The Role of Analytics in Predicting Employee Performance

By Archana Jerath Jan 10, 2018
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Human capital forms the foundation of any organization, and employee performance has a significant impact on the bottom line. In fact, research indicates that a five per cent increase in employee engagement is linked to a three percent growth in revenues in the subsequent year. Yet, most HR departments struggle in the management of employee performance.

Employees often perceive performance reviews as a process that inclines heavily towards traditional practices (Bell Curve Method), is subjective and consumes time. If they are not satisfied with outcomes, their morale, productivity and performance may plunge. Consequently, it may lead to high turnover. However, it is an important exercise given that it creates a high-performing culture and motivates top-performing employees. It enables the organization to identify skill gaps, develop learning and development programs, retain employees and do succession planning.

Most organizations have realized that conventional performance review systems are outdated, do not capture real-time performance, and fail to provide timely feedback and improvement opportunities to employees. According to the Randstad India HR Game Changers 2016 Survey, 28% of HR leaders feel employee performance methods need to undergo a significant structural change and evolve into something more transparent. In fact, a PwC report titled ‘Performance Management in India – A Change Beckons’ highlights that 52 percent of organizations have made or are planning to make changes to employee performance in the near future.

For example, India’s leading IT services companies, Tata Consultancy Services and Infosys, have shifted to a continuous performance system. By doing so, these two organizations believe that they will be able to monitor employee performance at regular intervals and predict their behavior, which could affect their engagement levels.

Technology is being touted as a key enabler that HR is now considering to predict employee performance. A survey titled ‘State of Performance Management System in India’ conducted by Salto Dee Fe Consulting Service, reiterates that digital tools could improve the performance of employees. Analytics is one such tool that can help organizations predict employees’ performance based on historical and real-time data. It provides both retrospective as well as forward-looking analysis.

Predictive analytics can be applied to the workforce to identify traits/patterns that account for bad or good performance on an individual and team basis. Since analytics is an amalgamation of powerful mathematical algorithms, it also gives objective insight into their work preferences and the factors that drive their performance. An article published in The Times of India talks about a case study on how analytics helped a manufacturing firm predict what was wrong with employee performance. Using analytics, this company discovered that morale of ten employees was down due to their issues with manager. The management quickly stepped in to resolve the situation and take preventive measures before the employee performance deteriorated further.

Adani Group has hired an analytics startup firm Vahanalytics, which uses machine learning for driver profiling, behavior and performance. The startup will track the vehicles deployed at Adani Group’s Mundra Port and capture information on whether drivers have been speeding, taking sharp turns or not following driving norms. These reports will help Adani Group to predict the performance factors of drivers and make timely innervations in regards to their training.

With the help of analytics, HR can also identify engagement activities which have the maximum and minimum impact on employee performance. This exercise has two-fold advantages. One, an organization can direct their investment towards initiatives that generate the highest interest in the engagement levels. Two, an organization can define measurable metrics that co-relate engagement and performance.

Since organizations usually review employee performance annually, it leaves little time for HR to act on possible flight risks. However, performance analytics gives real-time information to take timely decisions. HR can recognize red flags of performance and predict which employees fall in the highest flight risk category. It can then either discuss the matter directly with the employees or implement tailor-made retention programs to re-engage them. When HR can gauge employee performance from analytics, succession planning also becomes easier. It can anticipate promotions, transfers and firing in advance. Accordingly, it can forecast workforce requirements and work towards filling the open positions.

HR is also discovering advantages of analytics in predicting employee performance and improving quality of hiring during recruitment. Analytics can mine data on candidate’s personality, behavioral traits and skills to throw useful insights into whether he or she would be the right fit for the organization. In a TJinsite Survey from TimesJobs.com, 90 percent of companies agree that predictive analytics is a promising hiring tool and could be the future of talent hunting. However, only seven percent of companies are using it for performance assessment during hiring.

Take the energy and automation conglomerate Schneider Electric India for example. It uses predictive analytics in addition to psychometric assessments, behavioral event interviews, PAPI (Personality and Preference Inventory) and Hogan assessments to avoid gut-based recruitment. Analytics helps it to prioritize and target only those candidates who are most qualified for a specific role or position. The company’s CHRO Rachna Mukherjee says, “The use of data and predictive analytics can impact the manner in which companies interact with customers, besides transforming how they search for, discover and retain promising talent.”

The Indian arm of the multi-level marketing company Amway has also been using analytics to identify the right-fit candidates from internal job postings. In fact, it was able to hire a candidate who was two levels below in the organizational hierarchy for a desired position. Apparently, his behavioral and performance indicators showed him a perfect fit, so he was promoted.

With business dynamics changing swiftly, real-time talent decisions are the need of the hour. There is no scope for taking a backward approach to analyzing employee performance. Or else, organizations stand a high risk of losing the business advantage. What better tool than analytics to peek into the future? There is no doubt that analytics can be a powerful data-driven tool for organizations to anticipate performance outcomes and develop pro-active strategies for people management.


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