Big data takes over organizational decision making – Mary T. O’Sullivan

By Mary T. O’Sullivan, MSOL, contributing writer on business leadership

Without proper HR analytics, executives wouldn’t be able to make proper business decisions that relate to hiring, firing or promoting employees. – Forbes Advisor

If you’ve ever felt that you are just a number at work, you may be exactly right. In order to improve the bottom line, more businesses are relying on data to make decisions that directly impact workers. It’s no longer acceptable to rely on “gut” feelings when deciding a critical organizational direction. Now, thanks to data, leaders make more informed choices when deciding which employees stay and which ones go. Most importantly, data supports employee advancement. High value employees require recognition and feedback which encourages loyalty and longevity. Accurate data also protects the organization from legal action when underperforming employees are let go. Payroll, benefits, hiring, employee onboarding, employee performance and overall morale can all now be measured and factored in high level decision making.

Some of the metrics used in gathering analytics are eye opening and show the dispassion that numbers create. For instance, “revenue per employee” measures each employee’s worth in relation to the dollars produced per year. Once a company has factored in the cost of the employee to the business, including pay, benefits, and other perks, they can calculate exactly what each employee’s value is in relation to profits. If there are 100 employees and the revenues are $10 Million, then the revenue value per each employee, from the CEO down to interns, would be $100,000, on average. $100,000 per employee is a big number, and if leaders paid attention, they may make decisions based on that metric, rather than a decision based on “like” or gossip.

Another interesting metric is “time to fill”. Everyone knows time is money and a prolonged hiring process can be costly depending on the level of employee needed. In the United States, the average “cost to hire” is approximately $4700, not factoring in differences in pay scale. ‘Time to fill” therefore can be critical in cost to the company. Time to fill also measures the efficiency of the recruiting team from job posting to offer acceptance. Some positions reflect the indecision of the hiring team, including the hiring manager, and it may take six months to a year to hire the needed talent.

In an average scenario, if a job is posted on March 1, and the offer is accepted on April 20, then the “time to fill” is 51 days. Depending on the salary and benefits of the person hired, the “cost to fill” can be $5000 or $50,000, making “time to fill” a critical decision-making factor. This metric should encourage leaders to ensure a smooth and efficient hiring process that doesn’t drag on. Your preferred candidate may take another position, while you are thinking about it. Then, you have to start the process all over again, wasting more time and money. In the US, the average “time to fill” is 42 days, with technical positions at a high of 62 days. The longer the “time to fill” the more costly it becomes to get a new person on board and ready to work.

With “time to fill” and “cost to fill” so critical, retention rates must be taken into consideration. Voluntary and involuntary turnover rates indicate how well the company is doing regarding the overall organizational environment and culture, including physical and psychological safety. When people receive better offers from other companies or competitors, it’s an indicator that the organization has failed its top talent. Involuntary turnover signifies a lack of leadership and management skills. If the person hired is not right for the job in the first place, or leadership has neglected to screen the incoming talent and has not guided the employee successfully, management has to reevaluate its approach to employee development. The organization is built on talent, without cultivating its talent the company overall will struggle.

If 10 people were fired or laid off in the last year out of 100 total employees, then the involuntary turnover rate would be 10% in that year. Each industry has its own metrics for turnover rates, but surprisingly, in the United States, the average turnover rate is 47%. With a low of 20% for government workers and a high of 82% for leisure and hospitality workers, the range varies, and each management team must work differently to address the holes in their employee journey and reexamine what mismanagement factor caused a firing or layoff. There are numerous reasons for determining the root cause of involuntary turnover, from inefficient hiring to lack of accountability, but each traces back to poor leadership decisions.

HR analytics provide unique information not usually gathered by any other organization. It demonstrates insight into overall employee performance and points out weaknesses in the organization’s leadership and culture. These metrics measure the effectiveness of the hiring process and give direction as to where to improve team and individual performance, and in particular, addresses morale. In the end game, analytics saves the organization money and time, which is the mother’s milk of business.

“If people aren’t happy, then they are likely to seek new opportunities elsewhere.” – Jeff White

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Connect with Mary:

Mary T. O’Sullivan, Master of Science, Organizational Leadership, International Coaching Federation Professional Certified Coach, Society of Human Resource Management, “Senior Certified Professional. Graduate Certificate in Executive and Professional Career Coaching, University of Texas at Dallas.

Member, Beta Gamma Sigma, the International Honor Society.

Advanced Studies in Education from Montclair University, SUNY Oswego and Syracuse University.

Mary is also a certified Six Sigma Specialist, Contract Specialist, IPT Leader and holds a Certificate in Essentials of Human Resource Management from SHRM.contributing writer, business leadership