How does big data affect HR?

For many years, businesses have been using big data to achieve a variety of goals, including more effective marketing, streamlined operations, improved sales or other achievements that are critical to a company’s success. Regardless of how big data is used, though, businesses rightly see it as a crucial tool for future growth.

Many human resources (HR) professionals have realized the value of big data and started using it to make strategic HR decisions. A company’s payroll often accounts for 15% to 30% of the business’s expenses, with labor-intensive businesses spending up to 50% on payroll, according to NetSuite. With such a large chunk of the budget dedicated to this important line item, firms can end up saving lots of money if they take advantage of big data analytics. Beyond payroll, there are multiple ways big data comes in handy for HR functions.

What is big data in HR?

The use of big data for human resources is commonly referred to as talent analytics. Whereas big data in marketing can gather and analyze data from customers, talent analytics gathers and analyzes data from a company’s current and prospective employees. In most cases, the goal is to optimize what the business spends on its workers and address questions such as these:

• Where is the money going?
• Is the business getting everything it can from the money allotted to workers?
• Can those funds be put to better use elsewhere?

As more and more organizations implement big data solutions, they’re quickly finding new ways to prevent wasteful spending, including on personnel costs.

FYI: See our review of Oracle NetSuite’s financial management solution to see how it can help you keep track of your business’s finances.

How you can use big data for HR

Big data can be used in many facets of business. Here are five ways it can be implemented to improve your HR processes.

Smarter hiring

Big data has a vital role to play in your hiring process. When businesses look for new employees, they can use data from job sites and social media to find people with the exact qualifications they want for a particular position.

Using big data can help you avoid making a bad hire, which can be costly. The U.S. Department of Labor says a bad hire can cost a company up to 30% of the employee’s annual salary, and other HR agencies estimate that expense to be even higher. If you reduce the possibility of hiring the wrong person for the job, you can save your business significant amounts of money in the long run.

Quality hiring factors

Finding the right employees goes beyond identifying a simple list of criteria. By analyzing data specific to your firm, your recruiters may be surprised that a supposedly valuable characteristic is actually irrelevant to your company’s work environment. In other words, big data allows you to discover what really matters for your specific organization. Companies should conduct their own big data analysis for their unique hiring and training purposes instead of relying on the qualifications held in high regard by other businesses.

For instance, one company using big data might find that people who had relevant job experience were not more likely to stay with the organization in the long term and that the length of tenure at previous jobs did not affect employees’ current performance. Based on these findings, the company might instead focus on what the data did tell them was relevant. 

Employee retention

One of the most challenging HR goals is to increase employee retention. Businesses with high turnover rates spend thousands of dollars on employees who don’t end up staying with the company, which is a waste of resources and time.

With big data, HR representatives can get a more accurate picture of who is leaving, how often employees are departing and if there are any patterns among those seeking employment elsewhere. At the same time, the data can be analyzed to identify patterns among people who choose to stay with the company. The takeaways can help businesses develop a model for employee retention.

Tip: If you’re experiencing high turnover rates at your business, take a look at these key reasons employees quit.

Workforce planning

Big data can help to inform your company’s overall workforce planning. For example, you can use the data to identify a need for additional resources and to distribute tasks equally across your workforce to prevent employee burnout. With a clear view of what type of workers are best suited for each job, you can make effective hiring and talent distribution decisions to maximize profitability.

Big data can also lower your payroll overhead by lending you insight into your current employees’ talents. For example, the data might reveal that an existing employee has the skills you need for an upcoming project, and you could make an informed decision about whether to assign that project to the employee rather than hiring someone to complete it. 

Performance management

Big data can help business owners and HR leaders measure employee performance more accurately. Companies using employee performance tools might determine that some hourly employees aren’t as productive during certain shifts and could use a performance improvement plan. Alternatively, the analytics could identify employees who are consistently excelling and thus worthy of a discretionary bonus. 

When you have hard data backing up your performance management decisions, you can rest assured that you’re treating workers fairly based on their performance. Businesses may also use big data analytics to enhance their on-the-job training and to ensure employees attend such sessions and actually apply what they learn to their roles. These tasks are much more difficult without the knowledge big data provides.

Did you know? An effective performance management process can increase employee morale, growth, productivity, engagement, and retention, and big data is a crucial ingredient in managing employee performance effectively.

Should you use big data for HR?

In short, yes, you should use big data for HR tasks and decisions. If you have the right tools and capabilities to gather and decipher data about your business and its employees, data analytics can be very useful for improving human resources processes. Even if your company saves only a few percentage points in payroll, that still represents sizable savings that can mean the difference between an organization’s financial success and failure, and payroll evaluations are only one example of how you could use such data. To find and recruit the best employees, retain them for the long term and ensure your workforce is set up for optimal performance, big data is invaluable.

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