People analytics provides insight into your organisation’s workforce. Your company’s workforce is at or near the top of your organisation’s expenses and strategic assets. Describing the importance of people analytics is very much an exercise in stating the obvious. For this reason, more and more companies are relying on people analytics, and that reliance is growing even as economic conditions change. In fact, as economic conditions become more challenging, people analytics becomes more, not less, important. Imagine a pilot flying in bad weather. Data on altitude, speed, location, etc become even more critical in that context. So yes, it makes sense to invest in people analytics now, even amidst our current economic concerns. People analytics in a recession is one of the most measurable strategies that HR can pursue. Whether you are hiring during a tight labor market or working through the implications of layoffs and reorganizations, you will want accurate, multi-dimensional, effective-dated, relational analytics ready to guide your decisions.
People analytics doesn’t just help organise HR data. It generates faster insights from widely-dispersed HR data to make better talent decisions. For example, your people teams can better manage workforce and staffing levels, maximise productivity, and avoid guesswork about their diversity and inclusion objectives. “New and improved” HR reports alone won’t cut it. With people analytics, your analysts and managers can run exploratory data analysis to connect and understand relationships, trends, and patterns across all of their data. Additionally, the analysis adds context and meaning to the numbers and trends that you’re already seeing.
The advantages of people analytics and why you should budget for it in a recession.
Advantage #1 - Save money with people analytics.
For nearly every business, labor is one of its most significant costs. But human capital is essential to generating revenue. HR analytics provides strategic and tactical visibility into one of your organisation’s most vital resources - its people. When your company uses analytics to manage the right people out, it can also use analytics to help you focus your recruitment efforts.
After all, replacement costs for an employee can be as high as 50% to 60% with overall costs from 90% to 200%. For example, if an employee makes $60,000 per year, it costs $30,000 to $45,000 just to replace that employee and about $54,000 to $120,000 in overall losses to the company.
HR analytics can also become a strategic advisor to your business to show insights into how your organization is changing. For example, people analytics can track trends in overtime pay, pay rate change for various positions, and revenue per employee (to name a few).
While the revenue per employee calculation is a macro number, it’s important for you to be attuned to how it’s changing. Knowing the trends of your revenue per employee can lead directly to asking important questions about your people strategy:
- Are we investing in people now for future revenue later?
- Are we running significantly leaner than we have in the past?
- Are we running too lean?
If metrics like revenue per employee or overtime pay are dropping or increasing over time, it could indicate that adjustments need to be made on a departmental level.
Advantage #2 - Identify trends affecting morale or productivity.
People analytics can also help you identify trends within your workforce that may be negatively affecting your business. HR data can help you pinpoint what is causing the change, and then address these issues early so you can avoid potential problems down the road.
For example, Cornerstone used metrics such as policy violations and involuntary terminations to identify “toxic” employees harming the company’s productivity. The findings showed that hiring a toxic employee is costly for employers — to the tune of $13,000. And this number doesn’t even include long-term productivity losses due to the negative effects those toxic employees had on their colleagues. Source.
With people analytics, Cornerstone identified common behavioral characteristics of toxic employees and now uses this data to make more informed hiring decisions. This created immediate benefits for their existing employees as well as future advantages as their workforce evolved.
Advantage #3 - Recruit and retain top talent.
The many benefits of people analytics also include a competitive edge when it comes to recruiting and retaining top talent. By understanding the needs and wants of your employees, you can create a workplace that is more attractive to potential candidates.
In a world where data is constantly being updated, it's important for talent acquisition and HR leaders to make informed decisions quickly. HR analytics gives them that power at speed (rather than waiting months before seeing what happened).
Using AI to discover related qualities of your top performers can also help your acquisitions team select candidates that will fit well into your culture and start driving results.
Advantage #4 - Identify high-performing departments.
Another one of the advantages of HR analytics is its ability to pinpoint positive changes as well. HR leaders can track department performance to know when to reward or incentivize employees for their productivity and work ethic. Additionally, it can help you keep your employees happy and engaged, which is essential for maintaining a high level of productivity (and sales).
For example, Best Buy analyzed its HR data to discover that a 0.1% increase in employee engagement resulted in more than a $100,000 increase in annual income.
Further, AMC’s people data showed that the theaters with top-performing managers earned $300,000 more in annual sales than the other theaters. These HR insights also helped this Fortune 500 company identify top talent and ideal candidates for its managerial positions, which ultimately resulted in a 6.3% increase in engagement, a 43% reduction in turnover, and a 1.2% rise in profit per customer.
Identify Trends With Real-Time Labor Market Intelligence
Ultimately, HR analytics offers real-time labor market intelligence to help businesses identify pain points causing turnover — something that’s essential in today’s hiring climate infamously referred to as “The Great Resignation.”
The rise in turnover rates is a nationwide problem. It’s important for companies to find out why their employees are leaving and then create an effective strategy so they can stop the trend before it gets worse.
One Model’s people analytics software can be a valuable tool for any business, especially during a downturn. In short: You should budget for HR analytics as an investment, not a cost. If you’re worried about a recession, you can start performing complex analysis on your data in just a few weeks.
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