‘People analytics can now become a strategic competitive advantage’

Fredrick Taylor, an industrial engineer, started this trend in 1911 when he published his report Scientific Management, which studied the movement and behaviour of factory workers in steel mills. Since then companies have deployed thousands of engagement surveys, studied the characteristics of top leaders, done countless reviews of retention and turnover, and built massive human resources data warehouses. All in an effort to figure out “what can we do to get more out of our people?”

Well now this domain is called people analytics and it has become a fast-growing, core-business initiative. A study, entitled High-Impact People Analytics and completed last November by Bersin by Deloitte, found that 69 per cent of large organisations have a people analytics team and are actively building an integrated store of people-related data.

Why the growth and why the business imperative? Several technical and business factors have collided to make this topic so important.

Firstly, organisations have more people-related data than ever before. Thanks to the proliferation of office productivity tools, employee badge readers, pulse surveys, integrated enterprise resource planning systems and monitoring devices at work, companies have vast amounts of detailed data about their people.

Companies now know who people are communicating with, their location and travel schedules, their salary, job history and training plans. New tools for organisational network analysis, built into email platforms, can tell leaders who is communicating with whom, new tools for audio and facial recognition identify who is under stress, and video cameras and heat sensors can even identify how much time people spend at their desks.

People walking

It could be argued that much of this information is confidential and private, but most employees don’t mind organisations capturing this data, as long as they know it is being done to improve their work experience, as shown in 2015 Conference Board research, Big Data Doesn’t Mean Big Brother. While European Union General Data Protection Regulation standards, enforceable from May 25, will put the burden of privacy and governance on HR departments, employers are stepping up to this and treating such data with great care.

Secondly, as a result of having access to all this data, companies can now learn important and powerful things. Not only are executives being forced to report on topics such as diversity, gender pay equity and turnover, but they can also now use people analytics to understand productivity, skills gaps and long-term trends that might threaten or create risk in their business.

One organisation, for example, found incidents of fraud and theft were “contagious”, causing similar bad behaviour among other employees on the same floor within a certain distance. Another is using sentiment analysis software to measure “mood” in the organisation and can identify teams with high-risk projects just from the patterns of their communication.

Many organisations now study turnover and can even predict it before it occurs by monitoring email and social network behaviour, enabling managers to coach high performers before they resign. Organisations now use analytics and artificial intelligence or AI to decode job descriptions, identifying words and phrases that create biased recruitment pools and prevent gender and racial diversity. Manufacturers use people analytics to identify workers who are likely to have accidents, while consulting firms can predict who is likely to be burnt out from too much travel and automotive companies now know why certain teams get projects done on time when others are always late.

AI is, therefore, entering the domain, giving it even more power and scale. A new AI-based people analytics tool sends anonymous emails to a manager’s peers asking simple questions to assess managerial skills. Through its carefully designed algorithms, it gives managers an unthreatening set of recommendations and has improved managerial effectiveness by 8 per cent in only three months.

For human resources departments, people analytics is now the number-one reason companies want to replace or upgrade their HR software, according to the Sierra-Cedar 2017 HR Systems Survey.

But for chief executives, chief financial officers and chief operating officers, it’s even more important. When a sales team is behind its quota attainment or a store’s sales numbers fall behind, why wouldn’t a leader ask “what’s different about the people, practices and managers at those teams that we may be able to address?” Or an even bigger question is “if we want to grow our business by acquiring a given company in Germany, what will the cultural and organisational impact be?” These critical strategic questions can all be answered by people analytics.

The history of this discipline is tactical and somewhat arcane. For years industrial psychologists led the effort and focused primarily on employee engagement and turnover. Today, however, the industry is taking on a new light, refocusing its energy on operational, sales, risk and performance measures. The technology tools are here and companies have AI engineers ready to analyse the data in a powerful and predictive way. And analysts say this domain will grow for years to come; remember that for most businesses, labour costs are the largest and most controllable expense on the balance sheet.

The bottom line is clear: people analytics can now become a strategic competitive advantage. Companies that focus in this area can out-hire, out-manage and out-perform their competitors.