What it is: People Analytics is the practice of using data-driven insights to inform Human Resources (HR) decision-making. As of March 2020, it’s most impactful in hiring strategy, but can also be used for retention, compensation, and other HR functions.
What it does: People Analytics tools use data to replace or supplement traditional ways of doing HR, which have historically been based, at least in part, on intuition. Data can come from internal sources, social media, quizzes and tests, or other sources. Outputs can range from the specific (e.g. recommended compensation for a given job candidate) to the general (e.g. variables that reflect team performance.)
Why it matters: Famously, psychologist Daniel Kahnemann discovered, while working as a psychological evaluator for the Israeli Army, that standardized intake tests were better at predicting officers’ performance than traditional intuitive assessments. This finding is suggestive of the hypothesis that intuitive processes are inferior to data-driven processes when it comes to estimating performance or rewarding positive attributes. People Analytics promises to expand the data-driven HR toolkit, allowing organizations to move further away from solely intuitive decisions about employees.
What to do about it: If your HR processes have yielded unsatisfactory results, consider a People Analytics solution. Remember that, as always, a data-driven approach is only as good as the model it uses: depending on what’s being measured, analytics can simply serve as a stand-in for human biases, rather than a replacement.
- Can provide more accurate estimates of employee performance for recruiters
- Can measure current employee performance for more accurate bonuses or insight into performance generally
- Can improve retention by identifying employee burnout or rewarding high performance
- Models must be carefully designed to avoid reconstitution of existing biases
- Not all data sources are useful or straightforward to collate
People Analytics promises a revolution in hiring, through the development of predictive models that estimate performance better than traditional metrics such as alma mater or extracurricular achievement. However, PA can have broader applications. For example, Google’s Project Oxygen used analytics to identify what differentiated more productive teams, and, finding that the answer was good management, used the data-driven insights to hone in on what constitutes good management.
PA platforms are proliferating, ranging from those devoted explicitly to recruiting or compensation to more diversified suites. Some examples: Lattice and Culture Amp are companies explicitly marketed as people analytics tools focused on performance management and employee experience. PayScale analyzes internal data and industry trends to guide compensation. IBM Kenexa is an AI-driven talent platform, aiming to optimize talent acquisition and retention. Isaak is a broader tool, offering insights into everything from email behavior to employee welfare.