What Is People Analytics? Understanding Data in HR
- Michiel Mulders
- October 29, 2019
People analytics is a method of analytics that attempts to leverage the data that Human Resources (HR) often hosts. HR is by nature a data-driven department. However, the missing part of the puzzle is how the HR department should use this data. People analytics attempts to answer this question by leveraging the data for analytics to assist company management and make more data-based decisions about employees.
Besides that, it’s important to understand that people analytics focuses on people broadly. This means that people analytics is concerned about employees but also about all customers the company interacts with.
According to the Society for Human Resource Management, people analytics is a new trend among HR professionals that will continue to grow in the coming years. The explosion of big data and new data analysis techniques have made it possible to apply this trend to HR as well.
Let’s take a deeper look into people analytics, discuss the benefits, and give some clear steps to get started.
Understanding People Analytics
As mentioned in the introduction, people analytics tries to leverage the data the HR department holds to optimize the people side of the organization. But what kind of data does an HR department generally hold?
- User data like skills, experience, education, and demographics.
- Company-related data like outcomes of tasks, team composition, connections with colleagues, and personal development.
- Performance data from evaluations or analytics of tool usage efficiency.
All this data can be leveraged to find answers for the following questions:
- Who is the ideal type of person for department X?
- Which skills are needed to be very performant for a particular job?
- Which is the ideal team composition based on skills to find new ideas or solutions?
- How can we improve the revenue per employee?
- Which employee is best suited for becoming a team lead?
Now that we know some of the use cases of this data, let’s have a look at the benefits of people analytics.
Benefits of People Analytics
People analytics are great for many reasons! Let’s see how the data the HR department holds can benefit an organization.
People Analytics for Recruitment
First, people analytics can help a company determine the exact skill set and experience a potential employee needs in order to get hired. Besides that, people analytics helps an organization measure a candidate’s potential during the hiring process. It can help you do the following:
- Reduce the number of mis-hires
- Shorten the time to hire
- Move to a more data-driven hiring process instead of manually looking for candidates
- Increase the quality of new employees
- Collect more hiring data to further optimize the hiring process to help you find the best talent on the market fit for your organization
In addition, people analytics helps with forecasting future hiring needs as well as employee retention.
People Analytics for Workplace Happiness
Company culture is becoming the next big thing. Millennials stay on average less than two years in the same company. Company culture is a much-needed aspect to retain your employees.
How does this relate to people analytics? The data the HR department holds can be leveraged to understand your employees better. The HR team has to understand employees’ goals and how it can create policies or benefits to support them in their goals.
Moreover, people analytics helps to find the right team for an employee, where their skills can flourish and benefit the team. In short, we want to get rid of the gut feeling and take a more data-driven approach. This way, we get a happier employee, but we can also expect higher performance.
Challenges With Adopting People Analytics
Your HR team likely has no experience with data analytics. It’s not easy to adapt a data mindset and apply the right analytics. For some, it might feel very overwhelming. Besides that, you’ll likely have to hire a data scientist who can help the HR team get started with adopting people analytics.
Moreover, don’t expect people analytics to solve all of HR’s problems. You’ll still need smart people to use their expertise to carefully analyze the results and make the right decisions.
Next, when your organization successfully implements people analytics, it’s important to spread this knowledge. Often, this new knowledge stays inside the HR department. But the HR department needs to learn to work cross-department with other groups like finance, operations, and IT. It’s important to share these findings so each individual department can learn from those insights and take the right actions.
4 Steps to Get Started With People Analytics
Getting started with people analytics isn’t rocket science. Here are four simple steps to guide you in getting started with implementing people analytics.
Step 1: Encourage a Data-Driven HR Approach
First, introduce people analytics to the HR team. The team must have a clear understanding of what people analytics includes. If possible, try to give at least one—preferably multiple—examples where a simple gut feeling turned out not to be the right solution.
For example, according to HR’s observations, the sentiment among the finance team was pretty positive. In reality, this was a gut feeling from daily observations, and it turned out to be wrong. A more data-driven approach would have given them better insights. HR could have sent out a satisfaction form to employees to measure the sentiment levels. This would have brought the HR team more accurate insights.
By using some past examples, it’s easier to convince the HR team of the need for people analytics.
Step 2: Identify Which Questions People Analytics Must Answer
Next, it’s logical for the HR team to define a couple of questions they want to find an answer for through people analytics. I recommend starting with simple questions to gain confidence in using a more data-driven approach.
Simple questions include:
- What’s the current sentiment in each department?
- How can we improve job satisfaction for the IT department?
- Which skill set is most important for the IT department for use in the recruitment process?
Besides defining questions, we should also define the data needed for each question. Let’s say that to measure the sentiment, we can send out a simple form to all employees. To solve a question like finding the ideal skill set, you need more advanced data points.
Step 3: Collect the Required Data
OK, we’ve defined the questions we want to answer and the data that’s needed. Now let’s start capturing this data. Make a concrete action plan on how you want to collect this data and execute the plan. A plan can simply contain a list of tasks and deadlines to collect the required data.
Step 4: Gather Insights and Make Smart Decisions
Lastly, when you have all the data available, you can analyze this data. In this step, you might want a data engineer‘s expertise. Based on the results of the data analysis, define the steps you want to take to solve certain problems within your organization.
It’s important to regularly follow up on the outcomes to see if the analytics are truly improving certain questions. It can turn out that you still made a wrong decision based on your data or you used incorrect data.
The Future of People Analytics
Finally, I foresee the field of people analytics to grow in the upcoming years. People analytics tries to address the need for analytics among the HR team. An HR team has the capability to measure all kinds of data streams. This data can be leveraged, for example, to improve the recruiting process or reduce the employee retention rate.
In short, people analytics stands for the analysis of HR data to optimize the people side of an organization.