HR was traditionally viewed through a narrow lens — a function that relied on intuition to make decisions with no real way of measuring their impact. The closest HR managers got to analytics was reporting on a handful of metrics, such as headcount, employee retention, and turnover. However, they rarely got involved in extracting insights for business leaders and driving company-wide decisions.
Today, analytics is at the center of HR. Known as people analytics, it’s what enables businesses to make informed strategic decisions about workforce and talent management. 73% of HR professionals say that people analytics will remain a top priority for their organizations until at least 2025, according to LinkedIn.
Your company will experience higher efficiency, happier employees, and better decision-making by relying on people analytics. More businesses are beginning to realize these benefits and are investing in analytics solutions to gain a competitive edge.
What is People Analytics?
People analytics — also known as HR or talent analytics — is the process of using your employee data to make informed decisions that result in positive business outcomes. It’s used to track the health of a company to ensure smooth talent acquisition, high engagement levels, and effective training and development, among other things.
People analytics goes beyond HR data and looks at information from other departments, such as finance, engineering/production, and customer support. Some examples of data points that people analytics looks at include employee tenure, employee engagement, customer satisfaction, productivity, hiring costs, gender pay equity, and revenue. The process requires the use of an analytics tool that allows you to:
- Gather data from disparate sources in a central location
- Transform the data into actionable insights
- Make reports that can be easily understood by business leadership
Modern people analytics is more than simply gathering data and creating pretty visualizations (though they are two major steps in the process). It also entails applying prescriptive and predictive analytics to help HR and other business leaders connect the dots.
For instance, if employee engagement levels are trending downward, predictive analysis would suggest a rise in turnover rate. Prescriptive analysis, on the other hand, would suggest HR interventions like improved recognition, consistent feedback, and better compensation to retain employees. That’s just one simple example of the application of people analytics — there are countless other ways it can be used to make organization-wide improvements.
The Key Benefits of Implementing People Analytics
Investing in people analytics has a direct impact on the efficiency and, therefore, the profitability of your business. With the power of data, you can:
Tackle Problems Before They Arise
Perhaps the biggest benefit of people analytics is that it gives you deeper insights into your HR processes. Consistently tracking data helps you identify problematic trends and intervene before they mature into real issues instead of making reactive decisions to tackle problems that already exist.
For instance, a company could investigate to find out what might be causing talent to leave. But it would be too late since the damage has already been done.
However, that same company could have been able to anticipate a rise in attrition before people left had it proactively tracked productivity, attendance, and industry/global trends. Then, they could run surveys to further understand how to improve the employee experience to prevent people from quitting.
Make Confident HR Decisions Backed with Data
A solid people analytics engine gives managers the information they need to confidently call the shots about all of their HR functions. Instead of making educated guesses about what might be behind ineffective recruitment, you can use data to identify bottlenecks and issues in the process. You could then use the insights extracted from it to drive sound decisions. And those decisions are likely to have a positive impact since they’ll be based on real data instead of mere gut feeling.
Improve Company-Wide Performance
Data provides clarity into what might be causing your business to underperform. Modern analytics solutions are even capable of enabling companies to gather real-time performance data. They could use that data to identify trends in productivity and make inferences regarding what could be done to optimize performance.
For example, customer satisfaction score (CSAT) could be directly linked to employee performance. If CSAT takes a dip, it could be because your customer support team doesn’t have the necessary information or is overwhelmed because of a sudden rise in complaints. Managers can then dig deeper to get more insights.
By analyzing data from different parts of the organization, HR acts as an integral part of the business. Providing insights that continuously help improve business earns HR managers a seat at the senior leadership table.
4 Tips to Get the Most Out of Your People Analytics Initiatives
Succeeding with people analytics isn’t as simple as implementing a tech tool only to retain outdated processes. The process warrants careful planning and the assurance that you’re making use of your data to drive decisions. Here are some best practices that will help you succeed.
Create a People Analytics Strategy
A people analytics strategy is an action plan that describes your goals and intentions for tracking and analyzing organizational data. It’s a subset of a broader digital HR strategy; it acts as a blueprint that helps you stay on track and allocate your resources efficiently.
Without one, you risk looking at unimportant data points, failing to connect the dots, and making decisions with little or no impact. Here are the essential steps involved in creating one.
- Set Goals: Your people analytics strategy needs to align with your business strategy. Start by setting clear, measurable, and impactful goals. Think about the existing and potential problems with major implications for your business, then set goals that will solve them. For example, a goal could be to keep the retention rate high, increase the impact of learning and development, or cut down recruitment costs.
- Select Relevant Data: Zero in on relevant metrics based on the goal(s) you set. Consider the same example from above of increasing retention rate. The metrics to track could be employee net promoter score (eNPS), engagement, and absenteeism. Also, think of the non-HR data you want to track across your organization that will add clarity to the problem you are trying to solve.
- Describe Your Tech Needs: Describe what an ideal people analytics platform should look like based on your organization size, the number of data points, and your goals. This description will change as your organization, goals, and needs evolve.
Clearly Define the Process
People analytics consists of a series of processes — typically data collection, cleaning, analysis, and reporting/interpretation. It helps to break these processes down into standardized steps.
Standardizing your people analytics processes will help clarify the role each person involved has to play and ensure that time isn’t wasted on second-guessing. For example, the HR team will know when to run the analysis, what to include in the reports, or what sequence of steps to follow. As a result, the entire process becomes more efficient, and there are fewer chances of errors. Make sure these standardized steps are available in a central document that’s readily accessible to your team members. Any new team member would also be able to get started right away with standardized, well-documented steps.
Defining the processes will also give you perspective on whether or not you have the right talent with the appropriate skillsets to handle people analytics. A company may need to hire a data scientist if it generates large volumes of data.
Check for Potential Compliance Issues
HR needs to act as a custodian of employee data, with data privacy laws becoming increasingly stringent. It’s crucial to know what data privacy laws apply to your business and ensure compliance.
At the very least, you shouldn’t track and use the employee data without their permission. Plus, make sure that you have all the necessary data privacy protocols and a secured system in place to avoid any potential breaches.
That said, different laws (such as the GDPR, CCPA, etc.) have different regulatory requirements that pertain to employee data. Make sure you understand which regulations you need to comply with. Use your general counsel for guidance.
Foster a Culture of Analytical Decision-Making
It’s easy to slip back into the habit of making important decisions based on personal observations. Therefore, you need to create a culture that values making data-backed decisions instead of relying on gut feeling. Keep in mind that this is an ongoing process and isn’t as simple as using analytics software and creating documentation, though that helps.
Encourage your top leadership to use data to make all decisions, irrespective of their impact. In doing so, they’ll inspire other managers to rely on data to make executive decisions to improve the employee experience and operations.
Finally, make sure the required data is readily available to enable everyone to make informed decisions. Managers will feel discouraged from making data-backed decisions if they’re starved for information.
What’s the Future for People Analytics?
The field of people analytics is constantly evolving. In the coming years, more businesses will transition to advanced analytics solutions powered by artificial intelligence and machine learning algorithms to aid in strategic decision-making. Businesses will need to invest in better training and potentially hire data science experts to handle the day-to-day analytics.
Furthermore, organizations that are HR analytics leaders are ten times more likely to be highly successful at relaying insights to business leadership than analytics laggards. That means HR professionals who use analytics are likely to have a strong say in strategic decisions.
All things considered, the future of people analytics sounds exciting. And the best part? It’s never too late to get started.