Organizations often use data as part of their effort to engage workforces and encourage productivity. But without context and meaning, metrics alone may not help move the needle. Employers interested in turning data into action may want to explore a workforce analytics or HR analytics solution.

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What are workforce analytics?

Workforce analytics refers to gathering HR data, understanding what it means within the context of business goals and using it to optimize decision-making and operations. Historically, this process required several teams and a lot of time. But modern analytics technology has simplified an employer’s ability to create and use meaningful data.

Why are workforce analytics important?

Workforce analytics helps employers identify potential causes of performance-related problems and address them in ways that maximize opportunities and minimize risk. Without this data, employers may have limited tools or no tools to support strategic decisions.

How are workforce analytics used?

Workforce analysis isn’t just about refining old processes. Employers who thoroughly understand their employee data and act on it may be able to increase business value in the following areas:

  • Reducing employee turnover
  • Limiting unauthorized overtime worked
  • Benchmarking performance metrics
  • Optimizing labor costs
  • Improving organizational agility
  • Managing compliance and risk
  • Promoting diversity, equity and inclusion

An example of workforce analytics

Consider employers that want to reduce the cost of overtime resulting from unplanned absences. They can use advanced analytics to compare overtime rates against absences and look for trends. They may also conduct a root cause analysis to understand whether the unplanned absences are connected to specific teams or supervisors.

This information can then be used to develop an appropriate corrective action. Manager and employee training, for example, may help improve attendance and scheduling management and engagement.

What are some types of workforce analytics?

Workforce analytics can be broken down into four categories. As businesses increase their ability to interpret data, they progress through each of the following:

  1. Reporting
    Reports capture transactional workforce data, helping employers identify potential connections and concerns.

  2. Descriptive
    Employers use descriptive analytics to monitor key trends and understand what they mean. This type of data can help employers better recognize and address issues.

  3. Predictive
    A proper review of historical data may help employers anticipate what’s likely to happen, e.g., employee turnover, customer purchases, inbound contact center traffic, etc. Any insights gained can be used to guide future decisions.

  4. Prescriptive
    Prescriptive analytics use the same sets of historical data to evaluate the likelihood of specific results or events happening. With this information, employers may be able to determine the actions necessary to achieve their desired goals.

What are the benefits of workforce analytics?

Workforce and HR analytics that are easy to understand and act upon can potentially help businesses achieve strategic objectives. Specifically, employers may be able to use analytics to:

  • Make more timely and appropriate decisions
    Leveraging internal and external data may help employers anticipate what could happen to their organization and quickly address or mitigate potential risks.

  • Recruit talent and keep them engaged
    With advanced analytics, HR professionals can potentially identify the type of talent needed for a particular job. The data can also help employers ensure that employees remain motivated to fulfill the company’s mission.

  • Improve productivity
    Centralized, real-time workforce metrics allow employers to monitor employee productivity and adjust operations as needed.

  • Reduce costs
    Employers that have access to benchmarks for their industry and location may be able to recruit employees with competitive market rate pay rates. Once hired, analytics can be used to monitor scheduling and help control overtime costs.

  • Enhance data security
    Workforce analytics that are cloud-based typically have a flexible and resilient infrastructure designed to help protect sensitive employee data and reduce risk.

Challenges addressed by workforce analytics

Organizations that still analyze workforce metrics using spreadsheets and other manual, legacy technologies may find their data too difficult to access and interpret or too simplistic to spur meaningful action. What’s more, external data, such as industry surveys and benchmarks, are not easily integrated and become outdated quickly. These challenges may be overcome with cloud-based, automated solutions offering real-time insights that are simple to understand and act on for all levels of decision-makers.

Workforce analytics software and tools

Depending on their organization’s capabilities, employers generally have two options when they’re in the market for a workforce or HR analytics solution:

  1. Build
    Creating analytics solutions from scratch requires internal IT resources for both the initial build and ongoing maintenance processes. There are also data permission and security challenges. This approach is typically only appropriate for organizations with very specialized analytical needs or custom-built systems that can’t easily integrate with other programs.

  2. Buy
    Organizations that don’t have the time, money or resources to build their own analytics solution can purchase one from a reputable provider. Many vendors will integrate workforce data with core human capital management (HCM) workflows, making dashboards and reports much more insightful.

How to implement workforce analytics

No matter the business objective, employers can follow these recommended steps to help them turn people data into actionable insights:

  1. Prioritize business goals and assess where analytics can potentially have a measurable impact.

  2. Identify key stakeholders from HR, finance, IT and other areas across the business and open communication channels early.

  3. Document the organization’s data-gathering and reporting processes and establish a data-scoring model for quality control.

  4. Identify the data needed to feed workforce analyses.

  5. Integrate data from outside HR to gauge the impact that workforce programs may be having on the organization.

  6. Look for a benchmarking provider with access to an extensive pool of reliable, up-to-date transactional data.

  7. Take ownership of data governance and ensure that team members respect privacy rules.

  8. Obtain the skills necessary for analyzing complex data and presenting it to business leaders in a manner that is not only simple to understand, but also meaningfully descriptive, predictive and prescriptive.

  9. Use workforce analytics to drive real-world action.

Frequently asked questions about workforce analytics

What is a workforce analysis?

Conducting a workforce analysis means compiling HR data and learning what it means to the organization’s objectives. The insights can then be used to drive strategic decisions and improve business operations.

How do you do a workforce analysis?

No two organizations will tackle their workforce data in the same way, but at its most basic level, a workforce analysis can be conducted as follows:

  1. Determine what the organization would like the HR data to achieve
  2. Identify all internal and external sources of data
  3. Use technology to make sense of the data and uncover patterns

What is the difference between workforce analytics and HR analytics?

HR analytics and workforce analytics sometimes overlap and may even be used to achieve the same goals. The key difference is that HR analytics generally pertain to HR functions, such as recruitment, whereas workforce analytics are more specific to employee data, i.e., productivity, absenteeism, compensation levels, etc.

What is the role of workforce analytics in talent management?

Workforce analytics can be used to develop compensation strategies and predict which employees may be a flight risk. In this way, employers may be able to attract more talent and limit turnover.

This article is intended to be used as a starting point in understanding workforce analytics and is not an all-inclusive resource on this topic. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.