A History of People Analytics in Five Ages

While writing my first book Excellence in People Analytics, with my colleague, friend and co-author Jonathan Ferrar, we gave much consideration to the history of people analytics as a field – specifically, to how it has evolved to create value and deliver impact to the workforce and companies alike.

People Analytics is not about HR. People Analytics is about the business. It is about delivering commercial value, value to employees and the workforce, and value to executives so they can make people-related decisions based on facts. At its best, people analytics delivers impact to the board of directors, investors and broader society, too.

People Analytics is not about HR. People Analytics is about the business.

People analytics as a discipline is expanding in importance in HR and across business, generally. There are more people with analytical skills in HR than ever before, and the depth of expertise is growing annually (LinkedIn, 2020). This growth is tightly aligned with the potential financial value a data driven approach to the people function can deliver – which today numbers in the hundreds of millions of dollars to the top and bottom lines of organisations.

For example, Google calculated it saved approximately $400 million by reducing new hires’ onboarding time from nine months to six months (McAleer, 2018); IBM’s former CEO Ginni Rometty revealed the company saved ‘nearly $300 million in retention cost in its predictive attrition program (Rosenbaum 2019); and shoe retailer Clarks found that a single percentage point in employee engagement is worth an additional 0.4 per cent of improved business performance (Levenson and Pillans, 2017). In the context of Clark's 2019 Annual Report, this represents almost £60 million per percentage point of employee engagement.

The Five Ages of People Analytics

History was my favourite subject at school. If you’re unfortunate enough to get into a conversation with me at a cocktail party, you risk me waxing lyrical on topics including: The War of the Roses, the Tudor dynasty and the English Civil War. I’m a firm believer that the best way to understand the present and assess what the future has in store is to study the past.

Writing Excellence in People Analytics compelled Jonathan and I to reflect on the research and work we’ve undertaken with companies in the last decade. For me, it also involved considering the regular collections of people analytics resources I’ve compiled over the past few years.

When we analysed the history, studied the present and looked to the future, our research and experience led us to conclude there are five ‘ages’ to describe the history and future of people analytics.

Excellence in People Analytics refers to this as DRIVE: Five Ages of People Analytics (see Figure 1):

FIG 1: DRIVE: Five Ages of People Analytics. Reproduced from Excellence in People Analytics, Jonathan Ferrar & David Green (Kogan Page, 2021)

The Age of Discovery: 1911 – 2010

The origins of people analytics can be traced back over a hundred years ago to Frederick Taylor’s book ‘The Principles of Scientific Management’ in 1911. Taylor’s ideas sought to optimise tasks, drive efficiency and maximise productivity through measuring everything employees did. A notable Taylorist of that era is Ford Motor Company, which famously used scientific analysis to automate processes in the car manufacturing plant and, therefore, provide efficiencies and increase production speed.

Another significant development in The Age of Discovery came in the 1940s when, in the post-war era, organisations established mass industrialisation. The role of the industrial organisational psychologist arose. Today I/O psychology is an integral part of sophisticated people analytics functions.

Fast forward to the 1980s and 1990s, which saw an expansion of the human resources department moving away from a sole focus on administration, to recruitment, development, reward and performance management. This created a need to measure processes and the efficiency by which people were hired, deployed and developed across the workforce. One influential text on this topic was The HR Scorecard: Linking People, Strategy and Performance (Becker, Huselid and Ulrich, Harvard Business School Press, 2001), which introduced a measurement system to illustrate how HR can impact business performance.

By the first decade of the 21st century, people were being recruited into formal HR analytics or employee engagement functions. The onset of the internet and the ability to collect quantitative and qualitative data in large volumes changed the desire and ability to measure more than just the human resources processes. These early teams in large multinational organisations often consisted of only a few people, delivering work such as annual em­ployee engagement surveys. Overall, people analytics functions of The Age of Discovery were administrative ‘white-glove’ functions, tackling data col­lection, statistics, reporting and business diagnosis, typically for a handful of senior executives and only occasionally undertaking analyses on complex business topics at the behest of the CEO.

The Age of Realisation: 2010 – 2015

It was the 2008 global financial crisis that changed everything for the field of people analytics. The advent of ‘Big Data’ and the use of analytics by business functions such as marketing combined with a desire to measure and monitor everything with an adequate level of efficiency and effectiveness, led to the realisation that analytics was critical. Teams that delivered insights to senior business executives allowed those organisations to flourish in the post-global financial crisis era. The Age of Realisation was epitomised by the development of maturity models and the emergence of leading practices in big technology companies, in particular.

Large teams established in companies like Google, Microsoft and IBM could use their external product teams’ expertise to translate this into a similar experience for their employees. These teams grew fast and focused on often complex predictive analytics projects. With senior executives’ spon­sorship, they could then scale these solutions, harness their technology prowess and deliver significant value.

This surge in the growth of people analytics sparked by the global finan­cial crisis was eloquently captured in the Harvard Business Review cover article ‘Competing on Talent Analytics’ (Davenport, Harris and Shapiro, 2010). This article had a notable influence on many people analytics practitioners at the time. It articulates how organisations such as Google, Starbucks and AT&T were increasingly adopting sophisticated methods of analysing employee data to enhance their competitive advantage.’ The paper highlighted how Best Buy calculated the dollar value of employee engage­ment. It was one of the earliest published examples of delivering commercial value with people analytics.

By the mid-2010s, people analytics teams had emerged in many multina­tional organisations. These were mainly ‘service teams’ managing a large number of requests from senior HR business partners and in some cases, senior executives and board directors. Work included everything from reporting, dashboard and data requests to very complex advanced analytics programs. In some cases, substantial financial value was created by under­standing the drivers of employee attrition, customer retention, leadership behaviours and diversity. The most advanced teams were using various peo­ple and other business data from sources inside and outside the company.

In the early 2010s, Google took people analytics mainstream with Project Oxygen (Garvin, 2013), which scientifically communicated the commonly held belief of the attributes of managers, validated in ‘Google language’ for Google as a company. It changed how business executives saw the value of human resources processes and how analytics could predict the capabilities and behaviours needed to achieve competitive advantage.

While some firms such as Google were doing outstanding work, most people analytics teams remained stuck in a reporting role. A leading practi­tioner, Thomas Rasmussen, and renowned management thinker Dave Ulrich, wrote about this in 2015 in one of my favourite papers, ‘Learning from practice: how HR analytics avoids being a management fad’. Of the recommendations highlighted, two continue to stand out: ‘Start with the business problem’ and ‘Train HR profes­sionals to have an analytical mindset’.

The paper also issued a warning: ‘HR analytics in its current form will continue to fail to add real value to companies.’

The Age of Innovation: 2015 – 2020

The mid-2010s marked a change in trajectory for the people analytics field.

The primary driver was executive expectation – chief human resources officers were increasingly being asked to modernise their workforce in response to market demands.

The Age of Innovation was characterised by “new” things: new models, new uses of technology, new modes of specialisation, new practitioners entering the people analytics profession and new approaches to creating business value.

Within companies, people analytics shifted from being a supple­mentary function within HR to a core component of people and business strategy. It has helped create business-aligned human resources or­ganisations across the globe. This was highlighted in the 2017 report by the Corporate Research Forum, Strategic Workforce Analytics (Levenson and Pillans, 2017), which revealed that 69 per cent of companies with 10,000 employees or more had a people analytics team. By the close of the decade, people analytics was appearing in organisations of all sizes, industries and geographies.

Towards the end of this period, Deloitte’s Global Human Capital Trends Report 2018 identified ‘People Data’ as the joint most important trend as rated by over 11,000 respondents.

To those of us who had been in the people analytics field for over five years (like me and Jonathan), this recognition felt like a landmark moment. 

The Age of Value: 2020-2025

In 2019 – towards the end of The Age of Innovation – the World Economic Forum published: HR 4.0: Shaping people strategies in the Fourth Industrial Revolution. The report identified six imperatives for the HR function of the future. All six are underpinned by people data and analytics.

Just a few weeks later, LinkedIn’s Global Talent Trends 2020 Report ranked ‘People Analytics’ as one of the four most important trends in the future of recruiting and human resources.

2020 was a pivotal year in people analytics. Just as the global financial crisis had propelled people analytics into a new age a decade earlier so the triple crises of the global COVID-19 pandemic, racial inequality and financial uncertainty did the same in 2020.

People analytics had to step into its leading role.

Globally, people analytics functions were required to provide data and information to C-suite executives in rapid response to the global pandemic in topics such as remote working, infection, absenteeism and mental well-being. This pushed the function of people analytics to new levels of urgency and accuracy for daily operational decisions and longer-term strategic scenario planning.

As such, there was an indication that people analytics – as a function within organisations - was investing in both people and technology to address these increased demands. A study by Insight222 in 2020 revealed that 93 per cent of HR functions would increase or maintain the size of their people analytics team even amid the financial uncertainty created by the pandemic. Furthermore, 97 per cent would increase or maintain their technology invest­ment in people analytics (Ferrar, Styr and Ktena, 2020).

Supported by the data and insights provided by their people analytics teams, the role of the chief human resources officer became ever-more critical in 2020. ‘In a pandemic, a Chief People Officer can make or break a company’, began an article in The Economist, comparing the criticality of the role to that played by the chief financial officer (CFO) during the global financial crisis.

This era we find ourselves in is defined by people analytics delivering value directly to the business. The Age of Value is characterised by four ‘pillars’ of trust, inclusion, purpose and equality (as listed below) with eight 'megatrends' influencing demand and activity as illustrated in Figure 2:

1. more trust between stakeholder groups especially executives and leaders
2. more inclusion in the work environment, rather than focusing on ‘just’ the topic of diversity
3. greater purpose to a ‘higher calling’
4. greater sense of equality

FIG 2: The Age of Value is characterised by trust, inclusion, purpose and equality, with eight megatrends influencing demand and activity. Reproduced from Excellence in People Analytics, Jonathan Ferrar & David Green (Kogan Page, 2021)

There is a widespread view that many, if not all, of these megatrends and pillars have been accelerated further by the pandemic. For example, in a 2020 Forbes article, Heather McGowan asserted: ‘where we once saw the future of work unfolding over years, we now believe that with coronavirus as an accelerant, everything we’ve predicted about the future of work will unfold in months’ (McGowan, 2020).

The Age of Excellence: 2025–2030s

Once value from people analytics is accepted and delivered – at scale, repeatedly, across the business as a whole, globally – then people analytics will move into The Age of Excellence.

If we take one 2019 study from Accenture as writ, The Age of Excellence could see companies access their portion of the US $3.1 trillion of untapped revenue growth that lies in people data. Employees and workers could benefit. The human resources function itself could become even more data literate. And wider society could benefit, significantly.

In Excellence for People Analytics, we outline the activities and outcomes required for success through our Nine Dimensions for Excellence in People Analytics model. The nine dimensions do not need to be completed in sequence – nor must they be addressed simultaneously. But, if conducted well, they will improve the value that can be derived from people analytics – and in turn, deliver ‘Excellence’.

That’s the aim. Now, we have to get there.

People analytics is no longer a ‘nice to have’ for companies but an absolute must-have for any chief executive officer or chief human resources officer

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About Excellence in People Analytics

Elements of this article have been explored in greater depth in the book Excellence in People Analytics, which is available to pre-order, authored by Jonathan Ferrar and David Green and will be published by Kogan Page in July 2021.

Excellence in People Analytics provides business and human resources leaders with everything they need to know about creating value from people analytics. It summarises the authors personal experiences and stories having worked and been advising in this topic for the last 10 years. Being a practical guide, it outlines how to create sustainable business value with people analytics and develop a data-driven culture in HR.

Additionally, Excellence in People Analytics equips chief human resource officers and senior human resources and business executives with the tools necessary to deliver real impact while navigating the rapidly evolving world of work. Most significantly, this book features 30 new case studies from leading companies including Microsoft, HSBC, Syngenta, Capital One, Bosch, Uber, Santander Brasil and American Eagle Outfitters, all assembled together around the easy to understand Insight222 Nine Dimensions in People Analytics model .

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ABOUT THE AUTHOR

David is a globally respected author, speaker, conference chair, and executive consultant on people analytics, data-driven HR and the future of work. As Managing Partner and Executive Director at Insight222, he has overall responsibility for the delivery of the Insight222 People Analytics Program, which supports the advancement of people analytics in over 70 global organisations. Prior to co-founding Insight222 and taking up a board advisor role at TrustSphere, David accumulated over 20 years experience in the human resources and people analytics fields, including as Global Director of People Analytics Solutions at IBM. As such, David has extensive experience in helping organisations increase value, impact and focus from the wise and ethical use of people analytics. David also hosts the Digital HR Leaders Podcast and is an instructor for Insight222's myHRfuture Academy. His book, co-authored with Jonathan Ferrar, Excellence in People Analytics: How to use Workforce Data to Create Business Value will be published in the summer of 2021.