Since the industrial revolution, management’s sense of how things are going in the workplace mostly came by personal contact and gut feel. Managers could walk around the shop floor, observe, and ask questions to get a pulse check. Some of that changed with globalization and work moving offshore, but many companies today still rely on the proverbial water cooler.
COVID-19 demolished that routine for a lot of organizations. Remote and hybrid working environments and the Great Resignation saw huge amounts of attrition—while the talent-acquisition supply chain became more complex and competitive. The room for error diminished and the employee/employer power balanced shifted.
Undiminished is the cost of labor, which is the largest expense for most employers. The consequences of a productivity shortfall because a company can't put the right people in the right job or can't keep them long enough due to employee experience issues are significantly harmful to a company’s business strategy.
For too long, leaders have relied on straight-line estimating for crystal ball forecasts regarding their people.
Unfortunately, that doesn't work anymore because the pace of change is so much faster. We're in uncharted territory in terms of consumer behavior, market changes, and people moving in and out of organizations.
Executives can get better forecasting and people insights, not from their gut, but from more robust information. The good news is that many companies have plenty of people data, but many don't have the capabilities to make sense of it.
The irony is that the vast majority of organizations are sitting on great HR Management Systems (HRMS) that are underutilized. And they know it. They're frustrated because they spent millions of dollars, and CFOs and CHROs are saying, "We bought this expensive system that was going to be a silver bullet for our people problem. Why does it take a week to tell me where we have the highest attrition?"
It's like they're driving a Ferrari with the parking brake on. But it doesn't need to be that way.
The thrust behind people analytics is about letting organizations combine the data they already have in ways that tell them: "Here's what just happened. Here’s a forecast and probability of what's going to happen. And here’s what we should do about it." In fact, market leaders have embraced and leveraged people analytics to differentiate themselves in a crowded marketplace by using fact-based insights to inform their decision-making.
For example, people analytics not only identifies causes of high turnover but also can predict how likely an employee is to become a flight risk, measure the health of an organization, and understand employee experience through ongoing listening strategies. This intersection of insights can quickly and continuously lead to a more engaged workforce and, in turn, reduce employee attrition.
An effective people analytics program can help HR organizations get the right answers to important questions such as:
- What is the internal and external landscape regarding geographic composition, hiring, attrition, career transitions, macrotrends, and gender/ethnicity?
- What variables contribute to someone that is likely to leave? What retention strategies can we employ by individual and team?
- Which people are at risk of leaving the company?
- What is the forecasted number of leavers, hires, and retirees in six months?
- What are employees saying regarding culture, work environment, leadership, career development, and total rewards?
- What’s the company perception from candidates who were hired versus rejected? Where in the recruitment process do we lose the highest volume of candidates? Why?
- What skills do we currently have and what will we need in the future to meet business needs?
- Which courses are the most impactful and correlate to high performers?
Build versus buy?
Nine out of 10 times, organizations are best served building their analytics capabilities in house rather than outsourcing. We believe that tools are best used in conjunction with experienced analytics resources to maximize value and insights generated from HRMS data outputs. Investing in an HRMS that is designed and configured to collect tremendous amounts of data without building a mature people analytics function to accompany it does not leverage the full capabilities of the system.
By building a mature analytics function, experienced practitioners with clear roles, responsibilities, and processes can leverage these systems and tools to better support business leaders and provide insights that would not otherwise be generated. Relying solely on prebuilt analytic solutions, dashboards, and other technology without specialized resources will likely lead to suboptimal results and a poor return on investment.
Additionally, workforce questions are ongoing and require constant rebalancing. Addressing those questions takes in-house capability. The best companies are building these capabilities—though some need to acquire support to get on their feet.
All the data in the world can be more noise unless management has the ability to understand and act. The tech industry tends to get off the rails by promoting all sorts of analytics. They promise 500 prebuilt reports. That's selling reports versus solutions to business problems and, by itself, is not valuable.
The road to value starts with asking the right questions for current people and business problems. Is growth the objective? Is a cost-optimization initiative needed? Do we have an employee attraction and retention problem? In our experience, those questions can only be answered by building and/or enhancing people analytics capability.
Here are five guiding principles for enabling people analytics:
Obtain buy-in from executives – It is important that all C-suite executives are aligned on the power that people analytics can provide, not just for HR, but for the entire organization.
Identify a people analytics champion – A visionary leader should not only have analytics acumen but also the charisma to bring others on board and drive engagement.
Build on a solid foundation – Have you ever built a sandcastle and it fell apart in a matter of seconds due to a poor foundation? Well, building a strategic people analytics function is similar in the sense that it requires a solid foundation: hiring experienced resources that are enabled and organized in the right way, having a robust ongoing listening strategy, ensuring data visualization and automation tools are leveraged appropriately, properly configuring your HRMS, combining disparate data sources via a HR data mart, and establishing strong data governance/quality.
Create a data partner role – A liaison between the business and core people analytics colleagues who understands business needs to scope requests and excels in presenting data, insights, employee experience surveys, customized recommendations, and research that lead to actionable solutions.
Increase self-service – Create intuitive, user-friendly dashboards and reports that employees can access themselves, freeing HR from the tyranny of the mundane to work on strategic, insights-driven analytics.
KPMG starts with the business issue to drive real business value through its people. We work with leading technology alliances such as Oracle, Workday, Microsoft, ServiceNow, Salesforce, and SAP, among others, to provide solutions that clients own for achievable, measurable value. For more information, download our PDF, "Building and leading people analytics capability," below.