Today’s HR teams are using data to answer their business’ most critical questions:
Who is most likely to leave? Do we pay all employees fairly? What skills are our competitors hiring for? How do we prevent burnout?
Rather than relying on gut instincts, HR now has data to answer these questions and create a more informed people strategy. It’s no wonder the HR tech market has grown steadily in the past two years.
But choosing a new software is hardly ever straightforward. Fortunately, we’ve got your back. In this guide, you’ll find tips to help you reduce this anxiety. The content here is based on the challenges facing HR teams today and our in-depth knowledge of the current people analytics software market.
Many great people analytics software tools are out there, and we’ll narrow down those choices so you can find the one that will help you accomplish HR’s most important goals—whether it’s improving retention, reducing turnover, or promoting meaningful DEI.
Identify Your Most Pressing People Challenges
The most crucial step in identifying your ideal people analytics solution is to figure out the most important people challenges you need to solve. In short, what do you want the software to do for your business?
Strategic HR Review finds that people analytics software can help HR respond to its biggest challenges, like reducing turnover and filling skills gaps. Depending on your organization, you might need a tool to forecast hiring needs more accurately as the business scales. Or maybe the business is growing fast and you want software that makes it easy to share and update the org chart.
Here’s how people analytics solves these problems:
- Turnover: Using a people analytics tool, you might discover most of the employees who left were people of color, or perhaps departing employees were never promoted. Armed with that data, you can begin a conversation with leadership and managers to find the root cause of turnover.
- Absenteeism: Engaged workplaces see lower absenteeism, according to decades of Gallup research. People analytics software lets you compare and analyze engagement and absentee data. You can conduct engagement surveys from the platform and view the results alongside absentee data. This analysis will enable you to spot trends to understand if certain departments perform better or worse than the company average.
- Skills gaps: In one McKinsey survey, nine in 10 managers or executives said their organizations currently faced skills gaps or expected gaps to emerge in the next five years. Analysis from Gartner suggests HR professionals using people analytics software can more easily identify gaps they need to close based on the business’ growth and predicted turnover, as well as how promotions or new roles might close those gaps. Say a sales team lead is moving into a VP role—with analytics, you can quickly see if any existing team members have the necessary skills to backfill the team lead role. You’ll also be able to visualize the structural impact of those changes before committing.
- Pay gaps: Salary data reveals that racial and gender wage gaps persist. A study from Equality, Diversity and Inclusion: An International Journal found when people perceived pay inequity, they were less productive and committed to the organization. People analytics software allows you to conduct a detailed pay audit to identify pay disparities in the company. Once you understand where the inequities are, you can put a plan in place to close those gaps.
To identify the business challenge, you need to ask the right questions and collaborate with colleagues.
How to ask questions that provide insight into people challenges
The questions you pose will be unique to your company’s focus areas; however, LinkedIn’s Rise of the Analytics report proposes a set of common questions HR teams can investigate:
- Workforce planning: Why do I find it difficult to hire talent with certain skill sets?
- Gender diversity: Why do I find it difficult to engage and hire female leaders?
- Skills analysis: In which competencies are my competitors investing?
- Talent sourcing: How can I grow my employer brand?
To gather deeper insight for your analytics project, myHRfuture suggests asking stakeholders:
- What’s the biggest people problem with which you struggle?
- What groups of employees will you compare during your analytics project?
- What data will you need to help solve the problem and appropriately analyze those groups of employees?
Based on the answers to the questions above, you’ll have some insight you can use to refine your search.
Let’s say you want to investigate bias in your compensation packages by comparing candidates’ salaries, bonuses, and equity grants. You’ll need a people operations platform that integrates with your HRIS and payroll systems and can show what employees earn across genders, ethnicities, and generations.
Let’s tie this back to the questions above:
- Question: Does discrimination exist in our hiring process?
- Employee groups to analyze: Candidates by different demographics
- Data required: Candidate demographics, hiring process outcome by demographics
Once you clarify the business question, summarize it, write it down, and get an agreement from the team involved in the buying process. Gartner calls this step “consensus creation.” During consensus creation, you’ll need to build a shared understanding of the problem among the team involved.
Collaborate with managers and peers
Through collaboration, you’ll be able to frame the business question — whether that question is about how to improve the employee experience, increase engagement, promote pay equity, or anything else.
Because a people analytics tool is an organization-wide solution, it’s crucial to understand the company-wide problems it needs to solve. To develop this understanding, liaise with key stakeholders, including:
- Line managers: Managers work closely with employees, understand their daily priorities, and know how their tasks relate to company strategy. According to Gallup, managers are responsible for an organization’s employee experience, performance, culture, brand, and values. Collaborate with line managers to gain an accurate picture of how people analytics software can support employee needs and department-specific goals.
- Finance: Tighter collaboration between HR and finance ensures both business functions can boost headcount planning and create an accurate skills gaps analysis to inform hiring. For example, HR may identify a future skills gap that necessitates a budget increase. Working closely, finance and HR can project the impact of a more ambitious hiring plan, and that insight can help prioritize which roles to fill first.
- Employees: 81% of people analytics projects are jeopardized by ethical issues, according to the HR Observer. To avoid this challenge, it’s important to be open with employees about the intention to use people analytics software, take the time to understand their needs, and explain how the software will make their working lives easier.
Determine the Product Features You Need to Solve the Problem
The range of new people analytics tools on the market can make it difficult to identify exactly what you need.
Again, you’ll want to keep the following question front and center: what do you want the software to do for your business? That’s how Joe Taranto, an HR generalist and project manager at Rémy Cointreau, navigated the buying process. Before adopting a people analytics software, updating the org chart and developing a headcount plan were manual processes for Taranto.
“Sometimes manually updating the org chart on PowerPoint could take hours and hours to get done. It was just very time-consuming and inefficient. We needed a better solution. ”
Taranto realized the business needed people analytics software to visually represent the organization. This insight guided his selection, and he chose a solution that offered both org chart and headcount planning capabilities.
“What previously would have been discussed in a back-and-forth email thread, a PowerPoint, a drawing, is now presented in a way that enables our team to propose changes that propel our business forward.”
Below, we’ll dig deeper into product features. First, we look at features by goal, and then we get into the specific elements every people operations platform must have.
People analytics product features for specific goals
Different people analytics software offer different functionality, so you’ll want to make sure your preferred solution offers the specific features you need to accomplish your goals.
Headcount planning
Headcount planning — the process of planning to hire to meet a company’s needs — is one of HR’s most important activities.
People analytics software improves workforce planning for future needs because it can forecast headcount changes effectively. For example, Zapier reviews past interview rates, onboarding completion, and new hire performance data within their people operations platform. JT Haskell, Zapier’s director of recruiting, says: “It gives us predictable outcomes for the business so that everyone can start delivering on what they’re working on.”
Compensation planning
Compensation planning helps HR create a pay strategy that supports the business goals and employee needs.
People analytics software can boost your compensation planning by bringing together your comp and people data into one platform. A people analytics software can sync with your human resource management system (HRIS), equity management system, and performance management software, centralizing the data you need to make informed decisions during a compensation review. You’ll also be able to add data and guidelines managers can use when they propose promotions.
DEI analytics
DEI analytics are indicators you can use to measure your progress toward inclusion goals. More and more companies are adopting software to track DEI performance — between 2019 and 2021, the number of HR tech vendors offering DEI analytics jumped by 136%.
Although many companies have DEI data, they struggle to draw insights from that data, according to Harvard Business Review. People analytics software solves that problem by presenting your DEI data in a clear, easy-to-understand format. Let’s say you want to see representation, compensation, and performance across the company. A people analytics tool can sync with your HRIS, performance management, and other tools to present the data by ethnicity and gender. To get a better idea of what such a presentation might look like, view this sample DEI report created by people analytics software.
Performance management
The performance management process evaluates how people carry out their work based on shared expectations. Its goal is to enhance employee performance, but that’s not always the case. Frequently, the performance review is influenced by manager bias or based on outdated information. It’s why several companies are rethinking their approach to performance management, according to Transforming Performance Management to Drive Performance.
Remote work, in particular, changed how businesses measure performance. Kevin O’Connell, head of marketing at Sapling, said companies had to define new performance indicators in the era of remote work:
“When working remotely, it’s best to look at a team member’s contributions to a department’s OKRs or KPIs rather than this ‘always available’ mindset.”
Using people analytics software, you can shift to continuous performance management. Continuous performance management provides a more accurate reflection of employee performance because it pulls in data from a wide range of sources over time. You’ll also be able to conduct 1:1s, 360 reviews, and ongoing assessments from within people analytics software.
Employee engagement
Improving employee engagement in a hybrid workplace is among the top concerns for HR leaders, according to the Human Resource Executive’s survey.
With people analytics software, you can conduct employee engagement surveys, track historical engagement data, and add context by overlaying additional data points (e.g. location, compensation, diversity, etc.). For example, some platforms let you drill into the data by group to see engagement level trends among people of different backgrounds, based on compensation band, or any other number of factors. Then, you’ll be able to use the data to develop an engagement strategy to tackle problem areas.
Beyond looking at engagement across different groups, it’s also important to be able to track trends in engagement over time as you continue to issue surveys. This time-based view should allow you to determine areas of engagement that are trending down over time (and where you should take action as a result) as well as how any efforts you do put into place to boost scores are achieving their goals.
Essential product features
No matter your unique goal, the people analytics software you choose must have these essential features.
Integrations
Your HR tools should integrate seamlessly to avoid wasting time transferring data between disparate systems. As a result, when evaluating software options it’s important to consider whether or not each solution connects easily with the HR software that’s already part of your workflow.
Data access and transparency
Consider how well the tool simplifies data for team members who only need higher-level insights. Ask yourself whether the software produces informative, easy-to-follow reports and dashboards. Perhaps it’s important that different views are broken out for teams that neither want nor need to see everything.
Data visualization
The ability to access data is only as strong as the ability to understand what that data is actually saying. As a result, being able to easily visualize trends in the data you collect is an essential feature for any people analytics tool. Some of the best ways to visualize data are through easy-to-read graphs like pie charts and bar graphs and by overlaying different data points on your org chart for even deeper, more contextual analysis.
Data actionability
Once you do identify any trends in data, it’s important to back up that insight by taking action accordingly, making the actionability of data critical. Examples of actionability include being able to build a new headcount scenario based on data that employees feel overworked or data that a skills gap exists, or being able to collect additional information through a survey to help answer follow-up questions about why certain trends exist.
Security
The best people analytics software comes with a suite of features to protect employee data, as prioritizing data privacy and protecting against data breaches is critical to keeping your workforce safe.
When evaluating tools, check the granularity of access control models. For example, if you’re prioritizing pay transparency, do you want employees to be able to view everyone’s salary? Conversely, do some users only need access to pay data for their direct employees?
Different businesses require different levels of security and compliance. For example, the American Institute of CPAs will examine organizations to assess whether their systems meet security standards. These examinations are known as SOC 2, and you can read more about that examination process here. Or, if you’re a global company, the European Union’s GDPR may apply. You need a solid handle on your company’s unique requirements before choosing a vendor that can meet those needs.
Configurability
The level of configurability in everything from fields of data collected to filters for viewing that data will vary from software to software. For example, some tools have pre-configured bundles, like an employee net promoter score (eNPS) bundle that comes with employee engagement surveys. Determining your needs for configurability starts by understanding how your organization plans to use the platform.
Ease of implementation
How easy it will be to implement your solution of choice is extremely important to consider, as once you make a decision you’ll want to get started on all things people analytics as quickly as possible.
When it comes to ease of implementation, consider how quickly you can get up and running with the new solution, who from your organization needs to be involved, the level of support you’ll get from the technology provider, and how quickly you’ll be able to access and set up all of the features you plan to use.
Importantly, you should be able to run the implementation easily within your own HR team (no special technical expertise required!) without having to engage a consultant or highly specialized technology team, since that can slow down time to value and lead to technology management challenges down the road.
Responsiveness
When choosing new software, customer support is critical. If you’re getting started with people analytics software, then you’ll want a provider that will respond to your messages promptly.
For a deeper dive into the features you’ll want to prioritize during your search, check out some of people analytics software’s essential features in this post.
Create a Shortlist of Vendors
Once you’ve narrowed your requirements, discussed with relevant stakeholders, and established a list of specific questions, you’re ready to start reviewing your options in depth. The next step is to create a vendor shortlist.
Find trusted product recommendations online
Online review sites G2 and Capterra are great resources you can use at the start of your search. Take the time to read through reviews and features.
In addition to software review sites, online HR communities are another great resource. Here are a few popular, active HR forums:
Narrow the list of options
Once you’ve gathered a list of vendors, it’s time to narrow the list based on your requirements. Then, check each solution’s features against your organization’s needs and goals.
In the end, you might whittle down your list to two or three top picks. Gartner’s SaaS buyer experience map reports that buyers typically identify up to three vendors that serve their requirements best.
Finally, schedule a demo to see first-hand how the software matches your use case. TechTarget recommends involving team members who will use the software every day in the demo. For instance, finance may want to evaluate how well the system integrates into the general ledger and meets reporting requirements.
The Right People Analytics Tool Yields Better Business Results
It’s time to take the first step. Start thinking about where your business needs to improve. Ask for input from employees and team leaders. Talk to decision-makers. And when you’ve pulled back the layers and decided where you need to focus, you’ll be on your way to finding the right people analytics tool for your organization.
Once you find the right solution, getting started doesn’t have to be a massive undertaking. Click here to discover what it takes to easily implement people analytics for your organization.
