Spotlight on People Analytics

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analytics is expanding its reach and returning even greater insight. Hr leaders now have the chance to demonstrate ROI on analytics through improved insights, leading to enhanced employee welfare, and wider commercial gains.

by Alex White

Senior Partner, Talent & Research 18th Jan 2017

Today, 'People Analytics' is more important than ever before. It used to be that People Analytics used to be called HR Analytics, and it was about understanding HR Data. Now these are business problems, why do we have low productivity in the organisation? Why are we not selling enough products in some of our branches? Why do we have turnover, fraud or error problems in those parts of the organisation? These are the critical problems that companies in a wider context are now trying to solve. 

The problem is, that many companies and organisations are still at the genesis stage of this HR revolution, and perhaps are even struggling to understand the basic concept of People Analytics.

When I meet with HR Directors at large corporations, they readily tell me that Analytics is a top priority, but when you ask them about their approach to implementation, some leaders have little idea of where to start.  The complex is that the definition of Analytics has not evolved to any great degree. Most HR directors will not want to admit that they have only a basic level of comprehension, and will typically describe the steps towards fully integrating Analytics in to HR as ‘building a data warehouse and filling it with HR data’. 

When you speak to chief HR Officers they will tell you that Analytics is one of the top priorities, and then you ask them what they are going to do, they’re not sure, the reason is that the definition of Analytics has changed, 4 or 5 years ago I would have thought that most people would have thought of Analytics as building a Data Warehouse, sticking your HR Data in it, and seeking to better understand your HR programs and spending, but that is just the beginning. 

Human capital represents 60-70% of the bottom line cost of the entire company, it's a major expense, how do you optimise that? The answer lies in who you hire, who goes in to sales, how you motivate people in different parts of the organisation. These are now people related business problems that companies are trying to analyse, its no longer a case of dealing with one dimensional HR process.

In the near future companies will reach a point where they say ‘people analytics does not belong in HR’, it will be a role that evolves to sit within operations. It is essentially the Head of Operations, or the COO, who is concerned primarily with why the organisation has retention problems, or why it has productivity or quality problems, and it is the people related data that will provide operations people access to the insights that they need to enable them to address those issues.

People analytics has introduced a new way of thinking about HR methodology. With it has seen the creation of new platforms and technology that is being applied to the analytics approach.  Software developers are developing increasingly sophisticated systems to enable HR leaders to better recommend and predict events using analysis, and this is the draw for Big Data and Data Science professionals, it has become so popular that most highly technical people like to venture in to this area, which is good news for Human Resources Leaders. 

When considering all of the vendors in the ‘people analytics’ arena, the ERP vendors, talent management vendors, the recruitment technology vendors, the engagement vendors, they all have analytics tools now that not only allow you to perform a deep analysis of data, these tools also enable companies to make accurate predictions that will affect business performance. 

 'Big data literacy can be a lengthy process, taking companies 5 years on average to achieve optimum data insights'.

'Big data literacy can be a lengthy process, taking companies 5 years on average to achieve optimum data insights'.

Over the next couple of years we predict that HR leaders will be purchasing analytics tools off the shelf, tools that will once have been customised by software companies according to the unique requirements of that business. No longer will companies need to build a custom data warehouse, they will be solutions available that will allow you to establish and manage people analytics without needing to be an analyst. 

For now, the challenge for HR leaders is to accommodate and get a handle on technology. To create a new biotope that blends analytics technology with established HR frameworks, companies will need to attract data-centric technical people in to HR. PhD statisticians and predictive modelling analysts that were once drawn to marketing or finance are now stepping out of the actuary team and seeing the attraction of the HR business unit, with the perceived potential to unlock an incredible number of employee insights through the power of data science, enabling companies to make better decisions affecting employee welfare, and improving the overall performance of the company

These leads on to the topic of data security, as managing employee data comes with great responsibility. Workers value security, privacy and anonymity. Once a company is invested in a people analytics programme, HR managers are going to begin uncovering insights that are very sensitive. Companies will need to ensure that data is not made available to the wrong person, and that individual employee identities are concealed.

Measures to protect HR data are a crucial component for engendering confidence among employees if they are to support an HR people analytics programme, there needs to be clear data policies in place that define the parameters and limits on data collection. Transparency is key, employees are generally happy for their information to be shared with the company if they think it will be used to improve their life at work and to increase their levels of productivity.

The analytical journey towards big data literacy can be a lengthy process, with estimates of around 5 years to reach the highest maturity level. This is because the fundamental problem that most companies have is ‘unclean data’, which is simply data that has been aggregated and stored, with no clear intent or purpose as to what to do with all of the information.

During the HR systems lifecycle, multiple new systems have been introduced, older systems have been swapped out, they haven’t had a data dictionary, there is indiscrimination about who puts the data in. The only data which they will have access to that has 100% accuracy is payroll data, which taken on its own doesn't tell you very much.

The task of getting to grips with data cleansing is fairly monumental, as most companies and organisations will typically have vast, multiple repositories of data that have yet to be rationalised. With this data representing an unknown quantity, depending on the size of the business and the volume of data, it could take at least 12 to 14 months to properly scrutinise and clean-up.

People data is a major corporate asset, akin to the importance of having accurate manufacturing or sales data made available to senior management.

Insights gained through predictive analytics enable business critical decisions, so that investment in data relative to human capital, whilst it won't necessarily return a measurable ROI in the first year, its going to pay off many times further down the road. The reason that its a 5-year journey towards achieving optimal data management, is the sheer length of time that it takes to clean the data up and then learning how to make use it.

There can also be internal factors which affect data, such as seasonal changes, mergers and acquisitions, and changes to products and services. The HR team must seek to familiarise themselves with what all of the data components mean as a sum of parts. Once the data is structured and managed according to a people analytics HR framework, a rich stream of insights will then begin to flow. 

Interestingly, some of the technology companies that we partner with on analytics talent assignments have an existing people analytics program integrated in to their HR systems. Tech companies are always very confident in their approach, their method is to typically pull a data scientist from the engineering team to begin work on building a consolidated database, they then perform a deep analysis of all of the data, and then 6 months later, they have a working model on something like predictive retention, which is impressive, but when you try to apply that to a global company it simply doesn’t work, they encounter errors, due to regional variations and differences.

By performing an analysis on people data that is not 100 percent accurate, you may find that you are making predictions or recommendations that are not the same month-to-month. The business case for apportioning a significant part of the HR budget on data cleansing is well worth the investment, as a business would not make decisions with wooly financial data, or develop products or services on the back of ‘inaccurate data’. There is a clear case for running a company with the same degree of data accuracy on its people.

The role of the analytical leader, where does it sit within the organisation? Insights?  In HR, the People Analytics Leader should report to the CHRO, I don’t think that they should report to the HR technology group, as they are engaged on other things.

People Analytics is about consolidating data on every single employee of a company or organisation, regardless of function or level, taking in the performance data, leadership data, recruitment data and all other relative people data.

Within any significantly large business where there are a large number of employees, the designated Head of People Analytics (HPA) needs to have a seat at the table, alongside the Chief Human Resources Officer (CHRO), as there are questions that are going to come in, from the leadership team and board directors.

CHRO's typically won't have time the exact information unavailable to respond to questions from senior counterparts on HR Insights, its more efficient to go straight to the analytics group leader to get hard data on key matters such as employee retention, and compensation. Some of these will be global, organisation-wide issues, the HR analytics team will need a large degree of support from IT, and other wider analytics groups sitting in finance and marketing, with their related data, other business units will have much the same objective as the HR people analytics team. When all of the separate business units then match up their data, they soon discover amazing new insights. 

The sum total of people analytics joining with other business units within companies to exchange, compare and match data will in effect create a new ‘Centre of Excellence’ for Human Resources.

When companies commit a programme of intelligent people analytics, it lasts, with significant increases in productivity gains through insights, along with an overall improvement in employee welfare.

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Author - Alex White.


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Alex White