Traditionally, HR has been a high-risk field based largely on soft science.
While an interviewee might seem like the ideal candidate, you won’t know for sure if they’re a good fit until you hire them. Similarly, when looking at existing employees, it can be challenging to gauge variables like their level of satisfaction or their likelihood of leaving.
While there are many tools that help HR managers assess these vulnerabilities, few of these tools leverage advanced data and analytics to foretell what’s to come. In other words, these tools lack the capability of predictive analytics.
Today, we’re taking a closer look at how predictive HR analytics works, and how it’s changing the world of HR for the better.
The Basics of Predictive Analytics
At its core, predictive analytics is a type of intelligent system that learns from existing data. It does so by using advanced data mining techniques that analyze and compare historical data and related outcomes.
Over time, the system becomes smart enough to predict what will happen next based on what’s happened in the past. It can do so on an increasingly granular level, with the capacity to analyze and predict behavior on an individual basis.
Predictive analytics is transforming a variety of industries when it comes to human resources, customer relationship management, and more.
While predictive analytics has a variety of uses, the focus today is on HR, so let’s dive into that.
Put simply, predictive analytics allows HR teams to use data to make better-informed decisions, such as determining who to hire. It also provides visibility into employee sentiments and behaviors, so HR can predict outcomes like employee turnover.
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The Role of Big Data in HR
Left unstructured, the volume of people-based data can easily overwhelm even the most competent team. For this reason, many organizations choose to invest in enterprise software, like human resources information systems (HRIS).
Like an ERP system, an HRIS receives, organizes, and manages data in one centralized location. While this is an excellent advantage, many of these systems lack the capacity to analyze large amounts of data, leaving HR managers grappling with how to make sense of the insights.
By applying predictive HR analytics to those same datasets, companies can forecast the effects that their policies and procedures will have in the workplace.
Otherwise, they’d rely on soft science and hunches to guess how those strategies affect employee performance and overall satisfaction.
While these technologies can be cost-prohibitive for many companies, early adopters have shown that the benefits of analytics in HR are measurable and worth the investment.
Examples of Predictive HR Analytics in Action
1. Predicting (and Preventing) Employee Turnover
Turnover can stall projects, skyrocket costs, and lower productivity. Employees do more than just leave a company. They also take with them specialized knowledge.
Understandably, companies want their turnover rate to be as low as possible.
With predictive HR analytics, some business leaders are developing models that can help them predict an employee’s projected flight risk. Not only do these forecasts shed light on which employees may leave, but they surmise the “why” behind their departure.
2. Automating and Optimizing the HR Hiring Process
Predictive analytics can also improve the hiring process. With these tools, companies can automate much of the interview process through auto-generated questions.
Then, they can analyze answers for key trends and patterns that indicate long-term success.
Additionally, some companies are applying analytics to review the Facebook profiles of potential candidates. Though it’s still in the early stages, this technology can automatically analyze someone’s personality and potential work performance based on certain profile elements.
3. Improving Employee Engagement
Engaged employees are more productive, focused, and happy. Yet, how much do companies truly know about the level of employee engagement?
Predictive analytics tools can help companies measure this engagement and gauge its impact on sales and productivity levels.
Integrating Analytics With ERP
For companies that already have ERP software in place, predictive HR analytics can help users mine workforce data for greater, enterprise-wide connections and correlations.
The key is ensuring that predictive analytics is fully integrated with cross-functional data, including financial and operational inputs.
This integration can help users understand how hiring and retention relate to sales and company growth. It can also help HR teams improve visibility into hiring plans, which can optimize the employee onboarding process.
The Future of Predictive HR Analytics
As the world of human resources continues to change, the future of predictive HR analytics is promising. Moving forward, we can expect that this technology will become smarter, easier to integrate, and more cost-effective.
Future-focused HR managers can employ this technology to attract new candidates, make informed hiring decisions, predict career longevity, and increase employee retention.
Our ERP consulting company can help you understand what systems can support your HR function and help you achieve your HR goals. In addition, our team can prepare you for common digital transformation challenges. Contact us below for a free consultation.
