HR analytics – which we define in our latest market analysis as “a method of tracking, measuring, analyzing and assessing HR and business performance for the purpose of making more informed strategic decisions, improving financial outcomes and monitoring goals” – have never been more vital than in today’s economic climate. Organizations must have data-based insights into their HR cost structures, how to optimize their diminished workforces, their cost per hire, employee cost as a percentage of sales, labor costs by department across various locations and myriad other considerations.
But whether leveraged by in-house staff or an HRO provider on behalf of its clients, most HR analytics today are focused on operational reporting such as basic, aggregated headcount data, and tactical metrics including quality of hires and sourcing effectiveness. HRO providers can step up their competitive game by addressing the main drivers of HRO analytics – justifying the outsourcing business case, providing HR ROI and becoming an integral partner in not just process performance but in business intelligence.
To do so, per the findings from our just completed study, “HRO Analytics: Utilizing Analytics to Improve Outsourcing Experiences”, HRO providers must address factors including:
• Demonstrate the effectiveness of the function or process such as sourcing effectiveness within recruitment or a new communications strategy within benefits administration services
• Deliver analytics around not only quantity, but also effectiveness, of recruitment, learning and benefits, e.g., utilization of various benefits programs offered and why they may vary across geographies
• Prove the return on investment in the relevant HR function, e.g., ROI of a specific training program or reduction in recruitment cycle time
• Assist in prioritizing HR activities and determining what should be provided with an appropriate budget, such as a particular training course which increases sales capabilities
• Provide insight into how to improve workforce performance and increase employee productivity
When reviewing the findings from our HRO Analytics market analysis, my colleague Helen Neale observed the following: “Indeed the surprising finding from the study was the low incidence in the use of higher level analytics within multi-process HRO arrangements, which, given their focus across a number of process areas, particularly within talent management, would provide a perfect platform for enabling HR through analytics. However, it seems the struggles providers are experiencing with developing a business model that works has impacted the value-added services originally promised in these contracts. NelsonHall expects the next wave of multi-process HRO contracts, which are more focused on payroll plus basic transactional and HR IT services, should enable a more robust platform for developing higher level analytics solutions. This will help, in the longer term, to prove the ROI of payroll plus multi-process HRO.”
Of course, implementing a robust, high-level HR analytics initiative requires an up-front investment by buyers and providers, in terms of both cost and time. But these can be mitigated by ROI achieved by the buy-side, and increased client satisfaction and development of repeatable solutions on the sell-side.
We believe that as the economy recovers, HR contracts will be likely to adopt more strategic level uses of analytics to justify HR spend, prove ROI for specific HR initiatives, and reduce costs associated with pain points in the organization. HRO providers are continually being asked by their clients to provide more value-added services, and suppliers can prove that value by moving outsourced HR analytics up the value chain.
Gary Bragar, Lead HRO Analyst, NelsonHall
HRO Insights 
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