Recruiting in Transition: How People Analytics Is Revolutionizing the Process
The importance of data in HR departments is continuously growing, with People Analytics playing a key role. The tool allows multiple data sources to be used to increase the effectiveness of HR-related measures. It also supports the development of successful strategies that contribute significantly to the achievement of business goals, including recruiting.?
Human Resources has never been subject to as much change as it is today. The effects of the Corona pandemic are still clearly felt in 2023, New Work is transforming the labor market, and digitization is associated with numerous challenges. One of the most dominant issues continues to be the shortage of skilled workers. While the unemployment rate in Germany was at just under five million people in 2005, the war for talent is now omnipresent. According to the Voices of HR study, many companies are currently having problems with positioning themselves as attractive employers and thus attracting new employees. One solution that can optimize recruiting and is becoming increasingly important as part of the HR strategy is People Analytics.?
What is People Analytics??
People Analytics refers to the use of talent, organizational and employee data with the goal of gaining insights that lead to informed decisions and positive business outcomes. The term is often used interchangeably with HR Analytics, Talent Analytics or Workforce Analytics, however People Analytics has a broader focus. It encompasses not only people management, but also data from other areas of a business. When implemented correctly, People Analytics can add important value to organizations and directly feed into business goals. It can for example can ensure that patterns in employee behavior can be identified and employee needs can thus be better addressed. This can improve employee retention, which in turn can have a positive impact on employee engagement and culture within the organization.?
Examples of other topics where People Analytics can help are:?
For HR departments, People Analytics generates great added value. It provides important data that can be of major benefit in effective decision-making and can form the basis for a sound HR strategy that is optimally aligned with the company. Positive and negative developments within an organization can be better foreseen thanks to People Analytics and appropriate measures can be initiated in good time. People Analytics also plays an important role in process optimization and can use data to show where processes are too cumbersome. In addition, People Analytics makes employee data available more quickly.?
After all, whereas a few years ago HR managers had to have programming skills in order to access personnel data, information on topics such as salaries or desired qualifications can now be retrieved in just a few clicks using an HRIS (Human Resources Information System).?
What are the key stages of People Analytics??
A People Analytics process typically includes the following steps:
1. Identification of problems and definition of goals?
In order to work successfully with People Analytics, it is necessary to determine what exactly needs to be achieved. The first step is to identify problems that need to be solved. These can be, for example, weaknesses in the applicant selection process or in employee retention. It is important that the definition of the problem is as clear as possible to facilitate data analysis. It is then necessary to determine which data points should be used and how they can contribute to potential solutions that are aligned with clearly defined business objectives.?
2. Data selection?
In the second step, one main question arises: how to get the data? Often, it is already available, for example in the form of personnel data in the annual report or in the payroll system. It may make sense to start by analyzing this data and formulating initial hypotheses based on it.??
Regardless of which data you work with, it is important that the data quality is accurate. One solution for a clean data basis can be an HRIS that has a well-developed People Analytics module. But even here, a proper data basis is not always guaranteed and the following applies: complex data analyses based on a poor data basis are wasted time. The focus should always be on analyzing traceable data.?
3. Data cleansing and analysis??
Once a usable data source is found, the data quality should be checked. This is the only way to ensure that the analyses are ultimately usable. To ensure stable data quality, it is advisable to define which employees need to make adjustments when personnel data changes and to determine the corresponding user types in the system. Prior to analysis, it should also be determined which data records are relevant. KPIs (Key-Performance-Indicators) should be defined, too. Only then can the analysis begin, using various statistical methods to identify patterns and trends.?
4. Knowledge discovery and application?
The next step is to start developing actionable insights. These should be usable for optimizing decision making. Here, the use of a clear dashboard can be of great benefit. A/B testing should also be considered to generate meaningful data that can be translated into recommendations and implemented by the business.?
5. Continuous improvement and adaptation?
The People Analytics process does not end after the data has been interpreted and improvement measures have been implemented, but should be repeated regularly and systematically. This is the only way to keep track of developments within the organization and to identify problems or opportunities. In addition, objectives, data sources, methods and tools should be continuously reviewed and adjusted as necessary to adapt to any changes in business goals, customer preferences, technology landscape or market conditions.
Prerequisites for successful People Analytics?
For People Analytics to help solve challenges and improve employee performance, it is important that the data and insights gained are integrated into the company's strategic planning and implementation. As mentioned earlier, the accuracy, completeness and consistency of the data used are also essential. It is equally important that the selected data is relevant. Only if the data analysis has a practical use can it contribute to business goals. It is also crucial that the necessary analytical skills are available in the HR team to be able to interpret data correctly. When using data, meticulous attention should be paid to data privacy and security to protect employee privacy and mitigate ethical concerns.
For successful People Analytics, it is furthermore advisable to work closely with the Finance Function. This enables a better understanding of the cost of Human Resources, quantifies the impact of workforce decisions, and ensures alignment of the HR strategy with that of the business.?
Another point that is essential is proper implementation, which can be technically demanding and present challenges to organizations. This is especially true when different HR and business systems need to be integrated to gain access to relevant data sources. In most cases, investments must be made in new software and employees must be trained to close gaps in IT infrastructure and know-how.?
Finally, it is also important that the insights gained through People Analytics are easily accessible and understandable for managers and C-level. This enables the tool to receive the necessary support at management level. Training is often required for executives as well, so that analytics results can be interpreted correctly and sound findings can be derived from them.?
Possible uses of People Analytics?
The potential uses of People Analytics are manifold and can be found in a wide variety of areas of HR management. One of the most important applications of People Analytics is in talent development. Here, People Analytics helps to identify individual strengths and weaknesses of employees, among other things. This enables personalized training and development opportunities to fully leverage employees' potential.?
Another area in which People Analytics is used is workforce planning, specifically in budget planning and headcount planning.?
The method also plays an important role in performance management. With the help of People Analytics, companies can define measurable performance indicators to assess and improve employee performance, track target agreements, and evaluate employee performance using competency matrices.??
In addition, People Analytics enables the optimization of HR processes and the measurement of error rates, for example in sensitive areas such as payroll. It also assists with capacity measurement and planning to ensure HR teams are working effectively.??
Other areas where People Analytics can be an important support include health management and compensation and benefits. While analyzing employee health data can help develop and adapt health programs to promote both physical and mental health of employees and reduce medical costs, when designing compensation and benefits packages, People Analytics can help develop competitive and equitable compensation structures that promote employee motivation and retention.
How can People Analytics help with recruiting??
Another important use of People Analytics is in recruiting. By evaluating applicant information, companies can develop a deeper understanding of talent and better assess their suitability for a position. Rather than relying solely on traditional application materials, People Analytics enables companies to use data-driven pre-selection in the applicant selection process, assessing candidates against objective criteria. This makes it easier to identify suitable candidates and optimize the selection process. At the same time, process-related weaknesses can be uncovered. According to a study by management and strategy consultancy McKinsey, People Analytics can increase efficiency in recruiting by 80 percent.??
Furthermore, companies can use People Analytics to create more transparent recruiting and selection processes. Questions that can be answered here using data analysis include: What skills are already available in the company? Which competencies are important for success in the respective position? The insights gained can be used to develop job postings that reflect the required qualifications and reduce miscasts. In addition, this data can help companies better understand employee development needs and provide more effective training programs. As a result, turnover can be reduced.?
People Analytics is also a great support in measuring the effectiveness of each recruiting channel. Different channels are used for recruitment, which can be evaluated using HR tools. Important KPIs are, for example, cost-per-applicant, cost-per-hire and closings-per-source. Measuring channel effectiveness makes it possible to determine which recruitment channels produce the best candidates and employees. Organizations can thus focus their resources more efficiently on the most promising recruiting channels and create the basis for optimizing cost-per-hire and building a reliable pipeline.
Conclusion: People Analytics is becoming increasingly important?
Data-driven solutions are playing an increasingly important role in attracting new employees. It's likely that People Analytics will be a standard part of HR decision-making in the not-too-distant future. This is hardly surprising; after all, the successful implementation of a People Analytics strategy gives companies a holistic understanding of their HR operations. The method supports data-driven, objective decision-making processes and optimizes employee recruitment and retention, workforce development, and many other processes. People Analytics goes far beyond the visualization of data and can lead to higher productivity and profitability, making a decisive contribution to the company's success.??
According to audit and advisory firm Deloitte, more than 70 percent of all companies surveyed in a study are investing in People Analytics solutions to integrate data into decision-making and derive value from available data. These investments suggest that People Analytics is not just a passing fad, but an essential practice in modern HR that helps companies make smarter business decisions and achieve better results.?