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The use of analytics in HR is growing, with organizations aggressively building people analytics teams, buying analytics offerings, and developing analytics solutions. HR now has the chance to demonstrate ROI on its analytics efforts, helping to make the case for further investment.
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The people analytics revolution is gaining speed. While HR organizations have been talking about building analytics teams for several years, in 2016 we see a major leap forward in capabilities. Businesses have recognized they need data to figure out what makes people join, perform well in, and stay with an organization; who will likely be successful; who will make the best leaders; and what is required to deliver the highest-quality customer service and innovation. All of this can be directly informed by people analytics. Companies are hiring people analytics staff, cleaning up their data, and developing models that help transform their businesses.
After several years of discussing the need for analytics within the HR function, last year’s Global Human Capital Trends report concluded that the drive for analytics was “stuck in neutral.”1 Companies were investing heavily in HR systems replacement projects and talking about analytics, but few were actually making progress in this vital new business function.
Driven by competitive pressures and the greater availability of more integrated systems, organizations are aggressively building people analytics teams.
This year, the situation has changed for the better. Driven by competitive pressures and the greater availability of more integrated systems, organizations are aggressively building people analytics teams, buying analytics offerings, and developing analytics solutions. Fully 77 percent of all organizations believe people analytics is important. (See figure 1 for our survey respondents’ ratings of people analytics’ importance across global regions and selected countries.) And more than half (52 percent) of the organizations now rate themselves as excellent and 38 percent as adequate at conducting multi-year workforce planning.
The name of this trend—“people analytics”—reflects the use of people-related data to improve and inform all types of management, business, and HR decisions throughout the company. The focus areas vary based on industry and specific business issues.
What are companies doing? Examples of positive momentum can be found in a number of different areas:
Each of these examples (and there are hundreds more) reveals the opportunity to take people data (some from HR, some from outside HR, and some external to the company) to make better management decisions. Google, Twitter, and most other tech firms have people analytics teams.6
We expect the trend toward analytics-driven HR to continue gathering strength over the coming year.
Today’s people analytics teams often call themselves the “employee listening” department. They bring together data from a range of sources, including core HR systems, employee engagement data, survey data, external data (from LinkedIn, Glassdoor, and other systems), and text data from employee comments. Then they analyze these data to understand company culture, find opportunities to improve retention or performance, or diagnose management weaknesses or other operational problems.
What is driving the upsurge in people analytics adoption?
First, companies are now rapidly adopting more integrated cloud-based HR systems, giving them an opportunity to look at their HR data in an integrated way for the first time. Nearly 40 percent of all global firms are either replacing or plan to replace their core HR systems over the next two years.7
Second, people with analytics backgrounds are coming into HR.8 Companies are now bringing industrial and organizational psychologists, statisticians, and analysts from other domains into HR; they are attracted to analytics because it is an exciting, new, and still-fluid area. Data science careers are now hot professions for college graduates and more people are coming to this profession than ever before.
Third, the vendor market is exploding. Nearly every ERP vendor and talent management provider now offers off-the-shelf analytics tools, and many include embedded models. Some are starting to offer analytics services that provide repeatable solutions across clients. In addition, organizational data are more useful than before: This year, 42 percent of survey respondents said the data supporting HR analytics were “good” or “very good”; only 17 percent still rated their data as “poor.”
Fourth, there is now a small army of people science experts, many of whom were pioneers at some of the early adopters, available to consult with large companies. They are sharing ideas and bringing expertise to companies new to the domain.
Finally, CEOs are reading about this topic in the business press, so they are pressing their CHROs to build this capability. For instance, a CHRO of one of the largest health care insurance providers is investing in a three-year, multi-million-dollar program just to clean up employee data, so the company can take a lead in analytics within four to five years.
While there has been much progress, there is much room for improvement. In this year’s survey, 62 percent of organizations rate themselves as “weak” in using big data in recruiting. Some 55 percent of organizations similarly report being weak at using HR data to predict workforce performance and improvement.
We expect the trend toward analytics-driven HR to continue gathering strength over the coming year. As this happens, analytics will penetrate deeper within HR, extending beyond talent acquisition to learning and development and operations. In fact, the Global Human Capital Trends survey data show us that HR is now more convinced of people analytics’ importance than the business, with 82 percent of HR respondents viewing it as important or very important, compared to only 69 percent of business people viewing it as important or very important. HR has the opportunity to show the value and ROI that investment in analytics can bring, which will result in a willingness to invest further and spur acceleration in analytics capabilities.
Unsurprisingly, all this leads back to greater investment in HR, generating a virtuous cycle where higher ROI justifies greater analytics investment. The success of analytics comes down to measuring the value of people to an organization—and analytics is key to unlocking that value.
However, providing great data and insights is only part of the solution. The real value is in turning these insights into change that delivers business value. The hardest part of people analytics is implementing the changes recommended by the models, which call for people analytics to be accompanied by sound change management practices. One large company recently discovered it was underpaying its high performers and overpaying its mid-level performers. It took several years to teach managers (and the organization itself) that it makes business sense to offer a large raise for high performance and a middling raise for fair performance. The key is to invest simultaneously in analytical skills and in interpretative and transformational skills to ensure that the insights deliver value to the business.
In September 2015, GE brought together all the digital and analytics capabilities across the company into one organization, GE Digital. At the same time, the organization put forward the goal to be a top 10 software company by 2020.9
Developing an integrated talent management strategy was critical in making the move from a center of excellence to a full-fledged business with ambitious goals in a competitive talent market. One of GE Digital’s initial focus areas was strategic talent planning linked to learning and recruiting; the unit gathered fresh data in a rigorous process. This was combined with other GE people data to assemble a data set of more than 6,000,000 data points to use in a variety of talent decisions.
GE Digital has been able to complete robust talent planning by leveraging detailed information on what success looks like in terms of skill level, number, and location and by using predictive modeling to identify gaps. The organization’s strategies include recruiting as well as targeted training (when recruitment will not be able to meet needs), and these data have also informed acquisition strategies to help acquire specialized talent.
GE Digital has also developed a strong link between talent planning and learning. It uses data analysis and predictive models to support organizational design to inform hiring practices, to identify reskilling needs, and to refashion leadership development programs—all areas of future focus for the GE Digital team.
The success of analytics comes down to measuring the value of people to an organization—and analytics is key to unlocking that value.
The most critical success factors have been business involvement and employee transparency. The business has been instrumental in defining key capabilities and identifying learning requirements. Employees now understand the critical skills required for success in the organization and have been given tools to identify gaps and strengths as well as to develop needed skills, all of which have been positively received.10
Companies are no longer “stuck in neutral” in their deployment of people analytics. As analytics moves into the corporate mainstream, organizations that are still in the early stages of adopting technology and building teams with data skills risk being left behind.
In the not-too-distant future, it will become impossible to make any HR decisions without analytics. Indeed, analytics capabilities will be a fundamental requirement for the effective HR business partner.
Deloitte’s Human Capital professionals leverage research, analytics, and industry insights to help design and execute the HR, talent, leadership, organization, and change programs that enable business performance through people performance. Visit the “Human Capital” area of www.deloitte.com to learn more.