Why is People Analytics so Important for HR?
As businesses face increasing challenges and complexities of navigating hybrid and remote working models, understanding EURSD regulations, economic uncertainty, and the rise of generative AI changing the way that the workforce operates - senior executives are now placing a greater emphasis on understanding their people data and utilising it to make informed decisions.
Despite this growing importance, a study by the CIPD has found that only 2% of UK boards have an HR director as an executive board member. Additionally only 25% of FTSE 350 companies have any form of HR expertise on their boards.
However, with our Insight222 research showcasing that people analytics teams in 88% of companies had been asked to do specific work for their board of directors in the previous 12 months, could the adoption of people analytics be the saving grace that enhances HR representation on the board?
What is People Analytics?
According to our Insight222 CEO Jonathan Ferrar in his online learning course "Getting started with People Analytics", people analytics is defined as:
"The discovery, interpretation, and communication of meaningful patterns in workforce-related data to inform decision-making and improve performance."
The primary role of a people analytics team is to provide the organisation with insights that help make better business decisions, ultimately leading to improved business performance and employee experience. Essentially, people analytics focuses on using data to understand the impact of employees on business value, providing an outside-in view of the value that HR delivers to the company.
Historically, analytics in HR had been largely focused on tracking basic HR metrics or providing reports to managers on headcount and attrition. However, people analytics teams are now focusing more on using data to understand every part of how people impact business value and operations. As well as embedding analytics into real-time applications and the way we work to derive insights and support the business in making data-driven decisions.
How Has People Analytics Evolved Over the Years?
Before the 1990s, HR was primarily involved with administrative processes. Professionals in this field were mainly responsible for dotting "I's" and crossing "T's", and when they gave advice, it was based on past experience and working knowledge of people management. Their roles were more reactive, handling issues as they arose, such as filling job openings, orientating new hires, documenting disciplinary actions or filing paperwork for an employee resigning.
But as time progressed, so has a need for HR to be strategic business partners and be more proactive with their people strategies.
The realisation that human behaviours could be measured and evaluated to produce best practices grew the interest in incorporating data into business decisions. Thus began the journey of people analytics, which, though initially slow to gain traction, is now seeing accelerated interest due to an ever-changing work environment.
David Green's and Jonathan Ferrar's "Five Ages of People Analytics", as portrayed in their book "Excellence in People Analytics", provide a comprehensive view of this evolution:
The Age of Discovery (1911 – 2010)
This era saw the foundational concepts of HR analytics take shape, with early efforts focusing on optimising tasks and measuring employee activities for efficiency and productivity.
The Age of Realisation (2010 – 2015)
Sparked by the 2008 global financial crisis and the advent of 'Big Data', this period saw a surge in the growth of people analytics. Companies like Google, Microsoft, and IBM led the way in applying advanced predictive analytics projects to drive business value.
The Age of Innovation (2015 – 2020)
Marked by a shift in executive expectations and the modernisation of workforces, this period saw new models, technologies, and specialisations in people analytics. It became a core component of business strategy, with widespread adoption across various industries and sizes of organisations.
The Age of Value (2020-2025)
This current era has propelled people analytics into a leading role due to challenges such as the global COVID-19 pandemic, racial inequality, and financial uncertainty. The function is now essential for rapid response and strategic planning, focusing on themes like psychological safety, DEIB (diversity, equity, inclusion & belonging), purpose, and equality.
The Age of Excellence (2025–2030s)
Looking to the future, this age anticipates people analytics achieving scale and delivering consistent value across businesses globally. This era could unlock tremendous potential in terms of revenue growth and societal benefits.
Our Insight222's People Analytics Trends 2023 research “Investing to Deliver Value: A New Model for People Analytics”, supports the notion that we are currently in the Age of Value. For instance, there has been a significant increase in investment in people analytics technology and teams, with findings showing:
70% of companies increased investment in people analytics dashboards and/or specialised people analytics technology in the past 12 months.
58% of companies predict that investment in people analytics technologies will increase in the next 18-24 months.
Between 2020 and 2023, people analytics functions have grown by 43%.
And with more organisations such as Amazon and Raytheon Technologies taking major steps to productise and democratise their HR analytics insights across the organisation, the Age of Excellence could become an imminent reality.
Interested in learning more about People Analytics? Take a look at our online People Analytics certifications on myHRfuture
What is the Importance of People Analytics in HR?
Using data to drive discussions creates the potential for people analytics to make informed decisions about how companies should adapt their practices. This impacts all factions of HR, from recruitment, retention, performance management, employee engagement and more. Because of people analytics, vital questions are being asked, as Patrick Coolen of ABN AMRO says:
"If I was to prove very quickly that people analytics, how we just defined it, is beneficial for our business, it also is a good selling point within HR because they like that, of course. So, understanding what drives the business? What keeps them awake at night? What opportunities do they see? What language do they talk? It is very important to know and to understand.
And I always like to tell the story that when we walked into a management team, in the early days of our journey, I just asked, would you like to understand how your workforce is influencing your business outcomes? And nobody says no to that question, of course. Although I haven't found people who said no to that question. And that is a good starting point to start going into the discussion and go, how can we support that from our people analytics practice?"
How Can People Analytics Drive Greater Business Value?
In Leading Companies, people analytics and insights are infused into the company's operations and strategies and externally play a leading role in the organisations advancing in their field.
With a data-literate and skilled HR function, these companies focus on building capabilities in consulting and influencing, product management, and change management to a much greater extent. This shows their desire to make their solutions and predictions effective by focusing on:
Business outcomes: Improved through people analytics by gathering and evaluating information that gives decision-makers the tools they need to implement practices that drive their unique business and help them stay competitive.
Diversity & Inclusion: In an environment where employees and employers alike are aware of the importance of having a diverse staff and working to have everyone feel included, people analytics offers a lot. It can assist with better hiring practices and improving steps to make everyone feel like part of the organisation.
Employee engagement & listening: With a new awareness of employee needs such as working for an organisation with shared beliefs, needing a more flexible schedule, wanting assistance with career advancement, and preference for hybrid work, people analytics has helped companies draft policies through actively listening to what employees have asked for, resulting in happier and more productive employees.
Workforce experience: Encompasses the entire experience employees undergo from application to the last day of work and beyond. As perceived by the employee, there are several factors that can make this process effective with the right data collected and evaluated. From this, companies can determine if they have the capacity to be productive and the skill sets among their employees.
HR processes: They should be clear and easy to follow without much hassle. People analytics assists with evaluating what processes work, which ones don't, and how those processes can be improved to make hiring, onboarding, learning & development, or performance reviews streamlined.
Working systems: They should be in place for employees to work as efficiently as possible. By evaluating current or future technology, people analytics can continue to create a productive environment and staff to meet a company's growth or shift in business.
Skill sets: By evaluating the changing talent marketplace and the internal shift of work, people analytics gives HR professionals the insight to source for talent before the need becomes pertinent or to upskill current employees for upcoming roles or reskill employees to shift them to new roles when their current job becomes obsolete.
Company culture: Substantial improvements can be seen when people analytics is involved and determines if everyone is on the same page by having the same goals and working under the same mindset. By evaluating the "pulse" of the organisation, managers and HR leaders can have real-time knowledge, making big or small changes to better direct the culture toward driving the best business value.
To add to this, in our Insight222 People Analytics Trends 2023 research, we found that companies that monitored the financial value of people analytics found great monetary returns.
People analytics has surprised many with its ability to offer business value in all aspects of HR and business goals, as it provides crucial insights that otherwise would not be explored. As described by Guru Sethupath of Capital One:
"It is absolutely incredible when we can go take an insight or an idea that transforms how someone thinks about the decisions they make. I can't tell you the number of times I have had people being like, gosh, I didn't know HR could do this. I didn't know we had this kind of data, and I didn't know we could draw kinds of insights, and this has changed my thinking on this topic."…"
That is kind of what you aspire to in this space. I just think as more and more people, business leaders, get exposed to this function and get to interact with this function, you just see the light bulbs click and see how it transforms their view around talent, organisations, decisions that they make."
Why Does HR Need to Be Insight-driven?
HR professionals need specific skills for the new environment to be most effective in their work for all the stakeholders they serve. Being insight-driven provides them with a strong foundation to perform their role in the changing face of HR and the exciting turn to people analytics.
Insight-driven checks all the boxes:
To deliver results: With the proper data, HR can determine a solution to a company's challenges and determine the best possible path for overcoming the problem.
To drive business value change: With the right information at hand, HR has the expertise to champion change that assists companies in reaching their goals, whether it is developing a positive employee experience, lowering turnover, improving reskilling, or creating more productive teams.
To be taken seriously: By having the information that backs up their conclusions at hand, HR professionals can make it harder for senior leaders to dismiss their advice and gain a seat at the boardroom table.
To have the skills to deliver: This means having the mindset to evaluate what they see while taking into account the big picture. HR professionals can make the best use of data by knowing what to collect, how to evaluate it and how to interpret it without bias or assumptions.
As such, through our Insight222 “Upskilling the HR Profession: Building Data Literacy at Scale” research, we identified 5 top skills that HR professionals require to become more data-literate and take full advantage of their people data:
Data-Driven HR: Mastering People Analytics for Success
For HR to excel in the ever-changing world of work, being data-driven and having a strong people analytics function is crucial. With the right skills and mindset, HR professionals can drive significant value for their organisation by using people analytics to understand their workforce and make data-driven decisions that benefit both the business and its employees.
To take the first step towards becoming an insight-driven HR function, we recommend taking our Leading Companies Diagnostic to understand the current state of your people analytics capabilities.
Once you understand where your organisation stands and the skills and capabilities you need to develop, consider joining your team to upskill through myHRfuture Academy to build a data-driven HR culture and drive business success.
The Age of Excellence is just around the corner, and by investing in people analytics and upskilling HR professionals, your organisation can be at the forefront of this transformative era.
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We help individuals and organisations reinvent learning. Our learning programs support HR Business Partners to build the skills they need to effectively use analytics in HR to have data driven conversations with the business that drive actionable outcomes. The Data Driven HR Fundamentals certification is a collection of 6 on-demand, video based training courses that can be completed within a 12 month period, at your own pace. This certification program is designed to support you and your team build their skills in analytical thinking, data analytics and storytelling. By completing this learning program you will learn how to better interpret HR data and be confident in having data driven conversations with the business, that drive actionable outcomes.
ABOUT THE AUTHOR
Manpreet Randhawa is the Head of Digital Content for myHRfuture.com. In her previous role as the Change Management Lead for People Planning, Design & Analytics at Cisco Systems, she was responsible for defining and executing on the change management strategy to successfully implement and sustain the digital and cultural transformation across the enterprise. Manpreet is very passionate about change management and technology and how to use both to transform the employee experience and prepare companies for the Future of Work.