Blog
Table of contents
What is People Analytics? A Guide for HR Leaders and Business Owners
Would you happily hop on a plane flown by intuition alone? Or, would you fly more easily knowing the pilot uses their flight instruments and GPS? The same applies to HR and the practice of people analytics.
People analytics drives smarter, data-based decision-making for workforce management. It’s shifting what once used to be instinct-based into something far more informed and effective.
Read on to see why so many businesses are using people analytics, the key types and metrics to know, and some scenarios where its value becomes obvious.
What is People Analytics?
People analytics, sometimes known as workforce analytics, involves analysing data from across HR and the wider organisation to improve workforce decisions. People analytics is similar to HR analytics, but goes further. Where HR analytics is confined to HR department data, people analytics draws on broader organisational data too. This can include finances, marketing and business performance. Organisations use people analytics to look at the workforce holistically, as well as pinpoint specific issues.
This type of analytics can help you understand what’s already happened, illuminate noteworthy patterns, and predict future developments in the workforce so you can take astute action now.
How Common is the Use of People Analytics?
Research by Deloitte found that while 83% of companies surveyed globally still have low people analytics maturity, 84% have a clear vision and mission for their people analytics function.
Australian HR still slightly lags when it comes to adopting data-driven HR tools. But with HR managers taking an increasingly strategic role in boardrooms, and with so many data integrations available, there’s more incentive than ever to unlock informed insights.
Benefits of People Analytics for HR and Business
A clearer understanding of workforce drivers brings with it several advantages for a business. As such, the benefits of people analytics can include:
- Improved internal mobility and hiring decisions: People analytics can help uncover hidden potential, highlight diversity shortfalls, and bring focus to the hiring process. Skills are better matched with fewer resources wasted.
- Better employee engagement: A holistic view can help businesses structure teams more appropriately, reduce stress, and provide support in ways that genuinely boost workplace engagement and culture.
- Lower turnover: A significant amount of employee turnover is preventable. Clear analytics can reveal early warning signals and improve the quality of interventions, making it easier to retain great talent.
- More effective L&D investment : Businesses can appoint learning and development resources more efficiently and effectively once they develop a better understanding of what’s really needed.
- Improved strategic planning: People analytics can provide both responsive and proactive insights, making it easier to align talent management and business goals via HR strategy and workforce planning.
You’d best believe that for these reasons and more, the leading brands in the world are using people analytics to drive smarter decisions.
The 4 Types of People Analytics
There are four sub-types of people analytics that help to identify, in simple terms, what’s happening, why it happened, what’s likely to happen, and what you can do about it.
Let’s look closer at each type of analysis you might conduct:
1. Descriptive Analytics
Descriptive analytics is the most common type of people analytics. It’s retrospective, focusing on what’s already happened via historical data.
Examples of when to use it: Descriptive analytics is useful in establishing a baseline and identifying patterns over time, such as voluntary turnover or absenteeism trends.
What type of data to look at: Headcount reports, turnover rates, absenteeism figures, and time-to-hire averages.
2. Diagnostic Analytics
Diagnostic analytics looks at the why behind an existing pattern or development. These qualitative insights uncover explanations or correlations for an existing development in the workforce.
Examples of when to use it: Diagnostic analytics is most useful when a pattern is clear, but the reason behind it is not, such as high employee turnover in a certain department, or productivity dropping despite healthy employee engagement.
What type of data to look at: HR conversations and requests, pulse survey data, termination records, onboarding survey scores, interplay between data.
Diagnostic analytics can involve connecting multiple data sources. For example, a spike in employee absences might prompt an investigation into overtime records. A clear correlation between the two could hint at excessive workload being a factor.
3. Predictive Analytics
Predictive analytics helps to anticipate workforce development before it happens, based on historical data and patterns. Advanced predictive analysis reveals future scenarios and how likely they are to occur. It can be a very useful risk management tool, because you can be proactive about problems and intervene early.
Examples of when to use it: Predicting which employees are flight risks, identifying high-potential talent for development, forecasting hiring needs based on growth plans.
What type of data to look at: Early performance indicators, absenteeism rates, engagement scores, business growth projections, and time since last promotion.
4. Prescriptive Analytics
Predictive analysis helps to uncover what to do about a workforce insight: either to address an issue or work towards a certain objective. Businesses use this type of analysis to fine-tune their L&D, performance, and employee relations.
Examples of when to use it: Targeting interventions for at-risk employees, focusing learning pathways to address skill gaps, and restructuring a department with minimal disruption.
What type of data to look at: Skills assessments, performance trajectory, intervention history and outcomes, and high performer trajectories.
Key People Analytics Metrics Every HR Professional Should Track
The specific metrics you measure and analyse will depend on what you’re setting out to achieve. Your analytics system can be simple or sophisticated, depending on your organisation’s needs. At a minimum, Australian HR functions will do well to track metrics across these three categories:
Recruitment and Acquisition Metrics
By tracking acquisition metrics, HR can optimise their hiring processes, make onboarding smoother, and identify disparities to be addressed for improved workforce diversity. Key metrics include:
- Time to hire
- Cost per hire
- Quality of hire
- Source of hire
- Offer acceptance rate
- Candidate experience.
Engagement and Retention Metrics
Having a finger on the pulse of employee retention and employee engagement empowers HR to fine-tune L&D, launch new engagement initiatives successfully, and intervene effectively to keep quality talent from leaving. Key metrics include:
- Employee Net Promoter Score (eNPS)
- Voluntary turnover rate
- Absenteeism rate
- Employee satisfaction scores.
Performance and Productivity Metrics
By analysing performance and productivity metrics, HR can develop targeted reskilling initiatives, optimise leadership effectiveness, and fill future skill gaps. Key metrics include:
- Goal achievement rates
- Internal mobility rate
- Performance review completion rates
- Training completion and effectiveness
- Data from performance appraisals and management
- Customer satisfaction.
The seven pillars of people analytics include: workforce planning, talent management, leadership, organisational culture, learning and development, performance management, and employee engagement.
How to Use People Analytics Effectively
A business can have a world of data at its fingertips, but it will also need the right analytical skills, tools and approach to really make the most of that data.
One critical first step is removing data siloes, as even the most specific focus benefits from having a single source of truth across the organisation.
Other essential steps include:
- Identifying what usable data is already available
- Choosing the right tools to integrate and examine data
- Setting clear ownership over data management and analytics
- Maintaining data quality and privacy compliance
- Building analytics capability, and/or bringing in external support
- Proactively reporting to the C-Suite and providing insights
- Measuring the success of initiatives driven by people analytics.
Truly effective people analytics can deliver immediate insights as well as long-term strategic insights.
People Analytics in Practice: Example Use Cases
People analytics is helping shape decisions in the real world. The scenarios below show how data can help HR and leadership teams act early, efficiently and accurately.
Addressing Team-Specific Employee Turnover
A mid-sized business notices higher-than-average voluntary turnover, but this seems limited to only one team, and the cause is unclear.
HR dives into people analytics and discovers that team employees who have left tended to have low eNPS scores at the six-month mark. These employees also didn’t have a structured performance check-in. These two data points reveal the common conditions that precede employee departure so HR can address them.
In a proactive move, HR works with the team manager to implement a targeted retention intervention at the six-month mark. Turnover in the team falls, and employee engagement improves as an added benefit.
Refining Recruitment Quality
Another organisation is struggling to get their new hires up to speed effectively, with a long time-to-productivity dragging down performance. New hires come through a number of recruitment channels, including employee referrals, job boards, networking platforms and staffing agencies.
The HR team turns to people analytics, focusing in on the 3-month performance data to look for any patterns. It becomes apparent that new hires from a particular hiring channel are outperforming their colleagues at the 3-month mark.
In response, HR redirects more of the recruitment budget to this channel. Onboarding becomes more efficient as the calibre of new hires improves.
Workforce Planning Ahead of Growth
A third business is planning an expansion into a new market. However, leadership isn’t sure whether the business has the workforce capability it’ll need to succeed.
The HR professional sits down and gathers headcount data to understand who exists in the organisation already, including everyone’s roles, skills, locations and capacity. The HR professional then puts together a list of the capabilities the new market will demand, and develops a skills gap analysis accordingly.
It becomes apparent that much of the skill gap can be addressed with internal development, while a few key hires will also need to be made. HR is able to target resources on a focused L&D plan and hire precisely the extra skills needed for a successful expansion.
Using your Data to Drive Decisions
The future of human resources is data-driven. As HR transitions from a support role to a core business role, there’s a genuine need to make switched-on decisions that are based on evidence rather than guesswork.
Developing your people analytics system doesn’t need to be overly complex. However, the more you can remove siloes and smooth out data integration, the better equipped you’ll be to attract, develop, and retain great talent. Developing that system can require certain capabilities, so if you’re looking for support, then the HumanX team can assist through project-based HR consulting and ongoing outsourced HR.
Whether developing your analytics capabilities internally or with help from an external provider, the insights can be valuable, sometimes surprising, and significantly more effective than those based on gut feeling alone.
