According to Oxford Research, in the UK, the average cost of replacing an employee is in excess of £30,000. Add to those high costs the loss of hard-to-replace skills and talents, and it’s easy to see why employee retention is one of the major challenges facing HR leaders in 2016.

And, as we further progress into the digital age, where millennials’ long-term commitment to their employers has been called into question by a number of sources, many organisations are looking to the next wave of HR transformation to deal with this challenge.

Agile and efficient

HR has done a good job with the first wave of transformation, including using cloud technologies to drive down costs and make processes more agile and efficient.

The next challenge for HR is to demonstrate how empowering all users with relevant data analysis can add strategic value to the broader business. One of the fundamental components of this next wave is the use of HR analytics to identify things such as top performing employees and understanding areas of the business with poor people retention.

Having the hard data to back up traditional ‘gut feeling’ is central to HR being recognised as a more strategic business partner.

Are you utilising anlytics effectively?

However, despite the obvious potential, many HR organisations are not fully utilising these capabilities.

A recent report from the Chartered Institute of Personal Development (CIPD) and Workday found that while 92% of HR leaders in the UK have some form of analytics programme in place, only 7% are using predictive analytics to inform HR and business strategy.

This disconnect was highlighted by Josh Bersin, Principal at Bersin by Deloitte, in a recent webinar. Bersin said many HR leaders become frustrated by the lack of business credit received during the stage of data cleaning and collection for analytics projects, which limits progression to more advanced, predictive HR analytics programmes.

Business-critical or a nice-to-have

Bersin also believes that many HR leaders have not viewed analytics as business critical and have put these initiatives off. However, due to the timescales involved in gathering data to analyse, the sooner HR adopts analytics, the sooner they can uncover business insights.

The harsh reality is that analytics do drive competitive advantage across areas, such as training, hiring and people development. If you don’t do it, you’re at a disadvantage to competitors who will.

But for those HR leaders who get to what Bersin describes as the “choke point,” where they are confident in their data, the benefits of HR analytics are potentially enormous.

Citing global research, Bersin believes that HR analytics leaders can be up to 2.5X more effective than those not deploying analysis tools.

The success of such programmes has created a thirst among HR leaders for deeper analytical insights, using data which can be hugely useful in identifying patterns and trends around areas, such as talent retention. As part of this next phase, managers within any organisation are looking to answer questions, including:

• Which of my top performers might leave in the next year and what’s the cost to replace them?
• Which job functions or departments are at higher risk?

This is where analytics can help.

While big data and analytics have been industry buzzwords for some time, it’s only recently that their true potential value to HR is beginning to be seen in practice.

One reason is that these capabilities are being built right into core HR systems and don’t require analytics expertise, making them accessible, and more importantly, actionable across the wider business.

Visualising value

Another major challenge facing HR is actually visualising the true value of analytics and which real-world problems they can help them overcome.

Communicating their potential benefits is crucial in making the case to the rest of the business that investments in HR analytics technology can benefit the entire organisation.

Below we look at two specific examples of how analytics are helping HR leaders think about performance management and use the hard data to become a better business partner:

Discovering the real indicators of performance

When searching for high-potential employees and future business leaders, it’s not surprising that how employees performed at school or university has been one of the key benchmarks for HR.

Yet, some organisations have discovered with the help of HR analytics that the relationship between pedigree and performance is of lesser importance when identifying future high performers, according to Bersin.

He cites the example of a company that found, perhaps surprisingly, that the quality of employees’ CVs (looking at things such as number of errors) and their experience of working in related industries were more important than academic performance in determining future success.

While academic achievement should not be discounted, analytics can reveal underlying factors that are really driving performance and help HR and the business make the right decisions.

Personality, popcorn and performance

In the Bersin webinar on people analytics, in addition to detailing the business value of analytics, he also gave examples of non-intuitive insights that analytics can enable:

• Do happy people make better sales people?
• Are attractive employees better performers?

Dangerous territory for HR leaders, although, based on HR analytics from one major cinema chain, employee happiness is a key trait for driving sales.

It may sound very obvious that a happy employee may sell more popcorn, but having the hard numbers can empower HR to advise the business on where training and development should be focused.

Similarly, one major beauty products provider, in an industry where aesthetics play a key role, analytics revealed that the best sales performers were actually those with the highest IQ, and that customers gravitated to those with a better understanding of the products.

A real case of brains over beauty.

While no analytics model can be 100% perfect, placing science ahead of guesswork will give HR leaders the ability to get it right more often than not.

Understanding factors such as the attributes of someone who is likely to stay with a company, how different hourly shift patterns impact employee retention rates, or why certain line managers have more sick employees than others can be hugely valuable sources of information that can be used to drive better business decisions.

These insights alone can help HR lead the organisation make smarter people decisions and become a better partner for the wider business.