Importance of People Analytics (4:07)
Dan says that many companies, especially those new to people analytics, often ask about the importance of people analytics.
HR has the ability to really add more business value to the organization than ever before,” he says. “ Two-thirds of costs are around salary, wages, and benefits. If you don’t have a ton of ideas as to where those costs are going in an organization, then you really don’t have the ability to optimize some of those resources that you’re spending every month.”
Dan compares the parallels between marketing analytics and people analytics. “
Years ago, some organizations had a marketing budget. They would push marketing out into the ether and just hope to understand that marketing spend would gain more customers. Over time, marketing analytics has just gotten a ton more specific, right? With all those web apps, the ability to track and understand the cost of acquiring a customer, the cost of keeping a customer.” he says. “ The same parallels are drawn in HR now. But whereas marketing analytics is much more in maturity, people analytics for most companies is still pretty immature.”
With the further development of people analytics, companies are beginning to realize the benefits of HR analytics to an organization. Just like how marketers 20 years ago operate very differently from marketers today, this shift towards analytics is bringing in new people to become business leaders in HR — people who are able to think both creatively and analytically.
Core People Analytics Concepts to Understand (7:19)
A people analytics expert, Dan shares a few core things that organizations using people analytics should understand or do.
The first place organizations should look into when aiming to optimize the workforce with people analytics is talent management. Top talent is quite difficult to get and keep, but there are aspects to the hiring process that can be improved with the help of people analytics by emphasizing key concepts.
For one, there’s DEIB (Diversity, Equity, Inclusion, and Belonging). DEIB has been a leading business priority in hiring decisions. While
DEI has been a core concept in Human Resources for some time now, it has been found that a sense of belonging really improves the work environment, employee experience, and employee performance.
Dan also says that employee engagement should be a factor to consider for better decisions. “
How do you keep them engaged through the different trials and tribulations of individual workers, motivations, and aspirations to continue a career?”
Dan points out that one of the easiest places to start is within talent acquisition. No matter the size of the company, the same market forces exist, which is why everyone is trying to get the best possible top talent. Thus, it is critical to understand the different components of the recruitment process, such as the right candidate pool, the roles out there, the assessments, the high performers, the job descriptions, and more.
Are you getting a solid candidate pool? Right? Not only skilled workers but of diverse backgrounds. Are you getting enough where hiring managers feel like they have the talent they need to execute on the strategies they have?”
Internally asking the right questions can make a huge difference to the candidates that an organization is attracting. “
How long does it take to hire this person? Are we offering the right salaries? Is this a remote role? Is it a hybrid? Will I have to come to the office? Do I need a vaccine?”
Although all these aspects can be tracked with an organization’s talent acquisition system, it’s really difficult to plan ahead unless they make use of good analytics.
If you have an organization of a hundred people and you have 10 or 15 openings, but you also have a turnover rate of 10% or so, even if you’re hiring on a pretty regular basis, you’re still going to fall short of the number of workers that you need,” he says. Dan draws the analogy of a supply chain that organizations need to have candidates coming in for new roles, as well as coming in to replace roles that they’re losing. When the attrition rate and employee turnover cannot be overcome by recruitment, then the company will soon be in trouble.
Being able to run that arithmetic on your workforce and understand that you have as close to full capacity for what your organization needs to operate — understanding that is a really key fundamental.”
Dan explains that understanding this is a great place to start as it helps the organization and the stakeholders manage the skill sets needed for whatever business initiative is being executed.
People Analytics at Smaller Companies (11:53)
Understandably, many people associate the concept of people analytics with companies that have a relatively large workforce since data should be more meaningful when in those numbers. However, a smaller company can still benefit from people analytics nonetheless.
Any organization that’s got more than 150 can definitely start in this realm. You get to a saturation point of knowing everybody or understanding what everyone’s doing up until that point,” he says. “ And then once you hit that point. Even for CEOs and C-suites, it’s really hard to get a good understanding of those different departments and how well they’re running.”
That being said, Dan shares that while he has worked with companies with more than a hundred thousand people, he has also worked with organizations that are about 50 people. While Dan reiterates that 150 people may be a good base minimum as the benefits of workforce analytics increase as the workforce does as well, he emphasizes that companies with at least 1,000 should really go for it.
A couple of my clients, they’re at around four to five thousand, they’ve been running really well for years and years, but they’re starting to experience difficult problems with talent supply,” he says. “ They’re starting to experience a little bit of these issues where they can’t fill the roles that they have because they’re not getting candidates with enough skill sets that they would want to hire, at least at a minimum. So now they’re trying to understand. Where are these candidates? How do we actually get them in? Is it a cost aspect? Is it an employee value proposition?”
Dan explains that it’s different for each firm. He defines employee value proposition (EVP) as the overall offering that a firm offers to the talent supply out in the market. For some companies, it can be a high salary, while for others, it can be flexible work arrangements. This is especially important because the EVP that a company is ultimately offering should match the candidates they are looking to acquire.
Do You Have a Favorite Implementation of People Analytics? (17:00)
When asked if there are any implementations that he found particularly clever, Dan shares that he appreciates any form of implementation that ensures companies have enough staff to operate whatever business goals or operations they have. This is especially important for a talent segment that keeps the business up and running.
I remember years ago, I was working with a client that had finance groups, and they always would have finance people come in at an entry level [like two or three years out of school], and they had a couple hundred. They knew they had to continually hire them month over month because they knew that three or four would leave every month,” he says. “ And so they had this evergreen finance requisition for an entry level that would continually be open. They would always be interviewing and always be onboarding simply because they knew that’s one of their critical talent segments for keeping their business up and running.”
Dan advises that “
if you’re always reactionary, then you are scrambling, you’re having people working overtime, and you’re creating this dissonance or even a sentence of disengagement because people are burnt out and whatnot.”
Understandably, many have voiced their concerns that hiring talent proactively can come at a cost. However, Dan assures that acting reactively can pose more of a risk because desperate companies might mistakenly hire candidates that are not best for the jobs.
Can you meet those dates if you’re constantly reacting instead of proactively hiring that critical talent segment? Some months you might be over what you need, some months you might be a little under, but you’re always feeding that pool, so you’re never way under because as soon as you get way under, that’s when you start having mission-critical issues with the workforce.” Pitfalls of People Analytics (20:34)
The first pitfall of people analytics that Dan takes note of is with regards to data privacy. Understandably, datasets utilized by people analytics are quite sensitive and are actually somewhat federally protected. Laws in the U.S. that protect personal employee data include the Americans with Disabilities Act, the Health Insurance Portability and Accountability Act (HIPAA), the Fair Credit Reporting Act (FCRA), and the Fair and Accurate Credit Transactions Act (FACT Act).
While it is true that untrained managers can misuse the data they have access to, Dan asserts that with proper security and access control, companies are set to avoid any large pitfalls regarding personal employee data.
Since people analytics is still relatively young, the tech itself could be a potential pitfall. Dan mentions
the issue Amazon had with hiring a few years back. As a way to streamline all the applications, Amazon recruited an AI that was programmed to help select candidates through the use of machine learning algorithms. Unfortunately, the AI exhibited a bias against women because it trained itself to look at the historical data, particularly previous candidates Amazon had, which were predominantly male.
You’re always going to end up being at a little bit of a risk for that kind of stuff, especially when you’re analyzing sensitive data, but the impact that you can have in an organization to be able to use some of that data to make faster decisions is pretty impressive,” Dan says. “ I think there’s a couple other technologies out there like organizational network analysis that really could be used for good in shaping an organization, optimizing the resources. It’s still a little bit new, and certain groups are a bit wary to start using it, but the ones I’ve worked with that have [used it] really do see a great outcome and impact on how they manage the resources, how they manage their teams, their career paths, and how they reinforce positive behaviors.” Advice for 150-500 Employee Companies (24:43)
Dan shares his thoughts on how companies with around 150-500 companies can get started on people analytics.
I would have to assume if you’ve reached 150, you’ve got most of your operations set. At this point, it’s probably a good idea to find an HR professional that has experience with people analytics, or at least systems, that they can set up some of the basic reports on HR data, on human capital data, that can start reporting on some of the absolute basics like headcount and turnover,” Dan says. “ Those are the kind of basic fundamental reports that organizations need to ensure HR has a seat at the table.”
Having a seat at the table here means that the HR department is given a voice. Dan says that aside from operational reporting and FP&A (Financial Planning and Analysis) reporting, an organization has to listen to human capital reporting as well.
Those are some basic, really good fundamentals to have, like understanding how many people you have, what those costs are and are they aligned within the right organizations, cost centers, and profit centers. That’s massive for being able to report accurately on those costs, and then getting granular with your general ledger, how that costs, or how those costs are being allocated and spent is another great thing.”
Dan shares his experience working with a previous firm that grew from 1,400 to 2,500 while he was there. They had issues with simply reporting on where resource costs were being allocated simply due to issues with the organizational hierarchy. Dan explains that by simply correcting some organizational data within their HRIS, they were able to report cleaner numbers to their stakeholders and their investors. A better number also allowed them to better optimize their operations by determining which areas could have more staff and such.
With that anecdote, Dan would advise smaller companies how important it is for them to set up their fundamentals. “
Making sure that you have some of the fundamental setup is really key,” he says. Smaller companies don’t even have to go for expensive and complicated software right out of the bat. “ All can be done in Excel or Tableau. Your basic, everyday Microsoft system is totally fine. If you want to move on to something greater, I applaud you for doing so, but again I’ve run and set up many of these people in analytics organizations simply with Excel for the first two years. It’s obviously not my preferred tool anymore, but it definitely works. It can be done. With an organization that size, it just typically is the right call for the costs.”
While companies may not need sophisticated tools at the very beginning, they do need to set their goals early on. This usually comes in the form of hiring more people or allocating more resources for a certain endeavor. Dan says that investing in people analytics can be done gradually throughout time, rather than a large sum of money all of a sudden.
How Can a Company Get Started with People Analytics? (31:21)
Without hesitation, Dan wholeheartedly suggests that a company should hire a consultant to help them get started.
It just gets you on the right path. See someone that’s started some of these things several times before. I would say that’s 50-60% of my clients. They just want some help really getting started. After a couple months of engagement, they’ll look at hiring outside or pulling in someone from somewhere else but really just to get off the ground,” Dan says. “ I think that’s really the fastest way to do it.”
While there’s still that stigma where HR people are more creative than they are analytical, Dan points out that he has noticed more and more individuals in HR coming out of school with more analytics and experience with big data than before. As someone who teaches grad-level courses, Dan observes that more individuals are coming and taking these courses, giving them more practice with data than was previously seen in HR.
Additionally, there are tons of available resources for people to learn these analytical concepts online, such as AIHR and Insight222.
Yeah, great resources for getting started in people analytics, but I’ll finish by saying, I think there are a lot of HR professionals that might shy away from this in the very beginning simply because it is an all-engrossing, somewhat overwhelming topic to get started in, especially if you’re not used to understanding data and systems and APIs and connections and that kind of stuff,” he says. “ But I haven’t really met any HR professional within an organization that wasn’t able to pick it up if they were interested and willing to do so.” ROI with People Analytics (34:55)
Not surprisingly, the use of people analytics in an organization is a worthy investment.
We’ve done projects in the past. Let’s say you’ll spend a couple hundred thousand dollars on resources. Six, eight, nine months working on these projects for 20 hours a week, you’ll see millions of dollars in returns simply because you’re able to find a lot of excess inefficiency that exists within an organization.”
For a more concrete example, Dan explains time-to-productivity, a common HR metric that refers to how long it takes for a new hire to be processed and trained to be a productive member of the organization. Dan says that time-to-productivity can vary from organization to organization, depending on the company culture. However, when those roles are paid by the hour, inefficiencies can add up. Simply by optimizing time-to-productivity, a company can save millions every quarter.
Tools in People Analytics (39:43)
Dan reiterates that companies can get started with people analytics and data analysis using very accessible tools.
As I mentioned before, anyone can get started with Excel, Tableau, and even Power BI is a great resource these days, especially because with most organizations that are Microsoft-based, they have the ability to sign in with those tools at a relatively low cost per user license,” he says. “ I even know several organizations that are run off Google Sheets, and I even have a Google Sheets developer that I’ve worked with on several occasions that has done amazing stuff with G Suite.”
However, when companies surpass their initial maturity and begin to further grow their workforce, Dan mentions some HR analytics tools that he finds especially helpful such as
Visier, One Model, and Orgvue. He is also excited to see more providers looking into integrating more AI and predictive analytics capabilities.
Dan shares that it has been encouraging to see vendors offer plans that are more accessible to smaller companies in recent years. While typical offerings can begin at hundreds of thousands of dollars, a smaller company can get their foot in the door at a much lower price point. Even though they would be starting with highly simplified dashboards, it’s an easy way for these companies to get started with data analytics at a much faster time period with better automation and implementation.
Dan recounts that setting up an analytical system for a large company can take up to a year and a half and cost $10-12 million. In contrast, a smaller company nowadays can get their software up and running in 8-12 weeks.
Dan also shares his amazement at how accessible tech these days can be. “
Back in the day, 12 years ago, we would spend months just simply coding connections. It was wild,” he says. “ And now, you get your key texted in there, have a few security questions to answer, and then wow, you’re connected. It’s wild. It’s fantastic.” Final Advice (45:02)
In the many years Dan has worked in the industry, he emphasizes the importance of taking the initiative in having conversations with the stakeholders.
I encourage, especially analysts and individuals, kind of either low on the totem pole or kind of maybe toward the middle: Start having some of these conversations with your stakeholders. Get to know them better by providing them with some of the basic information that they’re asking for, but then try to get them to meet with you,” he says. “ Some of the biggest ways I’ve been able to better serve our stakeholders is to have those one-on-one conversations.”
Dan explains that talking with stakeholders builds a connection and a relationship with them where they become more open in sharing areas where value can be added to. This will then develop a cycle of growth as more projects can lead to growing one’s own discipline and skill sets.
About Dan George
Dan George is the founder and CEO of Piper Key. Aside from consulting, Dan is also an Adjunct Professor at Vanderbilt University, where he teaches grad-level courses on workforce planning and people analytics.
Connect with Dan on
LinkedIn. You can find Piper Key on LinkedIn as well.