Organizations have to make a lot of big people decisions – especially in the HR department. Did we hire the right person? Are employees feeling engaged? How many are at risk of burnout? 

There's no way around it: people decisions are hard. And while these decisions have massive ramifications for your company, they’re extremely necessary. Simply hiring the wrong person can cost your organization 30% of that hire's annual salary, and 6 to 9 months’ salary to replace an employee who has left the company.

HR professionals need better ways to make these critical people decisions that bring strategic value to the organization. That's where people analytics comes in — an ongoing paradigm shift that empowers human resource teams to make data-driven decisions, identify trends, and predict future workforce needs by leveraging the wealth of data around their people.

In this article, learn everything you need to know about people analytics – what it is, why it's essential, and how HR managers and executives can drive ROI through employee insights. 

What is people analytics?

As businesses become more complex, so do the challenges of managing a diverse workforce. Employee expectations are shifting, remote work is on the rise, and the demand for skilled talent is fiercer than ever. 

People analytics, often referred to as HR analytics, talent analytics, or workforce analytics, is the application of data analysis and data science methods to human resources processes. Ultimately, it's about using data to make informed decisions about an organization's most valuable asset: the people. 

People analytics combines HR expertise with that of data scientists. Advanced statistical analysis, machine learning, and data visualization can be used to extract meaningful insights from a vast pool of HR-related data to drive successful business outcomes. At its core, people analytics seeks to answer critical questions about your workforce, such as:

1. What are our top performing teams, and what sets them apart?
2. Can we improve productivity in our current workforce, or do we need to hire?
3. How can we optimize our workforce planning?
4. Do employees have enough time for productive work?
5. Do employees spend too much time in meetings?
6. How can we improve our diversity and inclusion?
7. What’s impacting employee engagement and satisfaction?
8. What’s driving employee turnover and burnout?

By analyzing employee performance and talent data, people analytics can identify the characteristics and behaviors of high-performing individuals and teams within your organization. And as many companies are pausing hiring, or even facing layoffs, these insights are incredibly valuable for implementing both training and new tools to optimize productivity in current employees and workforce planning – so organizations can reach goals faster with their existing workforce.

For example, you may find that employees actually only spend a couple hours a day on productive heads-down work because they’re overloaded with meetings and distractions all day. So instead of hiring another 20 people to meet their project goals, leaders can identify the problem and implement more productive workplace culture practices to protect employees from time-wasters that eat into their daily routines.

People analytics can also give you and your team a better understanding of what's actually going on within your workforce. It allows you to look at the diversity of your new hires, who is being promoted within the organization, and the makeup of the leadership team. HR teams can also uncover the underlying causes of employee flight with people analytics so you can take proactive steps to retain key talent and reduce recruitment expenses.

Top 8 people analytics benefits

In the movie Moneyball, Oakland Athletics' General Manager Billy Beane (played by Brad Pitt) and his assistant Peter Brand (Jonah Hill) revolutionized baseball by using statistics and metrics largely overlooked by traditional baseball scouts and managers. By focusing on undervalued statistical measures, such as on-base percentage and slugging percentage, rather than relying on conventional wisdom and subjective judgment, they could lead to better player selection and team performance.

This groundbreaking approach in baseball mirrors the evolution happening in human resources. Whereas Jonah Hill and Brad Pitt used "sabermetrics," HR professionals are using people analytics. And just as baseball scouts had traditionally relied on gut feelings and observations, HR professionals have also often made talent decisions based on intuition and personal experience. But with key people analytics trends in hand, data and analytics can be used to make more informed, evidence-based decisions.

So, what are the top benefits of people analytics?

1. Informed decision-making

People analytics equips HR leaders with the data and insights needed to make informed, evidence-based decisions. This isn't just a nice-to-have; it's a necessity in today's rapidly changing business landscape. Whether it's making critical hiring choices, optimizing training and development programs, or addressing employee retention issues – this data allows you to identify your biggest challenges and take action to improve before your problems get worse.

2. Competitive advantage

Talent is a precious resource in our global market, and organizations that leverage people analytics have a major competitive edge. By identifying top talent, reducing turnover, and enhancing workforce productivity, you can position your organization as an employer of choice and attract the best candidates in your industry.

3. Cost savings

High employee turnover and suboptimal workforce planning can be costly. People analytics helps you pinpoint the factors contributing to turnover, forecast future staffing needs, and reduce time-wasting activities from the workweek so employees can spend more time on their important team goals. 

4. Employee engagement & satisfaction

Engaged employees are more productive, innovative, and loyal. People analytics allows you to measure and track employee engagement, identify drivers of satisfaction, and implement targeted strategies to create a positive workplace culture.

5. Diversity and inclusion

Promoting diversity and inclusion is not just a matter of ethics; it's a business imperative. People analytics enables you to track diversity metrics, identify areas for improvement, and measure the effectiveness of diversity and inclusion initiatives. A diverse workforce can lead to better decision-making and innovation.

6. Agility & adaptability

In a world where change is constant, agility and adaptability are paramount. People analytics provides real-time insights into workforce trends and so you can adjust your HR strategies to stay ahead. Whether it's responding to shifts in market demand or adapting to remote work trends, data-driven decisions make your organization more agile.

7. Aligning HR with business objectives

People analytics bridges the gap between HR and broader business goals. It enables HR to demonstrate its impact on the bottom line by aligning talent strategies with the company's strategic objectives.

8. Employee development

Identifying skills gaps and opportunities for employee development is a must-have for building a high-performing workforce. People analytics helps you identify areas where training and development efforts can have the most significant impact.

How to get started with people analytics?

Sounds great, right? So, what does people analytics involve? 

Truth be told, there's no one-size-fits-all metric when it comes to this burgeoning field of HR data analysis. Every organization is different, so their people reporting will need to be different too. 

For example, your company may be struggling with retention, while others may grapple with an unengaged, unproductive workforce. Your company may need to conduct analysis on things like promotions and compensation structures to alleviate employee flight risk, whereas the other organization may need to study their learning and development opportunities. 

Here's a general framework you can follow to start implementing people analytics in your organization:

1. Define clear objectives

You'll want to start by setting clear and specific objectives for your people analytics initiatives. What HR challenges or goals do you want to address? Whether it's reducing turnover, improving employee engagement, or enhancing talent acquisition – well-defined and clear goals are necessary to choose and understand your metrics. 

2. Identify the right metrics

Once you have your objectives, you'll need to choose HR metrics that align with these goals. This is where you’ll set key performance indicators (KPIs) to measure progress in your organization. Of course, this is not always easy and may require some prior research on the part of your people analytics teams to discover which factors are most important for a given HR goal/challenge in your company. 

3. Collect your data

From here, you can start collecting your people's data. But what are some typical people's data sources? Oftentimes, people analysts will investigate employee demographics, payroll, promotions, tenure, performance, time across activities, and employee engagement, along with other sources such as labor market statistics, population information, social networks, and more. 

4. Invest in the right analytics tools

They say data is the new oil. However, just like oil, raw data is useless if it isn't refined. Given the complexity that comes with any kind of data analysis, you may need to invest in the right people analytics tools. 

People Analytics tools like Reclaim.ai, for example, can help you make sense of your people data to improve operational efficiency across focus time, meetings, and work-life balance — without the need for intrusive employee monitoring.

6. Visualize & present your data

Collecting new and intriguing people data is great and all. But, it won't do HR departments any good if business leaders can't make sense of your findings.

That's where data visualization comes in. In short, data visualization helps people see, interact with, and understand data. Proper visualization techniques will help make complex HR data more accessible to your organization's executives, employees, and your own people analytics teams.

7. Regularly conduct people analysis 

People are complex, and things change all the time – especially in an organizational context. Your HR data needs to be analyzed on an ongoing basis. Monitor trends, patterns, and anomalies so you can proactively identify issues or opportunities that require attention.

Use Google as an example. The Google People Analytics team is conducting its own longitudinal study (meaning they continually examine the same subjects over a long period of time) of Googlers at work that will run for decades to come. 

8. Experiment & iterate

Finally, take an experimental approach to the people analytics at your company. Considering how nascent the field is, there are no set-in-stone methods or techniques. So, continuous experimentation is necessary if you want to unearth the best insights within your data.

Data-influenced decision-making

Of course, the power of data is undeniable – but you can’t solely rely people decisions on the analytics alone. 

Effective human resources management is not solely data-driven; it's about being data-influenced. 

Perhaps more than any other company, Google has blazed the trail on people analytics – and how to implement within large companies. As Prasad Setty, Vice President of People Analytics & Compensation explained, twice a year, thousands of Googlers convene to form committees to evaluate who should get promoted within the company. 

The Google people analytics team developed a formula to improve the efficiency of their promotion process. The algorithm predicted, with 90% accuracy, the right promotion decisions. But Googlers weren't interested. In fact, they actively opposed "hiding behind a black box." They wanted to make their own decisions.

People's decisions should ultimately be made by people, not by algorithms. Statistics, as powerful as they are, don't always tell the whole story. They provide snapshots, but may not capture the nuances of individual situations or the intangible qualities that make an employee valuable.

That's why people analytics should be used to influence your decisions, not mandate them. While data provides valuable insights, there's still a place for human intuition and judgment in HR decisions. Factors like cultural fit, creativity, and adaptability can't always be quantified in data.

Striking the right balance between data-influenced decision-making and the human touch is key to harnessing the full potential of people analytics while respecting the complexities of human resources management.

Corporate examples of people analytics

Let's take a look at some real-world examples of organizations that have harnessed the power of data-driven HR strategies via people analytics:

Google's Project Oxygen

Google's HR team embarked on Project Oxygen to identify the key attributes of their best managers. Through extensive data analysis, they found that technical skills, often considered paramount in the tech industry, ranked lower in importance than soft skills like good communication and a willingness to empower their teams. In fact, Google found that these 10 qualities made for the best managers:

1. Is a good coach
2. Empowers team and does not micromanaging
3. Creates an inclusive team environment, showing concern for success and well-being
4. Is productive and results-oriented
5. Is a good communicator — listens and shares information
6. Supports career development and discusses performance
7. Has a clear vision/strategy for the team
8. Has key technical skills to help advise the team
9. Collaborates across Google
10. Is a strong decision-maker

Armed with this insight, Google tailored its leadership development programs to emphasize these crucial qualities, resulting in more effective and engaged managers.

IBM's Predictive Attrition Program

IBM's HR team developed a predictive attrition program that uses machine learning (via their own AI, Watson) to forecast which employees are at the highest risk of leaving the company. By proactively addressing the concerns of these employees and tailoring retention efforts, IBM managed to save over $300 million in retention costs, specifically by focusing on the company's high performers with in-demand skills.

JetBlue’s People Assessment & Analytics

JetBlue's People Assessment & Analytics team, working with the customer support leadership team, sought to determine the most challenging aspects of working in their call centers, along with the characteristics that allow employees to thrive. They used focus groups, on-the-job observations, and interviews with employees and supervisors to gather data. 

They identified the most essential qualities of successful call center employees. As a result, JetBlue improved its hiring efficacy and is now working to develop similar people analytics for talent acquisition across all customer-facing positions. 

Unlocking HR's data potential with people analytics 📊

By blending data-influenced decision-making with human intuition, HR can harness the power of data to make informed, strategic choices that drive organizational success and create a thriving workplace.

As you go on to use people analytics in your own companies, remember that it's not just about the numbers; it's about the people behind them.

Did we miss anything? What do you think about people analytics? Tweet us @reclaimai to let us know!