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What is the big deal about People Analytics?

This past week, I had conversations with 9 CEO’s of large South African Corporates (5 of them listed on the JSE) and only two of them grasped the critical need for People Analytics.  Yes, 2 out of 9 CEO’s believe People Analytics is worth investing in.  From experience, I can say that this small sample is roughly representative of the South African landscape.  Whenever I’m asked to deliver a Keynote Address on People Analytics, I make it a point to understand the current capabilities within the delegates’ companies.  More of then than not, most delegates have not even started implementing People Analytics in any form, while a large number do not even have the basic HR systems in place to enable data analysis. 

So, if most South African CEO’s clearly do not believe in People Analytics, why the big fuss over this globally? 

The father of Business Management, Peter Drucker, is often quoted as saying that “you can’t manage what you can’t measure.”  For this reason, businesses are obsessed with measuring every part of the business – well, almost every part.  While companies have spent millions on building their capabilities to measure and manage their finances, business operations and sales, Human Resource departments often must beg for funds just to send their team on Excel training.  CEO’s have access to reports that give them a real-time overview of their cash-flow, production activities and sales.  Additionally, these reports often have predictive capabilities, providing forecasting information for the next 3, 6 or 12 months. 

Yet, CEO’s have no real-time information about how happy their employees are, or which employees are likely to leave next, or what the skills gap are between current skills and skills needed to implement the current business strategy.  How ironic, since most companies profess that people are their most important asset.  I think it is time that we all call out these CEO’s for their hypocrisy…

Human Behaviour – like any other activity – can be measured, assessed and improved.  Admittedly, years ago HR Departments did not have the tools to measure, assess and predict their employees’ behaviour.  But the exponential advancements in Software, Hardware, Big Data, Artificial Intelligence and IoT has made it quite possible for companies to predict future People Behaviour.  For example, IBM’s artificial intelligence can now predict with 95% accuracy which employees are about to quit their jobs.  Similar breakthrough is Recruitment, Succession Planning and Learning & Development has taken away the mystery of managing people and placed HR right in the middle of science.

The benefits of People Analytics are numerous.  Research by IBM and MIT showed that companies that invested in advanced People Analytics (up to predictive and prescriptive analysis) had 8% higher sales growth, 58% higher sales revenue per employee and 24% higher net operating income than their peers. A study by Gartner showed that People Analytics boost gross profit margins by 4% and drive talent outcomes by up to 23%. And the HRO Today Institute found that companies that use employee performance data to improve recruitment outperform competitors 58% of the time and by up to 200%.

 

Looking at all these facts, I have one thing to say to South African CEO’s:  You have a choice between two options.  Option 1:  Invest in People Analytics now and watch your bottom-line grow.  Option 2:  Keep ignoring the power of People Analytics and try explaining to your shareholders in 5 years’ time why your peers are outperforming you on every business metric.  The choice is yours.

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