The myriad challenges faced by businesses over the past few years have shined a new spotlight on people analytics.
The C-suite is paying more attention to how talent shortages impact the bottom line; how factors such as compensation, training opportunities and remote work affect employee retention; and how diversity, equity and inclusion (DE&I) initiatives influence the corporate brand.
This new focus has translated into a growing thirst for people analytics to give senior leaders and non-HR managers improved data to make challenging people decisions. As a result, more HR functions are using next-generation analytics technologies that can integrate disparate HR data and quickly put actionable insights into the hands of leaders to help them make better-informed decisions.
A recent McKinsey & Co. survey of senior leaders including CHROs found more of them are increasing their investments in advanced analytics tools. Almost three-quarters of CHROs expect to nearly double the number of different applications they use for analytical techniques in the next 12 months, according to the survey.
Meanwhile, Sapient Insight Group's 2022-2023 HR Systems Survey found that for midsize and large companies, HR analytics will be a top target for investment in the coming year, second only to recruiting technology investments.
Increased interest in analytics also is reflected in the growing size of people analytics teams. According to the 2022 People Analytics Trends study from Insight222, an HR research and advisory firm in London, 65 percent of surveyed companies said they increased the size of their people analytics team in the previous year. In addition, LinkedIn's 2023 Jobs on the Rise report ranked people analytics managers as the second-fastest-growing job in the U.S.
"The data shows that investment in the people analytics discipline was not just because of the pandemic, but a strategic business decision that is expected to continue," wrote the authors of the Insight222 study. "Our research shows there is clear intention and action of CHROs in building a data-driven culture in HR and delivering value to the business by leveraging expertise and skills that people analytics bring."
What the Best Do Differently
Organizations that successfully use people analytics to improve leadership decision-making do things differently than others, experts say. SHRM Online spoke with people analytics experts and HR practitioners to identify practices and technology investments that help separate the best from the rest.
Best-practice organizations use analytics, not guesswork, to measure the success of key initiatives. Best-practice companies don't rely on assumptions or gut feel to determine whether key HR initiatives are paying dividends—they use proven analytics tools to measure success and return on investment.
Stacia Garr, co-founder and principal analyst with RedThread Research, an HR research and advisory firm in Woodside, Calif., said her organization conducted research last year looking at companies that had used stay bonuses as a means of improving employee retention. Under those plans, new employees who stayed with an organization for one year to 18 months received a significant bonus.
"What analytics in those organizations found is that stay bonuses didn't meaningfully impact retention, yet the company was pouring millions of dollars into them," Garr said. "Data showed they needed to stop providing bonuses and start using other means to stem attrition."
Lydia Wu, director of HR strategy and technology for Panasonic North America, said her analytics team surveyed employees when her organization was considering bringing workers back to the office as the pandemic began to wane. Those surveys were conducted against the backdrop of ongoing DE&I initiatives in the company.
"With that DEI lens in mind, we discovered through surveys that we were about to lose one-third of our female population as a result of requiring a return to the office," Wu said. "The data convinced our leaders to delay the return-to-work conversation at that time."
Exemplars "democratize" people analytics for use across the organization, not just in HR. Best-practice organizations use technologies to get people data into the hands of non-HR leaders to help them make decisions, understanding that such analytics need to travel outside of HR for maximum impact.
"That's important because it creates a 'pull' effect on HR when more business leaders start seeing people data and asking more questions about it," said Dirk Petersen, a managing director with Insight222. "It leads to more sharing of people analytics outside of HR."
Garr said more technology vendors are building or adapting their platforms with non-HR users in mind, noting that even more improvement is needed in that area.
"We're seeing more analytics vendors wake up to the importance of viewing senior leaders and line managers as full-fledged users of their systems for whom they need to design features and functions," she said.
Wu said partnering with analytics vendors that can make people data understandable and actionable for non-technical users is increasingly important.
"Vendors need to understand that not everyone who works in HR or needs access to HR data is a data scientist or is data-savvy," she said. "You want a platform that can translate people data into understandable insights and make recommendations for your end-user audience, which also takes some of the analytics workload off of HR."
Best-practice organizations use platforms that can easily integrate HR data with other internal and external data. Experts say the ability to collect and integrate data from multiple HR systems, as well as other internal or external platforms, leads to improved people decisions.
RedThread's 2022 study found that almost 50 percent of vendors now integrate existing employee data with other internal and external data, and many also have designed integrations—with a growing number using application programming interfaces—to connect data from HRISs to other talent platforms.
These platforms can pull information including sales, CRM and learning data together with external data, such as labor market information, to help guide leadership decisions. RedThread's research found that effectively using integrated people analytics data "can impact businesses in terms of millions of dollars," wrote the survey's authors.
"More HR leaders are seeing the power of bringing data together to produce contextual insights," Garr said. "They're also requiring technology vendors to make people data more portable so they can analyze it through tools like multi-source analysis platforms."
Those platforms integrate and analyze data from different operational systems and distribute insights with appropriate levels of security throughout an organization, Garr said. Examples of vendors with multi-source analysis platforms include Visier, One Model and Crunchr.
Best-practice organizations use analytics to break down barriers between HR and finance.
Leading HR functions build bridges with finance on the use of people analytics. "The idea is to help finance understand our view of the world regarding analytics and vice versa," Wu said. "For example, helping finance understand that a job vacancy doesn't just translate to cost savings and will impact company performance in other ways in the long run."
Such partnerships also allow finance to educate HR on how it measures success, Wu said. "That helps us translate HR outcomes into numbers that make sense to finance, allowing us to structure our HR data in a way that's understandable and meaningful to them," she said.
Best-practice organizations use a host of dashboards to monitor key people metrics.
Best-practice employers use a wide variety of user-friendly dashboards to track key metrics. These dashboards often monitor headcount, total cost of workforce, voluntary employee turnover, source of hire, failed hires, DE&I metrics and time since last promotion/pay raise, among other measures.
Dashboards are often used in recruiting, where organizations continue to face talent shortages and challenges in filling open roles. Amy Wood, former senior director of recruiting operations for vendor Gem, said more recruiters are leaving behind traditional tools such as spreadsheets in favor of more sophisticated technologies that bring new efficiencies to tracking key recruiting metrics.
Dashboards can produce insights such as a need to rework job descriptions, pinpoint bottlenecks in talent pipelines or quickly identify hiring sources that aren't performing up to expectations. For example, dashboards might show that candidates from diverse backgrounds or underrepresented groups are dropping out of the hiring process at disproportionate rates before making it to the interviewing stage.
"You want your recruiting team spending more time in the funnel talking to candidates and less time doing manual data entry or struggling to conduct data analysis," Wood said. "More sophisticated technologies can automate the data gathering and analysis process and give recruiters far more time with applicants."
Dave Zielinski is principal of Skiwood Communications, a business writing and editing company in Minneapolis.