Posted in Human Resources Articles, Total Reads: 2183
, Published on 01 March 2016
Uberization is has started permeating every aspect of business worldwide. Uberization means disrupting an existing business model by the way of technology. Be it marketing or finance, analytics is proving to be a lot more helpful than expected and now the time has come for it to enter the most manual function of any business, i.e. Human Resources.
Only 12% of Fortune 500 companies from 1955 were still on the list in 20151. According to Professor Richard Foster from Yale University, the average life span of a company listed in the S&P 500 index of leading US companies has decreased from 67 years in 1920 to 15 years today2. The leading companies failed when they were confronted with disruptive changes in technology. There is no pattern in the changes that overtook them; in some cases, new technology quickly swept through as they were simple extensions of existing ones; in others, it took long time as the technologies were complex and expensive. However, in both the cases, inability to predict the market trend and needs of customers led to the failure of such great companies.
Most of the companies today heavily depend on intellectual capital. People, who are lifeline of such firms, need to be handled more delicately than ever. People cost is often 60% of the variable cost for human capital intensive organizations. For such firms, human-resource professionals are more desirable to be strategic partners and enablers of business success, who by the help of advanced predictive behavioral analytics would drive superior values to the companies. Organizations incur huge cost on recruitment, selection, training & development, performance management and career planning of every employee. With the help of People Analytics, organizations are taking impactful decisions for each of the above activities in order to make them more operationally effective and accurate.
A lot of companies have gathered considerable amount of HR Data over the years. Computers, with the help of algorithms and advanced technologies (Cloud computing, Big Data, etc.) are being used to analyze the information collected over years. The HR Managers are expected to be interpreters, where they spot trends, observe the likelihood of each trend, connect the dots and predict its growth. Once the trend has been identified, accurate people management decisions can be taken in order to generate superior business results.
Getting right talents on board is very important for any firm. Google has developed an algorithm to determine the probability of success of a candidate after being hired. Predicting the candidates who have highest possibility of success, backed with brainstorming done by the hiring group has been their strategy. They have also developed algorithms for each job to analyze rejected resumes and identify any top candidate that they might have missed.
Workday, a company that offers cloud based personnel software, has released a product that looks at employees’ performance factors. Based on how long a person has been at a position and how well he person has performed, it predicts whether a person is most likely to quit and determine factors like new job or transfer that can act as a motivator. It can also characterize the managers as “rainmakers” or ‘terminators”. Studying the traits of high achievers, finding out the clues for what needs to be done differently, and identifying the success pattern has enabled Workday in significantly reducing human biases in hiring and promoting.
Using predictive behavioral analytics, few companies have found out that inadequate investment in training & development and recognition practices had led to severe employee dissatisfaction even after proper compensation. By the help of analytics, HR professionals have been able to gather more quantitative information than qualitative to identify the exact motivators.
McKinsey has been using people analytics to detect previously unobserved behavioral patterns in order to develop an approach for retention. They held workshops and interviews, collected large amount of data to test and ran multiple algorithms to get insight at organizational level. They expected factors such as performance rating or compensation to be top predictors. But, analysis revealed that lack of mentoring and coaching was on the top. The risk of attrition across the firm fell significantly when coaching and mentoring was deemed to be satisfying.
The plethora of alternatives for the employees has reduced the sense of corporate citizenship associated with the current organization. In order to save the talent pool, human resource managers must be fast, responsive and agile. They must quickly respond to the changing environment and keep reinventing themselves. Rather than basing their decisions on perception and judgment, they should make data-driven decisions. Rather than demanding or forcing executives or managers to accept their proposed approach, they must act as internal consultants and influence people to change based on powerful data and recommendations. People Analytics, if done properly, generates data-driven, organization-specific results, which can be used to change preset opinions of executives and managers and enables them to make more strategic decisions about their people.
A smart company creates a high level of employee satisfaction, which leads to higher effort, which leads to higher quality products and services, which create higher consumer satisfaction, which leads to more repeat business, which leads to higher growth and profits, which leads to high stockholder satisfaction, which leads to more investment and so on. This virtuous cycle spells profits and growth.
Top-notch organizations have started using people analytics to improve the quality of hires and employee engagement practices, predict retention, profile high-performers and gain competitive advantage over others. Employees feel more satisfied when they are judged on data rather than perception and bias. From both organization and employee perspective, data-driven behavioral prediction is the need of hour and thus, “People Analytics” has the potential to be a real game-changer.
This article has been authored by Niharika from IIM Ranchi
1. Perry, J. M. (2015, October 12). Fortune 500 firms in 1955 v. 2015; Only 12% remain, thanks to the creative destruction that fuels economic prosperity. Retrieved from https://www.aei.org/publication/fortune-500-firms-in-1955-vs-2015-only-12-remain-thanks-to-the-creative-destruction-that-fuels-economic-growth/
2. Gittleson, K. (2012, January 19). Can a company live forever?. Retrieved from http://www.bbc.com/news/business-16611040
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