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How People Analytics Drives HR Insights
Jolene Dobbin
|
February 2, 2023
Though human resources is a people-focused function that is, quite literally, about interacting with human beings, there is an aspect to the role with which it’s not often associated. What’s that? People analytics. Invoking the words “analytics” may be enough to set HR executives and business professionals’ teeth on edge, but when it’s used strategically, people analytics can transform how HR operates, furnish vital insights, and lead to positive business outcomes.
Looking to get started with people analytics or become more data-driven in your organization? Learn how using data and analytics can enable better workforce outcomes.
What is people analytics?
People analytics refers to the process of gathering, analyzing, and reporting human resources (HR) data. Although it’s also alternately called human resource analytics, HR analytics, talent analytics, and workforce analytics, there are some distinctions between the various terms. For our purposes, we’ll consider all of these terms as synonyms for people analytics.
People analytics helps your company measure the impact of HR data and metrics on its business performance. For instance, it includes time to hire, retention rate, turnover, and more. HR professionals can then make decisions on that data to ultimately improve workforce outcomes. In other words, people analytics is a data-driven approach to HR management.
Why is people analytics important and necessary?
While it’s true that many organizations already have data that they collect regularly, they don’t always do anything with it. People analytics takes that raw data and adds insight and meaning to it, eliminating the need to simply guess or rely on gut feelings. Instead, you can make fact-based decisions.
Although the origin of people analytics has arguably been around for about 110 years, it’s now ramped up from being a supplementary function with HR to a core competency within business strategies of companies. In fact, 73% of HR executives say people analytics will be a major priority for their company over the next five years. And organizations that excel at people analytics are 3.1x more likely to outperform their peers.
Constantly changing business environments, especially over the last two or so years, have made it abundantly clear that the age of people analytics is here to stay.
At the same time, readiness to capitalize on people analytics remains a challenge even though it’s become mainstream. Only 8% of organizations report that they have usable data, while only 9% believe that they have a good understanding of the talent factors that drive performance.
Defining HR metrics
Metrics are the foundation of analytics. However, because no two organizations are exactly alike, not every organization will use, or even need, the same metrics as another.
A number of common HR metrics don’t always provide your business with strategic value. For instance, headcount reports often don’t help HR articulate what is needed to meet a business goal and don’t explain how staffing shortfalls can negatively impact revenue goals or net promoter scores.
There are HR metrics that contribute to business value, but it’s important to select them according to what matters to your business. Communicating and then collaborating with strategic business leaders in your organization beyond HR – even within the C-suite if applicable – will help define key performance indicators (KPIs) as well as next steps to both select the right metrics and then apply analytics to them.
Some of the most important metrics can be delineated by categories that include:
- Recruitment – time to hire, cost to hire, time to fill, offer acceptance rate, etc.
- General workforce – satisfaction rate, average age, average length of service, etc.
- Performance – revenue per employee, training efficiency, turnover rate, absence rate, etc.
The importance of good (and great) data
The next step after identifying the metrics is to collect and analyze the data, which will then be fed into the right HR analytics tool or software. You should collect both internal and external data. The former may include data from core systems such as learning and development systems or talent management systems: for instance, records, compensation, tenure, etc., while the latter may include external data such as financial data or historical data.
One of data collection’s biggest challenges is obtaining the right, high-quality data. You must be able to not only collect the data easily but also integrate it seamlessly into data analytics for your HR professionals.
Pam Davis-Bean, Talent Systems and Insights Analyst at Patelco Credit Union, knows about the importance of data within HR. She’s the administrator and subject matter expert for a number of talent systems, including recruiting, LMS, performance management, and employee surveys at the company.
“As the administrator, I'm responsible for anything related to data from those systems. This includes requests throughout the organization, requests from managers for information and data, and requests from auditors,” says Pam. “Human resources can't really be done anymore without technology and data. It's a must-have skill set if you're an HR professional.”
Though the right data is important, it doesn’t have to be unnecessarily complex. Pam talks about the simplicity of the data needed for decision-making capabilities. “What I see is very simple, basic stuff. And I don't mean to say that to minimize it. It's the principle of parsimony and a little bit of pragmatism. Just get the minimum amount of information that you need to make your decision and then move on,” she adds.
“By the time that you have done an entire analysis and created fancy graphs and charts, the problem that you're trying to solve has already been solved and you've moved on to the next problem. The whole point of data analysis is to get immediate information about issues that people are having, and then solve those issues.”
What does the right HR analytics solution look like?
The right HR analytics tool, software, or solution will vary according to individual organizational requirements, naturally. But there will likely be several common characteristics, some of which include the following:
- Delivers on the right metrics – addressing the previously identified KPIs and answering the specific questions asked by HR and the business
- Flexible and easy to use – easy to use and accessible to both non-technical users and data analysts/data scientists alike
- Powered by predictive analytics – using statistical models to analyze existing and historical data to forecast future outcomes, opportunities, and risks
- Built on cloud-based software – helps provide accessibility and autonomy to the organization without needing integration with other IT systems
The reality of cloud-based software in HR
Pam notes how cloud-based software is now widely used within HR. “Cloud-based software is the reality in organizations at the enterprise level and in HR,” she says. “Everything is cloud software. And all of that software requires users to configure and make it work the way that you need to for your organization because out of the box is not really going to fly.”
She talks about the importance of having internal employees who can properly use that software. “You can often pay a vendor or a third-party partner to help you set it up, but if you have in-house people who can learn your cloud software and be able to add users and configure permissions and maintain it, then you have a lot more control. Because then you have people who understand your business who are operating the software. And you need to understand the business to customize it.”
Benefits of using people analytics
The end result of instituting an appropriate application of HR analytics solution is that you can have some genuinely effective workforce outcomes. Some of the leading benefits of applying people analytics include:
- Maintain (or increase) flexibility and agility to respond to changing needs
- Enhance hiring practices and recruitment
- Increase employee retention and reduce turnover
- Increase employee engagement
- Increase diversity
- Achieve fair pay
- Advance learning and development
- Optimize workforce planning and outcomes
- Increase productivity and performance
What skills are required to conduct people analytics?
To successfully build, run, manage, and turn people analytics strategy into productive business outcomes requires both business and technical skill sets. Because HR departments quite often lack the precise skills to carry out people analytics, analytics teams also include those people with experience in data analytics, finance, and information technology. Other important skills include:
- Advanced analytics
- Statistics
- Data science
- Behavior science
- Natural language processing (NLP), AI, and related technologies
- Programming languages and/or coding
- Storytelling/visualization
Pam, who has her PhD in organizational psychology, focused on a scientific approach to people management within her graduate education. “I learned statistics and research, but I also learned about best practices for managing, coaching, consulting, and recommended practices for organization dynamics change.”
Other skill sets are just as important within HR analytics. “You have to work with people really well,” says Pam. “You have to be able to understand requirements. You have to be a really good consultant. You have to ask good questions. You have to understand how things are going to be used and why. But even if you're not a decision-maker, you're really trying to create processes and system solutions for the rest of the business that helps their jobs be better.”
About the Author: Jolene Dobbin is a contributing writer for HP Tech@Work. Jolene is an East Coast-based writer with experience creating strategic messaging, marketing, and sales content for companies in the high-tech industry.
