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When it comes to people analytics, terminology matters

6 Feb 2019 By Nadeem Khan

Understanding the difference between HR, workforce and people data is key to ensuring they deliver for your business, says Nadeem Khan

Today, it’s hard to miss the huge rise in big data and analytics in the field of business and strategic decision-making. This is primarily because over the past three decades, the drivers of value creation for businesses have shifted dramatically, from tangibles – machinery, buildings, land and inventory – to intangibles such as people, goodwill and brand recognition. 

Previously, 80 per cent of business value could be accounted for on the balance sheet and we knew what to measure. Today, this ratio has flipped, so 80 per cent of value is off the balance sheet in the form of intangible assets. In time, this shift has encouraged business managers and owners to actively look for measures and metrics to maximise the effectiveness of intangibles and link them to business outcomes. 

Since human capital is a fundamental source of intangible assets, companies are now actively seeking ways to measure and capture the value it generates. There have been several global initiatives – such as the recent creation of the ISO Standard 30414 on Human Resource Management or the Embankment Project for Inclusive Capitalism – to synthesise and regulate human capital measures. These have provided a number of relevant metrics that are recognised internationally, enabling organisations to capture and analyse human capital information. This allows organisations to not only measure, monitor, track and understand how well people are being managed and developed, but will also allow for a more data-driven decision-making process with regard to the workforce. 

This means it is vital to clear up misunderstandings around the terminologies HR, workforce and people analytics. In practice, these terms have been often used interchangeably, however they are not the same. HR analytics captures and measures the functioning of the HR team itself – for example, analysing KPIs such as employee turnover or time to hire. Such analytics are mostly only relevant to the HR team and can be used to hold it to account. 

Workforce analytics encompasses the entire group of workers (not just full-time employees) and allows for the future inclusion of AI or robots that will potentially replace current jobs within an organisation. Workforce analytics, therefore, is more useful when it comes to understanding a holistic workforce strategy. 

The scope of people analytics, meanwhile, is almost limitless. True people analytics aims to encompass HR, data from the entire workforce, and customer insights. It measures, analyses and knits together all this information to improve decision-making and performance.

Deloitte reports that people analytics not only helps organisations understand the changing workplace but also provides insight to drive customer behaviour and engagement. Meanwhile, a recent CIPD survey confirms that using people data leads to improved business outcomes. Nevertheless, it is important to understand that a crucial barrier to attaining people analytics is the absence of a people analytics strategy of any kind – let alone a coherent one that aligns with the business strategy. 

For businesses to prosper with people analytics, it is important to have a well-thought-out strategy that focuses on what really matters to the overall business; this should ultimately align with people actions, behaviours and organisational culture. That way, people analytics can not only enable a business to measure and track progress in relation to the business strategy but also assist HR to manage the overall people strategy by prescribing future actions to ultimately reach strategic business objectives.

Nadeem Khan is founder and managing director of Optimizhr

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