An Introduction to Human Capital Analytics (and How It Can Benefit Your Organization)
The war for talent is fiercer than ever. Developments in digital communications and cloud computing technologies are creating a business world that is increasingly globalized. You, your executives, and your human resources department can no longer rely on gut instincts or historical trends to drive decision making about recruiting and talent management.
Rather, in order to position your firm for continued growth and success, you need to leverage human capital analytics, a field that allows you to utilize the massive amounts of available data about employees and economic trends to make better decisions about your organization’s most important resource: human capital.
Start with this introduction to human capital analytics. We’ll cover what it is (including the different types of analytics available), and show you how you can start using it to improve your management and recruiting decisions.
Understanding Data Analytics
With its emphasis on buzzwords like "big data", and requiring the use of intimidating computer models, data analytics can seem mystical. But the reality is different: data analytics is the practice of translating large machine-readable data sets into a format that is comprehensible by laypeople. Ultimately, data analytics offers your firm the opportunity to make better, more careful, and more precise decisions and predictions.
For example, you can use data analytics to understand how a macroeconomic trend such as a country’s GDP will affect the required compensation for potential recruits in a new market, or whether it’s a good idea to open a particular operational branch in that country to begin with.
Before we can talk about applying analytics, we need to clarify what kind we’re discussing. Specifically, we need to understand the difference between descriptive and predictive analytics.
Descriptive vs. Predictive Analytics
Data scientists and analytics teams will often talk about whether a particular analytics approach is descriptive or predictive. What do they mean when they use these terms?
Descriptive analytics do what their name implies: they describe particular trends in data. For example, you can use a descriptive analytics dashboard to display your organization’s monthly revenue growth, current rate of employee turnover, or median employee salary. Descriptive analytics are useful for giving you a quick glimpse at your current organizational health, but they can’t do much more than that.
Predictive analytics, in contrast, go beyond describing what’s currently happening (or what has happened in the past) and attempt to make predictions about the future. To be clear, predictive analytics cannot tell you what will happen. This method can only use statistical models and trends in existing data to help you prepare for the most likely future scenarios. For example, you might use predictive analytics software to help you estimate how many people you should hire in the coming year, or what the outcome would be of entering into a new market.
Applying Analytics to Human Capital Management
Now that you have a working understanding of analytics, we can turn to human capital analytics in particular. Human capital analytics give you a data-driven approach to the management of human capital. Instead of just guessing which departments will require more personnel as your company grows, you can make informed predictions based on data.
For HR, CEOs, and senior executives across your organization, human capital analytics can be revolutionary. Working with the right data team and software, you can make informed decisions that would have been prohibitively expensive (or even unimaginable) just ten or twenty years ago.
Furthermore, advancements in HR analytics technology also make it possible to make business decisions much more quickly than they were in the past. Many human capital analytics dashboards can show you real time data about your company, meaning that you can make key talent and performance management decisions before you need them, instead of when it’s too late.
You can then create a business strategy that will give you a competitive advantage in a world of globalization, rapid technological change, and workforce planning challenges that human resources experts never could have predicted.
Manage Your Existing Human Capital
Human capital analytics can give you key insights into your company’s recruiting needs, but what steps do you take to fill those positions? While it’s natural to look outwards, you should also consider looking at your best potential candidates: people who have already chosen to work for you.
This is where Twine Labs can help. We’ve developed an internal company network that you can use to match current employees with open positions, saving you time and money in recruiting, all while boosting employee retention. Schedule a demo call to learn more.