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People analytics: Will algorithms replace the critical thinking of HR?

October 20, 2021 - 14 min read

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What is people analytics?

Why is people analytics important for HR? 

Benefits of people analytics

Challenges of using people analytics 

How to implement people analytics 

Future of people analytics 

What is people analytics?

People analytics is the art of tracking, understanding, and utilizing human data to better understand and manage the business to achieve its objectives. While HR analytics is about the traditional HR systems metrics and focuses on the HR organization and processes, such as time-to-hire or turnover, people analytics is much broader. And the focus of people analytics is the business, not the HR organization. 

People analytics can encompass everyone from employees to customers. It takes into account the why behind every touchpoint a person has with your brand. From the number of people who apply for open positions to the amount of value a customer gets from your product, every metric tells the story of how effectively you do what you do.

People shouldn’t be treated like numbers. However, statistical analysis is an important way to track what matters to your people. Unfortunately, many organizations lack the data and the understanding that they need in order to keep tabs on the effectiveness of their initiatives. To create meaningful change, data needs to be predictive, proactive, and strategic. 

Why is people analytics important for HR? 

People analytics is about all the ways to understand employee performance and how it affects business objectives. Traditionally, the data has focused less on well-being and more on the “hard” numbers that directly impact the bottom line. However, understanding well-being is the secret sauce of understanding productivity.

When you bring in employee wellness as a non-negotiable for your company’s success, you gain insight into the bigger picture. This data can be used as a means of predicting burnout, team conflict, or departments at risk of missing delivery deadlines. Thoughtful, people-centered analysis guides major business strategies, including knowing when — and how — to intervene and staffing/hiring decisions. It has big implications for understanding how and where collaboration is happening, and can be used to tweak practices and systems to encourage more of it. In some ways, it requires higher-level systems thinking.  

If you think of the employee journey as being similar to the customer journey, you’ll immediately note the importance of analytics in both processes. Neither customer-supplier nor employee-employer relationships should be transactional. We know what the costs of both customer attrition and employee turnover can do to a business. These relationships thrive when nurtured but, in order to nurture, we have to understand what makes them work.

Analytics has risen in both popularity and necessity in the last few years. The field of people analytics has been in existence for more than ten years, but its early stages looked very different. At first, organizations tracked the basic metrics of salary, vacation times, and tenures. The later data began when companies started to ask the question “Why?”

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We know, after a decade of asking, that investing in our employees’ well-being — not just the human, but the person — is critical to nurturing their productivity, motivation, and success at our company. What the new direction of people analytics is designed to track is the experiential granularity of our workplace culture. Which experiences, which initiatives, which conversations make the most difference in the success of our workplace?

Analytics are the diagnostic tools of innovation. As this conversation deepens, more and more companies are claiming to have the answers to overnight transformation. But change doesn’t happen overnight. That’s why a solid people analytics platform is critical to weeding out the truth — the underlying causes of stagnation that go undetected when we don’t treat the right things.

In HR Joins the Analytics Revolution, a report by Harvard Business Review, researchers found that “more than 80 percent of respondents said that they needed talent-related insights to make business decisions.” However, most companies lack that data, relying instead on “the intuition of hiring managers and HR professionals” to make decisions about who to hire. This strategy lacks benefit to the company, since there’s no reliable way to ensure that HR is reaching the best candidates or maximizing retention. But it also highlights some troubling social implications, since this method of recruiting offers no insulation against implicit biases on the part of the company or its hiring team.

Talent acquisition and retention is a key part of improving and stabilizing business performance. Having targeted insights into what it takes to attract — and keep — the right people is essential to any kind of sustainable growth. 

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Benefits of people analytics

As long as there are companies looking to grow, there will be people interested in data. But the nature of human growth is predictable in some ways and mysterious in others. A nuanced understanding of people analytics provides the story behind the data. It helps justify and guide business decisions in a way that’s easy to understand and talk about.

  • Connect workforce decisions to business outcomes
  • Improve understanding of how talent programs, benefits, learning and development affect your employees and impact your business
  • Improves employee engagement and retention
  • Provides deeper insight into what works and why
  • Helps to streamline talent management
  • Increases productivity and efficiency
  • Gives context to data
  • Informs future directions for growth

Challenges of using people analytics 

Collect the data and figure out what it means. Seems simple enough, right? In data analysis — as in any scientific process — you need to have the right team analyzing the answers to the right questions. In other words, if you’re not intentional and clear about what information you want to collect and what you want to learn, data collection won’t help you much.

To get the most out of people analytics, it helps to be proactive instead of reactive. Start with the question you have in mind, and track the HR metrics, or key performance indicators, most closely related to those targets. Analytics may seem sort of sterile and bland, but the numbers you track are inextricably tied to the values of your company.

Here are a few common concerns about people analytics:

  • The data is inconsistent, unhelpful, or inadequate
  • No one is really sure how to interpret the data
  • The results show that there’s something to work on, but you can’t seem to get ahead of it
  • Companies are unsure which platforms best fit their needs
  • People try to let the algorithm do all the work, and don’t allocate enough human oversight
  • Limited understanding or capability related to analytics across the organization and need to develop analytical skills (problem-solving, statistics, data visualization) as well as performance and operational expertise to interpret the data 

The quality of the data collected comes up over and over again as a sticking point. There’s no getting around it — as the saying goes, “Garbage in is garbage out.” Just because data is easily accessible doesn’t mean that it is comprehensive or representative enough to inform decision-making. For example, pulse surveys to assess engagement are limited to those who respond, which can bias toward either those having a very positive experience and enough time and motivation to fill out surveys. Employees having a very negative experience may also tend to respond in higher numbers. You might not hear from the over-extended, working too many hours set or the disillusioned, disengaged set who are no longer motivated to try to improve the company.

Often, part of the challenge is that there’s too much data and not enough context. This creates a disconnect between data and implication. More and more, companies have the ability to gather people data passively, through the many systems they use to get work done. This is even truer with remote work teams. Passive data — such as keystroke capture, email patterns, websites visited, log-in hours — can be more robust and real-time than self-reported surveys. But the sheer amount of data gives a sense of accuracy despite not telling the whole story of whether the person is effective in their role or the value they create in the organization.

If companies only gather data passively from systems, they risk losing trust, or further damaging it, with employees. It can feel like monitoring if an individual’s data is delivered to a manager rather than aggregated — especially if it is used punitively. Transparency about what, why, and how data is being collected and used is important to maintain trust.

The important thing to note is that an analytics dashboard isn’t a replacement for human involvement and expertise. With insightful, experienced professionals looking over a customized, easy-to-use platform, you gain the benefit of a well-founded, evidence-based, human-to-human experience. 

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How to implement people analytics 

In order to start doing the work of analyzing customer and employee data in your workplace, you need to know the question that you want to answer. if you're not sure, start where your biggest area of growth, opportunity, or just where you're stuck at. What would make the biggest difference for your organization? Do you want to improve retention, attract new talent at scale, or streamline onboarding to help new hires be more successful?

Whatever your goal, start by asking the question “What is most important to my organization right now, and what metrics can I pull to tell me how we're doing at this?”

Now take a look at your existing data. If you already have this data, great! Look and see if there are any related metrics that you should be tracking. Set a plan for what that number should look like. For example, say a company has a commitment to improving employee engagement. What numbers communicate engagement, and what would those numbers ideally look like?

After you answer these questions, you need to collect the data. Establish how much time you need to see a difference in this area. If you don't already have baseline data, make sure that you do an initial collection. It’s counterproductive to set a goal arbitrarily. Knowing where you are right now is critical to setting the right goal for your organization.

Once collected, analyze the data. Your software may highlight patterns that you should be aware of. However, you may need to work with a professional to begin to recognize the story that your data is telling you. One of the benefits of working with a platform that's skilled in understanding people is the perspective of industry-wide experience and trends.

Future of people analytics 

As organizations develop their capabilities, they’ll become more intentional about how they use people analytics to inform and  accelerate business processes

People analytics will continue to be used to drive workforce strategy and decision-making. Many companies are dialing in their use of analytics to understand and improve the impact of HR and workforce initiatives. 

The greater value of people analytics will likely come as it is more tightly integrated into the business. Successful companies will use people analytics to understand employee performance relative to business operation and performance.

This will evolve as the data itself becomes more robust, real-time, and rich. Analytics will move further away from historical reporting based on transactional data to real time insights based on behavior. For many, the greatest promise lies in predictive insights that drive specific action (e.g., interventions for talent at risk for leaving), new practices (dynamic cross-functional team formation), and strategy. 

As people analytics focuses less on the transactional data of cloud HR systems, there is potential to get visibility into more interesting data from more innovative platforms. This type of data adds more texture to our understanding of our teams and employees. For example, BetterUp is able to provide aggregated realtime views of teams’ growth and progress on dimensions related to inspirational and inclusive leadership that create psychological safety, belonging, and drive greater innovation. For sales teams, BetterUp’s dashboard offers a look at goal achievement, resilience, productivity, and engagement

While people analytics are designed to improve management decision-making, the insights may be more effective when also shared with the employees themselves. They can understand more about their own performance. Just like with fitness trackers and readouts at the gym, when we see our own data, it can be motivating or informative. The more interesting, real-time behavioral data provides texture into how we are doing, really, and what we do as a result.

Conclusion

At BetterUp, we believe these insights are powerful. But they don’t replace the skill and critical thinking of people. The goal should be augmentation, not replacement. People analytics still require informed, skilled practitioners to assess and interpret data and skilled thoughtful leaders to set strategy and take action.

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Published October 20, 2021

Allaya Cooks-Campbell

BetterUp Staff Writer

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