People Analytics:

A Step-By-Step Guide To Using Analytics In HR

You’ve heard it over and over again: data and people analytics are transforming the workplace. 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.

The focus on big data will challenge HR leaders to build a people analytics team, bring together multi-disciplinary skills, and develop a long-range plan to “datafy” HR.

-Deloitte

 

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.

78%
of large companies rated people analytics as “urgent” or “important”
7%
rate their organizations as having “strong” HR data analytics capabilities

This lack of analytics in HR represents a huge, untapped opportunity.

Early adopters that can successfully leverage data 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 how analytics is changing HR, we created this step-by-step guide on how to use data and analytics in your recruitment and talent management.

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 using analytics in HR is linking 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 the use of analytics has been caused by three main factors:

  1. 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.
  2. 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.
  3. 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.

People analytics are needed to take massive amounts of data being generated before, during and after the recruiting process and turn it into actionable information.

-Steve Levy, Indeed

 

Three main types of talent-related data that can be analyzed are:

  1. People data such as demographics, skills, and engagement.
  2. Program data such as attendance, adoption, participation in training and development and leadership programs, and outcomes of key projects and assignments.
  3. 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 using analytics

Using analytics has the potential to improve the effectiveness of a company’s talent acquisition function.

By determining the job qualifications and measuring candidates’ potential pre-hire, it can be used to prescreen and shortlist candidates for 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 an algorithm increases the ability of recruiters to find the best qualified candidates by more than 50%.

Analytics have also shown downstream benefits in HR:

  • attrition rates decreased by 35%
  • performance increased by 20%
  • revenue per employee improved by 4%

people analytics improve recruiting

An algorithm increases the ability of recruiters to find the best qualified candidates by more than 50%

Software is now enabling recruiters to collect, store, and analyze recruitment data.

Linking recruitment data with business data is what’s empowering talent acquisition to become a strategic function by providing actionable insights to the business.

Section 3

The challenges of using 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 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.”

Software is enabling HR to access data without needing to manually prepare it. It arms HR with a tool that provides a shortcut to analytical abilities.

So why is 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 more 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

Analytics in HR are in the early stage of adoption.

While the majority of companies are recognizing the need and value of adding analytical capacity to their people function, only a few actually have strong capabilities in this area.

While no company would possibly run their business with inconsistent financial data, most companies are riddled with inconsistent HR data. Companies are waking up to this issue and are starting to invest heavily in people analytics.

-Bersin

 

This gap between the desire to use analytics and its actual 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 4 steps outlined below on how to implement analytics into your hiring 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.

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. Software that uses analytics 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 analytics a truly strategic tool.

Section 5

The future of analytics in recruiting

Analytics hold the potential to transform the HR function: from recruitment and workforce planning to performance management and employee engagement.

Recruitment and talent acquisition

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. Instead, recruiters will function more as marketers and relationship builders by focusing on making initial contact with the most qualified candidates.

The real value of recruiters will be in candidate outreach and engagement and becoming the best at it. Counterintuitively, the adoption of people analytics holds the promise of enabling the talent acquisition function to become more human.

Data can be used to profiled what employee success looks like in a particular role and then apply that knowledge to candidates to automate the screening function.

Linking pre-hire data with post-hire performance data allows recruitment and talent acquisition departments to more accurately measure the effectiveness of your recruitment function.

Performance management

Research has found that top performing employees contribute disproportionately to a company’s value.

This means they should be paid disproportionately more in order to keep them motivated and retain them. Analytics will enable HR departments to identify and automatically profile top performing employees.

Using 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.

HR will also be able to measure employee engagement and then measure the effectiveness of engagement programs.

Turnover

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.

Data 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 that time.

Workforce planning

Analytics allow HR to measure the average attrition rates across departments to recruit and hire for backfills.

As well, it can measure your company’s revenue growth and market share to proactively recruit and hire for future growth.

Section 6

A summary of people analytics

  1. Definition: People analytics is the use of data and data analysis techniques to understand, improve, and optimize the people side of business.
  2. The benefits of implementing analytics: Analytics has the potential to improve the effectiveness of a company’s talent acquisition function by replacing manual processes. Recruiting and hiring data can be correlated with business outcomes such as increased revenue to create strategic insights and drive action.
  3. The challenges of implementing analytics: Harvard Business Review identified the biggest obstacles for adoption is “inaccurate, inconsistent, or hard-to-access data requiring too much manual manipulation” and a “lack of analytic acumen or skills among HR professionals.”
  4. How to implement people analytics: Identify a question you want to answer, collect the data, interpret the results, and take action.
  5. The future of analytics: Analytics will change the recruitment function by automating screening of candidates. This has downstream benefits for performance management, turnover, and workforce planning.

People Analytics:

A Step-By-Step Guide To Using Analytics In HR

Remember to bookmark this post and keep it as a resource to answer all of your analytics questions!

Want to Learn More?

What HR Experts Think You Need to Know 2017 Will Bring

See what recruiting experts believe will be the future of HR and the role analytics will play.