Unlock the Power of People Analytics to Optimize Your Workforce
Do I need People Analytics?
The short answer is: Yes, you absolutely do. No matter the organization, and no matter your circumstances, people analytics can deliver a tremendous amount of value.
Especially if your organization is just starting on its people analytics journey, there is enormous value, at very little cost. As organizations grow in data analytics maturity, the value is harder earned, but with a smart people analytics strategy, the value is still far higher than the cost. For many organizations, strong people analytics is what separates them from the competition. People analytics done well allows them to build a stronger, happier, more agile and more productive workforce.
So, the right question is not “Do I need it?”, but instead: What kind do I need? How much do I need? And where do I start?
Answers to these questions can make or break the effectiveness of people analytics, determining whether it becomes a force for good or a costly and ineffective investment. But finding accurate and reliable answers is hard, particularly for organizations that lack a track record of success in people analytics.
To find good answers and make the most out of people analytics, we need to understand what it is and what it is capable of. So, let's break it down.
Understanding People Analytics
Have you ever wondered how data can be used to improve decision-making and processes within an organization? People analytics, also known as HR analytics, is the use of data to improve processes and decision-making within organizations. It’s all about collecting and analyzing data about employees, the workforce, and the organization as a whole, in order to spot and understand both problems and opportunities that involve people. Because people play a vital role in every business, understanding what's holding them back can be a powerful way to improve almost every aspect of your organization.
More advanced analytics can help turn that knowledge into actions that solve problems and maximize opportunities, driving positive change.
People analytics are thus able to deliver several different types of value:
Identifying and solving problems
Identifying and taking advantage of opportunities
Optimizing the workforce and the organization
There are four general levels of people analytics, each with the ability to deliver value, and each building on the one before it: descriptive, investigative, predictive, and prescriptive. DIPP into people analytics with us below.
Descriptive Analytics involve using data to describe the current situation, or to summarize historical data to understand past events and trends. This type of analytics is the foundation of every other type of analytics. Getting a clear picture of the current situation is crucial for taking stock, identifying issues, and confirming that issues already identified are in fact accurately identified (this is often not the case!).
Common descriptive outputs include: attrition rate, time to hire, employee engagement, employee count, organization tenure and a few hundred other outputs.
This type of analytics can be useful for establishing a baseline, identifying areas for improvement, and for establishing benchmarks for future performance.
Investigative (Diagnostic) Analytics are the deeper dive. Suppose descriptive analytics identify or confirm some major problem, like high employee turnover. The question then becomes WHY are our people leaving? The underlying cause(s) can be one or more of dozens of reasons, from low morale to non-competitive pay or from ineffective managers to a high proportion of the workforce becoming eligible for retirement. Without understanding the root cause of the exodus, it is impossible to effectively and cost-efficiently curb the attrition. An effective solution for reducing attrition from retirement eligibility is unlikely to be effective for mitigating attrition due to ineffective mid-level managers. You must identify the specific causes of attrition in order to implement targeted strategies and retain valuable talent.
Investigative analytics collects and breaks down data to diagnose the underlying issues. Investigative analytics are particularly powerful when there are multiple underlying causes of an issue - which is almost always the case. By identifying the specific factors causing the problem, organizations can design and invest in a solution that is much more likely to be effective and cost-efficient. With the insights gained from investigative analytics, organizations can make informed decisions that lead to real, sustainable change.
Predictive Analytics build yet another aspect of insight on top of investigative analytics. It involves using data and statistical algorithms to make predictions about future events. It’s not about where we are now, but where we will be.
While it’s not a crystal ball, predictive analytics uses all of the information available from descriptive and investigative analytics, as well as extensive HR expertise to forecast the direction of various HR metrics over a specific period of time. Predictive Analytics can help you answer questions like this:
How much turnover will we experience over the next three years?
What skills are likely to be the most important in two years, after our merger is complete?
Taking into account the expected turnover and our predicted time to hire new talent, how big of a talent gap will we have in three years if we don’t intervene?
This type of analytics can help HR professionals to identify future trends and issues, such as turnover risk or talent shortages, and take proactive steps to address them before they even become a problem. It is not exact - people are inherently unpredictable - but when done carefully and based on sound data, it gives decision makers a competitive edge. By providing insight into potential outcomes, predictive analytics can help organizations plan and prepare for the future with greater confidence.
Prescriptive Analytics involves using data and algorithms to recommend specific actions or solutions to a problem. This type of analytics can be particularly useful in identifying the best course of action to take to address a specific HR issue or challenge. You can use prescriptive analytics to test and measure the effectiveness of several possible actions prior to implementing them in the workforce.
Prescriptive analytics goes beyond predicting what will happen and can actually suggest specific actions to take in response. Essentially, prescriptive analytics makes recommendations based on the data and insights gathered through the previous three types of analytics.
Prescriptive analytics can be used to optimize a wide range of HR processes, including performance management, talent acquisition, and employee development. For example, if predictive analytics suggest that a certain job role will experience high turnover in the coming months, prescriptive analytics can help identify specific interventions to reduce that turnover. These might include changes to the role, improvements to the work environment, or adjustments to how the organization attracts and retains that type of talent.
Prescriptive analytics can be a game-changer for HR professionals, providing a powerful tool to make data-driven decisions about their workforce. By combining data, expertise, and algorithms, prescriptive analytics offers HR professionals actionable insights and recommendations to make better, even proactive decisions about their workforce. People analytics takes a lot of the guesswork out of decision-making, ultimately driving better outcomes for the organization and the people within it.
Sure, each level of people analytics can be more powerful than the level before it, but the most important thing to grasp is that each level also builds on the one before it. It is tempting to jump straight ahead to prescriptive analytics, but without descriptive and predictive analytics foundations, prescriptive analytics will miss its target. The best case scenario is that resources are wasted, but the worst case scenario is that decision makers act on false insights from prescriptive analytics that are misleading because they are not rooted in robust descriptive and predictive analytics. Check out this article on how to ensure your organization is doing people analytics at the right level.
Assessing Your Organization's Needs
Now that you understand what people analytics is broadly capable of, let’s consider where your organization can gain the most value from its implementation.
Do you have a known and pressing problem?
Often, organizations have a known and pressing problem such as low retention, low productivity or high absenteeism. These are obvious areas where people analytics can be a powerful tool to rapidly understand the extent of the problem and its underlying causes. With those insights, solving the problem will be faster, more effective, and carry a much lower risk of investing heavily in solutions that do not ultimately solve the problem.
Can you confidently say that you know all of your workforce’s problems or opportunities?
Understanding the workforce as a whole is an important tool for unlocking the workforce’s potential. Even if there are no obvious problems, that does not mean your workforce is risk-free, not to mention optimized. Understanding the basics of the workforce as a whole, across its many dimensions, will not only reveal unknown problems, but also opportunities for improvement. If done carefully, a continuous analysis of the workforce will even reveal many problems before they grow big enough to do serious damage, and soon enough to allow interventions. A sound people analytics strategy will enable your HR function’s posture to move from reactive to proactive, and will earn the HR function a seat at the table with the rest of the C-suite.
Understanding the power of people analytics unlocks a wealth of options to capitalize on opportunities, test solutions, and optimize your workforce. Stay up to date with the latest resources and insights on people analytics: Subscribe to Opterion's email list or follow us on LinkedIn.
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