Increase ROI on Human Capital using People Analytics

By Smita Kumari |Email | May 21, 2018 | 7101 Views

The transformational shift in HR functions from routine matter to strategic function has changed the role of HR manager from supporter to strategic adviser or business partner. With this shift, companies have understood that human resource is central resource. 

The treatment has changed towards employees. Now, company believes that employees are capital not liabilities for the organization, the investment on which will yield a return to the bottom line of organization. Researchers have proved that there is direct connectivity in the productivity and HR practices.

With the increasing complexity, organizations are becoming ore value driven using data driven approach. The organization strive to add value at each stage of business process and each function.

To add value in HR function, many organizations are using HR Information System to gather data on different HR practices. Using these data, people analytics can measure return on investment on human capital and add more value to the bottom line.

How People Analytics can increase ROI on Human Capital

  • Integration of HR function with Information system

To use people analytics to measure return on investment, the foremost thing is to integrate each HR practice with HR Information System. Gather all the data related to recruitment, selection procedure, orientation, training, development, performance evaluation and the retirement. Company need to keep track on cost incurred on these and value added in return.

  • Identify problem areas

Once the data is gathered, HR manager needs to visualize and critically evaluate the data to identify key problem areas and the available opportunities that can result into value creation. This require HR leaders to involver key partners with them. HR manager needs to consult with other line managers to identify problem areas, prioritize issues and the value driven opportunities. These all efforts will improve the efficiency of Talent Management.

  • Develop Analytical Model

Based on the data gathered and after the discussion with other partners, HR need to build analytical model. The model will establish the relationship with different elements and then analyze the impact on the bottom line. For example, link between training of employees and productivity of the organization, cost of recruitment and intellectual capability of the organization, performance evaluation and training of employees.
The analytical model will analyze the data and its impact on bottom line.

  • Identify different solutions

Based on the analysis, the HR can identify the key areas that lead to greater return on investment. With the changing the nature of problem, the HR manager need to think beyond the traditional solution to HR related issues. The collaborative effort of business leader and HR manager may improve the talent management processes. The joint effort will easily sort the route cause of problem and may came with different innovative solutions.

  • Continuous review the process

The analytical model need continuous review to meet the dynamic environment and complex talent management issues. The more labelled data and strong analytical model will identify the key issues and areas of improvement. HR manager must have capability to build connectivity of different HR practices with bottom line. The persistence effort will result into increased return on human capital.

Using people analytics can add value to bottom line but the biggest challenge is there is no standardized method of HR Accounting. Also, organization face difficulties in measuring exact value added by different HR practices due to involvement of various qualitative aspects. But the increased focus towards HR strategic function are looking for innovative solutions in this domain.

Source: HOB