TL:DR;
People analytics uses workforce data to improve hiring, retention, and overall business performance.
It goes beyond HR metrics to connect talent decisions with organizational outcomes.
Key benefits include better workforce planning, productivity, and employee experience.
Different types of analytics (descriptive to prescriptive) enable smarter, proactive decisions.
Modern HR teams rely on people analytics to become strategic partners to the business.
People analytics brings together HR data and organizational data to help businesses solve critical problems and work better. Learn everything that you need to know about this rapidly emerging field, right here.
What Is People Analytics?
People analytics is an emerging discipline that is quickly establishing itself as the go-to tool for business leaders to solve complex business problems. Consider the example of IBM, which used a combination of people analytics and artificial intelligence to save millions of dollars in employee retention costs.
The IBM Case Study – The Power of People Analytics
For any organization, employee turnover is a major area of concern. With the cost of replacing a skilled employee estimated to be anywhere in the range of 30% to 400% of their annual salary, it’s not very hard to see why. IBM was no different.
To find a solution to the ever-present problem of employee attrition, the IT giant turned to people analytics and artificial intelligence. They fed the algorithm a rich diet of existing employee data, including job tenure, commute time, overtime, time taken between promotions, peer promotion, etc. The result was that in 2019, IBM’s artificial intelligence algorithm could predict which of their workers were most likely to quit the organization with a remarkable 95% accuracy.
This data helped IBM accurately predict employee attrition rates, revamp its talent management strategy, address its employee turnover rate, and put a well-thought-out hiring plan in place. The outcome of the exercise was that IBM ended up saving approximately $300 million in retention costs, according to former CEO Ginni Rometty.
Definition of People Analytics
As companies evolved over the last century, so have the drivers of business value. For instance, a highly skilled workforce has now become an integral part of business value.
However, these new drivers of business value were intangible and ever-changing. To capture the true value of these intangible assets, organizations began relying on data, which is now referred to as people analytics.
People analytics is the method of collecting and analyzing organizational and people data to gain insights and solve people-related business problems. A few of the uses of people analytics include improving employee productivity, identifying and closing skill gaps, and optimizing the overall organizational strategy, among others.
People Analytics vs HR Analytics: Key Differences
You may have come across many websites and source materials that use the terms ‘HR analytics’ and ‘people analytics’ interchangeably. While this is quite popular, it is not entirely accurate.
| Parameter | HR Analytics | People Analytics |
|---|---|---|
| Definition | Focuses on measuring and analyzing HR-specific metrics | Uses workforce data across functions to drive broader business decisions |
| Scope | Limited to HR processes | It is cross-functional, and can include data from sales, marketing, finance, customer success, and more |
| Objective | Improve HR processes' efficiency | Align workforce insights with overall business strategy and outcomes |
| Business impact | Primarily tactical, as it focuses only on HR processes | Organization-wide strategic decision-making |
To explore the differences between HR and people analytics in detail, read our blog where we expound upon the topic.
Types of People Analytics
SHRM research states that around 82% of organizations use people analytics in retention and turnover. However, that’s just one area of the entire HR functions and business goals. People analytics can offer value across all these functions through four key types of analysis.
Descriptive Analytics
Descriptive analytics focuses on historical people data. It aims to identify trends and patterns to detect deviations early. You can use it to track metrics such as attrition rates, headcount changes, absenteeism, and performance scores. Consider it to be the basic foundation of people analytics, as it addresses common challenges and creates visibility into workforce dynamics.
Diagnostic Analytics
Once trends are identified, HR leaders can move on to the next type, which is diagnostic analytics. As the name suggests, it focuses on identifying the underlying cause of any issue. For example, if attrition is rising, this approach examines factors like manager effectiveness, compensation, or engagement levels.
Predictive Analytics
Predictive analytics uses statistical models and historical data to forecast future trends. With this type of people analytics, enterprises can anticipate risks such as employee turnover, hiring needs, or skill shortages. Put simply, it lets you take a proactive approach to people management.
Prescriptive Analytics
Just like predictive analytics, prescriptive analytics can predict outcomes and recommend actions. For instance, it might suggest targeted retention strategies for high-risk employees or optimal workforce planning scenarios. This helps leaders make informed, data-driven decisions with clear next steps.
Why People Analytics Is Important for Modern Organizations
The concept of people analytics started in 1911. But over the past century, it has evolved with the business landscape. By 2017, a report by the Corporate Research Forum, Strategic Workforce Analytics, revealed that 69% of organizations that employed over 10,000 employees had a dedicated people analytics team.
Now, talent is a primary driver of business performance. Yet many organizations still rely on intuition when making workforce decisions. This gap leads to employee dissatisfaction and results in higher attrition rates. People analytics is important to bridge this gap and drive business value.
Here’s why it matters:
Better workforce planning
With people analytics, you can anticipate hiring needs, identify future skill gaps, and align talent supply with business demand. All in all, you can make a transformation shift from reactive hiring to proactive talent acquisition and management.
Improved employee experience
When you understand employees’ needs, you can create structured frameworks to deliver what they want. Data helps uncover what drives engagement, well-being, and performance. Leaders can design more personalized and meaningful employee journeys instead of relying on one-size-fits-all programs.
Strategic HR decision-making
Until now, you might have played an administrative role in hiring new talent and helping with onboarding and other HR processes. However, people analytics can give you the power to move beyond administrative roles and contribute to high-impact business decisions.
Increased organizational productivity
You can also identify performance drivers and inefficiencies within your organization. This will let you improve output at both the individual and team levels. People analytics also help pinpoint where interventions, such as training or leadership changes, will have the greatest impact.
Beyond these benefits, people analytics plays a significant role during periods of disruption. Be it managing hybrid work, navigating talent shortages, or responding to shifting employee expectations, you can rely on it. It gives leaders the clarity to act with confidence.
As the talent war intensifies, investing in people analytics can make your company better equipped to build resilient, high-performing workforces.
How Organizations Use People Analytics
People analytics can help organizations identify recurring patterns in employee behavior, determine areas of improvement, and make a coherent and sustainable evidence-backed plan of action to improve organizational performance. Be it hiring during a tight labor market or working through an organizational restructuring, people analytics can help you make the right decisions and help your business emerge stronger.
Some of the steps for setting up a people analytics process are:
Defining data sources: Some examples of data sources are HRIS, applicant tracking systems, sales CRM, finance tools, etc.
Setting up infrastructure: Establish a data infrastructure to collect, analyze, manage, and store the data.
Adhere to legal constraints: Consult with legal counsel to understand local data regulations and create a water-tight framework to safeguard your data.
Do a test run: Test the viability of your people analytics setup by testing actionable insights against a few hypothetical scenarios. Implement changes if necessary and repeat.
Read our ultimate guide to building a winning people analytics strategy here.
Key Benefits of People Analytics
The discipline of people analytics continues to be in the spotlight. In fact, a study by HR expert Josh Bersin indicates that as many as 69% of companies are in the process of building a people analytics database. Just to put this in perspective, in similar surveys conducted previously, the number used to be around 10-15%. An almost 4-fold jump. So why are organizations lining up to invest in people analytics?
Here are 4 benefits of integrating people analytics into your business strategy:
Better Talent Acquisition
The talent war has intensified. 75% of employers have admitted to facing a hard time finding qualified candidates, according to a 2022 study published by Manpower Group. People analytics helps you evaluate candidates based on their experiences, correlate this data with what the role requires, and draw up a list of the most suitable candidates from a pile of resumes.
Improved Employee Retention
It’s no secret that talent is in short supply, and replacing a skilled employee is significantly more difficult. In such a scenario, employee turnover expands from being an HR issue to a critical business issue. People analytics can help your organization identify the areas of improvement, flag relevant issues and bottlenecks, etc. This data can then be paired with Artificial Intelligence to create a potent algorithm that can help save millions in revenue.
Enhanced Employee Experience
Employee experience is an emerging field of human resources focusing on your staff and the quality of their experience while working in your organization. Spanning the employee lifecycle from hire-to-retire, people analytics can help you synthesize data collected from pulse surveys, etc., to analyze employee sentiment, evaluate their sense of belonging with the organization, identify any problems and solve them, enhancing their overall employee experience.
Identification and Closure of Skill Gaps
Among the various factors influencing employee performance, the skill gap is a major one. In fact, according to a report published by McKinsey in 2021, an astounding 87 percent of companies indicated that they are aware of existing skill gaps within their organization. People analytics can help organizations pinpoint and bridge these skill gaps, leading to better business performance.
Improved Workforce Planning
Workforce planning, especially global talent management, becomes more precise with data. Instead of reacting to hiring needs, you can be proactive and manage talent based on accurate forecasts. It lets you plan headcount more accurately, optimize team structures, and align talent strategy with business goals.
Data-Driven HR Decision Making
People analytics can shift HR from just an administrative task to a strategic business function. HR leaders can make informed decisions around compensation, promotions, performance management, and organizational design. With this transparency and accountability, you can ensure stronger alignment between HR and business leadership.
Enhanced Employee Productivity
Understanding what drives performance is key to improving productivity. Enterprises can remove bottlenecks, optimize workflows, and support high-performing teams. The result is improved output without overburdening employees. People analytics identifies factors such as workload distribution, manager effectiveness, and collaboration patterns.
Better Organizational Performance
All the above benefits ultimately contribute to better organizational performance. When employees are happy with their experiences, compensation decisions are based on data, global teams are managed efficiently, and it all leads to increased productivity and reduced absenteeism. People analytics helps connect workforce metrics to business KPIs such as revenue, profitability, and customer satisfaction.
Learn More: Unveiling Darwinbox Atlas: The All-in-One Reporting & Analytics Engine
5 Common People Analytics Challenges
Nothing is perfect. While people analytics has created a niche for itself among business leaders, there are multiple challenges that organizations encounter, especially during the initial days of implementing the model. Here are 5 common people analytics challenges your organizations may face:
Lack of Trust in Data
It’s human nature to trust gut feelings over cold, hard data. Business leaders are no different. While most business leaders know better, there remain business leaders and executives who would choose their gut feelings over software.
However, in today’s ever-evolving business environment, adopting an approach that is not evidence-based is like playing Russian roulette with your business strategy. In the course of time, this may lead to unfavorable outcomes for your business. It is important to bring everyone to the table at the outset and assuage any doubts so everyone is on board.
Fragmented or Missing Data
According to a survey carried out by Deloitte in 2017, only 39% of business leaders believed that their organization had “very good” or even “good” quality of data that could be used for people analytics. In fact, when it comes to people or HR data, many organizations use assorted systems and platforms that are often not configured to operate together properly. Often, there is no central storage for employee data, and sometimes even the format of storing the same data may differ significantly across systems.
User adoption or employees not using the system/s properly is another challenge that contributes to missing data. Some of the common reasons behind the widespread lack of user adoption are improper implementation of the system, poorly designed user interface, cumbersome login process, etc.
Organizations can easily overcome such challenges by investing in an end-to-end HCM suite like Darwinbox, which is both flexible and configurable. It comes equipped with a plethora of modules, and the consumer-grade intuitive interface sends employee adoption rates soaring. According to a survey carried out by Deloitte in 2017, only 39% of business leaders believed that their organization had “very good” or even “good” quality of data that could be used for people analytics. In fact, when it comes to people or HR data, many organizations use assorted systems and platforms that are often not configured to operate together properly. Often, there is no central storage for employee data, and sometimes even the format of storing the same data may differ significantly across systems.
User adoption or employees not using the system/s properly is another challenge that contributes to missing data. Some of the common reasons behind the widespread lack of user adoption are improper implementation of the system, poorly designed user interface, cumbersome login process, etc.
Organizations can easily overcome such challenges by investing in an end-to-end HCM suite like Darwinbox, which is both flexible and configurable. It comes equipped with a plethora of modules, and the consumer-grade intuitive interface sends employee adoption rates soaring.
Not Asking The Right Questions
Metrics are only as good as the actionable insights and business outcomes they deliver. This maxim is true for people analytics as well. If you’re embarking on a people analytics mission without adequate clarity on the starting line, finish line, and the end goal, you may end up completely lost in the sea of data. The objective of people analytics is to help you get specific answers to specific questions. Pro tip: Begin by clarifying the questions and gaining clarity about expected outcomes.
Challenges of Storing Data
Simply collecting people's data isn’t enough. You also need a robust data governance framework with clearly laid out parameters to ensure that the data is stored and used responsibly. This includes policies on data integrity, security, privacy, as well as access. Storing something as sensitive as people data is a critical challenge that can have a significant impact on your people analytics, your organization’s reputation, data security, employee security, and even on the bottom line of your company.
Lack of Proper Tools
With the growing demand for people analytics across industries, a plethora of tools are available in the market. However, to give your business the boost that you want, you need to have the right technology in place. Some of the things you should bear in mind while shortlisting people analytics tools include the scalability of the system, user-friendly interface, the ability to store and manage data effectively, configurability and customization, and most importantly, reliable after-sales support. Darwinbox’s HCM suite includes Darwinbox Atlas – the all-in-one reporting and analytics engine designed for fast-growing organizations of tomorrow. Read more about it in our blog.
4 Key Best Practices for Implementing a Great People Analytics Strategy
People analytics strategy is all about the art of planning what people data is collected, how the data is analyzed, and deriving insights based on the analysis to make crucial decisions to solve business problems.
Here are 4 key best practices that will help you create a great people analytics strategy:
Ditch Intuition for Data
We’re living in the age of data and analytics. The insights provided by data points eliminate the need for intuition-based decision-making. Instead, a data-based approach introduces precise and unbiased decision-making, which goes a long way in strengthening not just the performance but the very foundations of a business.
For example, by using objectives and key results (OKRs), you can easily measure the individual, team, or departmental performance with clear insights on what’s working and what isn’t. A careful analysis of the data with the right people analytics tools, like Darwinbox, can help you translate the data points into easily actionable insights, which can help you bring in a fundamental transformation in your talent strategy.
Manage Your Data Effectively
Precise data is at the core of the people analytics-based approach. Even a tiny deviation can have far-reaching consequences in the long run. Therefore, it’s imperative to define policies that clearly outline responsibilities for managing and storing data while commissioning an effective and compliant data management process.
It’s essential to remember that data management for people analytics goes beyond HR and requires close coordination between multiple stakeholders from other departments, including IT, finance, sales, marketing, and others. Due to the sensitive nature of these data, you should also involve cybersecurity and legal counsel to set protective measures.
Use Data to Create Actionable Insights
It’s not enough to generate data. Use the right people analytics tools to translate your data into a story. People analytics tools like Darwinbox’s Atlas can help you bring together data from multiple sources. It can also help you use AI-based predictive modeling to identify trends, risks, and opportunities, empower managers with personalized and consumable insights, and help you configure persona-based access controls and security.
Ensure Data Compliance
Data is sensitive. Almost all industries are subject to stringent data regulations by local and sometimes even global authorities. To ensure that your data collection, storage, and analyses are within compliance standards and guidelines, you should set up an internal vetting process. It is advisable to form a committee with other stakeholders to oversee and ensure data compliance. This committee can design policies around data governance to prevent misuse or breaches.
For a detailed read, check out our blog, ‘The Ultimate Guide to Building a People Analytics Strategy.’
7 People Analytics Metrics HR Professionals Must Track
If people analytics is the compass that shows your business is moving in the right direction, the metrics are the milestones. The right metrics can help you track your progress or course correct as required. However, it’s essential to know which metrics to follow at any given point in time. Here are 7 people analytics metrics that you should monitor:
Employee Turnover
Employee turnover or labor turnover measures the frequency with which employees of an organization leave their jobs either voluntarily or involuntarily.
Employee Absenteeism Rate
Absenteeism or absence rate is an individual’s unscheduled absences from work.
Time to Hire
The 'Time to hire' metric helps you track the time between a candidate applying for a job and the final employment offer.
Revenue Per Employee
Revenue per employee is the total revenue generated by your business divided by the total number of current employees.
Diversity, Equality, and Inclusion
Diversity, Equality, and Inclusion, or DEI, metrics help HR monitor the company’s approach towards inclusive practices.
Employee Engagement
Employee engagement metrics can help you monitor employee sentiments and help you raise a flag early on in case of an issue.
Employee Performance
Employee performance metrics can help identify skill gaps, plan training sessions, identify great talent, and ensure that all employee activities are aligned with the larger business objective.
For a more comprehensive list of people analytics metrics, read our blog here.
Key Takeaways
Organizations are striving to keep pace with the ever-evolving business environment and labor market. This quest has led to a growing realization among HR leaders that traditional HR roles may no longer be enough to surmount upcoming challenges.
Questions such as ‘What is the future of work?’, ‘How can organizations be more inclusive, diverse, and equal?’, etc. are keeping CHROs on their toes. The only way to answer these burning questions is through actionable insights based on quality data generated by robust people analytics.
Find out how Darwinbox can help you redefine your talent strategy with People Analytics, book a demo today!
References
FAQs
What is people analytics used for?
People analytics is used to improve workforce-related decisions through data. It helps organizations optimize hiring, enhance employee experience, predict attrition, identify skill gaps, and align talent strategies with business goals, leading to better performance and long-term growth.
What is the difference between people analytics and workforce analytics?
People analytics focuses on understanding employee behavior and improving business outcomes using cross-functional data. Workforce analytics is more operational, centered on workforce metrics like headcount, scheduling, and utilization to manage day-to-day staffing efficiency.
What tools are used for people analytics?
People analytics tools include HRMS platforms, data visualization tools, and AI-powered analytics solutions. Platforms like Darwinbox combine employee data, dashboards, and predictive insights to help HR teams make informed, data-driven decisions.
How does people analytics help reduce employee attrition?
People analytics identifies patterns and risk factors linked to employee turnover, such as low engagement or limited growth opportunities. This allows organizations to take proactive steps like improving manager effectiveness, offering career development, and addressing workplace concerns early.
Why is people analytics important for HR teams?
People analytics enables HR teams to move beyond administrative tasks and play a strategic role. It supports data-driven decision-making, improves workforce planning, and helps demonstrate HR’s impact on business outcomes, making HR a key contributor to organizational success.
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