You’ve heard it over and over again: data and people analytics are transforming the workplace and HR is becoming a data-driven function.
HR departments haven’t been ignoring this trend. According to the Society for Human Resource Management (SHRM), HR professionals believe the most critical competency for demonstrating business acumen in the coming years will be understanding HR and organizational metrics and analytics.
On the surface, the need to “datafy” HR is puzzling because HR has traditionally been one of the more data-heavy departments in an organization. However, this data has mainly been used to create descriptive reports. What has been missing from the puzzle is the ability to use and leverage this data in strategic ways that align with business goals such as increased revenue and lowered costs.
In fact, Bersin’s research has found that while 78% of large companies rated people analytics as “urgent” or “important,” only 7% rate their organizations as having “strong” HR data analytics capabilities.
of large companies rated people analytics as “urgent” or “important”
rate their organizations as having “strong” HR data analytics capabilities
This lack of people analytics in HR represents a huge, untapped opportunity. Early adopters that can successfully leverage people analytics will be able outcompete and outperform their peers in their talent strategies.
The rise of people analytics comes with that promise: the transformation of HR into a strategic, revenue increasing partner.
To help you learn more about people analytics and how it’s changing HR from recruitment to performance management to workforce planning, we created this step-by-step guide on how to use people analytics in your recruitment and talent management.
People Analytics: A Step-By-Step Guide – Table of Contents
- Section 1: What is people analytics?
- Section 2: The benefits of people analytics
- Section 3: The challenges of implementing people analytics
- Section 4: How to implement people analytics
- Step 1: Encourage a culture of data-based decision making
- Step 2: Identify a question you want to answer
- Step 3: Collect the data
- Step 4: Interpret the results and take action
- Section 5: The future of people analytics
- Recruitment and talent acquisition
- Performance management
- Workforce planning
- Section 6: A summary of people analytics
Section 1: What is people analytics?
People analytics is the use of data and data analysis techniques to understand, improve, and optimize the people side of business.
The promise of people analytics is linking this people data with different types of business data to create outcomes aligned with company goals such as increased revenues and lowered costs.
The rise in people analytics has been caused by three main factors:
- The explosion in data and data analytics due to improvements in technology and software. This adoption has been seen recently in the transformation of sales and marketing departments.
- HR departments are increasingly being asked to justify their decisions based on measurable outcomes. This has led to the push for business decisions to be made based on analytics and data rather than using gut instinct and subjective judgment.
- Most HR departments are sitting on mountains of data about their employees including demographic data, performance data, job history, compensation, and training. Until recently, this data has yet to be effectively and strategically leveraged by organizations.
There are three main types of data that people analytics can analyze:
- People data such as demographics, skills, and engagement.
- Program data such as attendance, adoption, participation in training and development and leadership programs, and key projects and assignments.
- Performance data such as performance ratings and data captured from the use of instruments such as 360 assessments and succession programs.
Section 2: The benefits of people analytics
People analytics has the potential to improve the effectiveness of a company’s talent acquisition function by determining the job qualifications for each role and measuring candidates’ potential performance pre-hire to prescreen and shortlist candidates to an open role.
The benefits to recruitment include:
- reducing time-to-hire by replacing manual processes
- increasing quality of hire by avoiding unconscious biases early in the hiring process
- collecting recruiting and hiring data that can be correlated with business outcomes such as increased revenue
Research featured in the Harvard Business Review found that using a people analytics algorithm increases the ability of recruiters to find the best qualified candidates by more than 50%.
People analytics have also shown downstream benefits:
- attrition rates decreased by 35%
- performance increased by 20%
- revenue per employee improved by 4%
A people analytics algorithm increases the ability of recruiters to find the best qualified candidates by more than 50%
People analytics software is enabling the collection, storage, and analysis of recruitment data. Linking recruitment data with business data is what’s empowering talent acquisition to become a strategic function by enabling them to provide actionable insights to the business.
Section 3: The challenges of implementing people analytics
A Harvard Business Review survey of executives – one-third being HR professionals themselves – found that the biggest obstacle to achieving better use of data and people analytics was “inaccurate, inconsistent, or hard-to-access data requiring too much manual manipulation.” 47% believed the biggest obstacle was a “lack of analytic acumen or skills among HR professionals.”
People analytics software enables HR to access data without manual manipulation and arms HR with a tool that provides a shortcut to analytical abilities. So why are people analytics being met with skepticism?
Decisions based on expertise tend to be more socially acceptable than those based on data or algorithms which has been called “algorithm aversion.” In recruitment, this means both job candidates and employers may prefer a subjective, intuitive approach to hiring.
Some HR departments may be resistant to using data-based approaches because of the fear that they undermine their expertise. However, you still need smart people to use their judgment and expertise to carefully assess the quality of the data being collected, to contextualize and make sense of the analyses, and to decide how the results should be best turned into action.
This is the critical thinking that algorithms can’t replace.
Section 4: How to implement people analytics
People analytics are in the early stage of adoption. While the majority of companies are recognizing the need and value of using a people analytics solution, only a few actually have strong capabilities in this area.
This gap between the desire for people analytics and its implementation represents a huge opportunity for progressive HR departments to create a competitive advantage. Beating your competitors when it comes to attracting, hiring, and retaining the best candidates is becoming more urgent in the current candidate-driven talent market.
Follow the four steps outlined below on how to implement people analytics to give yourself an edge.
Step 1: Encourage a culture of data-based decision making.
A data-based decision making culture is characterized by collecting data, analyzing information, and conducting tests. Encouraging innovation, tolerating mistakes, and emphasizing continual learning all help to create this type of culture. In a data-based decision making culture, insights revealed by the data – rather than opinion or gut feel – take priority.
Looking for a people analytics solution for your recruitment? Learn more.
Step 2: Identify a question you want to answer.
Assess your current pain points. What’s ailing your company the most right now? Remember to be specific and start small by setting a reasonable goal. Think of a hypothesis based on a problem you’re experiencing and that you think data will help solve. Based on this hypothesis, determine what needs to be measured and what data needs to be collected.
Step 3: Collect the data.
Based on step two, decide on what data you want to collect. Use accurate data measurement tools and software to ensure data is being captured in a standardized way. People analytics software is emerging for all areas of recruitment and talent management, and many companies offer free trials or reduced prices for early adopters of their technology. This software will look for patterns in your data.
Step 4: Interpret the results and take action.
Based on the results of your data analysis, figure out the story your data is telling you. Then determine which actions can be taken based on that story. Implementing those actions and then following up on their outcomes is what makes people analytics a truly strategic tool.
Section 5: The future of people analytics
People analytics hold the potential to transform the HR function from recruitment and workforce planning to performance management and employee engagement.
Recruitment and talent acquisition
People analytics will change the recruitment function. When it comes to talent acquisition, 64% of business leaders agree HR’s top priority is sourcing. Aberdeen’s top recommendations for HR include “prioritize analytics” and “invest in innovative technology options.”
Industry experts believe traditional sourcing skills such as Boolean search skills will become obsolete and recruiters will function more as marketers and relationship builders by focusing on making initial contact with the most qualified candidates uncovered by people analytics technology.
The real value of recruiters will be in candidate outreach and engagement and becoming the best at it. Counterintuitively, the adoption of people analytics technology holds the promise of enabling the talent acquisition function to become more human.
People analytics software can profile what employee success looks like in a particular role and then apply that knowledge to candidates to automate the shortlisting function. By linking pre-hire data with post-hire performance data, people analytics software allows recruitment and talent acquisition departments to more accurately measure the effectiveness of your recruitment function.
Research has found that top performing employees contribute disproportionately to a company’s value and that they should be paid disproportionately more in order to keep them motivated and retain them. People analytics will enable HR departments to identify and automatically profile top performing employees.
People analytics also has the potential to measure which managers and departments are under-performing, which allows HR to create interventions, provide training, or move team members around to increase performance.
People analytics software also allows HR to measure employee engagement and then measure the effectiveness of engagement programs.
Employee compensation represents about 80% of a company’s budget, so high attrition rates represent a major cost and a key problem for HR to solve.
People analytics can identify which employees are flight risks based on their behaviours and recommend retention interventions for them (e.g., promotions, developmental opportunities, raises and perks).
For example, research featured in the Harvard Business Review found that employees are more more likely to quit around their yearly work anniversary so proactive HR departments can time retention interventions before this happens.
People analytics allows HR to measure the average attrition rates across departments to recruit and hire for backfills as well as measure the company’s revenue growth and market share to proactively recruit and hire for future growth.
Section 6: A summary of people analytics
- Definition: People analytics is the use of data and data analysis techniques to understand, improve, and optimize the people side of business.
- The benefits of people analytics: People analytics has the potential to improve the effectiveness of a company’s talent acquisition function by replacing manual processes and bypassing unconscious biases that interfere with hiring. Recruiting and hiring data can be correlated with business outcomes such as increased revenue to create strategic insights and drive action.
- The challenges of people analytics: Harvard Business Review identified the biggest obstacles for the adoption of people analytics is “inaccurate, inconsistent, or hard-to-access data requiring too much manual manipulation” and a “lack of analytic acumen or skills among HR professionals.”
- How to implement people analytics: Using people analytics software, identify a question you want to answer, collect the data, interpret the results, and take action.
- The future of people analytics: People analytics will change the recruitment function by automating the profiling of what employee success looks like in a particular role and then applying that knowledge to candidates during shortlisting, which has downstream benefits for performance management (e.g., differentially compensating top performers), turnover (e.g., identifying which employees are flight risks and creating interventions for them), and workforce planning (e.g., linking revenue growth and market share in order to proactively recruit and hire for growth).
People Analytics: A Step-By Step Guide
Remember to bookmark this post and keep it as a resource to answer all of your people analytics questions!