People analytics: Make smarter decisions

With a global workforce crisis looming, human resource functions are facing growing pressures. People analytics provides deep insights about HR data by using predictive modeling techniques on multiple, integrated data sources.

It may seem unimaginable, but by 2030, many of the world's largest economies will have more jobs than available people to fill them. This looming shortage points to the need for better approaches to every aspect of managing the workforce, such as talent recruitment, retention and development.

In this case, “better” means more evidence-based, precise and predictive. People analytics applies analytic processes to data on workforce behavior, trends, individuals and markets to generate new insights that set the foundation for holistic talent and performance strategy.

As competition for scarce and in-demand talent intensifies, organizations around the world will feel the pressure. The workforce crisis will even hit three out of four BRIC countries (Brazil, Russia, India and China), traditionally assumed to be bottomless labor pools. The talent gap will be particularly acute for skilled roles, which is troubling as we race into a technology-dependent future.

 “This global workforce crisis is approaching very fast,” says Rainer Strack, Senior Partner and Managing Director at the Boston Consulting Group. In a December 2014 TED Talk, Strack said we are just at the turning point. It’s time to take notice – and take action. “Every company, but also every country, needs a people strategy, and to act on it immediately.”

“Workforce planning will become more important than financial planning,” Strack asserts. Getting it right will require a cultural shift toward making data-driven decisions based on people analytics. There is so much potential untapped. While 75 percent of HR leaders surveyed by Deloitte rated analytics as a priority, only 8 percent say their HR organization has a strong analytics capability.

According to Bersin by Deloitte, only 14 percent of HR organizations report they regularly use data and make talent and HR strategy decisions. However, those that do are twice as likely to rate themselves as excellent at selecting the right candidates, delivering a strong leadership pipeline and operating an efficient HR department. These organizations also generate 30 percent higher stock returns than the S&P 500 average over the last three years.

Answer the questions that really matter with people analytics

Are you tracking internal metrics that describe how HR performs – such as number of positions filled, training expenditures or employee satisfaction with the onboarding experience?

To sustain real clout with the business, you have to focus on quantifying value, showing how HR influences business performance – such as why top account reps are outselling everyone else, which high-potential or high-impact employees are at risk of leaving a critical division, and who among the applicants are the 20 most promising.

Teams get to those kinds of answers with a people analytics approach that:

• Integrates the data that is scattered throughout the organization and enriches it with third-party and benchmarking data to gain a holistic view of the workforce.
• Analyzes workforce conditions, strengths and vulnerabilities on a departmental and division level, to identify trends, risks and skills gaps in time to act upon them.
• Plans a workforce strategy that aligns with business objectives and market trends – then measures, monitors, proves and improves that strategy over time.
• Optimizes the workforce by modeling what-if scenarios under various conditions and constraints, to develop and validate strategies in a low-risk environment before putting those strategies into action.

Data integration and quality are the foundation of a strong people analytics practice. For most organizations, that means establishing consistency and governance across multiple systems. The latest research on HR systems shows that the average large company has more than 10 different HR applications, and its core HR system is more than six years old. It is unrealistic to rip and replace those existing systems to create a single view of people. That would take time and resources the business does not have.

Instead, an effective people analytics strategy needs to plug and play well with all HR systems and applications. But it doesn’t end there. A powerful people analytics platform draws from the entire enterprise, pulling from other systems that provide data on sales performance, IT, marketing campaigns, customer service reviews, external labor markets and more.

And it must do all this without adding complexity. More than 40 percent of the companies we surveyed for our upcoming Human Capital Trends study are embarking on projects to simplify the work environment. Nearly half of respondents who are buying new HR software cite ease of use and integrated user experience as one of their top two criteria. It should be easy even for nontechnical users to generate clear and concise workforce intelligence.

Explore the potential of people analytics

Optimize the talent you already have.

With an analytics-driven view of the training and experiences employees have received since they were hired – mapped against the organization’s present and future skills needs – you can:

• Discover underused talent that would be better applied elsewhere in the organization.
• Identify and more effectively retain your best performers, future leaders and most critical skills.
• Focus learning and development efforts based on employee potential as shown in survey results, rankings, manager feedback, skills assessments and more.

Engage with the right candidates. Avoid bad hires.

Start by understanding what success looks like at your organization. Predictive modeling techniques identify what makes an employee successful specifically at your company for a given role. These talent profiles are built using a broad array of internal and external data. You can then apply your insight to the current pool, scoring applicants against that profile to identify the most promising potential hires and the best way to recruit them.

Enrich your understanding of candidates through predictive modeling of behaviors and indicators pulled from resumes and LinkedIn profiles, such as years of service, promotion history, involvement in social media, volunteering and evidence of collaboration skills.

Understand cost of hire from the outset.

Forecast cost of hire based a number of factors, including heat maps of skills by geography/location and insights into who else is competing for and employing the talent you need. Understand what it will cost to fill talent gaps from the start of the recruitment process, not the end. Avoid offer surprises for competitive candidates.

Define workforce strategies based on deep data.

Use analytics, conceptual search and other techniques to forecast talent needs and build internal and external talent sourcing strategies. Get an at-a-glance picture of workforce status and the impact of activities on performance. See within seconds which results have the greatest impact, where to focus, and where to drill deeper to find the root cause of an issue, such as excessive turnover, a skills gap for an impending project or the effect of workforce trends.

Foresee and address workforce risks.

Powerful forecasting techniques enable managers to plan for possible future scenarios and proactively respond to changing workforce trends. Descriptive and predictive modeling reveal trends that influence voluntary termination, absences and other sources of risk. Optimize the use of resources within constraints, such as allocating merit increases to maintain the best internal and external pay equity.

Align people plans with organizational objectives.

Use people analytics to deliver insights in an audience-tailored way, so managers and executives can track activity and outcomes in alignment with organizationwide strategy, not just HR objectives. With analytical insights, HR leaders are equipped with both the quantitative and qualitative evidence to be at the forefront with business leaders to make critical strategic decisions.

Take people analytics from good to great

The potential gains are enormous. HR leaders can improve their organizations’ performance, engagement, innovation, agility and competitive position. They can reduce costs and risks while improving results. They enhance the value, productivity and esprit de corps of the workforce. Using people analytics, they gain the analytic insight to perform as trusted, strategic advisors to hiring managers and the executive team.