HR and Finance Leaders Can Work Together with HR Predictive Analytics to Boost Retention
By working with finance to perform and utilize predictive analytics, an HR leader can better understand people trends and forecast the degree of financial commitment needed to take advantage of them.
There are many potential benefits to making predictive analytics available for HR and finance leaders. One of the most significant benefits is the ability to forecast employee turnover more accurately.
The resulting projections can be used to enact programs that boost retention in advance of any anticipated decline, which can, in turn, lower costs associated with recruiting, onboarding and training new employees.
Although many HR and finance departments work together, there is a growing need for even more collaboration. Integrating finance and HR data is a top priority for many organizations, especially since a firm's financial situation is a major determinant of the size and composition of its workforce. As more HR leaders begin to use data analytics, they must be able to understand its figures and use them to make decisions and resolve challenges.
Because the roles of CFOs have become more strategic and operations-focused, they are now uniquely positioned to serve as catalysts for real change by enabling their HR departments to achieve organizational objectives through data.
Knowledge Is Power…Or Is It?
Data analytics has two components: internal and external information. Tracking and analyzing internal data to determine turnover rates, retention trends, employee development and more is critical. But how will you know what to do with this data? The statement that knowledge is power is often used, but knowledge only becomes powerful when it is used to make proactive, insightful decisions and is converted into solution-driven actions.
External data from industries relevent to your organization can help you to identify patterns and trends that you might not normally see. Is your employee overtime excessive? How do your firm's compensation rates compare across industries and across the country? What timely trends may have been overlooked by your organization? These are questions that predictive analytics can help you to answer.
Understand the National and Regional Trends
According to ADP Research Institute's® Workforce Vitality Report for Q2 2019, the average national turnover rate is 68.8%, a 5.6 percentage point increase from last year. The national average wage level is $28.54, up $1.08 since last year, and employment growth is at 1.9%, a slight increase over 2018. Job switchers had a slightly higher wage growth than those who remained at their current jobs (5.3% versus 5%). Continuous growth has further tightened the labor market, making it more difficult for small firms with smaller benefit packages and fewer growth opportunities to compete for talent.
It is vital that you use not only your own data for predictive analytics but also data from other firms in your region or nationally, depending on your footprint. For example, ADP Research Institute research shows that turnover was higher in the South (74.7%) than anywhere else. If you operate in an information bubble, you may miss something. Your internal trend could show low turnover, but a tight labor environment with double-digit wage growth in job categories your employees fall into could flip that turnover rate.
Tracking and Analyzing Data Has Value
According to the Harvard Business Review, in a survey of 1,510 firms with over $100 million in revenue, the overwhelming majority expressed that their HR representatives were highly skilled at using data for workforce plans. They can predict the likelihood of turnover, and they have insight into employees' current career development goals. This shows the potent value of tracking and analyzing data.
Half of the HR respondents were able to perform predictive or prescriptive analytics, and it appears that HR is more comfortable with predictive analytics than finance. This finding is most likely due to the focus on reporting and descriptive analytics in the finance realm.
By working with finance to perform and utilize predictive analytics, an HR leader can better understand people trends and forecast the degree of financial commitment needed to take advantage of them. Together, HR and finance can harness the capabilities of predictive analytics, and heighten their organization's operational and net profitability.
Learn about ADP's predictive analytics resources and how to forecast employee turnover by reading about ADP® DataCloud.
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