In the digital age, corporate adoption of analytics is soaring, as senior leaders and functional departments alike deploy data insights to inform business decisions. According to research from Accenture Analytics, nearly six out of 10 (59 percent) finance departments and 55 percent of customer service functions use analytics.
But in one function - human resources analytics has a lot of room to grow; just four in 10 (42 percent) organizations are engaging with analytics. Clearly, many major companies are missing out on the opportunity to use objective data insights to unlock strategic people issues and improve organizational performance.
Making A Difference in Workforce Planning
One area where talent analytics drives improvement is workforce planning. It means creating a predictive view of the demand for talent across the business versus the supply of key skills and people across multiple geographies.
Closing those gaps as effectively as possible has been increasingly challenging, in part due to the expanding geographic footprint of many companies. They are also more likely to deploy a mix of internal employees, contractors, vendors and consultants to improve the overall skills portfolio and delivery capability while managing labor cost more effectively.
Talent analytics provides an answer to these complex retention and attrition challenges. Analysts can determine patterns in HR data that help companies attract and retain talent. Improving performance in specific areas of the employee lifecycle can produce impressive financial results: just consider that the cost of replacing a worker typically ranges from 15 to 20 percent of that employee’s annual pay but can amount to up to three times what he or she makes in a year.
Consider the example of a cable and media company that wanted to better understand the high levels of employee turnover and absenteeism at one of its call centers. The HR director had a hunch that the major cause of staff attrition was the distance between employees’ homes and the call center. However, data analysis revealed that a larger issue was employee family obligations, such as child care and looking after ageing parents. By pinpointing the right cause, the company could introduce policies that allowed employees to fulfill their family duties while reducing absenteeism and attrition.
Supporting Business Performance
Talent analytics can also help companies determine which HR strategies are most effective in supporting organizational strategy and better business performance.
In smaller organizations it may be fairly straightforward to identify the link between a specific HR initiative and performance. However, in companies with very large workforces these links may be extremely difficult or perhaps impossible to discern clearly without analytics to see through the dense forest of data.
For example, one retailer with 3,000 stores nationwide, a multichannel sales environment and more than 50,000 customer-facing employees, faced the challenge of evaluating the impact of multiple interlocking HR programs. Would improving hiring and retention programs have a meaningful effect on store performance? Would improvement in employee engagement contribute to better customer experience and financial results? What is the optimal mix of full time, part time and seasonal employees? And how do you measure returns on a $2.5 billion labor spend?
To get reliable answers, the retailer built a multivariate econometric framework to provide real-time measurement and insights on door level sales opportunity, location versus operational performance drivers, workforce factors and targeted interventions that are most likely to have an impact on retail performance. Together, these data insights provided a foundation to build a coherent set of workforce strategies, ranging from employee compensation and staffing to training and retention programs, all aligned with the client’s business strategy. The retailer achieved double-digit improvement in sales conversions year-on-year, and first place ranking in the J.D. Power and Associates retail purchase experience rating.
Another organization analyzed the impact of its learning program and linked it with its business performance. It established the optimal targets for different categories of trainings for various businesses and identified the training programs that were most effective in delivering individual as well as business performance. Teams that met target levels performed 15 to 35 percent better than teams that failed to meet the targets an insight the organization leveraged to improve its training strategy.
Bringing HR Insights to Life
So where should companies start their talent analytics journey?
First, it’s important that they don’t wait for “perfect” data. Standardizing global HR systems to improve the data environment is a long-term challenge, but it’s possible to gain useful insights in the short term by doing basic data cleanup and analysis. In the retail example above, initial work on productivity measurement, quota analytics and scheduling optimization was completed through SQL-based queries and SAS analytics.
Next target the top two or three critical people issues facing the organization with a focused pilot project. This will demonstrate the value delivered by analytics and can illustrate lessons to guide infrastructure development, while ensuring a tangible link to financial impact.
It goes without saying that each talent analytics initiative needs to be aligned with the business strategy and its goals. A crucial part is to identify the people-related areas where improved data insights truly result in better business performance. For example, data on employee productivity gaps and contributing factors can help position the business case for change and drive targeted interventions far more quickly.
HR issues impact performance right across the organization (and, with today’s porous organizations, far beyond). This is why talent analytics should be part of an overall analytics roadmap. This map pinpoints the most strategic HR issues being faced across the organization and relates them to the overall data, analytics and organizational capabilities a company needs to advance on its analytics journey.
Make the Case
To a large extent, performance is driven through people. This makes managing them one of the greatest responsibilities within the organization. HR should make use of advanced analytics concepts and tools that can deliver significant business impact, rather than just a few percentage points of savings or productivity improvements.
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