From Payroll to HR Strategy – Data Mining And HR Analytics
By Ashley Bennington, CHRP and Helen Luketic, CHRP
You’re stumped. Everyone wants to you to start measuring your HR function and you know the value of measuring. But, you’re having a tough go at getting started for several reasons. Usually, you just don’t know where to start.
Originally presented at BC HRMA’s 2009 Conference, here’s how easy it is to mine your payroll data and develop your HR strategies. Avoid these common roadblocks:
Don’t have a sophisticated HRIS and don’t track a lot of fancy data.
You don’t need to track a ton of complex data to get insight on your workforce. Chances are very good you already possess the data you need. There is employee data every organization must legally keep in order to produce a paycheque, a Record of Employment, or other documents. 15 data points, commonly found in most payroll systems, are all that is needed to produce up to 80 HR metrics. In the links above, you’ll see that you can track turnover using your payroll data. But, it’s not as important to track turnover as it is to break the data down into the elements that make up turnover – resignations, retirements and involuntary turnover. You can segment the data even further: job level/job, length of service, gender, diversity group, age, work location, performance levels, and union status. For example, your turnover may be very low and therefore not attract any management attention. However, cut the data further and you may find that the volume of resignations spikes in the 30-39 age group and at the 3-5 years of service mark. HR may want to focus some resources on this demographic to stop the mass exit of these employees.
Don’t have HR metrics formulas and definitions.
Use BC HRMA’s HR Metrics Standards & Glossary which was developed from a scan of industry best practices.
Don’t know where the data is stored and if it’s clean.
Conduct an audit of all your HR systems and the owners and users of each system. Figure out how data flows from one system to another (e.g. does data from your Applicant Tracking System flow into your payroll?). If the same piece of data resides in many locations, choose the data’s “home” and declare it to be the “point of truth”. Here’s an example: you have “Hire Date” stored in the Applicant Tracking System, the payroll system and the HR database. Choose the location which is most accurate and most frequently updated and declare it to be the point of truth. All reports should pull the data from the point of truth.
Record the details you discovered and assign accountabilities to keep the systems updated and clean.
You can’t pull reports from your system.
No HRIS out there can produce the perfect report for you. But, most systems allow you to export data onto a spreadsheet. Learn pivot tables and v-lookups in Microsoft Excel and you’ll be able to crunch numbers and do analysis faster than any canned report in your system.
You get stumped on calculating turnover. How often should you calculate it?
Turnover is calculated as follows:
(Resignations + Retirements + Involuntary terminations) / Headcount
How often you calculate turnover depends on what makes sense for your organization. If your organization changes quickly, calculate turnover monthly. For most organizations, measuring on a quarterly basis is fine. Calculating turnover once a year is not recommended. If you calculate turnover on a monthly or quarterly basis, be sure to annualize or forecast your turnover for the rest of the year. (See page four of the HR Metrics Interpretation Guide for details on how to annualize your turnover.)
Measurement is new and you’re not an expert.
Welcome to the rest of the world! The best way to become really good at measuring is to capture data and calculate some metrics for a few months and see what happens. You’ll be surprised at how quickly you’ll find common errors and discover better ways to capture the data. Metrics are one of those things where the best way to learn is by doing.
Numbers take away the ‘human’ in Human Resources.
Intuition is still required to formulate a hypothesis which you then test out with metrics. You have a gut feeling that something is going awry in XYZ department? Use that instinct to do some real analysis. Qualitative information is also required in metrics. Calculating voluntary turnover at 27 per cent is of little use unless you ask these employees why they are choosing to leave through an exit interview.
Benchmarks don’t work for you organization because you’re unique.
Some may say that you can’t compare McDonald’s to Burger King because they offer different products and target different markets. Essentially, both companies are fast-food restaurants who serve burgers, fries and cokes and so these two truly are competitors.
When you’re benchmarking externally, you’re not looking to always “beat” the competition on their metric results. Instead, you’re eyeing the competitive market for patterns and trends. For example, if their turnover is steadily on the decline but yours keeps rising, and your competition is paying a higher salary, you may have enough information to show that there is a retention problem within your organization. Better ask your employees why they are leaving and if they are going to go work at Burger King! Don’t forget about internal benchmarking. Capture data within your organization over time to analyze internal patterns and trends.
Now you have some handy tools to remove your own measurement roadblocks. No need to become roadkill – if you need help navigating HR metrics, you have tools now available on BC HRMA’s website.
Ashley Bennington, CHRP is an Adjunct Professor of Business Administration at Simon Fraser University, where he has taught undergraduates courses in human resources since 2006. Ashley is also a Senior HR Advisor at BC Hydro, working in their new Workforce Planning and HR Analytics Department. Ashley earned his Bachelor’s and Master’s Degrees in Business Administration from Simon Fraser University, with specializations in marketing and human resources. He has been a Certified Human Resources Professional since 2007, and was the recipient of BC HRMA’s Rising Star Award in 2007.
Helen Luketic, CHRP, brings more than nine years of HR experience to her current role as HRIS Analyst at Vancity, where she’s assisting the organization implement new HR systems and processes. For her innovative achievements at Vancity, Helen was the recipient of BC HRMA’s 2008 Rising Star Award. In her previous role as Manager, HR Metrics & Research at BC HRMA, she combined her CHRP, B.A. in Economics, HR information systems knowledge and experience in HR metrics to develop the HR Metrics Service and related workshops, presentations and webinars to teach HR professionals about HR metrics and benchmarking.