People Analytics: The Secret to Improving Business Results

Mar 11, 2022

Blog 13 - People Analytics - The Key to Improving Business Results

The benefits of people analytics to human capital management speak for themselves—loudly.

For years, many companies have used it to guide HR strategy and elevate HR function in talent acquisition, management, and retention. As its value became more and more apparent and the benefits spilled over to the broader organization, it became an indispensable tool for top management that delivers almost guaranteed value to their organizations.

It’s no surprise that as it assumed a more critical role to the organization, people analytics grew from an HR-centric to a business-centric function, an administrative routine to a strategic function. This allowed the adoption of an outside-in, value-driven approach where the people analytics team and other business functions combine their expertise to solve business problems.

In practical terms, it meant that instead of mulling over run-of-the-mill questions like, “what is our attrition rate?” the people analytics team tackles more business-focused questions such as
  • What people factors will improve my business performance?
  • Which roles in my organization deliver the most value?
  • How can I reduce my human capital costs?

Reducing human capital costs

The most valuable asset of your organization is its human capital. Workforce costs can run you up to 70% of operating expenses, so you’ll want to manage those costs carefully. The dynamic duo of finance and HR (including the people analytics team) can work together to pinpoint the areas where human capital has the most significant impact on costs and profitability and focus on improving those metrics.

Recruitment costs

Inefficient recruitment practices aren’t just frustrating for potential hires; they can be costly for the hiring company. With the current labor shortages plaguing the market, efficiency is even more crucial because the costs of short staffing also compound the recruitment costs.

People analytics will identify when recruitment metrics like time-to-hire, interviews-per-hire, and cost-per-hire are unusually high and can seriously affect the bottom line. The hiring process might be too long and cost the company too many work hours. Determining these metrics’ people analytics allows you to analyze the factors responsible and provide actionable insights to fuel positive solutions (for example, identifying a better talent pool or shortening the shortlist) to lower recruitment costs.

Turnover costs

According to Gallup Workplace, the cost of replacing an individual employee is roughly one-half to two times their annual salary. When you consider the average company’s turnover rate of 18%, the yearly losses of an organization with a mere one hundred employees can be staggering.

The costs include lost productivity, recruiting, training the new hires, and hidden costs, such as overworking people who take on the responsibilities of the departed employee and the negative effect on morale.

People analytics can help to reduce turnover in several ways.

Lower the incidence of expensive hiring mistakes

Involuntary turnover metrics usually expose those mistakes.. Terminations for cause and poor performance fall into this category.

Analytics can identify the characteristics (combination of skill sets, knowledge/experience, personality traits) of successful, high-performing employees. You can use that knowledge to identify suitable talent pools. Then, assess candidates for those traits to increase the likelihood of selecting the right match for your organization, putting the right people in the right roles.

Reduce Involuntary turnover

Analytics enables you to predict who might leave and why, addressing the underlying causes such as on-boarding issues, poor management, a problematic work culture, or insufficient opportunities. Tackling these issues will improve your chances of retaining valuable employees to avoid the cost of replacing them.

A recent study of over 250,000 employees found that voluntary turnover costs companies about $15,000  per worker.

Employee engagement costs

Employees can also cost the business extra money when they stay.

While engaged employees are involved and enthusiastic about their job, motivated, and committed to the company’s goals and values, disengaged employees display a lack of interest and effort. Positive employee engagement has strong correlations with productivity, wellbeing, retention, sales, and customer experience.

According to a study by Gallup, disengaged employees cost a business approximately $3,400 per $10,000 in annual salary and have a higher rate of absenteeism, lower productivity, and lower profitability.

Disengagement is a symptom of a more significant problem. It could be because of poor management, a lack of connection with co-workers, or the company’s lack of appreciation and recognition, poor onboarding, or dissatisfaction with compensation.

People analytics can provide ongoing employee feedback to gauge satisfaction and identify pain points. This allows the organization to support employees and address their needs and concerns in a timely and authentic way to promote a positive employee experience and prevent attrition.

Productivity costs

Inefficiency is expensive.

People analytics uses data on time employees spend on tasks and in meetings, and methods of communication and collaboration to develop effective strategies for boosting productivity. By refining processes and prioritizing tasks, you will use assets in the best way possible. For example, if the data shows employees spend over 50% of their time in meetings, leaders need to develop a strategy to shorten meetings or reduce their frequency.

Another way that people analytics data can help improve business performance is by looking at patterns of overtime and absenteeism. Overtime is an added cost that, if high, may reveal excessive workloads because of a staff shortage.

Using data to predict staffing levels, especially in industries like healthcare, where staffing needs vary widely over time, will improve workforce planning, for example, the Vanderbilt University Medical Center averted critical workforce shortages by preparing for unanticipated upswings in surgeries foretold by the data.

People analytics gives business leaders the insights they need to improve operations and business results. One way it does that is by revealing opportunities for labor cost reduction in talent management, workforce planning & management, and performance management that lead to tangible, quantifiable business outcomes.

More Reading on People Analytics

People Analytics Resources 

7 Things About People Analytics You May Not Know 

How to Build Your People Analytics on a Strong Data Foundation 

About Pixentia

Pixentia is a full-service technology company dedicated to helping clients solve business problems, improve the capability of their people, and achieve better results.

Previously:  Next up: 


News Letter Sign up

Get in touch with us
phone_footer.png  +1 903-306-2430,
              +1 855-978-6816