HR analytics explained (with metrics & best practices)

Do you know how happy your employees are at work? Can you predict when your top performers might leave? Or identify your company’s skill gaps?

Research shows that two-thirds of HR leaders struggle to answer critical questions like these.* Those who can rely on one key factor: robust data analysis.

Data is the backbone of a successful HR strategy. But to truly make an impact, it’s not enough to collect employee information; the real power lies in transforming raw data into insights to improve your retention, recruitment, and engagement strategies.

The process of synthesizing and interpreting people data at scale is called “HR analytics.” In this article, we’ll explore how HR analytics can reshape your workforce planning and business performance, along with best practices and metrics you can start using right away.

*Oracle, 2019

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What is HR analytics & how does it affect business performance?

HR analytics is the comprehensive process of collecting and examining HR data to understand how your people and hiring practices impact business outcomes. People leaders can use HR analytics to benchmark progress, make data-driven decisions, and boost human resources task efficiency.

A well-thought-out HR strategy is vital for business success. In fact, businesses with highly satisfied employees are 1.3 times more likely to outperform competitors. However, people analytics has become increasingly complex; HR functions are often dispersed among various tools (small businesses use an average of 172 tech solutions across functions!), making employee data siloed and hard to process.

Without a unified view of employee data, a disconnect can grow between HR leaders and their teams. According to our 2023 Workforce Trends Report, organizations estimate that over 50% of their employees feel engaged, but the actual number is far less (under one-third).

HR analytics enables leaders to overcome these gaps in understanding, identifying challenges and opportunities within their talent management initiatives. A continuous analytics approach helps HR teams refine their strategies over time and maximize workforce potential. 
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HR analytics vs. people analytics vs. workforce analytics

The terms HR analytics, people analytics, and workforce analytics are often used interchangeably — but while they share similarities, each concept has a distinct scope and focus.

HR analytics aims to advance specific human resources goals. For example, HR teams might use analytics to improve hiring processes, support strategic decision-making, and boost employee satisfaction.

In contrast, people analytics takes a broader approach, using employee data from all departments to assess organizational efficiency. For instance, a CFO might compare annual recurring revenue (ARR) with improvements in employee satisfaction to understand how employee happiness influences business performance. Similarly, a people ops leader could analyze the impact of flexible work arrangements on productivity and work-life balance across departments to inform company-wide policies.

Finally, workforce analytics is a subset of HR analytics that examines employee performance. HR leaders use it to track productivity, identify skill gaps, and optimize team structures.
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Key metrics every HR team should track

To effectively analyze HR data, you must track and report on key HR metrics that align with your organization’s goals and challenges. While the metrics you focus on will depend on your company’s size, industry, and strategic objectives, the suggestions below are a good starting point.
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Employee engagement metrics

Employee engagement metrics gauge how satisfied and involved your workers feel. Pay particular attention to:

• Employee Net Promoter Scores (eNPS) — This metric determines how many of your employees are highly engaged and satisfied at work (AKA “promoters”) and how many are disinterested (AKA “detractors”). The eNPS is calculated using responses to engagement surveys.‍
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• Recognition frequency — Employee recognition programs are a great way to identify engagement trends. For example, team members who frequently post or receive praise via in-company appreciation tools might feel more fulfilled.
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• ‍Meeting attendance — Keep an eye on overall team participation in regular meetings and 1:1s. This can provide insights into engagement levels or indicate a need to improve team involvement, communication, or availability.

Alone, the metrics above can serve as a useful benchmark, giving you ideas on how to boost workplace fulfillment; together, they create a powerful roadmap for improving employee engagement at scale. That means it’s crucial to use HR analytics tools that draw on data from multiple sources to give you comprehensive metrics. 

Leapsome’s new human resources information system (HRIS) collects and synthesizes all your people-related data into a centralized single source of truth, with a dashboard that makes it easy to visualize key information.
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Turnover rate and retention metrics

There are different ways to measure turnover or attrition. Voluntary turnover refers to the percentage of employees who leave by choice, while involuntary turnover tracks the percentage of workers who are let go by the company.

Since highly engaged employees are less likely to quit, you can think of voluntary turnover as an extension of employee engagement. Meanwhile, involuntary turnover is more reflective of your talent acquisition strategy. Understanding both will give you a comprehensive view of your organization’s employment patterns.
Calculations broken down by department and seniority can also reveal more granular insights, like which teams are experiencing higher turnover rates and may require additional support or leadership development.

Another important retention metric is average employee tenure — another indicator of employee satisfaction. You’ll also want to measure the overall retention rate (i.e., how many employees remain with the organization over a specific period) to get a broad view of workforce stability.

Finally, in addition to these metrics, make sure to record qualitative employee feedback received during exit interviews or surveys. This can help improve your hiring and talent management process.
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Performance ratings and trends

Employee performance ratings measure a team member’s success in their role. The most common way of determining these ratings is through 360° reviews, which gather manager, peer, and report feedback, as well as self-assessments (and can even include client reviews).

A moment-in-time performance rating can be helpful, but tracking a team member’s performance over time is even better, as aggregated data can reveal patterns in performance that correlate with specific projects, seasons, or company initiatives. It can also point to trends in an employee’s development, highlighting improvements or declines in performance that may indicate a need for support.
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People enablement ROI

People enablement focuses on nurturing employee development and maximizing your return on investment (ROI) in L&D initiatives. To better understand how well you’re enabling your team members, track the following metrics:

• Learning path completion — This metric quantifies how many team members complete assigned L&D courses. Tools like Leapsome Learning can provide detailed reports on course completion rates, progress through learning paths, and insights into where employees stumble in the learning process.

• Skill acquisition metrics — You can get a sense of how well your people are gaining and applying new skills by looking at certificates achieved and progress along a clear competency framework. It’s also useful to rely on manager feedback to determine whether an employee is progressing in their respective career paths.
  
  

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Absenteeism rate

Your absenteeism rate measures unplanned employee absences, such as mental health or sick days, over a period.

A high absenteeism rate can indicate different things. Maybe your employees are burned out or fatigued because their workload is too high. Or you may need to revise your paid time off (PTO) policy. Remember: a generous policy with plenty of flexible PTO, vacation, and sick leave allotments helps employees do their best work while on the job.
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Core HR info

Basic employee data contains a wealth of insights. However, extracting those insights from within various different HR systems or tools can be tricky. That’s where centralized, scalable solutions like Leapsome’s new HRIS can help. Our HRIS provides automated, customized reports about key employee data.

Payroll data can give you visibility on the accuracy of your financial processes and your overall payment patterns, while time tracking provides insights on attendance, overtime, and resource allocation. Leapsome’s advanced compensation tools can help you answer critical questions around how your team’s salaries compare with competitors and pinpoint any discrepancies in pay between employees of different genders or ethnic backgrounds, so you can make sure your practices are fair, equitable, and supportive.

Best practices for effective HR analytics

Now that we’ve covered how key metrics can help, it’s essential to understand how to implement and leverage your insights. Whether you’re just beginning your HR analytics journey or looking to refine your existing processes, these best practices will help you maximize impact.
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Build out success metrics based on your HR initiatives

What inspired you to explore HR analytics? Perhaps you’re aiming to use data for more strategic HR decisions or to improve retention. These initial goals can serve as key performance indicators (KPIs) or success metrics in disguise.

It’s best to identify and codify KPIs before running numbers. For instance, if your goal is to increase retention, you might set a target to increase the average employee tenure by 2-3 months within the next year. By setting clear, measurable key results, you’ll be able to track progress, identify trends, and make informed decisions that propel your HR strategy forward. For a deeper dive, check out our guide to defining objectives and key results (OKRs) to effectively align your HR analytics with overall HR goals.
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Align analytics with business objectives

So, you’ve identified clear success metrics fitting your HR team’s growth plan. The next step is to see how these goals connect with your organization’s broader objectives.

Aligning your HR analytics program with broader business objectives is critical. To ensure smooth progress, schedule regular check-ins with key stakeholders from other departments to discuss the progress of your HR analytics program.

Also, communicate clearly and often about how your KPIs align with the company’s mission statement or overall goals. For example, if your company is in a high-growth phase, your goal might be to use data to improve hiring processes or predict talent needs. 

Leapsome’s Goals module can be invaluable in this process. It allows you to create a clear hierarchy of objectives, linking individual goals to company-wide objectives and offering cascading goal visualizations. And with real-time tracking, you can see progress at all times and at every level. 
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Collect data securely and effectively

Accurate and secure data is the foundation of good HR analytics. Data errors can mislead your analysis, and poor security can expose your organization to risks, fines, and a loss of employee trust.

Take a proactive approach to keeping your data secure. Ensure that sensitive applicant or employee data is submitted through encrypted systems, and use tools that follow the principle of least privilege (PoLP) — meaning employees only have access to the data they need for their jobs. This keeps sensitive employee data on a “need-to-know” basis.

It’s crucial to choose an HR platform that prioritizes data security. Leapsome’s HRIS is designed with compliance and data protection at its core. As a GDPR and ISO-compliant system with encryption, access controls, and compliance reporting features, Leapsome helps you adhere to data protection regulations and make sure you’re taking a sensitive, ethical approach to analytics.  
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Choose the right HR analytics tool 

The right HR analytics tool will depend on a few factors, including your company’s size, budget, and data complexity. Options include:

• Spreadsheets — Manual tools like Excel or Google Sheets are low-cost, but they become hard to manage as data volume grows. They also lack security, as well as real-time updates and powerful analytics and automation features. 

• HR analytics software — These solutions can handle data, generate reports, and offer visualizations like charts and graphs. They can be a good way of starting out with analytics, but they’re often not scalable — and if they don’t integrate with your other tools and systems, you could end up with fragmented data spread across multiple platforms.

• HRIS — One of the most common challenges in HR analytics is siloed data. An HRIS solves this by centralizing all employee information. HRIS software options like Leapsome also provide integrated reporting and analytics, delivering clear insights into workforce trends and patterns, enabling data-driven decision-making. An HRIS is ideal for businesses with complex data needs and those seeking a comprehensive people enablement solution.
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Visualize and communicate your analytics

Effective data visualization turns raw numbers into insights that stakeholders can easily understand and act on — especially outside HR who may lack full context on your metrics and goals.

Use graphs, charts, and dashboards to communicate patterns and other insights clearly. HR analytics solutions that automate data visualization will help you identify trends faster, freeing up time to focus on turning insights into action. 

Leapsome’s people analytics and HRIS tools consolidate critical data on employee engagement, career goals, and manager feedback into easy-to-digest visuals. HR professionals can switch between their favorite views, from lists to heatmaps, to gain a deeper understanding of HR data.

Streamline the process with AI

Automation reduces time spent on manual HR reports, making it easier to interpret and share data, gather feedback, and generate insights; AI-powered HR tools can even offer data-driven suggestions based on employee data.

Leapsome incorporates AI to help you turn HR data into action by summarizing key information (including survey results, feedback, and reviews) and translating them into practical suggestions for improvement. 

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