People Analytics: What Is It & How Does It Work?

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As a small business owner, you probably have gut feelings about what is best for you, your company and your vision. When it comes to hiring, human resources policies and work-life blend, you might have an idea about which practices lead to increased well-being and a healthier bottom line, but how do you really know?

People analytics can help you track data related to performance and your workforce that can back up what your gut is already saying so that your business decisions are evidenced based and feel less like shooting in the dark.

People Analytics: Definition

People analytics, also known as HR analytics, is a data-based way to manage your workforce and answer important questions like:

  • How satisfied are my employees?
  • For what percentage of turnover should I plan?
  • What practices result in increased retention? 

People analytics use data to answer these questions. For instance, if you want to track employee satisfaction, you might provide regular satisfaction questionnaires or even invest in technology that can scan written documents for word choices that convey certain levels of stress. This data is examined, cleaned and then analyzed in order to help your organization make informed choices about how to improve employee satisfaction.

People Analytics: Purpose

The purpose of people analytics is to help you make informed choices about your workforce, prevent HR crises and save your business money in the long run. According to Nucleus Research, you will get $13.01 back for every dollar you spend on people analytics, which is great news for small business owners who need to watch every penny.

When you ask the right questions, compile accurate data and analyze it well, you are more likely to make decisions for your business that result in long-term success while avoiding costly mistakes.

Three Types of People Analytics

While people analytics might sound complicated, there are actually only three simple categories to consider:

  1. Descriptive: Demonstrate why something might have happened

  2. Predictive: Predict what might happen in the future

  3. Prescriptive: Prescribe what to do about the problem

For instance, descriptive people analytics could show why you have high turnover rates, while predictive people analytics shows how much turnover is likely to increase. Prescriptive people analytics will help you figure out how to turn things around and reduce turnover rates.

People Analytics: Benefits and Limitations

People analytics are an excellent way to ensure that your gut hunches about business and human resources can be backed up by data. Some of the benefits include:

  • Finding better job candidates
  • Ensuring candidates are hired into the right roles
  • Increased awareness about trends
  • Improved employee satisfaction
  • Awareness about encouraging work-life blend
  • Reduced costs
  • Increased efficiency 

While people analytics can be incredibly beneficial, it is not without limitations. Your analytics are only as good as your data, so bad data can be a real problem. Even small fluctuations in data can result in drastically different projections and recommendations, so ensure your data is accurate or wait until it is accurate before you conduct analytics.

Using People Analytics

Gone are the days when small business owners had to learn complex equations or hire expensive experts in order to integrate people analytics into their basic business practices.

Today, people analytics tools like Python, Tableau and Visier can guide you in asking the right questions and collecting accurate data. They can clean it for you and even put it into easy-to-understand graph formats. These programs have their own unique algorithms that can help you figure out how to plan for employee turnover, promotions, recruiting, retention, satisfaction and more.