarding improves the overall
hiring process
➢ The newly adapted exercise of virtual training and upskilling is used to upgrade talent
processes
➢ HR analytics boost employee productivity through detailed performance management,
succession planning, and career development
➢ Data security, transparency, and ease of data accessibility achieved with the help of HR
analytics help in strengthening employee trust
➢ Enhances employee experience by monitoring pain areas, and ultimately improving HR
performance.

Importance of HR analytics in the present era

The importance of HR analytics for organizations in the present year is in three different cases:
1. It can help manage talent in smaller and medium sized businesses so that they can boost
productivity by retaining the gifted and productive employees during a time of crisis.

2. It can assess the difference in productivity between remote, hybrid and onsite work
environments and suggest suitable changes to workplaces.

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3. The importance of diversity to millennials needs no mention. HR Analytics will help
companies satisfy their diversity and inclusion criteria better and more effectively.

Steps to implement HR analytics

Step 1: Data Collection

Collecting and categorizing high-quality data is HR analytics first and most vital step. Basically,
there are two categories of data required for the process. They are as follows:

Internal Data: Employee Tenure, Employee Training Records, Data on high and low performers,
Retention, Engagement, Turnover, Salary and Promotion History, Absenteeism.

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External Data: Organization-wide financial data, Passive data from employees right from the
recruitment stage, Core offerings of the organization, and Historical data.

Step 2: Monitoring the Data and comparing it with Past Performance

The second step is all about continuous assessment and comparison of the obtained data. At this
step, the HR metrics are calculated to measure the effectiveness of the HR initiatives.

The HR metrics considered for the HR Analytics process are showcased below.

Time Training and

Recruitment Engagement & Employee Value and
Tracking Development
Metrics Retention Metrics Performance Metrics
Metrics Metrics

Training
Cost per Hire Retention Rate Absence Rate Company Performance
Completion Rate

Total Turnover Overtime Employee Training Expense

Time to Hire
Rate Hours Performance per Employee

New-Hire Voluntary Absence Rate Revenue per

Time to Completion
Turnover Turnover Rate per Manager Employee

Talent Turnover Training

Headcount Goal Tracking
Rate Effectiveness

Employee Performance and

Demographics
Satisfaction Potential

Time to Retention Rate

Productivity per Manager

Step 3: Analysis

After having assessed, compared, and calculated the HR metrics in the previous step, they can be
analyzed further to identify the impact of HR initiatives and activities on the workforce.

The analytical methods commonly used in this process are as follows:

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 a. HR Descriptive Analytics

This particular type of HR analytics analyzes historical data to understand past happenings. The
insights garnered from this analysis shed light on HR metrics such as turnover rates, employee
engagement scores, recruitment scores, etc, and identifying trends and patterns. It helps HR
professionals gain a clear picture of their workplace’s current scenario.

b. HR Diagnostic analytics

This form of HR analytics is oriented toward determining the cause behind the issues or problems.
To be precise, it focuses on identifying the root causes of HR issues or trends. For instance, if your
company has a high turnover rate, diagnostic analytics will come into play to determine the reasons
or causes behind the high turnover rate. It might result from company policies, poor management,
low satisfaction, or low compensation packages. Figuring out the accurate cause will help you
make and deal with the necessary changes.

c. HR Predictive Analytics

This form of HR analytics uses statistical models and historical data to forecast workforce trends
and outcomes. HR professionals can forecast future turnover rates or recruitment needs through
predictive analytics. It helps organizations to be proactive and take action prior to the occurrence
of the problems.

d. HR Prescriptive Analytics

This form of HR analytics involves using data to prescribe or recommend specific actions to reach
a certain outcome. It is more focused on providing guidance on actions to be undertaken to achieve
desired results. For instance, prescriptive analytics might suggest specific, actionable steps to
reduce turnover or improve employee engagement if the company struggles with them.

Step 4: Utilize the Obtained Data to Bring in Remedial Measures

Once the HR metrics have undergone the analysis step, the analyzed data is further utilized to
make informed decisions. The insights drawn from the analysis help address the issues that hamper

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 the organizational processes and likewise implement remedial measures and improvements in the
HR metrics.

HR analytics and changing role of HR managers

1. Think strategically – HR professionals need to build the practice of thinking in terms of how
various activities can lead to growth of business.

2. Think analytically— For HR practitioners, days of making decisions based on emotions are long
gone. They need to start incorporating analytical substitutes in place of emotion-driven decision-
making frameworks.

3. Marketers -HR professionals need to market job opportunities to the best candidates. Promoting
their company and explaining the benefits and opportunities in each position is very important.
The best candidates have a variety of companies they can choose to work for. The skill of effective
marketing is also important internally for an HR team. HR needs to effectively explain all the
challenges they address, so that their value is immediately apparent to the rest of the company.

4. Designer -Through completing an assessment of the organization’s talent needs, employee

rewards and job tasks and aligning this to the organization’s business strategies, HR professionals
are able to design an effective talent plan for the organization. Designing different work models is
another relatively new role for HR professionals. HR professionals are able to use their expertise
to design different work models to increase value and help employees become more effective.
There are a variety of options and tools that HR can use which may include implementing part
time employees, flexible work hours, work from home, job share arrangements or redefining job
roles and responsibilities.
5. Supply & Demand Experts -Many CEO’s are concerned about talent shortages. HR needs to
know where top talent can be recruited from. Preventing a talent shortage in a specific area requires
anticipating which skills and knowledge set will be needed in their organization in the near future.
Becoming a supply and demand expert is about understanding the market trends in relation to
talent shortages within your industry.

Aligning Human Resources to Business through HR analytics

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 ➢ Data driven Recruitment and Selection – HR analytics allows for analyzing the
effectiveness of different recruitment channels, understanding the characteristics of high
performing employees and identifying the best fit for the organization’s needs. This data
driven approach ensures that recruitment and selection processes are aligned with business
strategies by securing the talent necessary for achieving business goals.
➢ Enhancing employee performance – By analyzing performance data, HR analytics
identifies patterns and predictors of high performance. This enables HR managers to design
targeted performance management interventions, align employee objectives with business
goals and foster a high performance culture that drives business success.

Steps to align HR analytics with business to derive the maximum value

Understanding of the business imperatives: It is critical to identify and understand the key
‘context’ in which the current business is operating. Attain a thorough understanding of
organization’s core objectives and ascertain how HR analytics will help in achieving those
objectives. Knowing what your business needs and where it is heading will give you insights and
will help align analytics better with the business. Always involve the leadership in this initiative,
take their buy-in, consult them and keep them in the loop till the initiative concludes.

Understanding of the data: Once the key business imperatives are identified and understood, it
is important to understand the nature and scope of data to be analyzed. Having raw or unstructured
data will yield nothing, one need to understand the data and the pattern in it. Data literacy is about
looking at data and being able to "ask the right questions and seek the right assistance to
accomplish the goal." One should be able to answer these and many other questions around the
data, like – what is the type of data, when was it updated, where it can be found, how to access it,
is data private or can be used publically, is data complex, qualitative or easily quantifiable etc?

Data literacy can yield many benefits, for instance, a Boston Consulting Group survey of 3,507
participants revealed that top-performing HR offices which focus on data literacy were better
performers, were holding more strategic positions and were making better strategic and investment
decisions.

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Interpreting Analytics: Once the data structure is identified, it is important to know which type
of analysis should be carried out to derive maximum from the data set. Broadly the analytics can
be categorized into three broad categories

1. Descriptive: Simplest class of analytics that allows one to compress big data into smaller,
more useful nuggets of information. The main purpose of descriptive analytics is to use
data aggregation and data mining to provide insight into the past and summarize what has
already happened. Descriptive analytics are useful when one wants to know what is going
on in the organization and when one wants to learn from past behaviors to be able to
influence future outcomes. Common examples include general reports, scorecard, sales,
financials etc.

2. Predictive: This category uses various modeling techniques to predict what might happen
in future. It uses both historic and present data to make predictions. Simulations and
dashboards are commonly used to determine which selections to make from a range of
choices. For example: predicting person’s performance in a new role basis her past records
and performance in simulation.

3. Prescriptive: Prescriptive analytics allows one to “prescribe” a number of different possible

actions and providing advice to reach a solution. This approach predicts both ‘what’ and
‘why’ it will happen and also provide recommendations.

One needs to select the most appropriate analytics considering the demand of the
organization and nature of the data at hand. Furthermore, concerted efforts should be made
to upskill organizational resources to become more analytics savvy.

Design evidence-based interventions: The next step is to design interventions basis predictions
or recommendations made by analytics. For instance, if an analytics hints at surging attrition in
the coming months, organizations can focus more on designing and roll out ‘employee
engagement schemes’. Such evidence-based interventions apart from directly targeting the
business imperative will also be better accepted by the employees. A recent study by Deloitte
suggests that organizations which are using data-driven decisions are deriving better results as
compared to other organizations not using analytics.

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LAMP Framework - Logic, Analytics, Measures, and Process are referred to as LAMP.

The LAMP framework was developed by John Boudreau and his colleague Wayne F.
Cascio who questioned the slow progress of analytics in HR despite the impressive tools and data
available. Organizations utilize the LAMP Framework in HR to comprehend and enhance
employee performance. This framework offers an organized method for gathering, evaluating, and
leveraging employee performance data to inform organizational effectiveness and drive strategic
change.

Organizations may use this framework to develop a measuring system that will aid in
understanding and enhancing employee performance, promoting strategic change, and enhancing
organizational effectiveness.

Logic

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 ➢ This framework element refers to the methodical and logical process of discovering the
pertinent data and metrics required to assess and enhance employee performance.

➢ Make the right connections between talent and strategic success and find the predictors of
individual and organizational behavior.

Analytics

➢ This part of the framework examines the determined data and metrics to gather knowledge
and spot patterns and trends.

➢ Use the right tools and methods to transform data into practical insights that reveal
causation, not just association

Measures

➢ The exact metrics and indicators used to track and evaluate employee performance are
included in this framework section.

➢ Get the right data (accurate and system-generated) for analytics input to ensure your
numbers, and resulting decisions have a solid foundation

Process

➢ This part of the framework refers to how the measuring system is implemented and
managed, including how goals are created, progress is tracked, and decisions are made in
light of the data.

➢ Take the right communication approach in timing, channels, and tactics to share data with
decision-makers and make an impact

Importance of LAMP Framework

In HR analytics, the LAMP Framework is crucial since it aids firms to:

1. Identify the critical aspects that affect employee performance: Organizations may use
the framework to pinpoint the main elements that affect employee performance, including
leadership, attitudes, and motives.

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 2. Measure and track employee performance: Employee performance is measured and
tracked using a framework that offers a systematic method for selecting and monitoring the
metrics used.

3. Analyse data to generate insights: Organizations may uncover patterns and trends to help
them understand and enhance employee performance by studying the data and metrics.

4. Take action to improve performance: To enhance performance, take action. The

framework offers a mechanism for doing so based on the insights drawn from the data,
including defining goals, tracking advancement, and implementing adjustments.

5. Drive strategic change and organizational effectiveness: Boost employee performance,

which in turn may boost corporate energy and strategic change: By utilizing the LAMP
Framework, businesses can raise employee performance.

Benefits of LAMP Framework

1. Better decision-making: The LAMP Framework offers an organized method for

gathering, evaluating, and analyzing data, enabling firms to choose more wisely regarding
hiring, training, and performance management.

2. Enhanced employee performance: Organizations may enhance and boost productivity

by utilizing the framework to recognize and comprehend the elements that affect employee
performance.

3. Better employee retention: Organizations may enhance employee satisfaction and lower
turnover by utilizing data to understand better the elements that affect employee attitudes
and motivations.

4. Enhanced organizational effectiveness: Organizations may drive strategic

transformation and boost organizational effectiveness by utilizing the LAMP Framework
to improve employee performance.

5. Cost savings: Organizations may make adjustments that can save time and money by using
data to pinpoint weak areas.

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 6. Identifying critical areas for improvement: Organizations may prioritize the changes
that will have the most impact by prioritizing the essential regions where improvements
can be made based on data analysis.

7. Identifying patterns and trends: Patterns and trends in employee performance may be
found using the LAMP Framework, which enables firms to forecast future performance
and implement proactive adjustments.

8. Evidence-based decision-making: Organizations may guarantee that judgments are

founded on facts rather than assumptions by employing data and evidence, which can
enhance the decision-making process.

How to Implement the LAMP Framework in HR Analytics?

The stepwise implementation of LAMP framework are as follows:

Step 1 - Determine the primary elements that impact employee performance: Use the LAMP
Framework to pinpoint the critical variables that affect employee performance, such as
management style, employee attitudes, and employee motivation.

Step 2 - Find the pertinent measurements and data: Determine the information and metrics
necessary for tracking and evaluating employee performance.

Step 3 - Data collection and organization: Gather pertinent data and arrange it so it is simple to
examine and decipher.

Step 4 - Analyze the data: You may discover patterns and trends in employee performance by
analyzing the data and using analytics tools.

Step 5 - Set targets and create action plans: To increase employee performance, define goals
and develop action plans based on the insights revealed by the data.

Step 6 - Implement the action plans: To enhance employee performance, implement the
strategies and make any required adjustments.

Step 7 - Monitor progress and make adjustments: To ensure the action plans are successful,
monitor the progress and make any revisions.

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Step 8 - Share the findings: Share the results with the appropriate parties, including management
and staff, to ensure that everyone is aware of the changes and their effects.

Step 9 - Continuous Improvement: Make adjustments to the process after collecting input and
reviewing the outcomes.

Where can the LAMP framework be applied in HR analytics?

Examples of how the LAMP Framework may be used in HR analytics are given below:

1. Recruiting: Organizations may determine the elements that affect the effectiveness of
recruitment efforts by utilizing the LAMP Framework, including the sources of applicants,
the hiring procedure, and the kind of job offers.

The recruiting process may be better with this information, raising the likelihood of
selecting the best individuals.

2. Employee Development: Organizations may pinpoint the elements that affect employee
development, such as training programs, mentoring relationships, and possibilities for
career advancement, by utilizing the LAMP Framework.

The information provided can aid in designing and implementing employee development
programs that are more successful in raising employee performance.

3. Performance Management: Organizations may pinpoint the elements that affect

employee performance, such as work-life balance, motivation, and job satisfaction, by
utilizing the LAMP Framework.

Performance management systems that are more successful in enhancing employee

performance may be designed and implemented using the information provided.

4. Employee Retention: Organizations may discover the elements that affect employee
retention, such as work-life balance, employee engagement, and job satisfaction, by
utilizing the LAMP Framework.

Using the information provided, designing and implementing retention strategies that are
more successful in lowering turnover and keeping top personnel.

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5. Talent Management: Employee engagement, succession planning, and leadership
development are a few examples of the characteristics that firms may identify utilizing the
LAMP Framework for talent management.

Using this knowledge, talent management plans may be created and put into action that
are better at attracting, developing, and keeping elite personnel.

6. Employee Benefits: Organizations may identify the variables that affect employee
benefits, such as employee happiness, engagement, and turnover rate, by utilizing the
LAMP Framework.

With the aid of this knowledge, employee benefit plans can be created and put into action
in a way that will increase employee retention and satisfaction.

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