Employees are one of the biggest investments that an organization can make, so it’s not surprising that the field of workforce analytics has emerged to help support it. And with the amount of data that is being generated and recorded about not just employees, but the organization as a whole, the time is ripe for analysis.
In that regard, in this article we plan to explain what workforce analytics is, what are its benefits and challenges, and introduce you to some automation tools that are designed for workforce analytics.
What is workforce analytics?
Workforce analytics is a growing practice that uses metrics and tools to get a thorough and holistic understanding of workforce performance. This analysis includes a number of factors such as:
- Staffing and recruitment
- Training and development
- Compensation and benefits
Workforce analytics also takes into account wider factors such as skill gaps and demographic issues and more specific problems to a location or within an office, such as productivity concerns.
People vs HR analytics
In addition to workforce analytics, there are two other terms that are common to the topic:
- People analytics: Uses data and tools to measure, report, and understand the performance of employees. Often used in place of workforce analytics and includes the impact of exterior forces and similar on the movement of people within and through an organization.
- HR analytics: A more narrow definition, focused solely on HR issues and not other business issues that may impact HR and vice versa.
It is also important to keep in mind the role that an increasing number of bots and AI entities are taking; suggesting a need for a more inclusive term – like workforce analytics. For the sake of this article, we will consider that ‘people’ and ‘workforce’ analytics are equal in definition and reference.
What are the benefits of workforce analytics?
As with any type of analytics, businesses stand to gain enormous benefits from properly executed people analytics. Some of the biggest benefits that organizations can experience include:
- Improved recruitment practices: By having knowledge of what has worked in the past, whether it be in terms of candidate characteristics or hiring methodology, knowing what does and doesn’t work can make a huge difference in acquiring the right talent. Some key benefits in this area include:
- Less ‘mismatches’ when hiring,
- A smoother hiring and onboarding process,
- And a better understanding of employee trends, when they’re happiest, or when they’re most likely to leave; enabling better planning practices
- Improved employee experience: HR often plays a huge role in developing company culture and having access to essential employee information can help in building and implementing a cultural fit.
- More accurate compensation: By going beyond factors such as internal employee performance and expectations to include demographics and market characteristics, organizations can be sure that employees are being paid fairly (and within budget).
- Enhanced training and onboarding: A major part of any business is ensuring the successful integration of new team members. However, this alone is not enough, and providing the right initial and ongoing training is key to keeping employees productive and effective. With workforce analytics, it’s easier to see what skills are most in need and where resources should be distributed.
- Getting the most from machine learning: Organizations today are harnessing the power of AI and machine learning throughout their operations, so it’s no surprise it’s becoming part of HR and people efforts too. Analytics provide the information necessary, for example, such as employee and applicant data, to help put together great times, identify weaknesses and more.
These benefits together can help to build a more unified operation, with lower employee turnover, and a more balanced benefits and compensation structure. A more in depth look at this topic is available in our recent blog post.
What are the best practices of workforce analytics?
To make your people analytics more effective, there are a number of best practices that can be implemented:
1. Focus on outcomes
This helps you to measure the right things. Some numbers may be interesting and seem good on paper, but focusing on them may ultimately be causing more problems. For example, think about the case of customer service call time reduction: is it that the issue getting resolved faster? Or are customers getting frustrated and hanging up?
2. Implement predictive analytics
Use the data and knowledge gained to be proactive instead of reactive. This can help eliminate bad hires and integrate better practices related to employee retention and engagement before problems emerge.
3. Start small
It’s tempting to jump into a new HR analytics program with both feet, but it’s important to lay a solid foundation and start with smaller efforts first. This will make it easier when it comes time to integrate data from outside of the HR department.
4. Connect analytics with business needs
Companies today are flooded with data. Choosing data that has direct, demonstrable business needs has two benefits:
- Narrowing down the field of data to only include what is relevant.
- Achieving executive buy-in when growing and developing your people analytics program.
What are the challenges of workforce analytics?
Though there are several benefits associated with people analytics, it is not without its challenges. Some of them, and their related solutions include:
Analytics are only as good as the data that is used to support it. In large, decentralized organizations it can be difficult to ensure that high-quality data is what is being used 100% of the time.
To solve this problem, many organizations implement comprehensive data cleaning programs that help to ensure incoming data adheres to a certain format and to make any necessary changes before the data reaches the point of analysis.
There is a much greater need than availability when it comes to data scientists, analysts, IT professionals and other similar roles. This can cause analytics to either fall into the wrong hands or by the wayside until something environmental changes.
Thankfully, new tools are constantly emerging with the ‘business user’ in mind to help simplify analytics practices down to dashboards and displays. However, despite these rapid advances, there still remains a need for skilled professionals in the field.
Thinking only about HR
With a name like people or workforce analytics, it can be tempting for organizations to focus all of their attention and analysis on HR, without considering the potential impact that can be had from other departments.
Instead, choose platforms and approaches that take into account data from throughout an organization. This can help to highlight hidden relationships that may not otherwise be clear. It is also helpful to demonstrate the potential business benefits associated with workforce analytics to encourage congruence and cooperation.
Employers today can obtain more information than ever before about employees. However, how much about an employee can be tracked before it’s considered to be ‘too much’?
As technology, particularly when it comes to IoT enabled devices and similar evolves, laws are slowly catching up, but there remains a gap in many places. A more actionable solution? Being open and transparent. Tell employees what information you’re collecting, and how you’re using it, and give them a chance to communicate with you about how they feel about it.
How to get started with workforce analytics?
Implementing your HR analytics program can seem daunting, but this guide can help you as you begin.
1- Data management
Tackling data management is essential. Before you can have an effective analytics program, it is key to have a system that ensures data quality and accessibility. Some general factors that this program should take into consideration include:
- Specifying accountability for certain elements
- Establishing clear data definitions
- Setting clear goals and KPIs for data collection and input
2- Business planning
It’s then necessary to build a business case for how workforce analytics is going to contribute to achieving greater business goals. Subsequently, it is necessary to outline your strategy, including clear goals and what data is needed to meet these goals.
3- Careful delegation
Next, identify the right people to become accountable for specific metrics in each part of your organization. Here it can be helpful to emphasize the anticipated benefits and how their active integration will be helping to achieve them.
4- Cost analysis
After that, it will be time to determine the total cost of ownership (TCO) for the entire program. Some costs to consider at this point include:
- Assessment costs
- People expenses (hiring, training, etc.)
- Overhead expenses
Working together with your previously established stakeholders to validate any cost assumptions that you may have made can be helpful at this point.
5- Progress measurements
The final step is to establish your metrics and how you will define success. Remember to make your metrics easy to measure and straightforward to interpret and apply as part of your overall business goals. Some common metrics include:
- Time to fill
- Cost per hire
- Competency analytics
- Retention rate
- Replacement rate
- Accession rate
- Employee performance
Meeting these major prerequisites is essential prior to implementing a new workforce analytics tool or program.
What are workforce analytics tools?
There is a rapidly-growing market for workforce analytics tools, projected to reach $5.97B by 2026, giving organizations an almost dizzying array of tools to choose from. We cover some of these tools later in this blog, but in the meantime, these are some of the common functionalities that your tool should possess:
- Visual HR metrics and dashboard
- Real-time environment analysis
- Future employment planning based on predictive analytics
- Performance measuring tools
- Budget planning
For some organizations, it may be better to have a custom-built solution. For others, a cloud-based solution might be the right choice. After choosing the right tool, it will be necessary to complete the actual integration, employee training, and data collection and analysis.
Some tools currently available on the market include:
|Number of Employees
|Oracle HR Analytics
|People Analytics by TrenData
Choosing the right tool will require input from a wide range of sources, so it is important to allow ample time to complete the selection process.
No matter whether you’re referring to workforce, HR, or people analytics, one thing remains the same: the goal is to find a better way to bring employees and tasks together, better. Workforce analytics will only stand to become more useful and complex as our working population will grow to include robots and other forms of AI.
For more on analytics
If you are interested in learning more about the other use cases of analytics, read:
- Benefits of HR Analytics: 6 Reasons to Set It Up
- Top 10 Healthcare Analytics Use Cases, Examples & Challenges
- Retail Analytics in 2022: Uncover retail insights with AI
Finally, if you believe your business would benefit from a people/HR analytics tool, we have a data-driven list of vendors.
We will help you choose the best one tailored to your specific needs:
Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 60% of Fortune 500 every month.
Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.
Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised businesses on their enterprise software, automation, cloud, AI / ML and other technology related decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.
He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.
Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.
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