By: Stefan Gaertner and Ranjan Dutta, co-Leaders of People Analytics practice, Aon
Human resources can greatly benefit by applying analytics, but too few companies are doing so in a sophisticated way. Our research finds one-in-four technology companies and nearly half of life sciences companies don’t use people analytics at all. Too many businesses focus their efforts on processing data to yield insights into how things are today as opposed to looking at ways to change things or what might happen in the future.
Below, we outline three important ways people analytics can be applied to tackle some of the biggest HR issues facing companies today.
The drive to make compensation fairer and more transparent is everywhere. Ensuring your pay systems are fair is quickly becoming an imperative of doing good business. Organizations need to dig below the surface to determine whether and why they have any unexplained pay-equity gaps. This is where people analytics plays an important role. A simple compensation assessment by gender won’t tell you what you need to know. To get at the truth, you need to run a multi-variable regression analysis to understand what really drives pay outcomes. Then you can start to fix the specific policies, practices and behaviors that can lead to bad outcomes.
There is also the related issue of pay transparency. While access to crowdsourced compensation data on the internet is nothing new, how employees use these resources, discuss pay with others and feel empowered to challenge corporate pay decisions is changing. Pay transparency will force employers to proactively identify and manage a shared understanding of fairness that transcends all groups and individuals. Most mid- to large-sized employers have processes in place to establish and monitor pay fairness externally and internally; the question is whether those existing processes are robust enough to withstand a new level of scrutiny.
For HR leaders to get the most out of analytics, they’ll need to integrate their goals and strategy around people analytics with cross-functional business leaders. Some companies just implement analytics technologies and pass metrics along to managers in the hopes that sharing information will lead to change. But what makes analytics most effective is integrating these capabilities into every decision you make. This requires discipline and collaboration to identify problems and solutions.
As an illustrative example, we worked with a large US-based manufacturing company to understand the link between their health and wellness programs and employee performance. The work allowed our client to assess the full business impact of their programs and make modifications rooted in fact-based findings. We found there are four key health “concepts” that either drive or suppress performance: lifestyle risk, current medical payments, DxCG Risk Score (a widely used risk-scoring model) and participation in wellness programs. Using statistical analysis, we charted employee performance against these four health concepts to find if health and wellness improves employee productivity. We were then able to quantify the impact, showing that moderate increases in health and wellness would improve employee productivity by 5 percent, driving business value up by about $25 million per year.
Strategic Workforce Planning
Companies need innovative solutions to address today’s talent gap. The long-term futility of organizations simply hiring top talent from each other has also become apparent. Data and analytics are now critical in the race to gain an edge in three big ways:
- Leads to new fact-based approaches for sourcing, attracting and retaining top talent;
- Helps leaders quantify the future workforce gap, allowing for better strategic planning and a chance to address talent shortfalls earlier; and
- Uncovers new labor markets and new talent polls that are underutilized.
A search for new talent does not necessarily have to happen in a new geographic region. Sometimes it is a change in business strategy that drives a change in hiring strategy. We worked with a client that was shifting its business strategy toward technology and digitization, thus requiring new skills and a pivot in corporate culture. The CHRO was tasked with building a strategic-workforce-planning program that was sustainable, while also keeping the core culture of the organization intact and would be simple to implement and maintain. Our analysis identified two critical jobs with large future-labor gaps. A pilot workforce plan was built for one large business unit.
Harnessing data to yield insights that make talent and rewards programs more effective will ultimately make your HR function more strategic and a better business partner within the entire organization.
To learn more about how to utilize people analytics to benefit your organization, please contact us at email@example.com.