How Can People Analytics Drive Business Success?
More than ever, organizations are data-driven. We owe this partly to rapid technological developments, which have made access to information virtually endless, and partly to a cultural change: companies and their leaders increasingly realize that the use of smart data can be a significant catalyst for business transformation and growth. We are also better able to understand and interpret data. This certainly applies to people analytics and HR analytics. In this article, you will read why people and HR analytics are essential for your business, and how best to use them.
- Intro: The Truth is Out There
- What is People Analytics (HR Analytics)?
- The Difference Between HR, Talent & People Analytics
- Goal and Objectives of People Analytics
- How Can People Analytics Help to Reach Business Goals?
- What metrics are used in People Analytics/HR Analytics?
- What are the Best People Analytics Tools?
- Importance of People Analytics
- People Analytics Course
1. Intro: The Truth Is Out There
HR teams, professional and skilled as they may be, have long struggled to make objective personnel decisions. HR decisions were often based on gut feelings and personal beliefs, without data to back up those choices. This way, injustices in the workplace often went unnoticed – not necessarily with any wrong intentions involved. A good example is the gender pay gap or the ‘glass ceiling,’ where promotions and pay raises were (and sometimes still are) based on prejudice and privileges rather than relying on objective performance figures.
People analytics changes this. It gives HR teams access to valuable data. With that data, they can develop insights to make informed decisions about countless personnel processes, like recruitment, payment, learning, and the entire employee journey. Needless to say, these insights are relevant to the whole company and can have a considerable impact on employee happiness. It turns out the truth can sometimes be quite surprising when the actual data comes to light.
2. What is People Analytics?
So what is people analytics (also referred to as Human Resource analytics) exactly? It can be defined as an evidence-based approach for making adequate decisions on deploying human capital assets, using various methods and techniques ranging from key performance indicators to complex business algorithms and predictive models. Simply said, it’s about analyzing employee data to develop better insights into the company and its people.
In addition, people analytics is also used to study and optimize company culture. Company culture includes both written and unwritten rules and behaviors, procedures, and systems. The subjective and intuitive nature of the many elements linked to company culture makes it difficult to analyze. However, using feedback tools like internal interviews, questionnaires and engagement surveys can provide a lot of data on the values and norms within the company, how people behave and how they feel.
3. What are the Differences between HR, Talent & People Analytics?
HR analytics, talent analytics and people analytics: these terms all refer to methodologies that give insights into employee-related data, and improve strategic decision-making. They have a lot of common ground, but their scope somewhat differs.
- HR analytics is a form of people analytics, but the focus is specifically on HR-related topics such as time to hire, retention, absenteeism, and employee turnover. The main goal here is to optimize these processes by predominantly looking at ‘hard’ data like age, education, turnover rates, recruitment costs, etc. For example: analyzing the cost per hire to optimize the recruitment process
- Talent analytics is all about better understanding the skills, characteristics and behavior of talent: both within the existing workforce and the potential hiring pool. These target groups are essential for an organization’s continuity, change or growth, so it’s important to know what makes them tick, how they interact, what their strengths and weaknesses are, and how these can be improved. This form of analysis often uses ‘soft’ data like personality traits, skill sets and behavior. For example: conducting a skills analysis to identify top performers in the sales team
- People analytics has become a popular term in recent years and is often interchanged with HR analytics. But it’s broader than that. It includes a more holistic approach to people data and also tries to understand and predict future business success and employee happiness. For example: doing in-depth research about the attitude toward diversity and inclusion in the company, or analyzing what kind of talent will be needed in three years
No matter what name you give to the methodology, it all boils down to this: data science in HR and an analytical approach to talent and people management are on the rise. Deloitte even talks about a seismic shift in HR: driven by the widespread adoption of cloud HR systems, companies are investing heavily in programs to use data for all aspects of workforce planning, talent management, and operational improvement.
CEOs and CHROs now understand that
people analytics is a vital part of running a
Josh Bersin, Global HR Industry Analyst
4. Goal and Objectives of People Analytics
The ultimate goal of people analytics is to provide meaningful insights on various types of people- and HR data, and by providing that information, actively contribute to the business’s bottom line. However, the objectives of people analytics may vary from one organization to another. It all depends on a combination of various elements: in what type of industry the company operates, the business size, it’s financial standing, the composition of its teams, its vision of corporate social responsibility, plus external factors like market conditions, competition, technological developments, and legislation.
Generally speaking, when we look at the most common internal and external business objectives, they often include the following:
- Boost productivity
- Improve performance
- Realize business growth
- Improve the employee experience
- Improve diversity, equity, and inclusion in the workplace
- Encourage self-development
- Improve well-being and employee satisfaction
- Improve employee retention
5. How Can People Analytics Help to Reach Business Goals?
How can people analytics help drive business success and tackle organizational and HR challenges? Here are a few examples:
People analytics can help HR and recruitment teams to find the ideal candidates for their job listings, for instance by analyzing where top candidates found a particular vacancy. Was it a career platform, LinkedIn, or the company website? With this information, they can then focus on the right source and drop the ones that don’t work well. People’s data can also help to determine the skills candidates need for a specific job. Making smart recruitment choices will save money and attract the best talent.
Retention and turnover
HR data can give a clear insight into the reasons why people stay or leave. When you’re able to identify potential risk areas and trends, you can take action by investing in L&D or other resources that will boost retention rates and lower employee turnover. This way, a company won’t only hold on to top performers but also attract suitable candidates and anticipate future staffing needs.
Overtime costs can quickly become a budgetary nightmare. To analyze the root causes of overtime, you need HR analytics. Understanding these data will make it easier to come up with solutions to the problem. It’s a useful metric that helps HR strategically manage the workforce needs – now and in the future.
Optimizing the employee experience can become much easier with the right data. For instance, AI can help to map skill levels in different departments. Then HR and L&D can act on it by giving people the right tools to develop their talents and become their best selves. Surveys and interviews can identify the drivers of engagement and predict what actions will have the most significant impact on improving it.
HR analytics can help identify health and safety issues. This data can be used to pinpoint the factors causing work absenteeism, as well as the extent to which work absenteeism is a cost driver for the business.
People data can also give insights into how sales figures can be improved. You can for instance analyze which skills stand out when it comes to employee performance, or track which training programs have a positive impact on sales figures.
Learning and development
Measuring and illustrating the impact of L&D strategies helps organizations optimize their training and bridge skill gaps, which is directly linked to future business success. Another interesting metric is to look at training expenses per employee, and analyze how cost-efficient a learning strategy is.
The influence of people analytics in everyday decision-making is indisputable. According to research, organizations employing people analytics in decision-making are more than three times more effective than their peers.
6. What Metrics are used in People Analytics?
There are hundreds of metrics (quantifiable measures) to track business processes, simply because there are so many types of organizations, each with its own goals and objectives. The key is to find out which data is important for the C-suite and various department leaders. For instance, a sales manager may not be interested in how much it costs to recruit a new hire. It is however relevant for that person to know what the average revenue per staff member is, and how that affects company profits.
Based on the key performance indicators (KPIs) of the organization, HR can propose the metrics that can influence these KPIs. Of course, HR professionals can’t have all personnel data at their fingertips. However, it is useful to have some important numbers ready so that they – and the whole company – can act on them.
Here are some common metrics that can be measured by people analytics:
- Costs per hire: what does it cost to recruit new talent? This includes internal costs, like the salary of hiring managers, and external costs, like agency fees and employer branding activities. This metric will give clear insights into the efficiency of the recruitment process or the company’s brand image
- Time to hire: how much time is there between getting in touch with a potential job candidate and their acceptance of the job offer? This metric can help recruiters improve the candidate experience
- First-year turnover: how many new hires leave the company within a year? This metric can give interesting insights about the company culture, or about (wrong) expectations job applicants have about their job
- Staff turnover: how many employees voluntarily leave on an annual basis? This may say something about (a lack of) opportunities for growth within the company
- Revenue per employee: how much money do employees bring in on average? People who work efficiently, are motivated and happy in their jobs, and usually generate more revenue. There is a number of actions to get better results: for instance by creating a healthier and friendlier working environment
- Absenteeism: how often do employees call in sick? People who are frequently absent may not be satisfied with their jobs. With this metric companies can gain insight into hidden causes of absenteeism and overall employee health issues
- Overtime costs: what do you pay in overtime per year? If the number of overtime hours is rising, chances are there’s not enough staff for the amount of work. This means you have to organize your business smarter, for example by automating certain tasks
- Employee engagement and satisfaction: how engaged are employees with the company? Do they feel valued in their roles, are they happy in the team and do they have a good relationship with their managers? There are countless ways to measure these metrics, such as surveys and one-on-one meetings. Obviously, data on absenteeism and employee turnover can also say a lot about the overall employee happiness in the company
- Training costs per employee: how much is spent on developing talent and skills within the company?
- Training efficiency: probably even more important than the training costs per employee is measuring the efficiency of training. This data is obtained by multiple data points, like test scores and performance improvement after the training. This metric also has a link to productivity and employee well-being, as high-quality training programs boost morale and the quality of work. On the other hand, poor training efficiency may require L&D to re-evaluate the training expenditure per employee
The list is endless, and can also include more in-depth metrics for instance equal pay and pay equity, the percentage of diverse employees in leadership positions, gender diversity across organization levels, and retention rates across employee groups. etc.
7. What are the Best People Analytics Tools?
It hasn’t always been easy for HR departments to generate and interpret data in order to make better people decisions. Too often they had to cobble together data from a bunch of spreadsheets, long evaluation forms, and old-fashioned, administrative systems. Tracking and analyzing relevant metrics for instance gender pay equity, employee engagement, and retention rates was usually an agonizing, time-consuming chore.
While these obstacles still exist, the ‘people-first’ approach (recognizing that people are a company’s most important asset) has boosted the development of sophisticated, cloud-based tools and human resource information systems (HRIS) that support organizational decision making. It has changed the role of HR analytics in a positive way.
[H3] Best Rated Cloud HRIS vendors
Many HR-tech companies offer next-generation software and products that include functions for collecting, processing, reporting, and visualizing data with the click of a mouse button. Some programs have specific functions (like talent analytics), while others come as a complete, all-in-one suite.
Like every year, Gartner compiled a list of top performing vendors, based on their reviews and customer ratings. The top 10 for the EMEA region is dominated by the following names:
- Infinity Zucchetti
- Zing HR
- Bright HR
- UKG Ready
- Oracle Fusion Cloud HCM
- Bamboo HR
Research on people analytics tools
It turns out that most companies tend to use a variety of software tools. In a recent study on the people analytics technology market, Deloitte found that “the most mature organizations – those furthest along in their analytics journey – reported using an average of seven analytics tools, as compared with four tools in the lowest-maturity organizations.”
The study also showed that:
- 91 percent of organizations are regularly using basic data-analysis tools such as spreadsheets;
- 48 percent use embedded analytics in their HR or talent systems;
- 38 percent use data-visualization tools;
- 35 percent use data warehouses;
- 31 percent use analytics embedded in an enterprise resource planning system;
- Just 6 percent use cognitive tools like AI and machine learning
Sample People Analytics Report
Now with all these different people analytics tools and smart technologies that HR departments can use, spending valuable time on writing boring, elaborate reports have become a thing of the past. With the right HRIS, HR can pull a dynamic and accessible report on practically any HR process and present management with interesting graphics and visualizations too. Some examples of people analytics reports are:
- Employee performance reports
- Workforce planning reports
- L&D reports
- Strategic HR analyses
- Predictive HR analyses
- Forecasting and budget reports
- D&I reports
Learn more: check out the key takeaways from our webinar ‘Working with Data’
8. Why People Analytics is Important
People analytics offers HR a great opportunity to better formulate HR strategies and establish more efficient people processes – without losing track of the ‘human’ aspect. While personal contact with employees is still central, data analysis brings substantial added value to the organization’s results. It helps HR professionals with reliable, consistent decision-making, based on the adequate measurement and thorough analysis of factual information.
People analytics contributes to improving that decision-making in two ways:
- Decisions are based on reliable data and hard proven facts, on how processes happen and what actually takes place in the organization. This provides better knowledge of what works and what doesn’t work and can improve human resources policies in a targeted way
- Decisions are made more carefully, are better founded in the day-to-day reality of the organization and are much less influenced by unconscious bias, subjective judgments, and personal opinions of the decision-makers. This results in an improved employee experience and better business results
Data collection should not be an end in itself. It’s about what you do with it as an HR department. Gaining insights from HR data is one thing, then you have to act on it.
Rebecca Wetteman, HR-Tech influencer & Principal at Valoir Market Research
9. People Analytics Course
As organizations become more data-driven, so are HR departments. In fact, analytical thinking is considered to be one of the essential skills of the future, according to the World Economic Forum. This doesn’t mean HR professionals need to become data analysts overnight: it requires some training and practice to work with HR metrics and people analytics. At Lepaya, we recognize this. That’s why we offer companies engaging training on analytical thinking, which enables employees to tackle any data analytics challenge confidently, so they can make informed organizational decisions.Reach out
Which skills are essential and needed for your employees to become future-proof?Download skills index