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Why should businesses use people analytics?

Whether you're a business leader or HR manager, it's important to understand the possibilities and potential of people analytics.
Published 12 Oct 2021
Updated 16 Nov 2023
7min read
People Analytics 101

How long does it take to hire and train new employees? Do you know how to get the most out of your people? What patterns can we see in employee turnover? Are learning and development programs having an impact on performance?

While the answers to these questions aren’t exactly crystal clear, you no longer have to rely on intuition or guesswork to understand them.

Businesses today want to extract the most value from their talent. To do so, you’ve got to learn what motivates and drives employees to perform through data analysis. Over the last decade, there’s been an explosion of interest in data-driven decision-making.

Data analysis is used across a range of business functions, from finance data right through to workforce planning. However, it was only recently that humans were placed at the centre of analytics to measure, analyse and predict employee behaviour.

What is people analytics?

People analytics (also known as talent analytics or HR analytics) is about being able to utilise and interpret human-oriented data to understand problems, aid decision-making and anticipate future developments that improve employee performance.

The beauty is that big data is used throughout the entire employee lifecycle – from acquisition to performance management and retention.

Three distinct factors have triggered the unprecedented interest of business leaders in human-centred analytics:

  1. The rapid uptake in big data and data analysis as a result of the software and technological advancements.
  2. The pressure is being placed on HR departments to justify talent management decisions based on data-driven insights. Rather than using traditional means such as subjective judgement and intuition, business leaders are now opting for decisions to be made based on people analytics.
  3. The majority of HR departments are already sitting on a gold mine of employee data, such as demographics, performance outcomes, training, job history and salary. It’s only recently that businesses have seen the potential of leveraging this workforce analytics for goal-related purposes.

Most HR departments already collect HR data surrounding their people, so why is there a need for a specialised area of data analysts?

While data collection can help you get started, merely possessing this information isn’t enough. Without decoding and understanding employee data, the information will appear meaningless.

After all, it’s no use having all the ingredients to bake a cake without the recipe.

Understanding big data analysis

Big data refers to the body of information that’s gathered and aggregated to evaluate and plan desired business outcomes for key HR practices. This includes recruitment, onboarding, talent management, engagement, training, performance and retention.

Descriptive and predictive analytics

Generally speaking, two types of analytics are used to develop data-driven insights about a company’s people.

The first is descriptive analysis, which focuses on gathering and analysing data that are representative of the current state or historical events. Descriptive analysis is commonly associated with questions like ‘what is happening?’ or ‘what has happened?’.

On the other hand, forecasting future events or outcomes based on current and historical data is known as predictive analysis. The purpose here is to answer questions like ‘what might happen?’. This kind of analytics requires additional statistical techniques such as data mining and machine learning to detect patterns in data.Image showing a team having a discussion at work

What are the benefits of people analytics?

People analytics has become a recent HR buzzword, with over 70% of businesses today investing in data scientists, people analytics teams and people analytics tools to better understand their people.

However, it’s a relatively new domain for many HR departments, with only 26% of organisations using people analytics tools effectively.

Human-centred analytics can help businesses make smarter, more strategic and informed talent decisions. Armed with data-driven knowledge, HR departments are equipped with actionable insights to source talent, increase performance and improve employee retention.

There are numerous benefits to incorporating people analytics into core HR systems, so let’s delve into more detail

1. Aids in acquiring and hiring talent

Thanks to data analytics, the time spent manually screening new potential candidates is dramatically reduced. Talent data analysis can create a shortlist of talent that’s suitable for the role and have the necessary qualifications, experience and other relevant attributes.

By leveraging insights derived from human-centred data, you can also ensure the right people are placed in the right jobs. The best part is it can help your business recruit a more diverse workforce by removing any implicit bias that could otherwise occur in manual screening.

You can do this by tracking diversity ratios and ensuring equity is upheld throughout the hiring process.

2. Improves the employee experience

HR analytics can be used to determine effectively how your employees feel about their work and the organisation. When it comes to organisational culture, analytic approaches can be used to identify what motivates your employees and any areas in need of improvement.

3. Can help reduce employee turnover and absenteeism

When your employees decide to leave, there is often limited understanding as to why. This kind of inconclusive data provides no way of identifying trends or patterns in employee turnover and how they can be prevented.

Turnover is costly to any business, so it’s important to learn how to prevent this from becoming an ongoing issue. If your office has become a revolving door, people analytics can help you identify the root cause of employee turnover and absenteeism.

With these data points, Human Resources can use past data to identify patterns in employee behaviour and flag the kind which results in high turnover. They can also investigate the current level of productivity and engagement to determine areas in need of improvement.

By correlating both kinds of data, businesses are able to understand the causes of employee turnover and how it’s impacting their bottom line.

3. Evaluates the effectiveness of employee training

While it’s all well and good to offer training programs for staff, you need to have strong measurements in place to determine their level of effectiveness. People analytics capabilities can help score training and performance outcomes to reveal which courses produce the strongest results.

4. Can help you prepare for future talent needs

Predictive people analytics can help your business forecast talent needs that are critical to future operations. Succession planning will allow your business to prepare effectively for any new roles or positions long before they’re needed.

Workforce planning is key to understanding what your organisation needs in terms of experience, skills and qualifications to help you navigate any future uncertainty.Image showing a team analysing patterns in the workplace

What are the challenges when implementing people analytics tools?

The Harvard Business Review surveyed a number of HR professionals and executives in relation to the people analytics revolution. 47% of respondents believe the biggest obstacle to interpreting data is a “lack of analytic acumen or skills among HR professionals.”

While analytics might not be for everyone, modern technology allows people to access and visualise data without the need for manual preparation. Essentially providing a shortcut to data science.

It’s all about having the right people to translate analytical HR data into an easily understandable format and communicate this to the rest of your organisation.

While some HR departments are fearful of data-based approaches removing the need for human expertise, it’s important to recognise the role people play in collecting and contextualising data.

Algorithms cannot replace critical thinking, and we still need people to determine how the results can be turned into action.

How does people analytics work?

In order to understand how people analytics works, it’s important to understand the process first.

People analytics is made up of several vital components that flow into each other:

  1. Data is first collected to gather unique problem-solving insights
  2. The data is then measured against previous data, like historical events or information
  3. The results can then be analysed to identify any trends or patterns in behaviour
  4. Lastly, insights can be applied to organisational strategies and decisions

If you’re interested in implementing analytics into your HR operations, there are two key steps to help you get started

Step 1: Identify the questions you want to be answered

Without relevant, strategic questions, it’s difficult to determine what exactly it is you’re looking for when collecting big data.

If you want to try and tackle business goals, it’s important to determine how your people fit into these goals and the types of questions that need to be asked in order to achieve them.

For example, if your business needs to reduce costs associated with employee turnover, you want to start by identifying why your workforce is choosing to jump ship.

Are we offering little opportunity for growth and development? What kind of benefits do we provide to staff?

Step 2: Experiment with different statistical tools

There is a multitude of data measurement tools and software that help simplify data collection and present the information in easily identifiable graphs, charts, and visualisations.

The majority of people analytic tools use sophisticated data science and machine learning technology to produce more efficient, effective and accurate data that are reflective of their people.

If you want to get started, try experimenting with a few different tools to see what works best for your business. Having the right people analytics solution is crucial in providing valuable insights to your company.

Note: Ensure all data collected is ethically sourced, legally compliant and integrated into a succinct reporting system. The system must be capable of aggregating and organising the data for future analysis.

The wrap up

With data-driven evidence, organisations are better equipped to make necessary improvements to the employee experience and plan for future initiatives. People analytics removes the guesswork of HR, so it’s no surprise that successful companies like Google are using HR analytics to hit organisational targets.

Human resources are vital to your business, and how you understand your people is even more so. With people analytics still in the early stages of adoption, there’s a huge opportunity for HR departments to leverage the capabilities in this area and obtain a strong competitive advantage.

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