Connecting People Analytics to Business Outcomes

April 20, 2021

Connecting People Analytics to Business Outcomes

The leaders of successful businesses know that investing in human talent pays off. In the words of Sir Richard Branson, decision-makers should train people well enough so they can leave; treat them well enough so they don’t want to. When it comes to people analytics, the case for investment is just as clear. The largest and most successful companies in the world, like Google, Apple and Microsoft, have spent years building up sophisticated people analytics departments to improve their teams and boost their efficiency. 

Despite this, most companies still struggle with using people analytics. Over half of companies say they need help with basic people analytics, even though nearly three-quarters are planning to make it a priority in the next five years. Although most companies don’t understand the ins-and-outs of people analytics, it’s clear that people analytics is the future. If your company hasn’t begun thinking about it yet, right now is the time to start. 

Why Invest in HR Optimization and Analytics? 

The link between HR investments and business results has never been given the attention it deserves. In Investing in What Matters: Linking Employees to Business Outcomes, Scott Mondore and Shane Douthitt point out that Fortune 500 companies sometimes include general figures about HR in their annual reports (such as “$1 billion spent on training”). However, these figures are rarely linked to concrete results (for example, “$1 billion spent on training, which resulted in a 25% increase in productivity and a return on investment of $5 billion”). Wouldn’t it be nice to connect HR practices to real business outcomes? 

Today, there’s no reason why this can’t be done. Companies have the ability to access more data than ever before and can analyze those data using advanced techniques. With machine learning and AI-driven analytics software, plus statistical expertise in model building and scientific assessment development, organizations can fine-tune their processes and get measurable results. By using people analytics to improve HR outcomes and quantify performance, companies can not only remain competitive in a digitizing world, but also significantly boost critical business outcomes. 

Here are some great reasons to invest in HR and people analytics today:
 
1. Reduce Turnover 
Predictive analytics can help you understand who’s likely to leave your organization and why. By examining existing data, employers can identify what’s going on with turnover and reveal trends that might surprise you. 

Rather than making assumptions about what’s causing turnover, HR professionals should identify proven variables via predictive modeling. Some variables that might affect turnover include salary, benefits, commute time, sick days used, community embeddedness and performance review scores, to name a few regular culprits. 

Reducing turnover is important because it’s so expensive for organizations. Every employee departure costs about one-third of that employee’s annual salary. That would put the cost of losing a single marketing manager at $35,224 and the cost of a mid-level software engineer at $29,714, according to the median US salary for those jobs at the time of writing. The cost of turnover doesn’t only include the time, effort and money spent on hiring, but also the lost productivity of having to train someone new and integrate them into the team. And let’s not forget the priceless cost of lost institutional memory. 
 
2. Increase Employee Engagement 
Employee engagement and involvement has a direct impact on the bottom line. According to a Gallup meta-analysis, organizations with a high level of engagement had 22% higher profitability and 21% higher productivity, plus significantly lower turnover. The problem with employee engagement is that it can be difficult to measure and even more difficult to improve. 

By developing a strong data culture in your company, you can make it easier to understand what’s going on with engagement. You can also streamline your processes in ways that improve engagement across the board. For example, people analytics techniques like organizational network analysis help you identify highly collaborative employees who may be good candidates for promotion to management. Since managers account for 70% of variance in employee engagement, finding and developing great managers is key to creating more engaged teams, and thereby driving real business outcomes. 
 
3. Improve Productivity 
Creating stronger teams and reducing turnover can also improve your company’s productivity. Research published in the Harvard Business Review shows that the average company loses more than 20% of its productive capacity to “organizational drag,” or inefficient structures and processes. 

With people analytics, you can improve pretty much any process that makes up part of your HR function, from onboarding and offboarding to performance reviews and learning and development. Collecting, storing and analyzing data appropriately will give you new insights into how these functions are currently working, and what you can do to improve them. 
 
4. Encourage Innovation 
Finally, investing in HR and people analytics will lead to enhanced innovation. Ninety-four percent of executives say culture is the most important factor when it comes to innovation, and culture is largely driven by leaders; leaders create strong teams and hire the right people for the culture. Literally, not figuratively, people make the place. 

If you’re looking to make better hires, it’s worth taking a look at your recruitment process and how you can improve it. From the number of interviews you hold to the selection assessments used, a robust and data-driven process can help you find and select the best new team members for your business. Likewise, when developing leaders, you should focus on competencies that directly link to business outcomes and put disconnected competencies (and those you “think” should make a difference) on the backburner.

The Future Lies in People Analytics 

People analytics has become essential in a changing economy. While in 1975, 83% of the value of S&P 500 companies was tied to physical assets, 84% of that value is now tied to human capital. Today’s knowledge-based businesses have people as their unique selling point. Not investing in those people would be a missed opportunity (and likely spell doom for your company).

The world’s top companies are already using data to drive human resources success. Here’s how Nike sees people analytics, according to Amanda Tomkoria, Senior Director of Global Talent Management Practices. “We have a talent vision—the best come to Nike and choose to stay every day. Metrics help us bring that vision to life. Just as we track business success with financial and operational data, people analytics is our way to hold ourselves accountable as we measure progress to know if we’re moving in the right direction to achieve that vision.” 

As technology develops and circumstances change, selecting and building strong, well-trained teams has become even more important. The COVID-19 pandemic revealed a strong need for effective leaders, adaptable employees and contingency plans for when things go wrong. More broadly, though, HR leaders have been talking about a skills gap for quite some time, especially in digital and high-skilled fields. Finding, training and promoting the best talent is the key to closing this skills gap and driving critical business outcomes. People analytics can provide a highly accurate investment strategy as we look to invest in what matters most—our people. 

“Like high performing sports teams, Nike uses insights to identify priorities. We then use those insights to adjust as needed so that we can deliver what matters most to our people—accelerating a culture of inclusion, high-performance, learning and coaching. Data enable us to innovate and move with speed,” Tomkoria adds.

Conclusion 

Even for companies who want to invest in HR and people analytics, getting started can be an intimidating prospect. Many organizations don’t have the specialized talent or software on hand to begin with people analytics. They may also not have the processes in place to support a data culture. 

The good thing is that plenty of help is available. Whether you’re looking to kick off a specific program, train your existing staff or simply learn more about people analytics, there are solutions out there. Never forget, people are at the heart of any successful company. With your time and investment, they can take your business to new heights. 

The Authors: 

Craig Wallace is an organizational psychologist and currently the Department Head of Management in the College of Business at Clemson University.