Analyst Perspectives

The market for human capital analytics is in flux, as companies begin to evaluate and adopt more capable tools and processes for this area of human capital management. A look at the tools organizations are using and plan to use for human capital analytics provides an example of this change. Our recently published benchmark research on human capital analytics shows that nearly nine in 10 (87%) organizations are still using spreadsheets for human capital analytics while fewer than two in five (37%) presently use a dedicated human capital analytics tool. However, it also shows the market’s greatest growth yet, as more than two in five (43%) organizations said they will implement dedicated tools in the future. And organizations are recognizing the imperative of making such an investment: Two-thirds of those in our research consider human capital analytics important or very important.

While much has evolved in workforce analytics since our last research, many of the core reasons organizations are choosing to invest in human capital analytics systems are the same. The top reasons are demand for higher productivity, according to three in five participants (63%), and lack of an analytical process, cited by more than two in five (41%). However, some expectations are different today, as several next-generation technologies become important. For example, a full two-thirds of organizations now use mobile technology to access human capital analytics, and organizations see collaboration and big data as important in efforts to improve their human capital analytics applications.

In contrast to their interest in newer technology, users of human capital analytics are still focused on fundamental capabilities: They want their tools to produce actionable information and be easy to use. In our benchmark research, nearly four out of five (78%) participants said taking action based on outcomes is an important or very important capability for a human capital analytics system. And while many analytics systems can provide extremely complex representations of information, it is important to remember that the goal is to take action and save time, not just provide more data. Not surprisingly, the second-most sought-after capability is for a system to enable users to design metrics and measures easily. More generally, we correlate the desire for these specific capabilities with the most organizations (92%) citing usability as an important or very important product selection criterion.

Equally interesting when we look at the shortcomings organizations reported in human capital analytics systems, we find a need to make investments in time, people and systems to gain the most benefits. More than half (51%) of participants are not satisfied with their human capital analytics process. The leading reasons for this are that they lack readily accessible data and enough skilled people to manage the systems. Combine this with the finding that among the 87 percent of companies using spreadsheets for  human capital analytics, three in five (59%) said spreadsheets make it difficult to produce accurate and timely analytics. We  conclude that to achieve the kinds of benefits and key capabilities desired from human capital analytics organizations should adopt new technologies. To meet the requirements of next-generation applications, decision-makers in HR and IT should plan for enough time and resources to get the results they need.

The research shows that when businesses make the right investments, they gain benefits from the use of human capital analytics. Specifically three in five (61%) participants said that human capital analytics has helped improve efficiency and productivity, and more than half (52%) reported better retention and engagement of employees. These and other benefits show that actionable, easy-to-use approaches make human capital analytics more valuable for executives and managers, enabling them to make better decisions.

When we look at how organizations are using human capital analytics to gain these benefits, several important trends emerge, including a focus on talent management analytics. Nearly three-fourths of organizations (74%) said this is critical to their efforts, followed by core HR analytics (54%) and workforce management analytics (52%). Among specific analytics those being used most are in talent management: Two in five use performance modeling, one-third use leadership effectiveness, 31 percent use return on human capital, and more than one-quarter (28%) use tenure. This shows us that organizations are working to balance the needs to improve employee performance and to retain those who could have opportunities elsewhere.

Overall human capital analytics is becoming more important and more effective as businesses become adept at using these tools in decision-making processes. Organizations are going from tracking a few basic metrics to more sophisticated tracking of higher value metrics spanning the range of human capital management (HCM). This is happening in the best-performing organizations, which our research shows make up roughly half of the market. Further, leading organizations are striving to bring together HCM data and data from financial, sales and customer-related systems to track the business impact of HCM decisions on the bottom line. This will further enhance the benefits already achieved from human capital analytics systems, including improved productivity and better alignment, as companies can see evidence of impacts from their investments in people on specific parts of the business. Finally, we anticipate that big data will play an important role in human capital analytics. I’ve already written about how big data is brewing in HCM, but only some application areas – like recruiting, where there is a well-defined model and data set – are showing immediate success. We believe that human capital analytics is going to become a staple of human capital management. It has proved its value in business, and to be competitive organizations should make investments in it now. Otherwise, they will be at a disadvantage in the market and risk losing their best talent by mismanaging their largest competitive differentiator: their people.

Regards,

Ventana Research