By Heather Bussing

Once you centralize all of your analytics related to costs, you can quickly and easily figure out what’s going on. When HR can offer vital strategic information, they become an essential ally in managing the business. Here’s how people analytics can help.

People management tools are getting better and more sophisticated. As HR becomes the keeper of the data, they also have access to insights that make a difference to the bottom line.

To understand more about how people analytics can save you money, we talked to Brent Weiss, Senior Director of Product Management for DataCloud.

Q: You are a huge advocate for HR using people analytics to become a strategic and valuable business partner for senior leadership. How can we make that happen?

BW: In most organizations, people are both a major cost and essential to generating revenue. Leaders know this. But they generally get quarterly reports based on aggregated figures. By tracking what’s going on in real time, being able to dig into details and adding more context to analytics, it becomes possible to see where and how things are changing sooner.

For example, everyone tracks year over year earnings and expenses. With analytics, we can break down labor costs to track Full Time Employees and see how labor costs are shifting by location, department or even jobs.

When you input the budget, then you can see not only what you’re spending, but how that compares to what you planned to spend. Analytics can show you where you are over, under, net, and how things are trending.

Budgets are all about margins and profitability. When HR has real time insights on whether the organization is on track and can figure out what needs attention, they become an important strategic advisor.

Q: What are some other examples of how organizations can save money by combining business data with people analytics?

Combining sales data with payroll data allows you to track revenue against labor costs and measure labor productivity. You can calculate revenue per employee and understand your return on human capital investment.

If revenue is down, you can see whether sales are lower or employee costs are higher. You can dig into the data and see exactly where the issues are. It’s all there, and easy to monitor.

This invites strategic conversations between HR and leadership on essential business and financial issues and how to handle them.

Q: If you see your labor costs going up, what information do you want to understand to figure out whether there’s a problem or not?

BW: The first place to look is to see where pay has increased. Compare those costs with budget and see where you are over. Maybe the market requires higher wages or you’ve added some more expensive roles.

If that doesn’t explain things, look at overtime. Overtime is typically used as a short-term emergency approach when you have a big project or are missing some employees. But it’s not sustainable. Overtime is expensive and causes burn-out. If more people leave because they are burnt out, your problem just got worse.

If you discover you are paying a lot of overtime, then it’s time to look at whether you need more people.

Another place to look is scheduling. This is a common issue in hospitality, retail and service industries. If you have more employees working than you need, your scheduling is off and needs adjustment.

On the other side, when someone can’t come in, then you don’t have enough people. This tends to burn manager time where the manager fills in and doesn’t get other work done. Sometimes, it’s the cause of overtime for people who end up working longer shifts to cover scheduling gaps.

When you see increased labor costs, also look at premium time — shifts that require higher pay such as a night shift or hazard pay and compare that budget.

Any time your actual costs are exceeding what was budgeted, dig into the data to identify where it’s happening by location, department, or role. Then you can start problem solving before it gets out of hand.

Q: What other people analytics can save you money?

BW: Understanding both internal and external compensation data can make a difference in labor costs. Benchmarking pay is a valuable approach.

In setting compensation, you want to be competitive but not spend more than you need to. Benchmarking allows you to see the pay range for similar roles in your location and industry. You want to be close to or slightly under median with room to grow.

We’re seeing that before clients have access to benchmarking, pay is a lot more varied relative to the benchmark with higher instances of overpay and sometimes underpay.

Setting compensation correctly is saving clients money while helping them stay competitive for the people they want to hire and retain.

It’s also possible to look at the effectiveness of where the organization is advertising jobs and sourcing candidates so they can maximize their recruiting spend.

Once you can see what’s changes to costs, there is insight into what it happening and whether it calls for action, or maybe even celebration.

Q: What’s your best advice to HR in beginning to work with people analytics?

It’s easier than you think and worth the time to learn. Once you begin to understand what’s possible, you will wonder how you ever functioned without people analytics.

When you can centralize all your analytics related to costs, you can quickly and easily click into detail to figure out what’s going on. You can make your own dashboard for the things that you want to track and back up your ideas with data.

Once HR can offer strategic information, they become an essential ally to managing the business.

Meaningful insights about your people and processes are hidden in your people data. We’ll help you find them.

This article originally appeared on SPARK powered by ADP.

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