Table of Contents
Table of Contents
To succeed in today’s fast-paced, highly competitive, and constantly evolving world, organizations need to be as agile as possible. Beyond well-crafted strategies, leaders need to be flexible and empowered to make good decisions in real time to drive performance and efficiency in every avenue of their business. Having the right data and analytics capabilities is critical for dynamic, informed decision-making, particularly when it comes to building a high-performance workforce.
In recent years, people analytics has become increasingly important in most organizations’ tool belts. According to people analytics solution research from Deloitte, more than 70% of companies use people analytics to improve their performance. Meanwhile, large and mid-sized companies are making significant investments in their HR analytics teams and systems. By transforming people data into valuable insights, organizations are able to align HR processes, workforce management, and talent development with their business strategies. This helps leaders achieve engagement and retention goals, control labor costs, and boost productivity and performance.
In this guide, we will take a closer look at people analytics, including strategies for integrating data-driven insights into your business processes to shape key decisions drive value for your business. This guide will give you a better understanding of how to use your data to better manage your most important asset: your people.
Chapter 1: What is people analytics?
People analytics or HR analytics is the systematic activity of collecting human capital management data and analysis to transform raw data into actionable insights to help achieve business objectives. People data includes everything from employees’ job roles, experience levels, and salaries, to their performance ratings, satisfaction scores, and absentee rates, to cite just a few examples.
When leveraged optimally, people analytics can be used to understand things like employee headcount changes over time, trends in compensation and workforce diversity, as well as potential risks to business continuity. As we’ll see in Chapters 4 and 5, by collecting and analyzing people analytics, organizations can address an array of business issues that have major implications for their long-term success.
Ultimately, HR analytics are a critical tool for driving strategy and giving organizations the business acumen they need to make smart decisions about their workforce. And they aren’t just useful for human resources departments. They can be equally valuable to finance and operations teams, C-suite executives, people managers, and other leaders across the enterprise.
Where does people data come from?
Data about employees exists all across organizations, but HR doesn’t always have the tools to generate actionable insights.
For example, HR teams might have data on recruiting, performance, learning management, and employee demographics. Meanwhile individual departments will have data of their own, such as how many deals individual sales team members closed in the past year, who’s next in line for a promotion in finance, or which shift workers call in sick most often. These are just some examples of the dozens, if not hundreds, of different kinds of data points that organizations typically collect about their employees.
Even though HR teams have a wealth of people data as a whole, this data typically lives in a number of different platforms. It takes time to consolidate your information in different formats to standardized reports that give your teams real, actionable insight.
What are the benefits of using HR analytics?
When used properly, people analytics can help drive significant value for organizations by creating opportunities and desired business outcomes. Some example use cases include:
HR analytics can provide insight into what drives performance, such as your organization’s strongest talent, where burnout is hitting hardest, whether different departments interact well with each other, what motivates employees, and where there are opportunities to work more efficiently. Armed with these insights, businesses can make the changes necessary to decrease burnout, streamline workflows, remove potential barriers, and cultivate a high-performance culture that paves the way for greater productivity.
People analytics helps companies work more efficiently, which in turn helps them see how resources are spent. Recruitment metrics, for example, might be used to help lower the average cost per hire, while overtime pay metrics can uncover ways to improve staffing and reduce payroll leakage. Another example is optimizing labor costs based on things like performance metrics, budgets, and individual employees’ unique roles and skillsets.
Higher employee and customer satisfaction
As noted above, surveys are a great way to collect data about employee and customer sentiment. Are your employees happy working at your organization? Do they feel motivated to work hard? If not, what could you potentially do to change their mind? When you figure out the right ways to increase employee satisfaction, you can make employees happier. That generally leads to a better work product and better customer service, which in turn can lead to greater customer satisfaction.
When you increase employee satisfaction, workers are more likely to stay in their roles rather than looking for new opportunities. That lowers recruitment costs, reduces the need for onboarding and training, and helps to create a better overall culture where people are happy to be a part of the business over the long term.
Fostering diversity, equity, and inclusion within an organization is essential for attracting and retaining talent, as well as driving performance. But HR leaders aren’t always confident in their ability to improve internal DEI. The right technology can help transform DEI from a large goal to measurable initatives that make an impact.
Ultimately, good people analytics can also lead to higher profits. When companies are more productive, have lower costs, and see happy employees and customers, it can dramatically increase how much revenue they are able to generate. Visier found through analysis and “reducing turnover by retaining retention of new hires, top performers, managers, and other key roles, led to savings as much as $15 million.”
Chapter 2: Current data challenges and analytics obstacles
While the power of people analytics is undeniable, the path to realizing the benefits hasn’t traditionally been straightforward. Some of the most common obstacles that organizations have historically had to overcome include:
Having multiple systems makes data collection, reporting, and analysis more difficult
Many organizations rely on a vast number of different tools and HR systems to keep operations rolling. Research from Sapient Insights Group found that the average HR tech environment for organizations included between 9 and eleven HR tech systems in their annual spend. Unfortunately, unless those tools are all connected, and able to interface with all of the other systems throughout the business that hold relevant people data, information invariably becomes siloed.
When data is kept in different silos across the business, bringing it all together can be incredibly difficult. Teams have to manually obtain data from different systems and departments, which is both time-consuming and creates a lot of unnecessary administrative overhead. They also have to cleanse the data and try to reconcile it. Not only is that a massive undertaking, it also makes accurate reporting and analysis a slower and much more challenging process.
Limited accessibility means data isn’t widely used by team leads
Having data in silos means that most people can’t access it on their own. Instead, they have to rely on others to share reporting and analysis, which can be problematic. Unless there are processes in place to incorporate other related workforce data, that reporting and analysis may only provide a partial view of what’s happening. Siloed data also leads to limitations on who can access people data, as well as individual security risks and maintenance associated with each system storing this sensitive information.
Meanwhile, manually collecting and collating data from different sources to create a more holistic view is extremely labor-intensive and time consuming. As a result, any reporting and analysis delivered could be stale by the time business leaders receive it.
Teams aren’t confident in data accuracy
Even when team leads have access to data, all too often, they may not trust the data they’re being given and instead opt to make decisions based on gut feelings. In fact, a recent study by HFS Research found that more than half of business executives surveyed said that about 60% of their data or less is consumable or usable. Leaders may not always have a high level of trust in their available data.
While there are many reasons why this might be so, often it’s because the data is not all coming from a single source of truth. When data is collected by different teams using disparate tools and systems that aren’t widely understood, people can be skeptical about its accuracy. That’s especially true if the insights that data reveals conflict with leaders’ own personal instincts about a particular situation.
Raw data isn't user friendly and requires complex analysis tools
Another challenge with having a multitude of tools and systems providing people analytics is that HR teams typically aren’t able to compile the data they collect into meaningful insights. Instead, companies need additional data analysis tools and data teams with significant subject matter expertise to translate it into something people can work with, like easy-to-understand visualizations. Once again, the lack of data analytics capabilities creates a barrier for leaders to use data if they perceive interpreting reports is too difficult.
Chapter 3: Leveraging data in your everyday processes
For people analytics to become embedded into your organization’s DNA, it has to become a part of business leaders’ daily lives. Below, we look at a few steps you can take to help ensure that happens.
Make data a part of your company culture
It’s important to ensure that every business leader across the organization is invested in people analytics. All too often, HR data can be dismissed, become conflated with company history, not be trusted, or get communicated in a way that’s overly complicated. Take the time to proactively make data a part of your company’s culture by regularly communicating what it is, the value that it can provide, and why decision makers should feel confident making decisions with it. Getting people on board isn’t difficult, but it does require a concerted effort to educate key stakeholders and keep them engaged.
Communicate the value of turning insights into initiatives
Data-driven insights are only as valuable as the behaviors they help drive. In some cases, that might be making smarter decisions. In others, it could be launching new programs or initiatives to address a problem or take advantage of an opportunity. Make sure to communicate the value of basing actions on data-driven insights. Share case studies or other real-life examples of how this has happened elsewhere in the business, what the outcomes were, and how others might adopt a similar approach.
Provide personalized access to key metrics and custom dashboards
Key stakeholders need to be informed with data on a regular basis to make data-driven decision making part of their daily practice. Rather than wait for business leads to seek out HR analytics, leaders need personalized access so that data reaches them. Set up custom dashboards that allow them to see what’s relevant to them whenever and however they want to. Ultimately, this puts business leaders in the position to use people analytics on their terms, which is critical for driving adoption.
Backing up decisions with data
Learn how Gannett, one of the U.S.’s largest media organizations is leveraging people analytics in their workforce strategy, from structuring hybrid work to providing meaningful insights to leadership.
Chapter 4: From data to action: Using people analytics to inform key decisions
The true power of data-driven insights is using them to shape decisions. Remember, HR analytics can and should be applied across the business. Let’s take a look at some examples of specific areas where they can be most useful:
Within human resources, people analytics can be used to track things like turnover and retention rates, work energy levels, and burnout rates, all of which need to be carefully monitored to inform key decisions around such issues as productivity and work-life balance. HR analytics are also helpful for understanding the distribution of your workforce in terms of gender identity and ethnicity, which in turn can be used to help track the impact of your diversity, equity, and inclusion initiatives.
Surveys are another valuable source of people data. Employee engagement, 360, professional development, and customer feedback are some of the most common types of surveys that can be used to derive meaningful insights into how employees feel, how they’re perceived by others, and how effective they are at their job.
While workforce management has implications for every department, it’s an area that finance and operations teams are particularly focused on. They can use people analytics to help them with things like time tracking so that they can get a holistic view of when shift-based employees punch in and out, how much overtime they’re working, or absentee patterns.
Anyone with direct reports should have an interest in talent management, including things like talent acquisition, performance management, and rewards. HR analytics can help managers see trends, such as how individual employees’ performance changes over time. It can also be used to identify the key characteristics of top performers so that hiring managers can look for candidates with similar profiles when looking to fill new positions.
Payroll and finance
For payroll teams, people analytics is critical for understanding the distribution of employees’ pay across the workforce. Being able to quickly identify how pay is distributed by location, department, and role is critical for staying on top of your workforce and remaining in line with internal forecasts and budgets.
Meanwhile, for finance teams, HR analytics plays an important role in informing compensation review cycles. For example, it can give teams a deeper understanding so that they can ensure that pay bands are competitive while also seeing how funds are distributed throughout the review cycle.
The power of people data
The answers to your most pressing workforce problems are hiding right in front of you. How can you reveal the insights that impact your organization’s bottom line?
Chapter 5: The power of predictive analytics
One of the most exciting opportunities for HR analytics is the ability to not only get a current or historic view of an array of workforce issues, but also anticipate what’s yet to come. Predictive HR analytics can help organizations forecast future scenarios so that they can be proactive instead of reactive.
Predictive analytics uses artificial intelligence to analyze vast amounts of people data. Algorithms can identify patterns and other trends within the data that can in turn be used to make predictions. For example, predictive analytics can be used to manage things like:
When you have a treasure trove of historical data about your employees, you can use it to predict which of the candidates you’re talking to will be most successful and which to avoid. Qualitative information about a candidate’s personality type, work style, or approach to handling difficult situations, for example, can all be gathered through surveys as part of the recruiting process. Their responses can then be matched to existing employee information to predict whether or not they will be a good fit for your organization.
Learn how Motivate uses data for strategic deicsions about budgeting, forecasting, and hiring.
Churn can vary dramatically from one organization to the next. When churn is high, companies can wind up spending millions of dollars hiring and training new people to replace those who left. With predictive analytics, business leaders can get a holistic look at their teams and understand who presents the greatest flight risk based on things like performance, productivity, and engagement. They can then decide to intervene to address the situation to try to get high performers to stay on the job.
“Data is critical to understand what’s going on and manage the businesss better. We’re now better able to manage our workforce and anticipate needs. We’re able to address issues proactively rather than reactively.” – Alan House, Executive Vice President of HR at OTG Management
Deciding how much to pay new candidates, how much to increase existing workers’ salaries, and when to distribute bonuses and other awards and compensation hasn’t historically been an exact science. Using predictive analytics, HR and people managers can make better decisions about how much to pay people to source and retain top talent without having to overpay. For large organizations, optimizing compensation has the potential for significant cost savings.
Learn how Milwaukee County is structuring succession planning and competitive compensation with their dashboards.
In industries like retail, revenue is often tied to employee engagement. Best Buy, for example, found that a 0.1% increase in employee engagement led to a $100,000 increase in sales per store. By regularly tracking and measuring employee engagement, some organizations may be able to more accurately forecast performance while also developing programs designed to drive greater engagement and boost their bottom line.
Ultimately, predictive analytics can take your visibility to the next level. For HR teams that haven’t had many analytics capabilities in the past, being able to not only report on baseline metrics about their workforce but also forecast future trends and decide which people strategies to prioritize represents an exciting new opportunity.
Learn how The Foschini Group is using real-time data to make informed decisions about staffing and labour costs.
People analytics is the future of your HCM strategy
Today’s organizations collect vast amounts of data about their people. Yet to make best use of that data, it has to be integrated, analyzed, and turned into the kinds of insights that help inform effective decision-making. To do that, businesses would be wise to adopt the right technology to centralize their people data and automatically deliver the kind of easy-to-use reporting and analysis that leaders can depend on to drive their strategies.
For those organizations that embrace people analytics, the opportunities for greater growth and efficiency are enormous. From helping to attract and retain the right talent to better overseeing your workforce and maximizing profitability, HR analytics can have a major impact on the trajectory of any business.
Those who ignore the opportunity to leverage the data at their disposal will not only find themselves lacking visibility into their workforce performance, but also at a distinct competitive disadvantage.