How to save money with people analytics

Employees are a major cost for businesses while being essential to generating revenue at the same time. That’s why managing their workforce in the most efficient way is crucial for businesses of any size.

In order to make better people decisions, businesses not only need access to data, but they also need to know how to analyze and interpret this data. That’s where people analytics comes into play. 

What does people analytics involve? What are the benefits of utilizing people analytics? Why should companies invest in people analytics? And how does people analytics help businesses save money?

People analytics is the use of analytics tools with the aim of transforming raw HR data into detailed insights into workforce trends and patterns. It involves a thorough analysis of all the data and processes linked to a business’s people and HR function. Other terms which are often used interchangeably with people analytics are HR analytics, workforce analytics, and talent analytics.

The idea behind analyzing HR data is to enable business leaders to make informed decisions regarding their workforce. The easiest way to gather, analyze and interpret HR data is to use a people analytics software that comes with the necessary tools.

Examples of people analytics data

In order to fully comprehend what people analytics involves, businesses first need to know what kind of data they need to collect and analyze. HR data that is relevant in this context includes:

• Employee age, gender, nationality, location, and more,

• Tenure at the company, job role, and compensation, 

• Employee satisfaction scores,

• Absence rates,

• Employee feedback,

• Performance evaluations,

• Exit interview protocols,

• Employee engagement scores,

• Overtime rates,

• Employee productivity rates,

• Revenue per employee,

• Cost per hire,

• Time to hire.

Potential sources for people data include HR tools, payroll systems, applicant tracking systems and talent management tools. People analytics tools gather all these different data inputs and transform them into different graphs and charts that visualize numerical data to prepare it for analysis and interpretation.

The objective of using people analytics is to base workforce-related business decisions on data and facts—instead of relying on instinct. But in order to analyze people data and gain real value from it, business leaders need to ask the right questions, such as:

• What are the main reasons behind employee resignation? 

• What are the different exit trends? 

• Which departments/managers have the highest exit rates?

• Is it necessary to hire more people?

• How many employees are going to retire in the next couple of years? 

• What is the current status quo in terms of workforce diversity, inclusion and equity?

• Which departments have the best revenue-per-employee rates?

• Which teams and departments are understaffed?

People are at the core of every business. They develop products, keep customers happy, and basically keep the wheels turning. They are the foundation businesses build their success on.

The better a business understands its workforce, the better it can manage its most important resource, which results in a better financial outcome. This is where people analytics comes into play. People analytics can:

• Help predict and reduce staff turnover by identifying the main reasons for resignation,

• Deliver valuable insights to improve the business’s overall people strategy,

• Spot management problems that lower employee satisfaction and happiness,

• Optimize L&D programs and investment,

• Develop effective compensation and incentive strategies,

• Highlight which departments are understaffed,

• Shed light on how the business is doing in terms of DEI,

• Improve the employee experience in an organization, and

• Businesses better understand the wants and needs of their employees.

People analytics provides businesses with detailed insights into HR data which can then be leveraged to optimize the use of available resources in order to get the best possible results. In the end, it all comes down to optimizing processes and reducing costs. 

But how can businesses actually save money with people analytics? Here are a few examples:

• Reducing employee turnover cost: If organizations can predict employee turnover based on past trends and patterns, they can adopt employee retention strategies to prevent employees from leaving. Since employee turnover costs businesses a lot of money (often up to 1.5 to 2 times the amount of the employee's salary), retaining potential leavers means saving some real money.

• Enabling strategic workforce planning: People analytics delivers all the insights that are needed for strategic workforce planning. One of the advantages of strategic workforce planning is that it significantly reduces hiring and recruiting costs. Plus, thanks to enhanced succession planning, leadership roles can be filled in due time, which avoids drops in productivity.

• Cutting down on overtime: Pay rates for overtime are usually between 25% and 50% higher than an employee’s standard pay rate. Detailed insights into which employees in which departments constantly put in overtime hours can help reduce overtime spendings by hiring a new employee to pick up the additional workload.

• Improving talent recruitment: People analytics can help businesses better understand employee wants and needs. Knowing what is important to employees is essential to creating a more appealing work environment and company culture. This, in turn, helps increase efficiency in the hiring process, which means that the cost per hire can be reduced. 

• Promoting from within: Employee performance evaluations and productivity rates can help businesses identify top performers who can then be shortlisted for a promotion. Promoting from within saves hiring and recruiting costs, since the business can skip the lengthy and cost-expensive process of hiring someone external.

• Adjusting hiring budget and strategy: People analytics not only delivers insights on employee level. Instead, it can also be leveraged to find out which departments perform well and which ones don’t. Business leaders can take this knowledge into account when drawing up a budget for hiring and employee training.

People analytics pulls data from many different systems, including an organization’s payroll system. Payroll produces large amounts of data every month. This data can be used to gain detailed insights into workforce costs, overtime pay, employee absences, and more.

Payroll consolidation platforms, like Lano, come with their own set of analytics tooling that delivers powerful insights into global payroll data, allowing businesses to generate detailed reports on global employee data by country, cost center, employment type, and more in minutes.

Book a call with one of our experts to find out more about how a payroll consolidation platform like Lano can help you get started with people analytics.