March 24 2022

What is people analytics and why is it important?

People analytics can provide you with insights into your workforce. Using this data, you can make data-driven decisions that improve your business. But what exactly is people analytics? And why is it important to organisations? 

What is people analytics?

People analytics, also called HR analytics or workforce analytics, is the process of gathering and analysing data about employees. By analysing this HR data, you can identify a particular trend that could highlight a problem or an opportunity in your business. The data will then help you understand what you need to do to solve that particular challenge.

How does people analytics work in practice?

The process starts with a question. For example, you might be asking ‘why is employee turnover so high?’. 

To find the answer, you could gather past data to see if there is a pattern that shows why employees leave. You could also analyse data on employee wellbeing and performance too to give you a more complete picture. 

By analysing the data, you’ll be able to make conclusions about why people leave. Armed with this knowledge, you can make decisions on how to improve aspects of your organisation. This might include the work environment, the onboarding process or perhaps management approach. 

What evidence can be used for people analytics?

The evidence you gather will depend on what you want to find out. Evidence can come from HR records such as:

  • Internal data such as annual leave records, salary data, and recruitment information. 
  • Specially-collected data like employee surveys.
  • External sources such as research studies, training providers, and employee monitoring software.

What is employee monitoring software?

While many have reservations about employee monitoring software, it does have its uses. For instance, employee monitoring software allows you to review email exchanges within your company.

By checking for patterns, you could discover that an employee who has gone unnoticed in the company is quietly supporting others to perform their jobs. That individual is in fact a key influencer in their team.

But you wouldn’t have known this had it not been for the employee monitoring software.

However, using employee monitoring software can be a contentious issue. By law, employers must inform their employees how they are being monitored. Employers mustn’t invade an employee’s privacy and right to family life under Article 8 of the European Convention on Human Rights

In any case, unnecessary employee monitoring is counterproductive as it could destroy trust in a company. It could also create a stressful working environment for employees. That’s why it’s important to only gather information that’s of true value to your business. 

Why is people analytics important at an HR team level and at an organisational level?

Data analytics provide evidence of how HR strategies help a business to solve problems and achieve goals. For instance, if a business has a high turnover of employees, then it isn’t operating productively. 

To understand why employee turnover is high, you might ask:

  • Are there any patterns in the data that shed light on high turnover?
  • Which group of employees is most likely to leave the company within a defined period?
  • Is there anything that’s impacting high turnover rates? Are training initiatives or employee wellbeing packages having a positive impact, for example?

People analytics can support effective decision-making

This is possible because HR data is evidence – instead of a person’s opinion (which could be biased). 

Employers may be more likely to take data-driven HR seriously. For instance, if HR analytics and reporting show that a past training programme resulted in financial benefit to the business, then they’re more likely to invest in future training. 

On a team level, people analytics can be used to inform HR strategies to address problems at an organisational level. For example, HR data could identify skills gaps which impacts other aspects of HR including recruitment, training, and mentoring.  

How can people analytics drive business value?

People analytics measure a range of factors to help a business make evidence-based decisions that help improve organisational performance. 

Here are some HR analytics examples and reasons to use people analytics in your organisation:

1. Professional development  

HR CIPD metrics can provide evidence that a particular training course has had a positive impact on business outcomes. Meanwhile the data could show that another training course is ineffective. In this way, HR data analytics can identify training that delivers the best value for money.

Human resources analytics can also identify skills gaps within a workforce as well as skills that may have gone unnoticed but are important to develop.

2. Employee engagement

People analytics can measure employee engagement and identify where improvements need to be made. Employee engagement is multi-faceted. That means that any employee surveys you implement shouldn’t be oversimplified. 

Employees who feel valued, are engaged, and motivated are vital to the success of a business. So if your business only uses people analytics for one thing, then this is a great place to start.

Metrics such as the Utrecht Work Engagement Scale can be an indicator of employee engagement. This is because it breaks engagement down into three scales: vigour, dedication and absorption. This assesses employees’ resilience, energy levels, and passion for their work.

Data must be collected with action in mind. For example, if an employee is disengaged with their work, why is that? And how can the organisation support them better?

3. Employee retention  

Research from Oxford Economics and Unum found that replacing an employee (with a salary of £25,000 per year) costs on average £30,614. Knowing this, it’s not surprising the businesses everywhere are on a drive to reduce turnover. 

When it comes to increasing employee retention, people analytics can offer real value to a business. Using HR data, you may notice a pattern of certain specialists leaving a business. Or perhaps employees in certain teams tend to leave sooner. 

This leads to the question, why? Taking a deep dive into questions like this is much easier when you have data to refer to. 

Perhaps the job doesn’t live up to employees’ expectations in specific teams? Maybe there are too few opportunities for progression within the business? This information could bring about changes in recruitment strategy or a new approach to training opportunities.

4. Fair pay

Fair pay is vital for a business to attract and retain the best talent and to comply with the law. People analytics can shine a light on a problem with fair pay and help craft a solution.

HR data analytics can provide a view of pay levels against nine protected characteristics outlined in the Equality Act 2010. These include disability, gender, and race among many others. 

In addition, pay can be compared between roles across different teams within a business and compared to the pay rates offered by competing organisations. HR analytics can therefore be instrumental in adopting pay transparency

5. Greater diversity  

Sometimes employers believe their business is diverse and inclusive. But people analytics can reveal an unconscious bias. 

Characteristics such as age, gender, disability, and race can be cross-referenced against job level, redundancy rates, access to training, and more. This can lead to important revelations that can stimulate positive change within an organisation. 

It’s becoming increasingly recognised that a diverse workforce can strengthen a business. A diverse workforce encompassing unique perspectives can lead to more informed decision-making.

It can also promote alternative ways of thinking. Not to mention new approaches to problem-solving that can significantly benefit a business. 

6. Recruitment

Data drawn from people analytics can also be hugely informative when it comes to recruitment strategies. With quality, talented individuals harder to hire than ever, it’s companies with superior recruitment strategies that are winning the war.  

For example, analytics might reveal that the most successful employees are not those who enter a business with high level technical skills. But those who have particular character attributes. This can lead to a drastic change in recruitment strategy.

7. Workforce planning

Human resources analytics can break down employees’ individual skills providing a bird’s eye view of a company as a whole. This can help if a business needs to identify a specific skill set to adapt to sudden changes in the market or to meet a particular client’s needs. 

Improving your business’s workforce performance 

People analytics can lead to changes in a business to create a more productive workforce. According to a report by McKinsey, people analytics can lead to a 25% rise in business productivity

By analysing the data collected through HR metrics and reporting, you could identify that your employee wellbeing package isn’t covering a specific area. This could be mental health or perhaps financial health. 

Openwage is a pay on demand and salary advance provider. It’s a benefit that empowers employees to access a portion of their gross monthly salary as soon as they earn it.

On-demand pay from Openwage doubles as a powerful tool for organisations wanting to promote financial wellness among its employees. Learn more about Openwage and how it can complement your wellbeing package. 

Key takeaways

  • People analytics is more than just collecting data. It’s analysing that data to identify and solve workforce problems and help prevent problems in future. 
  • Business leaders can make informed evidence-based decisions using people analytics, then take proactive steps to improve business operations.
  • Employers should only collect data that will translate into value. Data must be collected with action in mind.