Business Analytics before

HR Analytics
 Learning Objectives

• To understand the emergence of business analytics as a

discipline
• How to manage a business analytics project
• Pros and cons of business analytics
• Levels of business analytics
Motivation for Studying Business Analytics

• Rising popularity for studying business analytics

• It is an ‘in-thing’ now
• Thanks to cloud storage
• Assures bright career
• Verticalization, and comprehensible models and
transformations
 Emergence of Business Analytics

Timeline Major Contributors

late-1800s Introduction of the first formalized system of business analytics in the USA by Frederick W. Taylor.

Early 1900s Efficiency of assembly line measured in terms of time it takes in manufacturing automobiles by Ford.

1940 Development of a computerized, fully-automated, anti-aircraft fire control system by Kerrison Predictor.

1944 Utilization of Monte Carlo simulation technique to forecast the course of nuclear chain reactions as a part of the
Manhattan Project.
1950 Development of the computerized weather forecast models for the first time.

1956 Operations-based efficiency prediction for transferring logistics in the least possible time. Technology was used to
solve the shortest route problems.

1958 Usage of predictive modelling to assess credit risk by FICO.

1973 The Black–Scholes model for optimal stock options pricing.
1979 The first commercial tool for model-based decision support system (DSS) development.

21st century Big data and the cloud came along, real-time analytics, automated analytic, enterprise resource planning (ERP)
systems, data warehouses.
 Understanding Business Analytics

• A movement
• A collection of practices and technologies
• A transformation process
• A capability set
• Specific activities
• A decisional paradigm
Managing a Business Analytics Project

Executor

Analytics Evaluator
Tech
savvy Project

Manager

Experimenter Commitment
gainer
 Advantages of Business Analytics

• Organizations are increasingly investing heavily in the

information technology.
• Adds value to the organization.
• Provides competitive edge.
• Has strategic implications.
Making the Best Use of Business Analytics

• Speed to insight
• Persuasive use
 Challenges to Business Analysts

• Cycle time
• Analytic time and expertise
• Communicating the analytics results
• Data quality
• Data volume
• Model complexity
• Model usability
 Levels of Analytics Maturity

Optimization and decision analysis

Prescriptive
Simulations and modelling
Competitive analytics
Predictive modelling
advantage
Predictive statistics Predictive
Data mining analytics
Descriptive statistics
Data visualization
Descriptive
Basic reporting
analytics

Level of complexity
HR Analytics
 Learning Objectives

• To understand the scope of HR analytics

• To understand the requisite skills for HR analytics managers
• To understand the different levels of HR analytics
• To gain glimpse into the future of HR analytics
 What HR Analytics Is?

• The application of a methodology and integrated process

for improving the quality of people-related decisions for
the purpose of improving individual and/or organizational
performance.
• Demonstrating the direct impact of people data on
important business outcomes.
• The integration of relevant HR data from different sources,
the performing of organizational and workforce analysis on
this captured data, and ultimately the gleaning of insights
from the findings to shape decisions for better organization
performance.
 What HR Analytics Is Not?

• Not just about efficiency metrics or scorecards.

• HR scorecards do not automatically mean HR analytics.
• Departmental performance is outside the purview of HR
analytics.
• Correlation analysis and benchmarking are not HR
analytics.
Comprehensive Definition of HR Analytics

• A systematic, strategic, and evidence-based approach of

statistically analyzing data to understand the effects of HR
variables on employee, group and/or organizational
outcomes.
 Pitfalls of HR Analytics

• The HR manager or analyst needs to justify their stand.

• HR managers or analysts often make attempts to gather
more data if the results are not as per the expectations.
• Researchers try to augment their objective of contributing
to the already existing theories.
• HR analytics may well be misused in order to convince the
stakeholders on the story ‘the’ powerful or influential
person would like to convey.
 Evolution of HR Analytics
• Its roots can be traced back to 1978 when Jac Fitz-enz called for a
radical, anti-establishment action in HR departments.

• For almost three decades, that is, almost till 2008, Fitz-enz worked
on making the top management understand the importance of
measuring HR activities.

• Almost for about two decades (i.e., from the year 1980 to 1999),
the refining and improving of these benchmarks had been in
progress.

• Since 2000, HR analytics has undergone several developments,

thanks to the technological advancement.
 Adoption of HR Analytics

• Using analytics approach, Dow Chemicals reduced its hiring

cycle from 90 days to 30 days.
• Major firms acquiring one or other talent
management/analytics suites provided by major players
such as Kenexa (IBM), Cornerstone (Xerox), Visier (P&G)
and Taleo (Oracle).
 Compelling Benefits of HR Analytics

• Recognition of HR as a strategic business partner

• Linking HR initiatives with ROI
• Optimal utilization of human resources
• Focus on areas such as talent retention and performance-
based pay
• Enhance credibility and influence of HR with key decision-
makers
Levels of Analysis
Conducting HR Analytics
 Matrix for Decision-making in HR
Positive and significant
(Strategy: leverage)
If the results show that the relationship between HR activity
and outcome is positive and significant, the
recommendation should be to invest increased time and
efforts in such activities.
Negative and significant
(Strategy: depart)
If the results show that the relationship between HR activity
and outcome is negative and significant, the
recommendation should be to drop such activities as soon
as possible and keep a record to not to invest in them again.
Positive and insignificant
(Strategy: minimize)
If the results show that the relationship between HR activity
and outcome is positive but insignificant, the
recommendation should be to invest lesser time and efforts in
such activities.
Negative and insignificant
(Strategy: avoid)
If the results show that the relationship between HR activity
and outcome is negative but insignificant, the
recommendation should be to avoid investing time and efforts
in such activities to the extent possible.
 Who does It?

• HR-accounting analyst, talent analyst, human capital

analyst, and workforce analyst carry out analyses relating
to HR variables.
 Future of HR Analytics

• The next challenge in the future would be to resolve ethical

dilemmas based on the numbers.
• The managers need to ascertain the situations and
conditions in which HR analytics may be used and the
conditions in which it is to be avoided. According to
Rebecca Foreman Janjic (a partner in Heidrick & Struggles’
Menlo Park office and a member of the Global Technology
& Services Practice) and Brad Warga (a principal in the San
Francisco office and a member of the Global Technology &
Services Practice), many companies are yet to utilize
predictive and prescriptive analytics to their full potential.
• The next big thing in HR analytics seems to be
implementing machine learning in HR functions.
 The Scope of Big Data in HR Analytics

• The access to information in terms of both quantity and

speed has become much more than ever before. Given the
benefits of big data, a lot of companies are going beyond
the publicly available platforms such as Google, Facebook
and LinkedIn.
• They are making all efforts to collect data from within their
organizations extensively at the individual, group and
organizational levels.
• These data are no more limited to the traditional measures
such as sales and productivity. They are keeping track of
the changes in the employee behaviors by observing them
on daily basis.
Scope of Text Analytics in HR Analytics
HR Metrics
 Learning Objectives

• A brief overview of key HR metrics

• The difference between lead and lag metrics
• Exercises to understand how to compute HR metrics
 HR Metrics

• Metrics—standards for HR performance.

• Can be classified either under efficiency and effectiveness
measures or under lead and lag measures.
• Lead metrics are also known as process metrics, while the
lag metrics are also known as outcome metrics.
• As the names suggest, the lead metrics are the current
indicators of how efficient the HR processes are and the lag
metrics are the future outcomes of having an efficient
process.
 Differentiating the Two Categories of Metrics
Lead Metrics Lag Metrics
- Initiative to attract new hires - Number of resumes received
- Number of redeployment initiatives - % of benched employees due to overstaffing
- Number of man-days spent in training - Performance rating on skills post training

Efficiency Metrics Effectiveness Metrics

-Number of leader competency - Number of leaders ready for new roles
assessment programs

- % of incentives linked to customer - Revenue per customer share

satisfaction

Process Metrics Outcome Metrics

-Training programs linked to specific skills - Increase in productivity and customer
satisfaction
 Recruitment Metrics

These are metrics which can tell whether the HR department

is doing its job optimally
• Recruiting cost ratio—A metric of recruitment efficiency, it
is calculated as follows:

RCR = [(Total hiring costs/Total compensation cost for period

of onboarding)  Cost of underperformance during initial
period (6 months) of job placement]  100
Recruitment Metrics (Continued)
• Response time (RT) = RD–RR
where RD = Date first a qualified candidate was referred for
interview
RR = Date first a job requisition was received by HR
department
• Time to fill vacancies (TTF) = RR–OD
where OD = Date the offer is accepted
• Job posting response rate (JPR) = A/PJ
where A = No. of applications received at job posting desk, PJ
= No. of posted jobs
• Offer acceptance rate= OA/OE
where OA = Offers accepted; OE = Offers extended
 More HR Metrics

• Job posting response factor (JPRF)= PJR/PJ

where PJR = No. of posted jobs responded to
PJ = No. of posted jobs
• Internal hire rate (IHR) = IA/H
where IA = Total no. of jobs filled by internal applicants
H = Total no. of hires
• Interview time (avg. length of interviews) AIL= HO/I,
where HO = Total hours spent interviewing
I = Total no. of people interviewed
 Training Metrics
Training metrics help in measuring the efficiency of training
and development programmes.
• Training cost factor = [CC  TR  S  RC  TL  TS  PS 
OH]/PT
where CC = Consultant cost
TR = Training facility rent
S = Supplies/stationery
RC = Refreshment cost
TL = Travel and lodging
TS = Trainer’s salary/fees
PS = Participant’s salary
OH = Overhead of training dept/agency
PT = No. of people trained
 EXERCISE—TCF?

• External consultant cost = ₹10,000

• Training facility rental = ₹2,000/day
• Supplies = ₹5,000
• Refreshment = ₹15,000/day
• T&L = ₹ 1,500 per person per night + ₹ 2,000 per person to-
and-fro train fare
• Internal trainer’s salary = ₹200/hr
• Participant’s salary = ₹ 00/hr
• OH = ₹5,000
• PT = 30
• Number of days = 2 days, for 8 hrs each
 Calculate Training ROI

Formulae:
• % training ROI = (Benefits/Cost)  100

• Payback period = Costs/Monthly Benefits

An Exercise
 HR Accounting Measures

• HEVA = (net operating profit after tax-cost of capital)/FTEs

• HCVA = (revenue – (op. expenses-[compensation &

benefits])/FTEs

• HCROI = (revenue – (op. expenses-[compensation &

benefits])/[compensation & benefits]
 Calculate HEVA, HCVA & HCROI

• Revenue = ₹30,000,000
• Operating expenses = ₹80,000,000
• Payroll & benefits = ₹24,000,000
• Contingent costs = ₹3,750,000
• Absence costs = ₹200,000
• Turnover costs = ₹3,600,000
• Full time employees (FTEs) = 600
• Tax = 10% of revenue
 Different Phases of HR Analytics or HR
Predictive Modelling
• We can understand this based on Deloitte maturing model on talent analytics. This
model details the scientific progression from operational reporting through predictive
analytics using four distinct levels.
1. Operational phase involving the task of operational reporting
2. Advanced reporting phase involving multidimensional analysis using dashboards
3. Advanced analytics phase involving proactive identification of problems or decisional
issues
4. Predictive analytics phase involving development of predictive models, such as
scenario plans, risk analysis and so on.
 Strategic HR Metrics
• Employee Turnover Rate: This can be calculated for different time period using formula; (number
of separations during a time period / average number of employees during the time period) x 100.
• Revenue per Employee: This can help in assessing the cost of employee turnover and calculated
using formula; total revenue / total number of employees.
• Yield Ratio: This can help in understanding the importance of various recruitment sources and
calculated based on the percentage of applicants for different recruitment sources.
• Human Capital Cost: This can tell us the investments made in employees in terms of
compensation and benefits and can be measured with the following formula:
Total compensation and benefits cost/Number of full-time employees.
• Depending on the organizational need, couple of other strategic HR metrics such as human
resources to staff ratio, return on investment, promotion rate, female employees’ representation
at the management level, rate of employees’ absenteeism, average age-group of employees’ and
so on can also be considered.
 Important HR Data for HR Analytics
• Some of the important HR data that are commonly required for HR analytics and predictive
modelling of HR decisions are:
1. Demographic data of employees
2. Data on knowledge, skill and competencies
3. Training-related data
4. Data on employee engagement
5. Performance-related data
6. Compensation- and benefits-related data
7. Data on customer satisfaction
8. Data on employee attrition or turnover
• We run our predictive models making use of such data sets to arrive at decisions that are
likely to be less flawed and risky.
Data and Information for HR Predictive Analysis
• Data availability largely depends on the nature of organization. Many organizations do not recognize the strategic and
business roles of human resources.
• By linking data sources and thinking broadly across the whole organization, we are able to model organizational patterns of
behavior and link HR and people management practices directly with revenue and efficiency.
• To link and analyze the information available with ease, we need to use a statistical analysis package, of which there are
many available on the market.
• In the following table, we are illustrating some of the possible information/data sources, nature and examples of such
information.
Information/Data Source Description Example
HR Database. Commonly used HR databases are Information on all HR activities and also personal details All demographic data, performance ratings, job role, compensation and benefits, attendance,
SAP or Oracle. about the employees. leave information, health status, training and so on.

Employee survey data. Time to time organization All information based on survey responses received from
conducts survey to measure employees’ attitude, employees on various issues. Common employees’ All survey data or information on employees’ attitude, engagement level, motivation and job
motivation level, satisfaction level, response to survey can be attitude survey or employee engagement satisfaction level, employees’ perceptions on workplace equity and so on.
change and so on. survey and so on.

All information on customers’ preferences in alignment

with the employees’ profile, operation, service delivery,
Customer survey data. sensitivity to customers’ needs and so on. These data All customer ratings data pertaining to customer services, data on customer satisfaction,
and information can benefit organization in bringing customer preferences and so on.
change in customer services and processes, employees’
behavior and skills and so on.
Software Solutions for HR Analytics
• Some the known software solutions available in the market
are:
1. SPSS
2. Minitab
3. Stata
4. SAS
5. R
6. JASP

• Almost all software solutions have common features and are

capable to perform HR analytics jobs along with predictive
decision modelling.
Predictive Analytics Tools and Techniques
• Predictive analytics extract information from raw data and make use of the same to predict the future pattern of behavior or
trends for getting better insights to HR decision-making.
• Broadly predictive analytics tools are divided in to regression techniques and machine learning.
• Regression analysis helps us in estimating relationships among different variables. For predictive analytics following types of
regression analysis can be of use:
1. Linear regression: This helps in modelling relationships between a dependent variable (Y) and one or more explanatory
variable (X).
2. Discrete choice models: Using these we can describe, explain and predict our choices between two or more discrete
alternatives.
3. Logistic regression: This helps us to predict outcome of a categorical or dependent variable.
4. Multinomial logistic regression: This regression model can generalize two outcome (dependent) variables with the linear
combination of the predictor (independent) variables.
5. Probit regression: This regression model helps to study a problem when outcome or dependent variable can only take two
values, say yes/no.
6. Neural network: This denotes enhancing computer capabilities configuring it with required hardware and software, so that
like human neurons in human brain, it can solve complex signaling and pattern recognition problems.
7. Decision tree and scenario analysis: A decision tree helps in understanding multiple decision alternatives. Scenario analysis
helps us to understand the expected outcome of a decision in different situations.
Excel Basics for HRA
 Learning Objectives

• To refresh few Excel basics

• Explore possibility of using MS Excel for creating HR
dashboards
• A brief orientation of pivot tables and pivot charts
 Refreshing Excel Basics

• Cell Range: An array of cells; a group of adjacent cells

• Example: (B3:C12) includes all of the cells from B3 through
C12
• Cell ranges can be fixed by typing $ (F4)
 Name Range

• A shortcut to reduce the issue of selecting cell ranges again

and again
Steps:
1. Select data
2. Go to FORMULAS tab
3. Click on create from selection
4. Select top row (deselect everything else)
5. Check name manager to see whether name ranges have
been created
 Functions

Built-in formulas
Formulas and Functions begin with =
Use the Formulas menu, fx on the formulas bar, or
AUTOSUM arrow
Example of a function:
◦ =AVERAGE(B13:D13)
◦ Use a range of cells (B13:D13)
◦ Colon means Excel will average cells B13 through D13
 Some Common Functions

• SUM
‒ Calculates the sum of a range of cells
• COUNT
‒ Calculates the number of values in a range of cells
• AVERAGE
‒ Calculates the average of values in a range of cells
 The SUMIF Function

• SUMIF function is used to sum the values in a range that

meet criteria that you specify.
• Syntax:
SUMIF(range, criteria, [sum_range])
where range = array for which the sum is calculated,
• criteria = the if condition which is to be followed while
selecting cases from the specified array
• Sum_range = the array corresponding to the range array
whose values need to be summed up
 The COUNTIF Function

• Calculates the number of cells in a range that match

specified criteria.
• Sometimes referred to as a conditional count
• Syntax:

where range = array for which the counting is to be

done
• Criteria = the if condition which is to be followed
while selecting cases from the specified array
 The AVERAGEIF Function

• Similar to SUMIF function

• Calculates the average of values in a range that meet
criteria you specify
• Syntax:
 Form Controls

• Enable DEVELOPER tab

• Click on DEVELOPER tab
• Click insert
• Select list box/combo box
• Draw the box
• Right click on the box
• Click format control
• Provide input range using any name range of interest
• Provide cell link to connect master data with new
spreadsheet
 INDEX: Applications for form controls

• The INDEX function returns a value or the reference to a

value from within a form control box
• Syntax: INDEX(name range, cell link)
• Where name range = same name range selected for list
box/combo box
• Cell link = same cell link selected for list box/combo box
 LOOKUP Functions

‒ Allow you to use tables of data to ‘lookup’ values and

insert them in another worksheet location.
• Lookup tables
‒ Store data and organize it into categories (compare
values)
‒ Can be constructed as either exact match or
approximate match lookups
Using the VLOOKUP Function to Find an Exact
Match
• Searches vertically down the first column of the lookup
table.
• Syntax:
VLOOKUP (lookup_value, table_array, col_ index_ num, [range lookup])
where
• Lookup value: starting point of data search
• Table array: Range of data from where the search happens
• Column index no. : Relative order of column in the data
range from where data is looked up
• (Range lookup): true/false—signifies whether the lookup
search type is exact or approximate
Looking Up Values Using the HLOOKUP
Function
• Searches horizontally across top row of lookup table and
retrieves the value in the column you specify.
• Use when comparison values are located in the first row of
the lookup table and you want to look down a specified
number of rows to find the data to enter in another cell.
• Syntax:
A Sample Dashboard Made in Excel
Pivot tables and
charts
 Learning Objectives

• To understand the concept of slicing and dicing

• To get an overview of pivot tables and pivot charts
• To understand the applications of slicers in creating
interactive dashboards
Slicing and dicing
 ‘&’ Function

• Useful for joining cells

• Example: A1&B1&C1&D1&E1&F1&G1
 DATEDIF Function

• Years: =DATEDIF(F3,TODAY(),‘y’)
• Months: =DATEDIF(F3,TODAY(),‘ym’)
• Days: =DATEDIF(F3,TODAY(),‘md’)
 Pivot Tables

A cross-tabulation feature in MS Excel

Steps:
1. Click INSERT Tab
2. Click PIVOT Table in the tables group
3. When the create Pivot Table dialog box appears, choose
Select a Table or Range
4. Enter the data range in the table/range box
5. Select New Worksheet as the location
Pivot Table Field List
Design Options in Pivot Tables
Option to Remove Subtotals
Tabular Form Representation of Data
 Slicers

• Slicers are an integral feature of pivot tables in Excel 2010

and beyond, not available with Excel 2007.
• Previously, slicers were only available for pivot table data.
• Now slicers can also filter data in Excel tables, query tables
and other data tables.
• Slicers show the current filter so you’ll know exactly what
data you’re looking at.
AN EXAMPLE OF A SLICER
Sample Dashboard Using Pivot Tables and
Slicers
Understanding Future Human Resources
• In future, HR analytics can substantially do many HR jobs thus relieving HR managers from drudgeries of
lengthy work processes.

• All these would be substantial time-savers, thus, leaving ample time for HR managers to focus on
employee development and many other strategic and business functions.

• With the increased spread of digital work environment, HR managers in future are likely to face the
challenge of acute talent attrition, and in the process, talent attraction, development and retention would
become more challenging jobs, which may substantially pre-occupy them.
 Generic Future Human Resources Skill Sets
and Knowledge
• We can list some common skills that are essentially required for future HR managers. These are shown in the following
figure:
Future Skills of HR Managers
Statistics Programming

HR Analytics

Business & HR Data

Management Visualization
 Ethical issues in HR Analytics

• For HR analytics, employees’ data are used for modelling HR decision-making

process extensively and even at times violating the ethical norms.

• Best practice is to take employees’ consent for making use of their personal
data and information for decision-making. Operationally, it may not be always
feasible.
 CIPD Guidelines
• CIPD ethical guidelines are in general for HR professionals. However adhering to these guidelines can ensure
compliance with the ethical issues pertaining to usage of employees’ data also.
• CIPD emphasizes the need to:
1. Establish, maintain and develop business relationships based on confidence, trust and respect.
2. Exhibit and defend professional and personal integrity and honesty at all times.
3. Demonstrate sensitivity for the customs, practices, culture and personal beliefs of others.
4. Advance employment and business practices that promote equality of opportunity, diversity and inclusion, and
support human rights and dignity.
5. Safeguard all confidential, commercially sensitive and personal data acquired as a result of business relationships and
not use it for personal advantage or the benefit or detriment of third parties.
• More specific form of human resources `analyst ethical standards’ based on Schwartz (2011) can be listed as follows:
1. Compliance with the legal, cultural and social norms.
2. Safeguard against interest of all stakeholders.
3. Accountability for the HR analytics process.
4. Safeguard against the security of information.
5. Concern for information sensitivity.