HR Analytics: The critical success factors in personnel controlling

The shortage of skilled workers will be an even greater concern for companies in Germany in the coming years. Experts predict that there will be a shortage of more than one million skilled workers by 2030. This perspective makes it clear that human resources are a critical factor in any corporate strategy. To achieve a company’s goals, the right employees must be recruited, developed and retained.

Increase the value of HR Analytics within the company

Increased importance for HR Analytics

HR analytics aims to provide quality-assured metrics for fact-based decision-making in order to derive courses of action and effective measures for corporate management. As a strategic corporate function, HR Analytics is becoming increasingly important in the overall company in view of the general conditions. In addition, the steadily increasing amount of available data and the growing integration capability of HR systems are opening up new potential for HR analytics.

What is going wrong with personnel controlling at the moment

Currently, the reality in many companies still looks like this: Distributed systems with heterogeneous master data and processes lead to erroneous reports and data gaps. Due to the inadequate data basis, the reports only offer a limited steering capability. In addition, the comparability of different national companies within a company is made difficult. Overall, high manual efforts are required in the HR department to collect, consolidate and prepare data.

KPIs for corporate management

Effective corporate management is based on key performance indicators (KPIs), which are ideally derived from the corporate strategy. To determine the relevant HR KPIs, companies need to ask themselves the following questions:

• What is my corporate strategy and the HR strategy derived from it?

• What strategic HR goals are we pursuing?

• What key performance indicators do we need to achieve our goals?

The KPIs for HR must fit the corporate strategy. If a company aims to increase profitability, for example in saturated markets with low growth potential, the focus is on developing the existing workforce. Typical key performance indicators are productivity, rate of absenteeism and also employee satisfaction. If, on the other hand, the company is pursuing a growth strategy, the workforce must keep pace with the company’s growth. It is therefore important to find and retain the right employees. In this case, criteria such as fluctuation, reasons for leaving or time-to-hire are the relevant KPIs.

We recommend committing to five to ten HR KPIs that are reported to management and executives on a regular basis. There should be a cyclical review of whether the KPIs and the way they are collected still fit with the company’s objectives, so that any necessary adjustments can be made.

How can the HR organization increase its value contribution?

An efficient HR Analytics target picture includes cascading the corporate and HR strategy through the entire organization. Automated self-service reporting with standardized metrics relieves the burden on the HR department, as managers can retrieve their KPIs themselves. The reports can be provided flexibly in different views and breakdowns as required – provided that the key figures do not change in terms of content. Thanks to the freedom gained, the HR department has the opportunity to develop into a strategic advisory function and, together with the specialist departments, to initiate effective measures with which new employees can be recruited and existing employees can be developed.

In addition, it is important to ensure that content is provided to the various target groups in the appropriate format. For management, an aggregated, goal-oriented view of the entire organization as dashboards is sufficient and should not drill down to individual employees except for the purpose of data validation. For power users such as HR controllers, flexible tools with high usability are required. Mobile scenarios can be established where they make sense. However, they are not a decisive driver for operational business.

An important feature of a powerful HR analytics concept is to create company-wide standards for the presentation of content. Similar formats ensure high recognition and good comparability. This includes, for example, gap analyses according to the IBCS standard. At the same time, any company-wide reporting requirements must be taken into account. High performance ensures acceptance of the HR analytics system.

Conclusion: Recommendations for HR Analytics

The effectiveness of HR Analytics stands and falls with the clear definition, documentation and communication of HR metrics. This includes, among other things, involving managers at an early stage in identifying the relevant KPIs. This allows stakeholders to discuss content rather than how the KPIs are determined. It is equally important to define clear responsibilities with regard to processes, data and KPIs and to strive for continuous optimization of master data quality.

Modern HR analytics tools offer significantly more self-service functionalities than in the past. As a result, it is relatively easy to build up the appropriate expertise for operation in the business department, which reduces dependency on IT. The best way to ensure management acceptance of HR analytics is to obtain a broad picture of the mood in the company at an early stage and to take the relevant needs into account as much as possible.