What Is People Analytics?

Understanding People Analytics

People analytics, also known as talent analytics, is a data-driven approach to assessing and managing your workforce. It represents a tremendous opportunity for human resource departments and an organization’s leadership, as a highly effective way to optimize the people side of business.

In a nutshell, people analytics leverages reporting, metrics, predictive analytics, and experimental research to:

  • Uncover insights about employee challenges and opportunities
  • Solve problems related to an organization’s workforce
  • Direct HR initiatives with data-driven decisions

People analytics and evidence-based management allow leaders to make decisions about their employees and HR strategies based on data. It prioritizes the current, best evidence – instead of intuition and experience – when evaluating candidates, promoting employees, and making other human resource decisions.

How effective are people analytics initiatives? Very — when they’re implemented correctly. Deloitte found that companies that are able to correlate people analytics and business data to predict and improve outcomes are among the highest-performing organizations in terms of shareholder value, and they report a fourfold better ability to make data-driven decisions about hiring, promotions, and compensation. A similar study by MIT and the University of Pennsylvania found that companies with mature analytics functions produce five to six percent higher financial returns.

Who Can Benefit From Using Evidence-based Management?

Business leaders in all sectors need a comprehensive understanding of their people in order to manage them. They need to be able to answer questions like, what makes people join and stay with our organization? Which candidates are likely to be successful? What steps can we take to improve our leadership?

They also need to be able to solve people-related challenges. For example, why are the organization’s top performers leaving? How can they be incentivized to stay? And who should be in charge of the initiative to retain top talent?

Conventionally, these questions are answered after endless debate rooted in emotion and instincts. Not exactly a recipe for sound decision-making. Evidence-based management infuses this process with a much-needed dose of data and facts, which inevitably leads to more effective and fair decisions, increasing the likelihood of achieving your desired results.  

With an evidence-based approach, leaders can make decisions with confidence. They can look to verified data, robust research, and their expertise to determine which direction will allow the organization to accomplish its objectives. Using the best available evidence takes emotion and bias out of the equation, and sets the stage for better decisions across the board.

The reality is that every leader, in every organization, in every industry can benefit from a rational, objective, evidence-based perspective. Though the approach originally evolved from medicine, where the best available evidence is used to inform patient care, it has since been proven effective in business, education, and law enforcement as well.

Using Talent Analytics To Your Advantage

According to a recent report by Bersin by Deloitte, companies that invest in people analytics outperform their peers in quality of hire, retention, and leadership capabilities, and their employment brand is generally ranked higher.

Talent analytics can improve every step of your company’s hiring, retention, and talent development processes. When implemented correctly, it can help your organization:

  • Recruit and retain great people
  • Make better hiring and promotion decisions
  • Evaluate performance and improve leadership
  • Design jobs and structure compensation strategies
  • Develop talent and leadership within the organization

Among organizations that are currently leveraging people analytics, the number one area of focus is recruiting, followed by performance management, compensation, workforce planning, and retention. Also, companies are analyzing employee behavior and their organizational network to understand performance and identify areas for improvement.

How does people analytics make all of this possible? By evaluating the data and revealing actionable insights that were not previously visible.   

For example, compensation based on performance is generally accepted to work in most settings, so many companies implement bonuses to incentivize their employees. However, after looking at the data, a particular business may discover that it’s an ineffective strategy for their staff. In this case, they can save untold resources by eliminating performance related compensation structures and instead focus on what actually works — which could be additional PTO, better perks, or stronger leaders.

People analytics can also help your organization improve the quality of your hires, which ultimately affects your bottom line. For example, one company found that it could have saved 1.1 million Australian dollars by using a pre-hire assessment tool. Prior to implementing this data-driven solution, they hired 80 people over a 12-month-period — but they weren’t smart hires. In calculating the people costs of these appointments, offset by revenues generated, these hires ended up costing the organization 800,000 Australian dollars.

Data can also solve the problem of bias in the hiring process. Interviewers sometimes prefer candidates who are similar to them, likable, and attractive – even though these qualities tend to be completely unrelated to an individual’s ability to perform the job well. The best way to determine if a candidate is an optimal hire is to assess whether he or she can perform the job and will thrive in your culture. Period. And yet, most hiring decisions are made after reviewing information gleaned from interviews. By adding data to the mix, organizations can remove this bias and look to the facts – not intuition – to get to the bottom of the important questions: can this person succeed in this role, in this company? Does this person share the organization’s values and believe in its mission statement? Is he or she a cultural fit?

One way to use talent analytics to answer these questions is to survey high-performing employees and look for trends regarding their behaviors, traits, and prior experience. During the hiring process, interviewers can screen for these trends to determine if a candidate is likely to excel at the company. Once talent analytics are incorporated in this way, it’s common for longheld beliefs to be disproved. For example, a company may have believed for years that a high GPA and a degree from a prestigious university are tied to performance. However, the data may reveal that some relevant work experience and an ability to thrive without direction are stronger predictors of success.  

And finally, you can use talent analytics to understand and predict retention. With 40 percent of employees currently at risk of leaving their job in 2017, retaining top talent has become a huge issue that’s gaining the attention of CEOs. In fact, 86 percent of business leaders are deeply concerned about retention and engagement, according to Deloitte. Fortunately, not only can talent analytics offer insight into why people choose to leave, but it also has the ability to predict retention based on current behaviors.

By reviewing engagement and culture data by tenure, you’ll begin to see patterns and risk areas. For example, past and present employees can be evaluated based on age, years of experience, education, and number of prior positions, along with performance, hours worked, promotions, benefits exercised, and engagement. That information can be compared against the number of years each person has been with the company, grouping long-term employees together based on their demographic and behavioral traits. Analyzing exit interviews can also reveal trends that historically have led to the departure of high-performing employees. Current staff members can then be evaluated to determine if they are at risk of leaving based on their behaviors.

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How To Start

To begin leveraging hard facts to make better human resource decisions, you always start in the same place: with the measurable data.

The good news is that most HR departments already have a trove of information about employee job history, demographics, performance, compensation, and training. The bad news is that this data may not offer a complete picture of what’s happening within the organization.

According to a recent HR survey of executives by the Harvard Business Review, the biggest obstacle to achieving better use of metrics and predictive analytics is data that is inaccurate, inconsistent, or hard-to-access and requires too much manual manipulation. In fact, only eight percent of companies believe they have usable data for talent analytics initiatives.

For your organization to benefit from people analytics, you need to either collect new data or harness the information already at your disposal. Regardless of the route you choose, the data you work with should be of high quality.  Once you’ve gathered the data about your company’s employee performance, demographics, culture, and engagement, and you’ve verified it’s accuracy, you can begin analyzing, strategizing, and implementing. We recommend focusing on a few business areas that are most relevant to your needs at first – such as recruiting and retaining top talent – and expanding your focus from there.

How CultureIQ Can Help

How CultureIQ Can Help You

CultureIQ can assist with people analytics and evidence-based management every step of the way.

Our surveys will help you collect information about your people and paint a comprehensive picture of your workforce and current HR initiatives — including your strengths, weaknesses, and the areas that need the most improvement.

Throughout this process, you will discover how you can eliminate ambiguity and guesswork, and reveal precisely what needs to change in order to produce the tangible outcomes you need.

We combine this feedback and data collected from surveys with one-on-one guidance from our strategy team, who helps you transform these insights into action. Because every organization is unique, we can tailor our strategy so we can help you accomplish your objectives, whether that means you want to improve your retention, net promoter score, or something else entirely.

In other words, our goal is to leverage the clarity gained from people analytics to help you drive the specific needs of your business. To that end, your Culture Strategist and personal account manager will help you optimize the people side of your business and enact meaningful change that produces the business outcomes most important to your organization.

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