How predictive analytics for human resources will enrich human capital
Data analytics is fast becoming a key business intelligence tool across industries.
With the power of data analytics tools, businesses can gain insights on how to enhance their business processes, reduce costs, and improve their customer experience. It’s safe to say that data analytics spans the breadth of all functions in a business.
One data analytics discipline, in particular, is helping businesses leverage current and historical data along with advanced machine learning, data modelling, and forecasting techniques to predict the possible outcomes of future business endeavours.
Predictive analytics helps businesses identify and prevent fraud, perform proactive maintenance on their equipment, and predict the responsiveness of their marketing campaigns.
One use of predictive analytics, however, is not widely reported or talked about in the industry—the use of predictive analytics for human resource management.
Managing human resources is an integral and necessary part of business, as human capital is one the most valuable assets to any business; predictive analytics can make this process smarter, more efficient, and future-facing.
In this post, we explore how predictive analytics enhance human resource management.
Predictive analytics for human resources can help reduce labour turnover
As we mentioned earlier, human capital is one of the most valuable business assets and organisations spend thousands of dollars to train, nurture, and enrich the skills of each employee.
When trained talent leaves a business, businesses not only lose their skill but also the investment they made to train and nurture them—not to mention the additional cost of onboarding a new employee. Statistics show that to replace a mid-level employee, businesses can incur up to 150% of their annual salary.
In most cases, organisations can’t identify the resignation of an employee in advance with traditional HRM processes.
That said, predictive analytics for human resources can help analyse the behaviour patterns, performance, and engagement of the workforce and predict the likelihood of an employee leaving the organisation, helping HR managers to take necessary actions to retain the talent.
HP, for example, used predictive analytics for human resources to identify the potential causes of labour turnover, which helped the company improve its employee retention rate, saving $300 million in the process.
It helps hire the best candidates for key positions
The strength of the workforce of a business relies not on the number of employees but the skills of each individual—organisations with creative, innovative, and engaged employees tend to perform better.
Businesses, therefore, look to hire the best talent available in the market. With competition for skilled employees on the rise, however, employers need to be proactive in identifying potential candidates in the early stages of development and hire them as soon as they become available.
This strategy is famously used in the sports industry, especially in sports clubs; athletes are identified at a young age and contracted to the junior ranks based on their potential, and when they are at the prime age, clubs can promote them to the senior teams without losing them to rival clubs.
Predictive analytics can be a key enabler for this strategy, as it allows businesses to collect data on potential candidates and extrapolate the data to predict future work performance, helping recruiters make the best hiring decisions.
Facebook used data from their platform about the behaviour and personality of job applicants and leveraged predictive analytics algorithms to predict future work performance.
Helps improve employee satisfaction
Employee satisfaction impacts how engaged a person is with their job; satisfied employees are more likely to be engaged at work and utilise the skills to drive better performance in the organisation.
There are a lot of factors that affect employee satisfaction including the workplace culture, pay rates, the type of work, and more.
With predictive analytics for human resources, businesses can identify what factors that may help improve employee satisfaction and engagement, thereby, productivity.
Predictive analytics is crucial to enrich human capital
As a key part of an organisation, human capital needs to be carefully managed to create a performant and efficient workforce, and predictive analytics can help employers do just that.