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People analytics, also known as human resource (HR) analytics and talent analytics, is a form of big data that applies math, statistics and modeling to worker-related data to see and predict patterns. In particular, HR departments use people analytics to make better decisions about all aspects of HR strategy with the goal of improving business performance.
People analytics is a broad area that encompasses all aspects of acquiring and managing employees, and it has largely come to replace its predecessor term, HR analytics, though that term is still in use. Besides HR analytics, talent analytics and, in some cases, workforce analytics may be used synonymously with people analytics.
Uses of people analytics
People analytics is beginning to help more companies in their recruiting, performance measurement, compensation and retention efforts. People analytics can help organizations to understand which candidates to hire, which employees are doing well, who's receiving adequate compensation and how employee retention can be improved. Ideally, people analytics can improve on instinct and gut feeling; for example, showing that, in some cases, a community college certificate makes for a better employee than a four-year degree.
However, a groundswell of interest in people analytics points to its expansion into new territories, especially with the use of predictive analytics, and that its use is moving beyond HR into the business as a whole. Two examples are using people analytics to predict and address low-performing salespeople and hospitals that use analytics to understand the employee factors in patient outcomes. Creating new opportunities for revenue by looking at both customer and labor data and enabling profit growth by analyzing workforce spending are two others.
In addition, tools are being developed to expand the use of analytics. Increasingly, companies are looking to vendors rather than building their own tools as analytics models become more widespread. As just one example, some enterprise resource planning (ERP) vendors are including people analytics dashboards meant to help senior executives understand attrition rates, employee costs and employee engagement profiles for specific segments and managers.
People analytics are also increasingly expected to analyze teamwork and organizational relationships, which may take on heightened importance as companies replace hierarchical models with more collaborative ones.
Benefits of people analytics
The use of data analytics within HR departments creates the difference between guessing and making decisions based on actual facts. Some of the benefits of people analytics include:
- Saving time - The sourcing, hiring, training and nurturing processes can be time-intensive and frequently end up being wasteful. People analytics allows HR team members to find actionable insights and focus on the programs and people that will be most beneficial, allowing the HR department to spend more time on actions that will drive bigger results for the company at large.
- Improve company culture - An employee's feeling of belonging within the company is often correlated to their morale and productivity. People analytics can allow data scientists within HR to determine the wants and needs of employees, thus creating a better social and work environment and increasing employee retention.
- Cloud migration - Since corporate environments are becoming more globalized and systems are becoming more automated and consolidated, data analytics is becoming more important. Tools that utilize analytics are a cost-effective option for businesses that cannot afford an in-house system. Furthermore, people analytics can help transfer sensitive information over to the cloud so it can be accessed from any location, not just from within the office.
- Creates transparency - People analytics makes data visualization possible; employees are given results they can understand. Therefore, since employees can see and comprehend their performance data within the greater context of the strategic business objectives, they know exactly where to adjust their performance and the creation of ownership provides the incentive to do so.
- Strengthens decision making - Data analytics provides facts that people can use to inform and empower their decision making process. Therefore, people analytics allows HR departments to make decisions that are less subjective and emotion-based and more reliant on the statistical likelihood of success.
- Improved employee retention - As mentioned before, people analytics can improve employee retention rates. The analytics can inform recruiters in the HR team of the reason for employees' negative feelings while also revealing why employees stay with the company. These analytics can help HR departments understand where the skill gaps are within the team and work to fill them in an effort to make the team members happy.
Areas of concern
HR data management is still a major concern. HR data continues to be siloed, incorrect, out of date or inconsistent. Understanding the number of contract vs. salaried employees or changing the options in a system of record are just two examples of the data-related issues that can plague companies.
In addition, helping HR staff and other business users understand how to work with and accept analytics can be problematic. Further, understanding what questions to ask of data and how to ask them is an ongoing challenge.
HR analytics vs. people analytics
HR analytics was the initial term used to describe the measurement of human resource programs and their effectiveness. It was performed in HR data warehouses, which were primarily the realm of technologists. HR analytics has its origins in industrial psychology, studies to optimize production and thought leadership such as that represented in the 1984 book How to Measure Human Resources Management. The term HR analytics came into wider use as software providers increasingly offered what they called HR analytics tools.
However, other terms also came into use -- especially people analytics, talent analytics and workforce analytics -- and were often still used synonymously, although HR analytics remained dominant as the catch-all term until recent years.
In terms of meaning, talent analytics has been almost indistinguishable from the other terms, touching on everything from recruitment to workforce planning.
Workforce analytics tends to refer both to the macro elements of HR strategy -- for example, the effect of changing demographics or issues surrounding skill gaps -- and more narrowly focused workforce planning issues, such as the staffing needed for a particular region or labor costs and productivity.
People analytics has largely become the dominant term, according to many thought leaders, since all aspects of HR strategy, at their core, relate to people. Understanding talent pipeline issues and assessing which wellness and learning programs are working, for example, are all about people.
In addition, the term HR analytics suffers for its original connotation as analytics exclusively for and by the HR department, whereas today, analytics is increasingly being used to improve all aspects of employee experience by managers and others across the company. Moreover, the actual administration of the analytics tools typically needs expertise outside the HR department and requires the help of data analysts and IT.
HR metrics vs. HR analytics
One point of confusion may be the difference between HR metrics and HR analytics. In essence, metrics describe concrete measures of past performance, while analytics uses those measurements to gain insights or predict future patterns. Metrics typically describe basic information, like how many candidates applied, how many employees left the company and other descriptive measures, while analytics looks at answering questions such as what educational background best helps indicate future high performers or why top performers are leaving.