“Metrics” is one of the hottest buzzwords in human resources these days, and for good reason: in this age of big data, numbers are driving business decisions more than ever before. However, while most companies have mastered the art of capturing HR data, many have yet to realize that simply gathering the numbers is not the end of the line. In other words, many companies are still making the mistake of confusing HR metrics with analytics.
This is an understandable error. After all, the two terms are often used more or less interchangeably by many HR professionals. But in fact, metrics and analytics are very different things, and understanding what makes them so is a critical step in learning how to optimize the use of HR data to make effective decisions.
What you need to know about HR metrics.
The most important thing to understand about HR metrics is that they are informational. Focused on tracking past performance using hard data from a wide variety of sources, metrics help to paint a picture of the overall health and status of an organization, showing business leaders in statistical terms what happened as a result of past decisions. Typical HR metrics focus on addressing the impact and effectiveness of an organization’s human resources practices. If you want to know the answers to questions such as how many top sales representatives left their jobs in your company’s last quarter, for example, or what the average compensation is for software engineers across your organization, metrics can give you the answers.
What you need to know about HR analytics.
If metrics focus on the past, HR analytics are all about the future. Indeed, HR analytics are often referred to as “predictive analytics.” The role of analytics is to use past and present data to generate insights and predictions that will drive business decision-making. Whereas metrics are all about providing information, analytics are actionable. They take that information and use it to project and forecast possible future scenarios or potential outcomes of different business choices, as well as to understand the reasons why things are happening the way they are within an organization. HR analytics represent the tool you use to answer questions such as “Why do our top-performing sales representatives keep leaving?” or “Why are our software engineers dissatisfied even though they recently received a raise?”
How HR metrics and analytics work together.
Understanding the difference between HR metrics and analytics can also help to correct the prevalent misconception that analytics are more important than metrics. It’s certainly not the case that one is more important than the other, or that companies focused on metrics should be concentrating on analytics instead: this is a bit like comparing apples and oranges. We need HR metrics because they are the building blocks that make HR analytics possible. To return to the examples previously mentioned, the critical question that your business needs to answer might be “Why do our top-performing sales representatives keep leaving?” However, the fact that you are even asking this question is due to the metrics that told you how many sales representatives left last quarter. When thinking about the relationship between metrics and analytics, keep in mind that metrics tell you what’s going on, and analytics help you decide what to do about it.
How to ensure that you’re making the most of your metrics.
Given the importance of HR metrics as the foundation of HR analytics, it’s clear that the metrics an organization decides to track should be selected with care. The most useful metrics are those that are actively chosen with the goal of gathering data that will help better manage the business. Some basic mistakes to avoid when selecting metrics include:
- Not tying metrics to business goals—There’s little point in collecting data for a particular metric if it isn’t tied to a specific business goal.
- Choosing too many metrics—Selecting more metrics doesn’t always mean you’ll end up with greater knowledge. When it comes to metrics, more isn’t necessarily better.
- Only using standard metrics—There are a host of common HR metrics that most businesses will measure, such as turnover and new hire rates. But while standard information is important to know, you need to ensure that you are not overlooking critical metrics related to your organization’s unique needs and opportunities. In other words, you need to avoid choosing metrics that—while they may be easily accessible—won’t help to solve problems for your business. Again, it’s all about understanding what you need to know for your organization’s specific business goals.
- Not comparing figures—While it’s important to know the numbers, what you really want to get at is the progress your organization is making over time. To do so, you’ll need to set up procedures for benchmarking your data and looking at trending patterns.