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Talent analytics impact hierarchy. 5 steps to predicting performance

Internationally there is a lot of buzz surrounding HR analytics, people analytics or talent analytics. Measuring the impact of training, recruitment or performance management has been on many HR agendas for decades but only with the recent advancements in HR technology have HR analytics become a serious possibility. All the major software vendors have spent millions acquiring their own talent management software. We ain’t seen nothing yet. The people analytics industry is only in its early stage and the HR department will change significantly in coming years.

All this being said, companies in Europe are struggling intensely to start working with talent analytics. Most HR directors acknowledge the importance of measurement and analytics but don’t know where to start. The possibilities of analytics can be overwhelming. There are risks involving privacy and morality. And to make things worse, most HR professionals do not have the analytical skills to start working on highly complex analytics. Just hiring a smart business intelligence professional or consultant is no solution either since they will not be able to fully understand the impact of HR issues on your business results.

So where to start?

To make it easier to set priorities we have designed the talent analytics impact hierarchy. This simple model makes it easier to understand what the added value of talent analytics is, how mature you and your organisation are now and what possible next steps might look like.

This model is about talent analytics. All the different terms that go around can make things even more confusing. So first a bit of background about the difference between HR analytics and talent analytics.

In short there are two distinct ways to approach the field of measuring HR efforts. The first school is that of business economics. They mostly use the term HR analytics. This is a quantitative approach aimed at efficiency. By analyzing for instance recruitment processes you can tweak this process to make it more effective and efficient. The goal of these HR analytics is to optimize HR processes to get the best cost – quality ratio.

Talent analytics on the other hand is usually the approach of organizational psychologists. Psychologists are trained to analyze and research human behavior so it is no wonder they are also interested in this topic. They don’t necessarily aim for an optimal cost – quality ratio. Psychologists focus more on understanding and ultimately predicting behavior. The central question in this approach is: what kind of behavior do we need to be successful? Or to put it differently: what talent do we need to execute our strategy and how do we find, develop and retain that talent in the best possible way? So the goal of talent analytics in, for instance, recruitment is to find and select the very best talent for your company, not so much to make the recruitment process more efficient.  Although it has to be said that when you know exactly what talent you need and where and how to find and retain them your recruitment process will automatically get a lot more efficient.

In this line of thought one could argue that talent analytics are just a smaller part of the broader HR analytics agenda.

So back to the talent analytics impact hierarchy

In this model you will find 5 steps to come to true talent analytics with predictive analytics  being the holy grail. We will shortly discuss all the different steps in this process.

 Step 1: Vision, why?

It all starts with why. For talent analytics this means you should know why talent is important to your organisation. Why would you invest in attracting the right people? What do successful people do different than the rest? What results do you want from your employees? Is the need for talent management the same across different functions and teams or are there ‘A players’ with a more strategic importance? If you take the time to finish this step it will get easier to find the right business issues to analyse.

 Step 2: Process, how?

If there are no talent practices available at your organisation yet, you should get this done first. There has to be a company-wide best practice for all talent processes like recruitment, learning and development and performance management. If your company is struggling to get this right you will never be able to make any meaningful comparisons across teams or functions. If every apartment has their own way of doing things it will be hard to do any meaningful analyses.

Step 3, Measuring, what?

This is where it gets interesting. Because of all the recent online HR technology advancements it has become a lot easier to measure your talent management efforts. There is smart and easy to use software available for online assessments, engagement and performance management. Furthermore it is becoming a lot easier to automatically link your talent management software to other HR software like payrolling or absence registration. By building an online database you are setting an important step towards talent analytics.

Step 4: Insight, reporting.

Once you have a best practice and online database in place you will have a sharp insight in what is going on inside your organization on a day-to-day basis. You can start comparing teams and departments on several meaningful dimensions. Differences in business performance can be explained by looking at your automated dashboards. You can see the influence of recruitment, development, engagement and performance management by looking at your data, trends and time lines. You will have strong and logical arguments to support your point of view and increase your impact as an HR professional.

Step 5: Predicting, improve.

The holy grail of all business intelligence: predicting the future. Once you have all your data automation up and running, true analytics come into play. By doing complex statistical analysis on your data you can start predicting future trends. You can analyse and predict future performance, turnover, recruitment needs, impact of a new training program, absenteeism and so forth. You can find relationships between client satisfaction or other business KPI’s and certain HR metrics. All the things you discover in this area will help you to continually improve on the steps lower in the hierarchy, creating an endless feedback loop of improvement. Organisations that do this right will have a longlasting advantage over their competitors.

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David Verhagen
26 May 2016
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