There’s no question about it: Using analytics is important for business.
Without them, companies would still be in the dark about their customers’ desires and demands, inventory forecasting would still be based on what you think is selling, and equipment maintenance would still be a surprise.
But can you make decisions about employee behavior from a bunch of data points?
The answer is yes. And HR departments are just coming to that realization.
In its Human Capital Trends study, Deloitte University Press found 3 out of 4 companies believed using people analytics is important.
At the end of the day, employees are the people who make the real magic happen. And they aren’t a small investment either. Your workforce is up to 75% of the total cost of doing business. So just like your knowing customers, you want to know the ins and outs of the people sitting right outside your office door.
People analytics (also known as talent analytics or human resources analytics) sheds light on the behavior of current and potential employees, bringing HR to a whole new level of motivation and engagement.
Where Analytics is Taking HR
People analytics can be leveraged in a number of ways to improve the bottom line of a company. Here are the top three HR areas analytics can benefit:
The recent growth in the capabilities of applicant-tracking systems has changed how HR manages the hiring process. But, no matter how objectively the applicant’s information is presented, a decision might be subject to bias after interviewing a person.
“People hire what they’re comfortable with, but that’s not how you should hire people,” said OrangeHRM CEO Sujee Saparamadu in an interview with Better Buys. “When you do small talk before the interview, this leads to subconscious hiring on a confirmation bias. That’s where personality insight comes into the picture.”
People analytics can be used as a sort of “checks and balances” system to eliminate as much bias as possible when working through the hiring process.
On top of that, having clear data about a person’s traits can offer other insights, such as if the applicant’s personality will fit well into the company’s culture.
But people analytics can give insights beyond making the hire. For example, Cade Massey, practice professor of operations and information management at Wharton University, and Adam Grant, professor of management and psychology and leader of Wharton’s people analytics initiative, discussed with Knowledge@Wharton how Google has explored the onboarding process. It was found that the most critical person to meet on the first day of a new job is the manager you’ll be answering to. This will build the bond between employee and employer.
“It’s not that we didn’t know it was important for you to meet your manager,” Grant said. “But I think all of us, myself included, really underestimated how much of an effect that would have on day one.”
2.) Employee Retention/Turnover
With people analytics, a company can do more than just recognize the rate of company turnover or retention.
By pulling different data points and drilling down into the information, a company can look into employee behavior and determine the traits of loyal employees versus employees at-risk of leaving.
This type of insight allows HR to understand what makes its employees stay or leave, just as a business figures out what drives customers’ purchasing decisions. Relying on evidence-based insights instead of gut instincts, HR can make decisions to improve employee retention.
3.) Employee Performance
Employee performance is another area where preconceived ideas and biases are hard to shake.
People analytics gives HR the ability to identify capability gaps between employees in the same department, and what training is needed to close those gaps. This is especially important for bringing new hires up to speed on workflow processes and expectations faster.
By digging into the information, you can also identify which new hires will be high and low performers. This will help you understand how to best motivate and engage with employees to improve the company’s overall bottom line.
Although people analytics are on the rise, HR is still in the beginning stages of using the data-driven decision making model.
Michael Housman, Cornerstone OnDemand’s Chief Analytics Officer, has named four stages of people analytics:
- Ad hoc question answering
- Retrospective data analysis
- Predictive analytics
- Experimental design
Of those four stages, Houseman believes most organizations are between ad hoc question answering and retrospective data analysis. This means that most HR departments are manually pulling data from Excel sheets or a centralized location to answer specific questions, like who are the high-performing employees and if the referral program is working.
According to a collaborative study by Harvard Business Review (HBR) and Visier, only 9% of companies surveyed use predictive analytics to influence workforce decisions. That’s a small handful of companies getting to the heart of what it takes to recruit, retain and motivate employees to drive a better business.
Why is HR so wary of jumping on the data-driven train?
Many, if not all, of HR decisions thus far have been based on intuition. Even with robust applicant tracking and talent management systems, in the end, the HR professional still held the reigns without needing in-depth data to back up a decision.
HR professionals aren’t statisticians or analytists. So it’s understandable why many don’t feel comfortable making data-driven decisions.
In the same study mentioned above, HBR and Visier note that the biggest obstacle to HR achieving better data, metrics and analysis is data problems. In fact, 54% said the data was inaccurate, inconsistent or was too hard to access. Another hurdle (for 47% of companies): a lack of analytic know-how or skills among HR professionals.
In the discussion at Wharton, Massey made an important point to remember:
“People analytics is mainly just bringing data where data hasn’t been used before.”
Like any data-driven initiative, success is all in the planning.
Delloite University Press offers six tips to getting HR started with people analytics:
- Build the right team. The team should include diverse individuals who provide a combination of business knowledge and technical skills.
- Start with the tools you have. Use the analytical tools in the software you already have before investing in new software. This gives you a better understanding of how to use your data and what technology you’ll need down the line.
- Partner with IT. Data quality is a big issue, especially when working with data based on people. Establish a relationship with IT early on to help with data cleansing and integrity.
- Use analytics on HR department to show potential. Try using data to improve the operations of the HR department to show the potential of using people analytics.
- Focus on business needs. Analytics isn’t solely an HR tool. Focus on larger issues within the company that can relate to HR.
- Upgrade technology platforms. Many HR professionals still use Excel sheets and outdated technologies to get data. Once you’ve evaluated the tools you have, update your technology to the best platforms suited for the company (example: using the cloud).