Using People Analytics and Technology to Boost Performance

Businesses in almost every industry today are harnessing the power of big data and advanced analytics to identify problems in internal processes and create new efficiencies, rewarding them with significant improvements in performance. We believe that adopting this “analytics mindset” to human resource management can have a similar effect for companies interested in leveraging the value in their human capital for greater returns.

We’re talking about “people analytics” – the marriage of behavioral and data science. People analytics is about tracking people efficiencies and, as with business analytics, using the results to inform your company’s people practices, programs and processes.

Using People Analytics to Improve Retention and Sales

A recent case study by McKinsey and Company illustrates the tremendous potential that people analytics holds for helping companies meet their strategic goals through a better understanding of the human capital they have invested in their business.

The study focuses on a quick-service restaurant chain with both franchise and corporate-owned stores that was suffering from significantly higher turnover than other similar chains. After gathering a variety of data from its restaurants across four U.S. markets, the company was able to identify a number of human factors that drive performance. With the results from this study, the restaurant chain was able to implement company-wide changes that in just four months, increased customer satisfaction scores by more than 100 percent, improved its speed of service, and significantly raised its retention rates for new hires. During this time, the company also realized a five-percent increase in sales, illustrating the boost that people analytics can give to companies looking to improve their bottom line.  

The company featured in the study looked at several human factors in its workforce and workplace including:

  • The personality traits and cognitive skills of their employees
  • The day-to-day practices of their managers
  • How employees behave and interact with each other and with customers

Surprising Results

People analytics not only have the potential to provide actionable insights to improve performance, they can also uncover unexpected factors that affect it. By testing its perceptions and assumptions about what drives performance, the restaurant chain in the McKinsey and Company case questions some of the conventional wisdom of its industry – that friendliness is key to customer satisfaction and the most important factor in retaining employees is their compensation.    

Personalities matter.

This may not be surprising to most HR managers, particularly those in businesses with a lot of face-to-face interaction between customers and employees. For businesses like these, demeanor is often considered one of the most important drivers of customer satisfaction, and friendliness is commonly a key factor in hiring decisions. What is surprising is that of the personality traits examined, the study found those employees who were able to focus on their work and avoid distractions had a more significant impact on customer service than those considered most friendly.   

It’s not all about the money.

The study also found that compensation had less to do with performance than the training and development that employees received and how they were managed. Contrary to the commonly held belief that more experienced managers are able to drive better results, the study found no correlation between performance and the seniority of managers. Rather, the way people are managed appears to be more important, leading the company to take a closer look at the practices of managers in its high-performing stores and incorporate those practices into its management training.     

Ask the Right Questions and Challenge Assumptions

People analytics is quickly moving into the mainstream of the business intelligence industry, and technologies are now available to help companies find meaningful connections between system performance, user engagement, and their strategic goals such as sales performance, recruiting, and retention.

With real-time tracking, analytics dashboards, and custom reporting, technology can offer robust and credible metrics and analytic capabilities to help uncover critical insights into workforce success.

Before adopting any technology, however, it is important to understand the real and perceived connections between talent and strategic success in your company. Consider the example of the restaurant chain in the McKinsey and Company case study. Believing friendliness to be the most important factor in the quality of its customer service, the company tested its assumption with psychometric testing and a series of online games to determine how differences in personalities and cognitive skills affected performance. The company also tested its assumptions regarding management quality, evaluating specific management practices to determine how each impacted employee performance and retention.   

In the Journal of Organizational Effectiveness, researchers John Boudreau and Wayne Cascio emphasize the importance of also understanding how to choose the appropriate statistical analyses and study design to turn data into rigorous and relevant insights. For example, research shows a strong correlation of employee engagement to performance. But, understanding whether it is engagement that is fueling performance or simply that better performers are more engaged requires deeper analysis. People analytics can provide this kind of analyses, extending our understanding of the correlations we find in human resources research to make them more relevant and actionable to our day-to-day work.     

Adopt an Analytics Mindset

In business, the goal of any kind of analytics is to improve performance whether through a company’s processes or its people. Where processes are concerned, using analytics to make needed changes can be pretty straightforward. However, where people are concerned, those connections can be far more nuanced and as such, more difficult to understand. Further, to the extent that they challenge strongly held beliefs and perceptions, they can also be harder to implement.

Using the right tools – technology with customizable metrics – with the human resources and performance data they can provide clarity to those nuances and reveal the real connection between a specific business process and performance.

Boudreau and Cascio note that in order to use people analytics effectively, employees and managers alike need to receive the results at the right time and in the right context. But even more importantly, they need to believe that the analytics have value – that they have specific implications for improving their own decisions and actions. And, they also need to perceive that the impact of those results will be significant enough to justify their time and attention. Companies that want to harness the power of people analytics will need to adopt an analytics mindset, which begins with effectively communicating their value at all levels within the organization.  

The Perfect Marriage for Human Resource Managers

The traditional approach to dealing with human resource problems – recruiting and retention, performance evaluations, hiring and promotion, leadership, and compensation – is to discuss them in qualitative terms based on emotions, instincts, and beliefs. People analytics offers a complementary, data-driven approach to help explain these issues and lend a deeper and perhaps more accurate understanding of them.  

There will always be an important role for human intuition in human resources. However, to the extent that companies are able and willing to marry intuition with hard data to inform and calibrate their decision-making, the decisions they make will be more reliable and have a greater impact on strategic goals.  

Like the restaurant chain in the McKinsey and Company, your company can start by asking the right questions, using the right tools and adopting an analytics mindset, your company can benefit from the use of people analytics to address some of its most pressing human capital concerns.  

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