How Can Companies Use HR Analytics for Competitive Advantage

One of the most important aspects of the modern HR is analytics. HR analytics has grown in importance and relevance – the problem is that many organisation still lack effective implementation of HR analytics. This can be detrimental as HR analytics can offer a big competitive advantage to many companies.

For a small business, the excuse is often the lack of resources such as time and money. This is simply an excuse in the modern world because HR analytics is not impossible. In fact, modern HRM software has made it possible for even small firms to gain competitive advantage and gain the benefits of using these analytical tools.

Here are tips to ensure your company utilises HR analytics and gains a competitive advantage over its competitors.


Understand the meaning and purpose of HR analytics

The first thing to get right is about your understanding of HR analytics. The problem for many is the incorrect application of analytics because it is simply misunderstood. HR analytics is confused with HR metrics, making it impossible to utilise it correctly.


What does HR analytics entail then what is its real purpose? HR analytics are always looking at the current situation but utilising the present information to predict the future. Unlike HR metrics that just focus on the present and the past, the main purpose of HR analytics is to see what will happen in the future of the business.


Therefore, HR analytics aren’t just a tool to use to create short-term strategies or to adjust problems in the current business conditions. Instead, HR analytics should be used to look at long-term objectives and strategies. They can be used to create a broader outlook and direct the company into any specific direction the data is telling it to go.


When you’re just using HR metrics, you are simply correcting and reinforcing procedures and policies that work. With HR analytics, you are creating and innovating strategies based on different predictive models.


Understanding this difference is key to unleashing the competitive advantage of HR analytics. It’s not to say HR metrics aren’t important but that the two concepts have different meaning and purpose.


Pick your HR analytics approach

When it comes to implementing actual HR analytics, your company needs to use a specific approach. According to the specialists, there are broadly three ways of thinking about HR analytics.


Allowing organic evolution

Organic evolution of the use of HR analytics is, as the name suggests, organic in nature and it’s not generally an approach your company chooses but rather it just happens. The conditions for nurturing this type of organic HR analytics requires proper implementation of HR metrics. As more HR functions start utilising the information in these metrics, the system begins to start analysing and utilising the information more. This will eventually lead to HR analytics style use of data.


When organic evolution happens, processes and technology are in use together. Business units not only utilise HRM software but also adopt policies that consider insights important. The organic appreciation of analytics can begin at the HR department and spill to other departments of vice versa.


Adopting technology-focused view

A more effective approach to adopt is the use of a technology-focused approach. This starts by the HR department taking advantage of HRM software. Modern HRM software typically follows the view that data is at the core of good HR functionality, with multiple software solutions collecting vast amounts of data and utilising it with inbuilt analytics tools.


Examples of this type of approach include the use of cloud-based, integrated HRM software. This could be in terms of payroll management, onboarding systems, or insurance and benefits management. The key is utilising technology first and relying on it to provide the right level of analytics.


Following the business model

The third model companies tend to adopt is about following the business model. For this model to work, the business model itself has to be a labour or knowledge capital driven, meaning that it relies heavily on having the right kind of people working within it. The HR department can’t afford mistakes in the hiring process and so the company adopts HR analytics models that support the right hire.


Focus here is on finding technologies that make the management of the core business easier. Focus remains on hiring and retaining talent. Data is already plentiful in these core fields and thus it is just deepened with HR analytics.


Creating a hybrid approach

However, there is a fourth approach to consider and this is the most effective for any business to use. This simply means that companies combine the above three strategies and starts implementing effective HR analytics through the right use of technology, process, capability, and best practice. Instead of trying to solve a wider business problem or issue, the hybrid approach focuses on narrow business issues like workforce deployment or recruitment of skills. This can be helpful because it shows clearly the value of HR analytics rather than creating a confused look of the benefits.


Launch your plan

There are essentially seven steps to data success in terms of HR analytics. These were developed by Alexis Fink and outlined in this article on the topic. According to Fink, the plan to proper HR analytics is to:


  • Ask the correct questions.
  • Identify methods to answer those questions.
  • Generate data to back up your answers.
  • Analyse the data.
  • Create analysis and insights based on the data analysis.
  • Take meaningful action based on your insights.
  • Measure results to see if actions are effective.


By following and implementing this plan together with the above strategies, companies can gain competitive advantage with the use of HR analytics.


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