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The Importance of Data-Driven HR and How To Get Started

Data-driven HR helps organizations identify and focus on the most important areas of their business. Read on for tips on how to be a more data-driven HR organization.

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Three HR professionals looking at a laptop surrounded by data points, representing data-driven HR.

Engagement, retention, DEI, and talent acquisition strategies that attract the best are hot topics in HR. The one thing they have in common? They all rely on data. If you ever dipped your toes into the vast world of people analytics, you know all the benefits it can bring. But for it to be successful, you need a data-driven HR strategy. 

Here’s everything you need to know to use it to your advantage.

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What is data-driven HR? 

Data-driven HR is the practice of using data for all HR-related decisions, such as hiring, retention strategies, compensation, and more. With it, you’ll be using analytics to find patterns that will help you create strategies to motivate employees and boost productivity.

For this, you’ll need to collect, analyze, and interpret HR-related data. Information about employees, their performance,  compensation, and details like market trends, will all help you create a solid data-driven HR strategy.

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The importance of data in HR 

Making decisions in HR can be one of the most complex processes a business will have to face. The success of so many operations in the company relies on how well the employees are performing. 

So how can HR professionals minimize the risk of mistakes and unconscious biases? By using data, along with tools like HR analytics, to make informed decisions that will have a positive impact on the company. There are many reasons to shift to a  data-driven HR model. Here are some of the most important ones.

  • Increase workforce productivity. With analytics, HR can identify what drives productivity and what stands in its way. From there, they can then create strategies that help employees do their best work.

  • Improve retention, engagement, and talent acquisition. A data-driven strategy can assist in the most critical HR missions—recruiting and retaining top talent. Look at the market trends, understand what candidates want, and where your best hires are coming from. Once they start working for you, data can show you the best retention strategies.

  • Improve corporate innovation. No business can thrive long-term without innovation. By using analytics, you can understand what strategies increase collaboration and innovation. You can also create recruitment plans to attract true innovators that will help drive your business forward.

  • Identify hidden causes of problems. There’s nothing worse than seeing a negative trend in your company and having no idea why it is happening. A data-driven HR model can help see both what is happening and why so that you can make changes in the areas that most need it.

  • Better decisions for the future. A data-driven HR strategy is the first step towards using predictive analytics—a technique that uses historical data and analysis tools to make predictions about future outcomes. This is an essential tool if you want to make informed decisions about the future without having to guess what might happen.

  • Eliminate biases. Unconscious biases can influence the best-meaning of people, and HR is no different. By using a data-driven approach, you can spot where these biases could come in and eliminate them before they impact HR-related decisions.

How HR can be more data-driven 

Collecting data and using it to your advantage are different things. Creating a data-driven HR requires a smart mix of both. You need to know what to collect and when. But you also need to use it correctly to reap all the benefits mentioned above. Becoming data-driven is both about how you do it and the specific tools you use, but it also needs to be part of your business mindset. 

1. Integrate data into all parts of your business

You know you want to rely on data for important decisions. The obvious first step is to collect the information. You can use a wide range of tools and sources. From Applicant Tracking Systems to internal employee surveys, and other KPIs, nothing is off-limits. 

Don’t stop there, though. Start integrating the data into all parts of your business and use it to gain actionable insights. This could mean using tools like people analytics to understand not just what is happening but why.

2. Set clear goals

Data without goals to work towards won’t have much meaning. Define SMART objectives that will guide you in your analytics efforts. They’ll also help you collect the data that matters, without overwhelming your databases and your employees.

3. Implement analytics solutions

People analytics, predictive analytics, or workforce analytics are some options you can choose from. They’re all related, but can also serve different purposes. 

People analytics, for instance, can show insights into all things related to the people in and out of your company. That includes employees, but also customers, and potential candidates. 

Workforce analytics will look strictly at the employee data, while predictive analytics is the tool you’ll need to use if you want to gain insights about possible future events. Choose the one(s) that best fits your goals and begin integrating data-driven insights into your business.

4. Benchmark against the competition

Comparing HR metrics against industry benchmarks can help you set better goals and improve many strategies. It is also a way to validate the accuracy of your own data and gain insights into industry trends. It allows you to use data in ways that create more value for your business, and improve HR processes like talent acquisition or retention programs.

Download this free people analytics playbook to learn the seven key steps to becoming a highly effective HR organization.

Crafting your data-driven HR strategy 

HR strategies are only as good as the goals and data that drive them. So how can you craft a data-driven HR strategy? Here are a few steps to help you get started.

1. Identify the business problem

To use your data effectively, you need to have clear goals in mind. But for that, you often need to identify the business problem(s) you want to solve. Examples can include reducing attrition, improving the recruitment process, or boosting employee engagement.

It may feel like you're limiting your use of data at first. That couldn’t be further from the truth. Focusing on one or two business problems at a time will allow you to be more effective in your work. Instead of looking at all the issues, you’re choosing the most pressing ones, and fixing one problem at a time.

2. Ensure data quality and accuracy

Data collection can be a daunting process if you don’t have the right tools. Not to mention that without those tools, you’re prone to mistakes. You’re also at risk of gathering data that is inaccurate or outdated. 

One solution is to automate the data-gathering process. There are various tools you can use that will help you get the data you need while minimizing the risk of errors and inaccuracies. Data connectors are a great example here, as they extract data automatically and make transfer and integration very easy.

3. Create a data-driven culture

If, at the end of the day, HR and management don’t use data to make decisions, your efforts are in vain. Promote a culture of data-driven decision-making from the start. Train employees when needed, and provide various resources and support so that they can adjust to this thought pattern.

4. Analyze data

No data-driven HR strategy is complete without the use of analytics. It will give you a better understanding of your metrics and many other trends within the company. From there, you can create strategies to improve your processes and reach business goals.

5. Don’t forget about ethical and legal considerations

Whenever you’re working with people’s data, you need to remember ethical and legal aspects. Be respectful of people’s information and their privacy. Keep in mind some jurisdictions have fairly strict data privacy laws, such as the EU’s GDPR or California’s CPRA

Take the necessary steps to ensure compliance with all the regulations that apply to your business. You may also need to think of security measures like encryption or access control, to limit the risk of your data being stolen.

6. Measure your progress

Last, but not least, take time to analyze how well your strategy is working. Are you reaching your goals? Go back to step 1 and look at the business problems you identified. Are you making improvements in those areas? Measure outcomes against predefined KPIs at regular intervals. When needed, adjust your strategy to get back on track.

Data-driven HR can benefit everyone—employees, management, the HR department, and even customers. It takes guessing out of important business decisions, eliminates biases, and creates a stronger, more productive workforce.

On the Outsmart blog, we write about workforce-related topics like what makes a good manager, how to reduce employee turnover, and reskilling employees. We also report on trending topics like artificial intelligence, using generative AI in HR, and how skills are rapidly evolving, and advise on HR best practices like how to create a strategic compensation strategy, how to manage HR data, and how to use reports vs. analytics. But if you really want to know the bread and butter of Visier, read our post about the benefits of people analytics.

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