Business benefits of leveraging predictive analytics in HR

Abstract

The usage of predictive analytics is lifting its head in the HR area. The business benefits of using predictive analytics in sales are self-evident, but in HR the value is more difficult to prove due to non-monetary and non-standardized measurements. As predictive analytics in general is not yet widely used in Finland, the companies are cautious in taking the first steps towards this capability.

The purpose of this study is to explore and identify the possible business benefits of implementing predictive analytics into the HR area. The basic building blocks needed for predictive analytics are also covered, as well as the main challenges companies identify, in order to understand what could be hindering the analytics evolution in the HR area.

Whereas descriptive analytics concentrates on creating reports and summaries of the past, predictive analytics aims to understand the past but also complements it by understanding the correlations of events, by estimating the future and by predicting probabilities for the whole employee lifecycle; recruiting success, employee management risks and employee retention. The new capabilities delivered though the predictive analytics are meant to help today's HR professionals in making better decisions related to HR activities, accelerating the processes and by eliminating the error of the sole human interpretation.

As to the results of the study, the main benefits perceived were very company specific. However, all the companies saw the greatest value in using predictive analytics in the HR areas they identified to have the biggest business challenges in, or which were otherwise near their core business. Additionally, the most value for predictive analytics was identified specifically in four HR functions; employee acquisition, employee retention, employee engagement and employee well-being. Predictive analytics supports the HR activities, through which the benefits can be gained; increased employee engagement and satisfaction and enhanced performance resulting in increased company performance, customer satisfaction, sales and profitability increase and to cost reductions. Recommendation for each company is to start with quick predictive analytics trials in the areas they perceive as valuable.

The companies perceive their main challenges to rise from the lack of people who would understand both predictive analytics and HR business. Also the general level of the analytics maturity and data harmonization and integration were seen as challenges. Some interviewed companies wanted to have the basic building blocks in place, such as improved data governance processes, data integrations and optimal data quality, before taking the next steps. However, this study encourages the companies to start with targeted actions and to tie the measurements to financial figures with predictive analytics, in order to reach the identified business opportunities.