Apr 20, 2023

Why People Analytics should be a priority for your HR team

Learn what is people analytics and how investing in people analytics can help your business attract and retain talent.

Businesses big and small have been relying on data and analytics to drive better business outcomes for awhile. In recent years, we’re seeing more organizations integrating people analytics into HR management. HR leaders realize they can improve recruitment, performance, retention, and business outcomes through people analytics. Investing in this area now can keep you ahead of the curve during our increasingly competitive talent market, even if you’re a small or medium-sized business.

What is people analytics

People analytics turns talent and business data into helpful insights that guide company leaders to make informed talent management decisions.

As Cornerstone OnDemand puts it, “People analytics applies statistics, technology, and expertise to large sets of talent data, which results in making better management and business decisions for an organization.”

HR reports typically provide raw data; people analytics provide insights based on that data. It involves collecting data from internal and external sources and analyzing the data to get meaningful insights about people.

The insights enable you to make informed decisions related to recruitment, training, employee turnover, employee performance, etc. They could help you to improve your recruitment strategy, drive better employee engagement and productivity, reduce absenteeism, etc.

For example, you might have an HR report with data around your turnover rate. It might break down your employee turnover rate by time period, department, or manager. People analytics can then combine that data with other data sources to provide insights around why your employees are leaving.

For instance, people analytics may uncover that employees who don’t take vacation time are more likely to turnover. This insight could prompt you to encourage employees with high paid time off balances to unplug and recharge before they burn out and quit.

Types of Analytics: Descriptive and predictive analytics

The two types of analytics commonly used to get insights for answering people-related questions are descriptive and prescriptive analytics:

  • Descriptive Analytics - Used to analyze and interpret historical data to understand what happened. Basic statistics like sums, averages, standard deviations, percent changes are usually applied to describe what has happened.
  • Predictive Analytics - Used to predict what might happen (future outcomes or events) by analyzing current and historical data. Predictive analytics requires advanced techniques from data mining, statistics, modeling, and machine learning. You can use predictive analytics to predict things like absenteeism and turnovers.

How to get started with people analytics

Large companies like Google have the budgets to build their own proprietary people analytics databases and hire dedicated people analytics teams to run them. This investment makes good financial sense, as they could stand to lose millions of dollars by using intuition over data to make important business decisions.

But dedicated teams and proprietary software are not an option for most small- and medium-sized companies, which have much more limited resources.

Luckily, modern technology has put people analytics within reach for companies of all sizes.

Out-of-the-box solutions from vendors like Workday and Ultimate Software can provide important insights to HR leaders before it’s too late. For instance, Ultimate Software uses an algorithm to predict the likelihood that an employee leaves the company in the next 12 months. Managers could then plan stay interviews with flight risks to learn how to best retain those employees.

Fama is a talent screening software that helps identify toxic behavior such as bullying, harassment, intolerance, etc among potential hires and current employees by analyzing publicly available online content.

Other 3rd-party tools that could help you include Visier, Talentsoft, Graphext, and CruncHR.

If you’re ready to get started with people analytics, think carefully about your goals, the questions you’d like to answer, and which data sources you plan to use long-term. Many HRIS and ERP vendors provide people analytics capabilities, and it’s important to choose the best one for your company’s unique needs.

Best practices and recommendations for solving critical business problems like retention

  • Promote a culture of data-based decision making: HR has traditionally relied on gut feeling and instinct to make decisions. Now, HR can make data their friend and take advantage of the data available to make better decisions. To build and promote a data-driven culture, it’s important to educate everyone in the company on the benefits of using data analytics and prioritizing data over opinions or gut feelings when making decisions.
  • Start with clean data: If you put garbage in, you get garbage out. Keep your records clear and accurate to ensure you get the best results from your people analytics program. It’s helpful to use HR systems that integrate with one another to avoid mistakes related to manual data entry.
  • Identify the most important problems you want to solve: Start small and identify a few key business problems you want to solve and that you have sufficient data for. You may want to know things like: Why is my turnover rate increasing? How do I retain top performers? How do we identify job candidates that have the most potential to be top performers? How do our employee benefits and perks, like wellness benefits, contribute to employee performance? These questions can guide you in initially choosing the right analytics solutions, and navigating your solution for insights.
  • Use design thinking to brainstorm and test solutions: Once you’ve identified business problems or areas for improvement, utilize design thinking to empathize with your audience and define their needs. Then ideate, prototype, and test solutions. You will know something is working when you see the changes showing through in your people analytics solution.
  • Measure, rinse, and repeat: Collect the data, analyze it, and draw insights from the data. There are always more questions you can look into, issues to solve, and programs to optimize. Let’s say you discover that women are leaving your company at a higher rate than men, and find that pay inequity may be to blame. Once you solve that problem and find that you’re now retaining more women, look into potential pay inequities by race and ethnicity too.

How you’ll save organizational time and money by reducing turnover through data

A people analytics program will require an initial investment, but can save your company significant time and money in the long run.

For instance, if you knew what attributes your top performers had in common, so you could identify, hire, and train more people like them. This would almost certainly reduce the number of bad hires your company makes and therefore reduce voluntary and involuntary turnover.

Or if you knew your company’s top drivers for regrettable turnover, you could proactively address them and retain more of your top performers. This could mean addressing a gender pay gap before your female employees leave, or addressing a bad manager before an entire department quits.

Backfilling positions is both time-consuming and costly, and an investment in people analytics could pay for itself many times over if it reduced attrition. In fact, people analytics is linked to a 50 percent decrease in attrition rates.

Final thoughts on people analytics

Where business decisions were once based on intuition, now they can be based on data. Companies can use people analytics to make informed decisions around hiring, performance, retention, and more. I

Companies can even go a step further with predictive analytics to make proactive business changes before any damage is done. This approach is sure to make an impact on the bottom line, helping HR to get a well-deserved seat at the table.

If your firm's HR department lack the resources and expertise to implement people analytics as well as modern HR initiatives, it is worthwhile to work with an outsourced HR provider.

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