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Gaining competitive advantage with people analytics

Gaining Competitive Advantage with People Analytics

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.)
  • Google has a People Operations team (formerly known as HR) devoted to people analytics and predictive modeling. Google has used people analytics to improve the workplace across a number of studies, using both quantitative and qualitative data to optimize different aspects of its people processes and align them with its unique work culture.
  • In September 2015, GE brought together all the digital and analytics capabilities across the company into one organization, GE Digital. According to an article by Deloitte University Press, the unit assembled a data set of more than 6,000,000 data points to use in a variety of talent decisions, from robust talent planning to recruiting to targeted training.
  • Several industries have analyzed the profiles of top salespeople and now know that screening candidates for grade point average or academic pedigree is no longer considered a strong indicator of future sales performance. Software companies, retail banks, and manufacturers, in looking at the characteristics of their top salespeople, are realizing that personal networks, how their people work internally, and the time they spend with customers are more accurate predictors of results than the amount of sales training or experience they have.

Advance your business objectives with people analytics

Leading organizations know that they cannot successfully manage, motivate, and retain employees with analytics alone. But early adopters have created tangible value by applying the right teams, strategies, data points, and technology to people processes. The best organizations are seizing upon collective data that can provide unique human-capital insights and enable managers to make better decisions about talent.

If you're interested in learning how your company can draw on these new techniques to improve business results, learn more about our upcoming program, Leading People at Work: Strategies for Talent Analytics. The program, led by MIT Sloan Professor Emilio Castilla, will be offered July 11-12 and October 18-19, 2017.

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