Traditional HR practices are slowly becoming outdated, as new concepts such as ‘people analytics’ take over. Analytics have been used to create data and extract insight for a while. Only now, they are being integrated into HR management.
Over the years, professionals have repeatedly asked themselves, what does HR do exactly? The concepts of HR analytics and People Analytics were born, based on their answers.
According to Bersin, 69% of companies are aiming to build a People Analytics database. In addition, Nucleus Research found that investing in analytics returns $9.01 per dollar spent. This incentivizes companies to invest in analytics and adopt them.
Continue reading to learn all about people analytics, so you can make your HR process more efficient.
What is HR Analytics?
HR analytics is the use of statistical tools, models, and analyses to assess employee-based factors and improve HR practices, to increase overall business outcomes. It involves using data gathered from people working in a number of industries, to determine what the best human resources management methods are.
The term ‘HR analytics’ was unheard of until the mid-2000s, when software providers started to offer ‘HR analytics tools’. A quick peek at Google Trends shows that the phrase started to appear in search terms in early 2004, and gained traction after 2008.
What is People Analytics?
After HR analytics started picking up, people began using interchangeable terms for it, like workforce analytics, talent analytics, and people analytics.
Today, people analytics is the more often used term, seeing as all HR practices relate to people. ‘HR analytics’ is now used to describe a more general category of tools, while ‘people analytics’ is used when focusing on the employee experience, and ways to improve HR practices for better integration.
However, the idea remains the same. People analytics uses statistical data sets, models, and analysis on several levels to improve people-related HR practices. This is to further integrate business practices through data-driven tools. Using actionable insights, officials can make informed decisions to improve companies in the long term.
The Foundations of People Analytics
Even in 2019, a lot of companies lack an effective analytics-based HR process, for optimal growth. According to Bright, almost 50% of all new organizations have no analytics professionals.
There are two reasons for that. Firstly, many people (more importantly, HR professionals) still don’t know about people analytics as a whole. Secondly, the ones who do know, haven’t implemented it because they don’t understand it fully.
The following provides a basic understanding of people analytics, through concepts such as employee engagement, experience, and HR.
Workforce Planning Platforms
Workforce planning involves a careful analysis of an organization’s current and future needs. These needs rely on quantitative and predictive approaches that use technology-enhanced tools and techniques. This helps identify actionable insights so that businesses can make better decisions and achieve their objectives.
Companies have started to integrate various departmental processes into each other, to enhance the overall business process. For example, some companies have integrated talent acquisition programs with financial forecasting, which can help identify future changes to the workforce in terms of incoming and existing talent. Using predictive models, they can analyze, plan, and strategize accordingly.
Using specially designed workforce planning platforms, companies can now identify workforce issues before they occur.
Talent Sourcing Tools
With the job market being as competitive as it is, it can be hard to find the ‘right’ employees for your organization. Since employees are the most important part of an organization, it’s important to find ones that are capable and a good cultural fit.
Talent sourcing is the concept of using people analytics to identify and analyze top talent from a pool of candidates. The idea is to use data-driven tools and techniques to optimize hiring channels and sources, so that companies can hire employees that are best suited to them.
A lot of companies have already been using people analytic tools like talent sourcing to improve recruitment. Analytics highlight the traits and qualities of current high-performing employees, which lets HR professionals build personas around those qualities. These personas are then used to compare and evaluate potential recruits.
The recruits that possess all (or most) of the qualities of a persona are highlighted and chosen. This not only saves time and money but also ensures that the right person for the job is recruited.
Talent acquisition is the next step after talent sourcing. While talent sourcing helps you find the most relevant candidates, talent acquisition helps you properly vet them, ensuring that they make a good addition to the company.
The idea is to optimize the entire interview-hiring process. Companies are already integrating HR analytics with talent acquisition by creating tools that help skip the repetitive processes. They do so by setting pre-determined standards and use them to develop HR interview question & answers that automatically assess a candidate. This negates the need to interview and review every candidate separately.
This not only reduces the time and effort that goes into talent acquisition, but prevents the hiring of unsuitable candidates as well.
Onboarding and Employee Engagement
The next process is onboarding, which also happens to be one of the best employee engagement ideas for the modern workplace. Onboarding includes the training and mentoring of a new employee according to the company culture and policies.
Successful employee engagement at this crucial time ensures that the employee starts working with a productive mindset. People analytics can be used to simplify onboarding by automating exercises, tasks, and paperwork.
To check whether the new employee is settling in, companies often have them fill out surveys. Here’s an employee engagement survey questions template, to get you started.
Performance Management and Employee Lifetime Value
The employee lifetime value helps you assess how much an employee can contribute to your company. This is similar to how customer lifetime value provides you an estimate of your revenue. People analytics is used to combine performance management with employee lifetime value metrics, to provide regular updates on employee performance.
These are utilized within employee retention strategies by adding in other forms of feedback tools. The results are used to identify trends, as well as, employee strengths and weaknesses, so that employers can make informed decisions and enact change based on actionable insights. Companies used feedback platforms to make this entire process easier and more efficient.
These feedback platforms use real-time metrics and an optimized feedback system to keep track of all employee-related metrics. This ensures that their personal and company goals are being worked upon.
One of the biggest problems that companies face is employee retention. To counter this issue, some companies implement team building activities to build employee relationships, while others offer new and improved employee benefits.
The idea here is to use people analytics to identify high-performing employees and the potential reasons why they might leave. This allows employers to deploy preventative measures to retain these employees. HR analytics tools allow you to use heat maps, feedback software, and other data to improve the employee experiences of certain employees.
Even giants such as Nielson have adopted people analytics to help with talent retention, by developing models that help them predict turnover rates, so they can make the appropriate changes in a timely manner.
The last foundation is focused on using people analytics to improve employee well-being, as well as, create an environment that’s appropriate for all employees. Employers use employee appreciation ideas to increase engagement and overall employee experience.
Wellness programs are also used to connect with disengaged employees by providing pulse polls to find out overall employee satisfaction. This is then used to deploy appropriate engagement measures.
The IMPACT Cycle
Implementing people analytics is, however, one half of a whole. The IMPACT cycle is the other half. The data collected via the foundations is processed using the IMPACT cycle to get actionable insights.
The six-stage IMPACT cycle consists of the following steps:
- Identify the question in place,
- Master the data that is collected,
- Provide the meaning for said data,
- Brainstorm actionable recommendations,
- Communicate the insights after analysis,
- Track the outcomes of using these insights.
These steps process the foundational insights into data-driven results through a controlled and accurate statistical approach.
Types of People Analytics
Contrary to popular belief, people analytics is not a limited concept and can be used in a wide variety of applications. There are currently four types of people analytics.
- Cognitive Analytics: This type involves the usage of unpredictable and unstructured data sets to get insights on uncertain problems that have no straightforward or premeditated answer or solution. The data gathered for cognitive analytics is very diverse, and can be collected from any source, known or unknown. This is why machine learning technology is used to make sense of the data by seeking patterns and commonalities in the data with predetermined data sets, to get actionable insights.
- Descriptive Analytics: The idea behind descriptive analytics is to provide a detailed analysis of past events. Through data mining and aggregation, past occurrences are analyzed, and a descriptive analysis is derived to make sense of the data. This method is used in the recruitment process and to measure training attendance levels, among other things. Companies usually have tons of data regarding these practices. Descriptive analytics simply combine this data and processes it in a meaningful way, so it can be better understood and acted upon.
- Prescriptive Analytics: Often confused with predictive analytics, prescriptive analytics involves the use of complex simulation and optimization algorithms, to determine the best possible action one can take with the provided information. This can be used in several ways, for example, to help employees achieve their professional goals and/or fill out a skill gap. The organization can then take several possible paths with higher possibilities of success.
- Predictive Analytics: While prescriptive analytics involves simulated data, predictive analytics uses fact-based data, including forecasts and statistical models, among other things. These data sets are used to predict the most likely outcomes, so that factors such as the expected skill gap and recruitment results can be deduced. However, recently, a mix of both historical data and algorithmic computing has been used to develop models that can predict future occurrences based on data collected in the past. If there isn’t enough data, the program simply uses similar data from other data sets or adds placeholder ‘pieces’ to develop workable models.
All of the aforementioned HR analytic techniques help companies evaluate and analyze their organizational needs. Companies can choose to implement one or more of the techniques to develop solutions based on actionable insights.
Process of Implementing People Analytics
The entire point of people analytics is to use the insights derived from data acquisition, to integrate and improve an organization’s framework. The IMPACT cycle is used to implement the insights found by people analytics, so that an organization can maximize the benefits of said insights.
The rule of thumb should be to always start with the red flags and work your way up. Every bit of data collected throughout the company through surveys, communications, and testing, should be compiled. This is so that the more pressing issues are dealt with first.
In addition, you need to clearly define your metrics and goals so that the framework can be adjusted accordingly. This helps create a workable recurring program that can be installed, to handle repetitive internal data processing and decision-making functions. Since people analytics programs are an on-going process, key variables are constantly analyzed and the insights are used to further enhance the program.
Benefits of People Analytics
Using people analytics in the workplace helps you make decisions based on actual data-driven facts, instead of guesswork. Here are some major benefits of people analytics:
- Improve Your Company Culture: People analytics help employers better understand their employees’ needs and wants, and adjust the work environment accordingly. This inadvertently helps the employees feel like they belong, which is bound to improve morale, productivity, and employee retention.
- Increased Transparency: By making it possible for data to be visualized, people analytics ensures that all employees understand even the most complicated data sets. Employees can use this data to see where the room for improvement is, in their case.
- Saves Company Time: People analytics effectively reduces or outright eliminates certain redundant processes in recruitment, training, sourcing, and nurturing. It helps HR officials direct their efforts on things that provide the maximum benefit.
- Stronger Decision-Making: All HR analytics rely on factual data, which means the insights derived from it, and the decisions based on these insights, are the best you can make. This helps organizations make decisions based on data-driven results rather than emotion-based subjectivity.
- Cloud Migration: Increasing technology in the workplace is subsequently increasing the number of organizations that use people analytics. Using people analytics requires the use of complex software and automated tools that best work on the cloud. In short, you can effectively transfer all the data to your cloud and access it anywhere, at any time.
- Better Employee Retention: As mentioned before, the whole point of people analytics is to streamline HR practices and make the lives of employees easier and better. When employees feel that their needs and wants are continually being addressed, you are bound to boost employee morale.
Today, the answer to the question of ‘what does HR do’, has evolved into ‘HR ensures that the people of any company are taken care of through HR analytics and practices’.
Challenges of People Analytics
People analytics helps companies a lot, however, there are challenges associated with it. Some common challenges can be found below:
- Finding data scientists with the right skill set, according to your company and industry specifications.
- Proper data cleansing can be difficult, which makes it tough to maintain data quality.
- At times, there is too much data available, which can saturate the results.
- Data privacy is a major hurdle, since employee data is uploaded on the cloud. Several compliance factors also need to be addressed here.
- It can be hard to explain the worth of such a system to a company’s leadership, since it’s not easy to quantify insights and actions into ROI.
- An excess of HR software and systems has saturated the market, which can make it hard to identify which ones would best keep track of, and manage, your data.
All that said, the challenges associated with people analytics aren’t necessarily show-stopping. This means that they can be overcome with the right resources and efforts.
Future of People Analytics
People analytics is often regarded as the future, since most people believe that Boolean search skills will soon be outdated, to be replaced with automated HR practices. Soon, most (if not all) of the recruitment and talent acquisition steps will be replaced with computer-driven automated processes that will oversee everything, from screening to final interviews.
Also, the future of performance management and employee reviews will be based on analytical software (to oust biased reviews). As equal-opportunity gains traction, things like performance management will need to be handled by people analytics.
Employee turnover can be hard to keep up with, which is why people analytics will continually add factors to the employee turnover rate calculation so that more accurate results can be achieved. This will then help understand the reasons behind the turnover, allowing countermeasures for it.
Lastly, workforce planning can be one of the most tedious tasks, one which often leads to bad hires due to rushed recruitment or candidates overselling themselves. People analytics will use background data and employee profiles, and match candidates with existing company personas and job requirements to assess candidates. This will ensure that the company always hires the right person for the job.
The Bottom Line
Changing the way HR works, people analytics is an evidence-based process that streamlines and automates HR processes, making them more efficient and productive. Currently, companies are more focused on using people analytics to analyze employees, but the potential is far beyond that. If used properly, companies wouldn’t have to analyze the employees because they would never get to that point.
Using existing data sets, companies can predetermine employee wants and needs, issues surrounding employees, performance goals and objectives, and more. They may come up with actionable insights to improve their management styles, business processes, or simply work on individual employees.
Combining people analytics with things like relational analytics can further enhance the entire process and make decision-making better, creating a more productive and healthier organization.