What Is People Analytics?

Part of a series | People Analytics Series

With these nine FAQs, you'll learn what people analytics is, how it can benefit organizations, which metrics to track and more.

People analytics is a marvel of modern business technology, providing leaders with actionable insights about their employees. But what is it, exactly, and why does it feel like a must-have in today's business toolkits? We answer frequently asked questions about people analytics — including the different types and metrics and how to get started — with the help of Amin Venjara, general manager of data solutions for ADP.

What is people analytics?

People analytics is the process of analyzing employee data — otherwise known as workforce data, talent data or people data — to address critical business questions. It addresses foundational questions such as "How is my head count trending?" and more strategic ones such as "What are the core drivers of new-hire turnover?"

The results are often called analyses or insights and can be used to achieve organizational goals, such as:

Optimizing labor costs
Strengthening employee engagement
Improving talent acquisition
Driving diversity, equity and inclusion (DE&I)
Reducing turnover

"It's clear that you need analytics for your financials and sales, and nobody questions whether those are important," Venjara says. "But your people run your business. They're your core engine. Why shouldn't you have analytics about what they're doing, how they're feeling and what's happening with them day to day?"

People analytics, both the process and the data, can be managed with an analytics solution.

What's the difference between people analytics, HR analytics, workforce analytics and talent analytics?

People analytics is also known as HR analytics, workforce analytics or talent analytics. The four terms are often used interchangeably. Don't let the differences in terminology cause confusion; these are merely four different names for the same method. ADP uses the terms "people analytics" and "workforce analytics" to refer to the same process. You can pick the most fitting term for your purposes.

What is the people analytics approach?

The people analytics approach is how analytics technology is applied to HR management. "It's a different mindset for how you approach HR," Venjara explains. It leverages quantitative analyses frequently used in other business functions, such as finance, marketing, sales and IT, placing data and analytics at the center of HR. It aims to give practitioners better visibility into their organizations' workforces by, for example, letting them track retention rates, turnover costs, pay equity and more.

"People analytics helps you measure what's happening in your HR function and can make HR interventions and strategies, such as gathering information from your people, more strategic and effective," Venjara says. "It's much more effective than going by a gut feeling or by what's been done in the past, especially given how rapidly the world is changing. It can answer, 'How am I doing? Where do I need to focus? What's the impact of the interventions I'm making?'"

What types of people analytics are there?

Under the umbrella of people analytics, there are four main types:

Predictive. The process of predictive people analytics involves analyzing current human resources and recruiting data to create forecasts or models for future outcomes to inform decision-making and strategy.
Prescriptive. With prescriptive people analytics, HR leaders can gain insight into the most likely future scenarios and evaluate the impact of different possible courses of action to influence the outcomes.
Diagnostic. By evaluating trends in data, diagnostic people analytics helps to uncover the root causes of challenges and issues in the workforce, revealing a crucial understanding of where to focus on solutions.
Descriptive. Using descriptive people analytics helps leaders gain a better understanding of the past by focusing on historical data.

What are the benefits of people analytics?

People analytics can do wonders for HR professionals, business leaders and the employees and management processes these individuals oversee. At a high level, strategically applied people analytics can help organizations:

Find and attract top talent
Maximize retention
Enhance employee engagement
Improve DE&I
Offer more targeted benefits
Control costs, including labor costs

"These are just some of the things that people analytics can accomplish," Venjara says. "And then, you can take those things and say, 'Which of these am I going to prioritize?' You can't do everything at once. You could say, 'We're growing fast, so let's focus on hiring' or 'We're losing people, so let's focus on retention.' Pick something that you can dig into."

Learn more about what people analytics can do.

What are the most important HR metrics for people analytics?

Tracking the right metrics with people analytics can be useful in measuring the impact of various strategies and programs over time, creating ongoing opportunities for improvement. Among the most important HR metrics are:

Cost per hire. Perhaps the most common HR metric, cost per hire represents the total expense of recruiting, hiring and onboarding a new employee, including equipment, travel costs, administrative spending and employee benefits.
Turnover/churn rate/attrition rate. This metric, which can have many names, is a tally of the number of individuals leaving the organization (or a particular business unit or department) during a given time period.
Employee engagement. Tracking employee engagement or employee sentiment can provide insights into the pulse of the workforce and be an indicator of organizational culture.
Absenteeism. Keeping track of how often employees are not at work (for any reason) can help HR leaders measure the impact of absenteeism on other trends, such as productivity, efficiency and engagement.

Why do you need people analytics?

You need people analytics because past successes don't always indicate future successes. We live in an increasingly dynamic world where the speed of change, technologically or otherwise, is accelerating. Past approaches to increasing employee engagement, recruiting and retaining talent and solving other organizational challenges may not work tomorrow even though they work today. People analytics can provide organizations with real-time data about their workforces, allowing them to plan and adapt as needed. It can also provide visibility into the labor market, giving organizations an advantage over their competitors.

"This is why people analytics is so critical," Venjara says. "People are the lifeblood of your organization. If you don't have the capabilities to understand how you're competing for talent, retaining talent and creating culture in your organization, you're losing out to somebody who does."

People analytics with benchmarking data can show you how you compare to organizations in your industry. This can help you stop assuming and start competing. For example, say that you plan to raise pay by five percent. That's great, but your competitors may have already increased pay by 10 percent. Benchmarking capabilities can help you avoid this pitfall and others like it.

Where do I start with people analytics?

To get started with people analytics, ensure the data you plan to analyze are reliable. Are there any factual errors, duplicates, blank fields or inconsistencies? Some of these issues will be easier to resolve than others. For example, factual errors and empty fields can take more time to correct than duplicates because you must investigate whether the facts are accurate and track down any missing data while duplicates can simply be eliminated.

One thing to look for in a people analytics solution is data quality monitoring, which can help you identify issues with your data, resolve them and avoid making decisions based on questionable information.

"The first thing a good people analytics capability needs to do is deliver decision-quality data," Venjara says. "Then, you can start doing things with that data. But if you can't trust it right out of the gate, everything else down the line won't work."

How can I be good at people analytics?

You can be good at people analytics by just getting started. You don't have to be an expert in the beginning. Like many study areas, people analytics must be learned over time.

Think of it as a skill you're going to master. "The way to get good at it," Venjara says, "is to do more and more." Permit yourself not to be an analytics specialist right out of the gate. Don't let yourself get overwhelmed; most importantly, don't take on too much at first. Start small. Be consistent.

"Bite off a small thing that you can work on, something that delivers value quickly," Venjara says. "The best way to start is not with some big people analytics strategy. It's to take a very specific problem that people care about and make progress on it. The question you need to ask yourself when you're getting started is, 'What's the thing that's easy enough for me to tackle and that people really care about?'"

Venjara recommends following a four-step approach known as Assess, Plan, Act and Measure (APAM):

Assess. Gather and analyze people data to identify focus areas and root causes.
Plan. Create a roadmap for addressing them. Be sure to benchmark your data.
Act. Drive targeted action to address your focus areas and root causes.
Measure. Evaluate the return on investment and impact. Adjust and repeat APAM.

Meaningful insights about your people and processes are hidden in your people data. We'll help you find them.