Boosting Growth: How People Analytics Elevates Enterprise Value

Many HR professionals are extolling the virtues of people analytics. Some see it as a lever of organizational effectiveness; others as a source of value. Yet others speak of it as a game-changer, a disruptive force that will forever alter the course of human resources management.

I prefer to view people analytics as a powerful new tool for enabling the creation of enterprise value.

THE WORK TO BE DONE

Consider what analysts, managers, and consultants specializing in people analytics do. They collect organizational data and transform it into:

1. Evidence of viable business opportunities driven by people management initiatives,
2. Actionable insights into performance problems that require a people management solution.

This analytical work, in and of itself, does not create value: it is ancillary to value creation. For example, you could apply analytics to calendar data for your sales and marketing organization to identify the amount of time spent with customers versus time spent on internal meetings. Research has shown a strong relationship between market orientation and a firm’s profitability; therefore, this ratio between internal and external focus can become an actionable insight.

When done well, this work can improve a company’s fitness for delivering on its strategy and creating value. Not only can it help business leaders locate the right opportunities in an ocean of possibilities. It can also provide them with a mechanism for isolating and addressing the true challenges their company is facing in the areas of performance management, succession management, leadership development, and capability building (the 4 people priorities where HR adds to enterprise value).

In the past, business leaders didn’t have easy access to such evidence or insights. They might have a suspicion that there was an opportunity or problem in the business that called for a performance solution. Sometimes they might have a bit of data. Often they had to run with their hunches and untested assumptions. That no longer has to be the case.

People analytics can back up our insights and key decisions with concrete evidence and facts. We can even calibrate these very sophisticated, rigorous tools to quickly identify appropriate business opportunities and hidden problems.

Let’s look at one of those “hidden” problems: the issue of employee engagement and its impact on business outcomes. In 2015, Gallup found that managers account for 70% of the variance in employee engagement scores across business units. In 2020, they reported that business units scoring in the top half on employee engagement more than double their odds of success as compared to those in the bottom half. That same year, Gallup itself began training 14,000 managers to be effective coaches. In less than a year and a half, the engagement scores of the teams led by these managers were 8 to 18% higher. And the engagement scores of the managers themselves were 10 to 22% higher.1

Fast forward to 2023. Gallup candidly began their annual State of the Global Workplace Report this year with a simple recommendation to “give people better managers”.2 Gallup also indicated in that same report that 59% percent of the world’s employees are “quiet quitting” and 51% are actively seeking or watching for a new job.3

What if companies calibrated their people analytics to assess and identify good from bad managers? What if, in addition to training good managers as coaches, they gave them insights, driven by real-time data, into the people they manage? Not only would their managers be better prepared for those critical few moments in each employee’s life when the right feedback, inspiration, or coaching can dramatically increase engagement and productivity. They themselves might also be less likely to “quiet quit”.

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THE RIGHT OBSESSION

The primary responsibility of the HR business partner is to develop better managers and create a cadre of greater-than-good leaders. These are the professionals who are driving your company’s performance today and will be driving it tomorrow.

Realizing the full potential of people analytics will be a matter of deliberately and strategically applying it to our businesses. That is why I urge CEOs and CFOs to put aside all the hype about the future of this new technology, give up any superficial fascination they have with its novelty, and get very clear about what their enterprise needs. It is imperative they share those needs with their HR business partner.

I have seen many HR leaders, lacking this fundamental clarity about the needs of the business, become obsessed with “the latest and greatest” technological bling. Over the years, I have watched too many of them struggle with this obsession and end up implementing yet another one of those infamous “solutions in search of a problem”. Inevitably, they find themselves leading a plethora of initiatives that look sexy but solve nothing that truly matters to the enterprise.

When it comes to people analytics, don’t let this be you.

Instead of inappropriately obsessing about the level of tool sophistication, develop a healthy obsession with business needs and a ruthless focus on talent demand.

This healthy obsession and ruthless focus call for a new breed of HR specialist: the people data analyst. Experts who know which data to probe and how and who can lead the intricate “under the hood” work best left to data scientists. Masters of analysis who can translate complex business needs into queries that can be run against available data sets.

As business partners, HR professionals are responsible for identifying the biggest needs of their company and tightly linking people solutions to those needs. They already rely on the support of experts in talent development, performance management, and compensation and benefits for insights and an in-depth understanding of the solutions available in each of these areas. Now they can rely on the expertise of the people data analyst to support them with evidence in the realm of needs identification. This is perhaps the biggest contribution people analytics, as a tool and a profession, can make to value creation.

People analytics essentially helps build a much more solid bridge between business needs and HR interventions. It values evidence over assumptions. It moves HR professionals from supporting the overall business to providing specific, data-driven solutions to true business challenges. If there is anything to celebrate about people analytics, this is it.

P.S. Thank you to Laura Stevens PhD , currently the DSM Firmenich Head of Data & Artificial Intelligence, for significantly sharpening my thinking in this article.

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NOTES

1 ????????? Randall Beck and Jim Harter, “Managers Account for 70% of Variance in Employee Engagement”, Gallup Business Journal, April 21, 2015. Accessed online July 3, 2023 at https://news.gallup.com/businessjournal/182792/managers-account-variance-employee-engagement.aspx.

??????????? James Harter, Frank Schmidt, Sangeeta Agrawal, Anthony Blue, Stephanie Plowman, Patrick Josh and Jim Asplund. “The Relationship Between Engagement at Work and Organizational Outcomes”, Gallup 2020 Q12 Meta-Analysis: 10th Edition, October 2020, p. 2. Accessed online July 3, 2023 at https://www.gallup.com/workplace/321725/gallup-q12-meta-analysis-report.aspx.

2?????????? State of the Global Workplace 2023 Report, Gallup Inc., p. 1.

3?????????? Ibid, pp. 4 and 7.