In the past decade, analytics have taken significant guesswork out of decision making and scenario planning in fields like sports and finance, replacing gut feeling with big data. In the years since Tom Davenport's bestselling Competing on Analytics: The New Science of Winning, organizations have used data and analytics to identify their most profitable customers, accelerate product innovation, optimize supply chains and pricing, and leverage the true drivers of financial performance.
Analytics is now coming of age in the World of Work, bringing a healthy dose of science to the art of human resource management. While most hiring, management, promotion, and rewards decisions are based on intuition and corporate belief systems, "people analytics" offers a more data-driven approach to making those decisions. Recent studies are showing how the application of science to the selection, management, and alignment of people can result in better hires, significantly increased profits, and even a correction of systemic workplace bias.
Better HR decisions with data
It makes perfect sense: just as finance, operations, and business units have volumes of data, so does the HR function—companies are loaded with employee and performance data. Leading-edge organizations are building analytics teams and adopting more sophisticated analytics tools in an effort to enhance their competitive advantage and attract and retain top talent in increasingly talent-constrained industries. They are using their data to analyze flight risk, identify characteristics of high-performing sales and service teams, predict compliance risks, assess engagement and culture, and identify leadership candidates.
Here are some of the ways analytics are being used to improve the management of human capital across various industries:
- The sports industry has been a pioneer in the analytics revolution, using data to win games and run profitable businesses, and the implication of these techniques continues to evolve. As reported by Davenport and co-authors Jeanne Harris and Jeremy Shapiro in an article for Harvard Business Review, the soccer team AC Milan created its own biomedical research unit to help the team gauge players’ health and fitness (drawing on 60,000+ data points for each player) and to help make contract decisions.
- Analytics can be used to help correct workplace bias. According to groundbreaking studies by MIT Sloan Professor Emilio Castilla, merit-based reward practices can unintentionally lead to pay disparities based on gender, race, and national origin—the very biases that those systems seek to prevent. People analytics can play a key role in defining clear processes and criteria for hiring and evaluating employees. (In 2017, Castilla will lead a new MIT Sloan Executive Education program, Leading People at Work: Strategies for Talent Analytics, which focuses on the strategies that can be used to successfully design and implement people analytics in an organization.)