By Maria Black

For small businesses and startups, the concept of using employee data to make complex human resources decisions can be confusing and even intimidating.  It’s also easy to overlook the volume and variety of data that all businesses – even small ones – have on hand.  However, when properly evaluated, this data can yield enlightening insights that can significantly enhance an organization’s HR strategy.

By purposefully leveraging data analytics, companies big and small can make smart decisions that balance cost with the ability to attract and retain top talent.  The bottom line: Data analytics is a big deal no matter the size of an organization.

In today’s war for talent, the importance of making meaningful data-driven decisions is greater than ever.  Tracking metrics like turnover, salary by position, and retention can help small business owners better understand how certain investments in their employees are impacting their overall business.

Here are a few actions that small business owners can take to get started:

  • Ask the right questions. Before beginning any data gathering and analyzation processes, it’s important to take a step back to understand the business area, challenge, or question you’re trying to address.  Once that’s determined and there’s a clear understanding of what you’re trying to benchmark, you can then tackle how to leverage existing data or build the data model you need. If you’re worried about retaining your best employees, for example, some questions to consider include:
  1. Which employees are most likely to leave your organization?
  2. How does your retention for specific roles rank with other companies in your industry or geography?
  3. What are the key characteristics of a high-performing, long-term employee, and how do I invest to nurture those traits?
  • Look internally and Taking a close look at internal data can be hugely beneficial.  When this data is reviewed with a close eye on detail, broad trends within your organization can surface that can lead to moments of realization.  Don’t stop there:  By reviewing external data and comparing it with your own, you’ll have a better view of overall industry standards.
  • Don’t go at it alone. One way to review this external data is by partnering with a third-party HR company that tracks the clients’ own data and tracks what’s popular and trending in specific industries, geographies, companies of certain sizes, and more.  However, if an outside partnership is not the right option for your business, consider reviewing recent survey results that might offer insights into trends in your specific area of interest.
  • Monitor progress. It’s not enough to make data-driven decisions and implement a new plan; employers need to continuously monitor progress, set goals, and re-evaluate tactics, being nimble whenever it might be wise to adjust.
  •  Remember, data is not the only factor. Data is only one element in the decision-making process, and it should complement other resources being used to support any business case.  HR analytics can provide insights to help management make better decisions to acquire and retain top talent — but that’s just the beginning.  Business owners also need to consider their recruitment practices, their company’s culture, its work/life balance policies, and more.  All of these factors work together to create an environment that, when done right, fosters employee engagement and retention.

At the end of the day, HR decisions are still about people, and there are certain factors that can’t be quantified.  Data analytics can be a useful guide and valuable contributor to business decisions, but it pays to remember the distinction between data-informed decisions and the myth that analytics will tell you everything you might need to do.  There’s a human element that must be kept in mind even with data analytics.  Working with third-party HR experts can help small and midsized businesses assess the data they have and determine the best way to balance cost and the ability to attract and retain the people who will help their companies succeed.

Maria Black is the president of ADP TotalSource. @ADPTotalSource.