People analytics must embrace a more pragmatic approach or risk being sidelined

5 minute read

Global industry analyst Josh Bersin explains why, after years of investment in tools and the hiring of highly skilled PhDs, the field of people analytics is falling short of meeting the demands of today’s CEOs

A central button saying People Analytics surrounded by different metrics in bright hues of pink and purple

Here’s a sobering fact: despite years of investment in people analytics fewer than 10% of companies can effectively correlate HR data with business metrics. With such disappointing ROI, business leaders are losing patience. They’re no longer willing to wait for perfect answers to yesterday’s challenges and are increasingly turning to alternative sources to find the solutions they need.

The conclusion is both clear and disheartening: despite significant investments in tools and talent, people analytics remains the third least mature area in HR. The message to the people analytics field is unmistakable – adapt and evolve or risk becoming increasingly irrelevant. Business leaders are less concerned with perfect data and more focused on solutions that drive measurable impact and move the business forward.

This urgency is compounded by a crippling talent crunch as your colleagues struggle to secure new skills, recruit frontline workers and fill leadership roles. ManpowerGroup’s 2024 Talent Shortage survey underscores the challenge, revealing that the UK’s skills gap has widened to an 18-year high, with cross-sector shortfalls affecting 80% of businesses.

Yet there’s no shortage of AI-based Talent Intelligence tech aimed at solving these talent management challenges. Platforms like Eightfold, LinkedIn, Lightcast, Visier and Draup provide precise insights into talent, salaries and skills. When used effectively these tools have the potential to elevate HR analytics teams to the same level of influence as finance or marketing, driving data-informed decisions that truly impact the business.

People analytics best practice

As our recent research showed, reaching the highest level of maturity in this area and transforming that potential into a business-as-usual reality requires a strategic blend of multiple factors. This approach yields remarkable ROI, as organisations at this stage are:

  • 2.9x more likely to achieve high productivity across workforce segments
  • 3.0x more likely to retain employees effectively
  • 3.0x more likely to adapt to change successfully.

When executed effectively people analytics has the potential to become a trusted advisor to C-level executives, helping forecast trends and guide strategic decisions that maintain competitiveness. 

Industries such as technology, healthcare and life sciences are at the forefront of next-generation, business-focused and pragmatic people analytics, with 20% of surveyed companies achieving the highest maturity level. Manufacturing, financial services and professional services are also advancing, with 7% reaching this stage. Notably, larger organisations – particularly those with over 100,000 employees – are making remarkable progress, with 42% operating at this advanced level.

What distinguishes these high-performing organisations? They are replacing data perfectionism with an experimental mindset, prioritising agility and innovation. Close collaboration among CHROs, CIOs, CFOs and CMOs ensures seamless data integration across the organisation. They’re also willing to invest in advanced software that is tightly aligned with business goals. Central to their success are AI and predictive models, which empower teams to forecast trends and inform strategic decision-making. Moreover, most of these organisations have over a decade of experience in people analytics, with 54% reporting directly to the CHRO.

The results speak for themselves. These new people analytics performers are not only more inclusive but also drive higher customer satisfaction and exhibit exceptional agility in adapting to change. Our analysis reveals that this evolved form of people analytics now stands as the second most impactful driver of financial performance, surpassing more traditional HR functions like L&D and even EX (employee experience).

However, this success remains far from mainstream. Our study shows that only 10% of organisations have reached this advanced level, with the majority still focused on basic reporting. This gap represents a substantial missed opportunity, as our data indicates that advancing from Level 2 to Level 3 on the maturity scale (where Level 1 is the least advanced and Level 4 is the most) leads to a remarkable 47% improvement in people analytics outcomes.

True transformation, however, only occurs at Level 4. Reaching this pinnacle requires people analytics to evolve from isolated ‘science projects’ into what we call systemic business analytics. This demands a concerted effort to synthesise and integrate diverse data sources – including labour market data and internal HR metrics – to drive informed business decisions. Let’s explore how this can be achieved.

People analytics 2.0

To move beyond isolated analytics organisations must become more open to all types of data without fixating on their source or level of perfection. Systematic analysis of people trends involves leveraging diverse types of analytics – some ad hoc and time-sensitive - while continuously evolving and refining strategies along the way.

Our research has revealed that four out of the 15 key best practices for people analytics excellence are specifically focused on data. For instance, Microsoft leveraged data to shape its return-to-office policy, pinpointing critical moments when in-person attendance is necessary, such as onboarding and team-building events. This data-driven approach led to the development of guidelines for managers to help teams decide the optimal work location. Similarly, Starbucks uses various data points to identify the skills and behaviors that contribute to successful branch managers, while also uncovering hidden leadership potential. SAP employs advanced analytics to monitor its pay practices, ensuring that 99% of employees were paid fairly for equal work in 2022.

Top-performing companies also prioritise making data accessible to all employees. For instance, Panasonic and Providence Health & Services both moved to empower their line managers with data to make informed decisions about workload distribution, employee engagement and compensation. 

Interactive real-time dashboards play a crucial role in delivering timely, focused people analytics insights. For example, Standard Bank Group is equipping 9,000 managers with dashboards to monitor leadership effectiveness and support decision-making – an approach that has already led to notable improvements in employee retention and diversity.

Democratising data goes beyond mere access; transparency is key. High-performing systemic business analytics organisations are three times more likely to give managers access to people data and six times more likely to share it with employees. In contrast, most teams still restrict insights to senior executives, with only 44% sharing data with line managers and just 15% sharing it regularly with team members, as they should.

To transition from siloed, ineffective people analytics to a more impactful second generation we encourage clients to adopt a pragmatic, action-oriented approach that goes beyond traditional HR metrics. This involves incorporating business performance data, labour market trends and external benchmarks into all people analytics efforts moving forward. By integrating these diverse data sources into a unified strategy we’re already seeing how brands can shift the focus from solely HR outcomes to addressing key business challenges.

Embracing AI-powered technologies, predictive analytics and fostering a culture of data-driven decision-making will enable you to unlock deeper insights and drive meaningful, transformative outcomes that have previously seemed just out of reach.

Better: turn your version of ‘people analytics’ into a business analytics service 

This shift will require adjustment for you as a people analytics professional. However, it's a pivot well worth making, especially if you view it as a golden opportunity to transform your role from the sidelines to the heart of the business conversation.

Consider what this could do for your day-to-day work: transitioning from getting bogged down in micro-analytics and manually correlating multiple data points to collaborating with AI, which handles the heavy lifting, allowing you to focus on using the data to support and empower the line manager.

Managing your organisation’s data corpus while focusing on its most pressing challenges essentially transforms you from a potential helper into a strategic consultant. This shift enables you to answer key questions for the MD, such as: What role does recruitment play in turnover? How are our training programmes and work schedules impacting productivity?

After all, human capital factors are deeply interconnected, with countless variables to consider. People analytics 2.0 provides the framework to consolidate multiple data streams into an easy-to-use system that empowers the business to leverage AI for actionable insights, uncovering the hidden patterns and opportunities that have remained out of reach.

If you’re looking to unlock immense value for the business while positioning you and your team for a more prominent, strategic role within the broader business landscape, now is the time to embrace systemic business analytics.

Josh Bersin is CEO at human capital advisory firm The Josh Bersin Company. For more on the people analytics topic, see the The Josh Bersin Company’s Definitive Guide to People Analytics

Published 22 January 2025
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