People analytics, historically referred to as HR Analytics and utilized strictly as an HR function, has evolved into a systematic data-driven approach to improving your entire business.

If you are a leader or manager in a large organization, you are probably familiar with these terms. But you may be unaware how your organization can benefit from people analytics and what it will take.

That is what we will discuss today.

What is people analytics?

People analytics is the process of leveraging new or existing data within your organization to provide invaluable insights into your workforce and help you make better business decisions.

People analytics delivers facts about your organization such as why people are leaving your organization, the challenges they face, how much this is costing you, and more. Equally importantly, it paints a picture of how to anticipate and prevent these staffing challenges.

Difference between HR, people, and workforce analytics

People analytics, HR analytics, workforce analytics, and even human capital or business analytics are all different terms that share a common purpose: to improve all areas of business performance through the use of workforce data. Whatever you call it, the goal is to create a productive, innovative and powerful workforce, which positively affects the bottom line.

How organizations benefit from people analytics

The true value of a well-structured people analytics initiative will reflect directly on your bottom line. We’ll talk more about this in a minute, under the ROI section.

For now, here are a few ways your organization can benefit from people analytics.

Ten Ways Organizations Benefit from People Analytics

1. Understand and improve retention
2. Identify patterns of racial bias or inequity in compensation
3. Create effective, non-biased processes for hiring and promoting
4. Strengthen workforce decision making
5. Increase accountability
6. Shift team silos
7. Improve employee productivity and commitment
8. Determine the traits of your quality employees
9. Seek better employee sourcing options
10. Develop a culture where decisions are made in accordance with the evidence

How does it help my organization make better decisions?

A crucial component of people analytics is the ability to make informed decisions based on user data. An example of this is McDonald’s. They learned that employees working in groups containing a healthy mixture of generations tended to be happier. Happier workforces can lead to improved service, product quality, and teamwork, all creating higher value for the restaurant brand.

When CHCI worked with a shipment and transportation logistics business and analyzed personnel data, we determined their attrition rate alone was costing the organization millions of dollars. We were only able to start addressing the problem once we identified the root cause and fundamental elements of the problem through people analytics.

Google, a top 500 company, benefited tremendously from understanding their workforce at a much deeper level. Google is continually analyzing data and discovering solutions to improve their workplace, while creating an unstoppable powerhouse and attracting some of the most innovate minds from around the world.

Using data to solve problems

Leaders often make a decision based on “gut feeling” or “a hunch”, which is ineffective and unnecessary. This approach offers zero certainty that the solutions were the right ones, or what the effect of a different approach to the problem could have been. In contrast, having evidence that supports those decisions has a much higher chance of being correct.

Where do you begin?

Knowing the critical role that data plays in solving business and workforce-related problems, where do you begin?

CHCI has a meticulous process called PODAMIA, an acronym that describes the scientific, human capital problem-solving process. At a high-level, the process consists of understanding the strategy and critical business areas, identifying the right questions, and then answering those questions with data.

CHCI’s PODAMIA Process

The power of PODAMIA lies in its powerful six-step process to solving problems through data. It is specifically designed to improve the probability that the problem in question, the insights obtained, and the advice given by the leadership team are all in line with the organizational goals.

Let’s have a closer look at the steps:

1. Problem: Identify and prioritize key problems for the organization.
2. Opinion: Solicit opinions (not data) and think through possible solutions.
3. Data: Determine the type of data required to answer the problem defined in steps 1 & 2. Data may already exist; if not, establish a formal data collection process and begin data collection.
4. Analysis & Metrics: Start analyzing the data and metrics. Our team of analysts uses specialized software to interpret the results.
5. Insight: Our team of skilled analysts takes a close look at the entire picture and draws insights from the data, including answers to the questions defined in the beginning. These findings are then communicated to leadership in plain language.
6. Advice: Once these insights have been reported, leadership, now armed with data analytics, can make data-driven decisions.

How other organizations leverage people analytics

Many organizations have successfully implemented and enjoyed the benefits of people analytics, and those numbers are growing fast.

Another organization that is leveraging psychographics is Seedcamp. Their objective is to identify groups of employees (teams) that have the greatest odds for success.

Saberr uses algorithms that enable them to focus on the core values and behavioral traits of their candidates. They feed data into their algorithms to help them compare key values, behavioral compatibility, and diversity, thus helping them ultimately predict with much higher precision the strength of the interpersonal relationship between the applicants and potential employer. They are able to eliminate the initial bias, by using a survey for both the employer and applicant.

Understanding the ROI of people analytics

How much does it cost your organization to replace an employee? Do you know your cost per hire? What is the cost of absenteeism per salaried or hourly employee?

By understanding the answers to these and other relevant questions we can start to see the kinds of returns your organization can experience.

How do people analytics affect the bottom line?

Let’s take a hypothetical example:

Say your organization has 1,500 employees, with an average turnover rate of 18.5% (up from 15.1% in 2013). Let’s also assume your average employee salary is $70,000.

Lastly, we need an employee replacement rate. Some studies estimate 50% to 60% of an employee’s annual salary, while others say the ranges may be even higher for jobs that require a higher level of education and specialized skills, such as  213% for senior or executive level positions.

In our example, however, we will keep it simple and say it costs a third (33%) of an employee’s annual salary to replace them. Keep in mind our example does not include cost per hire or cost for absenteeism, which would drive our loss even higher.

Let’s throw these numbers into a spreadsheet so we can begin to see the real value people analytics can bring to your bottom line.

In this example, it’s costing this organization almost six and a half million dollars ($6,500,000) to replace employees every year.

Now that we understand the loss (and potential gain), we can start to analyze and explore solutions that will help increase the retention rate and reduce employee turnover. By drilling down on the data and understanding why people leave the organization and the things we can do to prevent them from leaving, we can start to see the impact this would have on the bottom line.

In our example, we only used ‘averages’. Your actual numbers may be much higher or lower. Without people analytics and the invaluable insights it can reveal, it’s difficult to assess the opportunities that can improve the long-term performance of your organization.

A study by the Work Institute pointed out that over 75% of reasons employees leave can be prevented. The question then becomes: how is your organization dealing with this?

How should organizations implement people analytics?

1. Understand the return the organization can ultimately gain from a well-planned people analytics program. The example above is a great way to start thinking about this.
2. Sit down with your team and start asking where the challenges are and how those tie back to the organizational mission and strategy.
3. Research consulting companies who are experts in the field of people analytics and have the capability to develop a solution customized specifically for your organization.

What to look for in an analytics consulting company

Working with an analytics company that will execute successfully is a crucial step in the process. A reputable analytics consulting company has a team who are experts in the key areas of statistics, qualitative and quantitative data analysis, predictive and descriptive analytics. They also dominate an array of analytical tools that help understand vital aspects of the workforce.

Let’s bundle this up into a short list of key items to consider:

• Determine if they are experts in the field of people analytics
• Examine vendor portfolio, papers, and research
• Check references
• Interview the consulting company(s)
• Consider and evaluate carefully (with your team)

What is the cost of implementation?

The cost for a successful people analytics implementation will depend entirely on the size of the organization, the kinds of questions you are trying to answer based on business goals, and whether existing data can be utilized or whether you will need to collect it. We encourage you to reach out to our people analytics team of experts for information on planning, strategy and investment.

Think of ‘cost’ in a different way

If you are an executive, particularly in Human Resource Management, then you know full well the challenges, and more importantly, the costs involved in hiring the wrong employees, the loss of those stellar ones, and the pain of dealing with absenteeism. Therefore the investment your organization makes in people analytics can easily be offset by improving those areas – quickly.

Anne Loehr, our Senior Vice President, said that organizations and top performers with advanced analytics strategies tend to enjoy increased revenue growth and operating margins of 15% or more.

The challenge then becomes how to align those issues with the strategy and mission, to solve these revenue-draining problems.

How does CHCI use people analytics to help organizations?

Our team of analysts is obsessed with discovering insights that are strictly based on evidence. Put simply, we help leaders make better workforce related decisions.

Our analysts are experts in the following research methods:

• Quantitative and qualitative data analysis
• Organizational network analysis
• Future workforce trend analysis
• ROI analysis
• Survey design
• Thematic and numeric content analysis

Getting a bit more technical, CHCI calculates and extrapolates information from descriptive and inferential statistical tests, including measures of central tendency, variability, correlations, chi-square tests, linear, logit, probit, and selection regression models to support analytically-based, human capital decisions. Why? To achieve measurable improvement in productivity and engagement across an organization.

Overview of capabilities

CHCI uses an array of analytical tools to assess an organization’s workforce characteristics. These tools help you make data-informed recommendations on topics such as talent acquisition, workforce planning, employee engagement, and performance evaluation.

Below is a list of the characteristics of our process. For a detail view on each of these, we invite you to read our complimentary people analytics summary paper.

• Analysis of existing data
• Survey design
• Performance assessment development
• Existing policy review
• Organizational network analysis

Conclusion

Having the ability to make decisions based on evidence is important. While we need the data of people analytics, this process will always rely on a ‘human element’ as well.

We are living in an age where almost everything we do generates some form of data, known as big data. And if you are not putting systems and processes in place today to help your organization leverage that data, you are falling behind. Without the ability to extract context that allows you to make sense of that data, it serves no value for your business.

So ask yourself where your business will be in ten years. Did you adopt analytics early enough to position your organization for success in the future? Will you have people and business analytics in place that will help you stay competitive? And lastly, will you have organized the data in such a way that allows you to seamlessly merge with AI technology?

These answers will not be straight-forward. However, what is certain is that only you can answer them.