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Rapid developments in technology force companies to create new business innovations. Technological growth also leads to an increase in data volume. As a result, this has become a major challenge for businesses, especially for those still relying on traditional tools. The transition to more sophisticated tools is becoming increasingly crucial in the current era. To overcome these challenges, analytics plays a crucial role—it helps companies gain a competitive advantage in the long run and operate more sustainably.

Furthermore, to ensure business sustainability and success, the support of Human Resource Management (HRM) is essential. Even the HRM department requires analytics to gain a competitive advantage in the talent market and effectively manage employees. Therefore, analytics has become indispensable for businesses to stay ahead in the market and this raises the question:

How familiar are Indonesian companies with analytics, especially in the field of HR?

Before we answer, let’s take a look at how Human Resources work evolves. 

Analytics is indispensable 

According to Deloitte’s Global Human Capital Trends 2016 report, 77% of organizations consider people analytics essential, yet only 32% feel prepared to implement it. Additionally, 71% of respondents prioritize people analytics within their organization. However, in line with Deloitte’s 2017 findings, only 9% clearly understand which talent characteristics drive organizational effectiveness.

Despite collecting diverse datasets from multiple sources, many businesses still struggle to harness data effectively for HR analytics. Deloitte’s study indicates that over 80% of HR professionals rate their analytical capabilities as low–an alarming statistic in an increasingly data-driven business environment. As analytics become essential for new HR professionals, existing HR practitioners will need to upskill to engage in strategic discussions on how HR initiatives contribute to business outcomes.

HR is typically responsible for keeping employees engaged and reducing turnover. However, these tasks are often perceived as being too emotionally driven rather than having a direct business impact, which is a common concern among senior executives.

Senior executives make decisions based on data. Therefore, HR needs to change its approach if it wants to be heard and taken seriously by showcasing statistical data. Otherwise, every presentation and finding may be dismissed as intuition rather than fact.

This is where HR analytics helps the HR department establish credibility as a business partner. Presenting findings with real figures can make a significant impact.

Today, HR is expected to provide more solid information and personalized services to employees. These demands reinforce the need for analytics. On one hand, HR analytics helps answer business questions from top management. On the other hand, it enhances the employee experience by delivering more tailored and data-driven solutions. With data becoming more readily available, HR is now tasked with providing comprehensive information, deeper insights, and well-founded recommendations.

Patches of HR analytics in Indonesia

Indonesia is one of Southeast Asia’s fastest-growing economies, experiencing continuous expansion. According to the Ministry of Cooperatives and SMEs of Indonesia, Small and Medium Enterprises (SMEs) hold a 99.9% market share, with 62.9 million business units across the country. In contrast, large companies account for only 0.01% of the market share, with just 5,400 units. Additionally, SMEs employ 97% of the national workforce.

Many businesses are striving to modernize their operations, including adopting data-driven decision-making to enhance business strategies. This extends to the HR department, which needs to implement analytics. HR analytics is essential for effectively managing shifts, overtime, and attendance.

We keep mentioning HR analytics, so what exactly is it? HR analytics is a process that involves defining objectives, collecting data, evaluating metrics, analyzing information, and making strategic decisions to optimize workforce performance. In simple terms, HR analytics helps businesses improve efficiency and decision-making.

There is strong evidence that implementing analytics enhances business processes. Many leading manufacturing companies have integrated HR analytics software to streamline HR operations. While large companies have adopted these systems, small and medium enterprises (SMEs) are encouraged to do the same to improve efficiency and remain competitive.

Despite the growing adoption of HR analytics, many HR professionals in Indonesia remain unfamiliar with its data-driven aspects. For example, in Jakarta, HR professionals have been slow to adopt HR analytics, with many still relying on traditional methods like spreadsheets rather than dedicated HR analytics platforms.

Opportunities & Challenges 

HR analytics will unlock many opportunities in Indonesia, such as managing talent digitally. Unfortunately, to realize this potential, businesses need to invest in learning these new skills. SMEs in Indonesia often lack the necessary resources, forcing them to prioritize other goals over implementing these technologies.

For the most part, SMEs in Indonesia are not yet ready for the digital economy. The education curriculum does not adequately cover digital literacy. Even worse, some SMEs owned by older generations are not familiar with the internet or computers and still rely on manual paperwork. A lack of knowledge about the internet remains a major challenge for SMEs, preventing them from taking advantage of digital HR systems. Addressing these issues requires rigorous education and training, along with proper guidance and support from the government and educational institutions.

Within reach but out of grasp

From gaps in digital literacy to resistance to change among business owners, several factors make analytics difficult to implement in Indonesia. Despite the country’s vast potential and opportunities, companies often hesitate to invest in analytics. The root of the problem lies in both poor infrastructure and the reluctance of many to shift from manual paperwork to automation. Digitizing HR processes is crucial for SMEs, as it can lead to significant long-term advantages. 

References

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Deloitte (2016). Global Human Capital Trends 2016 The new organization: Different by design. [online] Available at: https://www2.deloitte.com/content/dam/Deloitte/global/Documents/HumanCapital/gx-dup-global-human-capital-trends-2016.pdf. (Accessed: 7 March 2025).

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