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HR data analytics can lay the groundwork for workforce improvements

Emilio J. Castilla, a professor at MIT, urges executives to use data for decisions about employees, instead of relying on intuition, experience or advice.

Emilio J. Castilla, NTU professor of management at the MIT Sloan School of Management and the head of the Work and Organization Studies Group at MIT Sloan, has served as both a researcher and a consultant to companies on managing talent and implementing people analytics successfully. He is offering a two-day course for business executives called "Leading People At Work: Strategies for Talent Analytics." Castilla discussed a range of aspects about HR data analytics with SearchFinancialApplications.

What are some of the ways to successfully design and implement HR data analytics in a company?

Emilio J. Castilla: In my opinion, executives need to first take time to gain a deeper understanding of what is relevant to their managers and their employees in the workplace today. Second, they need to identify and review the most important existing frameworks and theories that could help them understand and address many people-related challenges and opportunities.

It is then crucial to adopt a people analytics strategy that will help collect and analyze the relevant and appropriate data to take action and address some challenges and opportunities related to their workforce. These steps would allow executives to become more strategic and more thoughtful about what they know and might not know about managing employees and managers, and make successful people-related decisions.

Emilio J. CastillaEmilio J. Castilla

Where are talent analytics most effective?

Castilla: People analytics is a data-driven approach to improving people-related decisions for the purpose of advancing both individual and organizational success. People analytics can be effective at many levels and stages of managing people at work. Analytics can be very successful in recruiting and hiring talented individuals, motivating and rewarding employees, and developing and retaining the best.

What is a specific way to use HR data analytics in recruiting and hiring?

Castilla: The first step is to determine the most important variables and factors you are seeking to maximize when selecting and hiring employees -- while anticipating which other important people variables may be affected as a result of such efforts. Are you thinking about maximizing returns? What kinds of returns? Are you thinking about performance, innovation, team work, collaboration or engagement? Then figure out the best methods and experiment with new methods to select job candidates and assess whether those methods are helping you maximize those variables and factors with relevant data collection efforts and analyses.

Today's leaders can strengthen their people decision-making processes using people analytics.
Emilio J. CastillaNTU professor of management , MIT Sloan School of Management

What can you discover by analyzing retention?

Castilla: Companies can experiment with different methods of recruitment, of evaluating performance, and rewarding employees, and assess the impact of such methods on employee retention, performance and collaboration, for instance, over time. Turnover, in particular, can be extremely costly for certain organizations and in certain industries.

At one company I worked with, for example, I investigated the association between the source of employee recruitment -- referrals versus nonreferrals -- and post-hire employee productivity and turnover. We controlled for important human capital variables such as work experience and levels of education in our models, and examined whether recruiting employees via referral programs helped reduce turnover and increase performance, and if so, by how much. We collected longitudinal data about the particular job applicants and looked at their productivity post-training. We found that employee referral programs effectively reduced turnover and gave the company a return on their investment in the referral program. In particular, we were able to estimate how much the company was saving on hiring and turnover costs, as well as how much the company was gaining performance-wise by hiring employees using the referral program.

How important is big data and huge data sets in people analytics?

Castilla: While it is very important to collect data and analyze data, I feel that sometimes professionals jump into collecting and analyzing huge data sets for the sake of collecting and analyzing something. These professionals tend to want to build big data sets for the sake of building data sets and be able to tell that they are measuring stuff about their workplaces and finding some interesting relationships among variables. People analytics is more than just collecting data and reporting.

Is leadership important in driving a program for HR data analytics?

Castilla: Absolutely. Leaders need to understand that employees are critical to the success of organizations. Many business leaders still make key decisions about their workforce based on intuition, experience or advice. But today's leaders can strengthen their people decision-making processes using people analytics. Leaders need to be extremely proactive in trying to understand what is happening with employee engagement and how the company can take advantage of data collection and analytics to continue to be successful in engaging and creating quality jobs and workplaces for their employees.

What is your best advice for establishing HR data analytics?

Castilla: After generating a hypothesis or identifying a people-related challenge or opportunity, I would recommend planning the people analytics project carefully. How are you going to collect the appropriate data to test your hypothesis or address your challenge? What are the existing relevant research and frameworks out there which can help you better design your people analytics approach? How are you going to analyze the data?

Reporting the results to top management is also extremely important. Are you going to be predictive or descriptive? Are you going to describe the benefits and costs of organizational initiatives that have to do with the management of people? Are you going to prescribe a solution based on your results? Are you simply going to compute benefits? Lastly, try to drive change in the company based on what you have learned.

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