KPI Analysis to Revalue HR Departments’ Importance

While human resource (HR) professionals are not traditionally data analysts, the digitalization of their departments increasingly calls for the ability to make data-informed talent decisions so they can reaffirm their value-added to the business. 

This is a relatively new challenge for HR leaders, though a crucial differentiator in a digital-first economy. To this end, HR leaders are now tasked with establishing relevant key performance indicators (KPIs) and an analysis framework so they can follow, assess and determine the effectiveness of talent programs to inform future talent development initiatives. However, because HR analytics is relatively new, industry leaders suggest companies stop focusing on recruitment alone and foster a broader perspective. Here, data analytics can play a major role to ensure that CHROs set up a system that will generate the data necessary to provide the added-value company leaders are looking for. 

Eduardo Asaf, Leading Partner Talent and Organization, McKinsey, said HR departments are commonly underappreciated since they are perceived to be focused only on recruitment. Nevertheless, HR also involves duties like onboarding, development and retention, which are essential for companies and must be backed by measurable metrics. “Organizations more active with HR data analytics see strong results, including being twice as likely to improve their recruiting and leadership pipeline, three times as likely to realize cost or efficiency gains and 3.5 times as likely to get the right people in the right jobs,” reported Korn Ferry insights.

Despite the potential benefits of HR data analytics, many organizations are still in the early stages of developing their capabilities in this area. This could be explained by the fact that companies do not perceive HR departments as strategic destinations for investment. Juliana Felix, Talent and Learning Consultant, LinkedIn, said HR departments have the tools and potential to show their real value and KPIs can play an important role in value creation. “Three main metrics that help in having more investment in talent are recruitment time, quality and retention. However, as HR, we must properly measure these metrics to show the true value HR departments bring to the organization,” she added.

HR data analytics capabilities vary in sophistication, from basic HR information systems (HRIS) to advanced departments offering world-class predictive modeling that incorporates social media, according to Korn Ferry. Historically, however, most organizations approach workforce planning as an annual exercise focused on cost, with little insight into whether employees can achieve their performance and revenue goals. Overall, HR departments face significant challenges in gathering and analyzing critical information to benefit their organizations including rigorous HR data analysis, inaccurate information scattered across the company, absent analytic skills among HR staff and inadequate investment in technology.

However, since personnel management is not only limited to HR departments, Alejandra Rodríguez, CHRO, Bocar Group RHR directives, believes CHROs must identify KPIs that are also important for other areas like rotation, talent availability and personnel replacement plans, among others. By identifying these factors, HR departments can identify actions that are aligned with the company’s objectives, and if they are not aligned, they can stop them before they spiral out of hand.

The main challenge in the use of data obtained by KPI tools is that not all the information should be spread throughout the company. What is more, measuring specific data may lead to information that is difficult to interpret. “We must maintain KPI models as simple as possible and identify the objectives that can align with the directives' goals. Additionally, we should not implement the same KPIs on all levels; it should depend on the interests of each area. Doing this can help us trace a route to follow in each of the company's areas,” said Lauren Burdick, Head of People and IT, Nuvocargo.