Using Predictive Analytics for Talent Management
The age of analytics is upon us. And for most industries, using data to inform business decisions is nothing new.
“For decades, companies have leveraged data to make decisions and to achieve desired business outcomes,” says Stephen Jeong, senior faculty in our leadership analytics practice.
But using predictive analytics in talent management — a.k.a, “leader analytics” — is the more recent explosion. “HR has lagged behind other functional areas in leveraging data to optimize how individuals and teams can achieve business goals,” Jeong says.
For example, that data could be used to measure the impact of leadership development programs. Organizations spend billions of dollars each year in development efforts but generally do a poor job of tying their investments to their bottom line. This has led some executives to question whether it makes sense to invest in leadership development efforts at all.
“What’s ironic,” Jeong says, “is that most companies have an abundance of business data they could leverage to make better leadership investment decisions. Often, they’re just not sure how to connect the dots.”
So how can you feel confident that when your organization invests in human capital through leadership development programs, you’ll get measurable results that improve your bottom line?
The answer is a 3-pronged strategy that involves data, analytics, and action.
Moving Beyond Employee Engagement Data
Employee engagement has dominated the talent management headlines for a good part of the last 2 decades. And many organizations actively collect leadership assessment data that can be directly linked to employee engagement.
“But it’s time to move beyond just measuring employee engagement,” says Cheryl Flink head of our leadership analytics practice. “The most successful organizations look at that data in conjunction with desired business outcomes. For example, how does a management competency for setting clear goals and direction align with a team’s understanding of the corporate mission?”
At CCL, we think about people analytics in 3 clusters:
- Data about leaders within the organization: “This data would include leaders’ beliefs, behaviors, and practices that exert real impact on their people, and, in turn, the business. It could be in the form of 360 data or other assessments on individual leaders and is a critical input to understanding and evaluating the impact of investments in talent,” Flink explains.
- Data about employee experience and engagement: How do employees feel about their organizations’ overall culture and senior leadership? Do employees feel that they have the tools and resources to do their jobs effectively? Do they feel safe taking calculated risks? What are their attitudes about their organization’s internal communications? These are questions related to how employees experience their organizations.
- Data about business outcomes: What do organizations consider to be their most important metrics? While specific metrics vary by industry, some outcomes, such as increasing gross and net revenues, operating income, and market share, while reducing turnover and other costs, are common. “These metrics should be examined alongside data on leader actions and employee experiences,” says Flink.
Predictive Analytics to Help You Prioritize Employee Development Initiatives
When investing in leadership development, organizations often have a goal of improving specific leadership skills that are correlated with their employees’ engagement and productivity. As is often said, though, correlation is not causation, and doesn’t address the root cause of a behavior, so correlations can lead to erroneous insights because they do not account for the complexity in data. For example, one leadership skill may impact multiple business outcomes in different ways.
Besides, employee engagement is not the endgame – improvement in a specific business metric is.
Predictive analytics allows you to leverage the power of multiple data sets, sort through the complexities, and arrive at the prioritized behaviors that will lead to specific business outcomes. Suppose that your organization wants to increase sales by 15% this year. What does your leadership assessment data and employee engagement data suggest that you should focus on to increase sales?
Jeong gives an example: “One approach is to correlate leadership behaviors with employee engagement data. Employee engagement surveys often ask workers whether their supervisor inspires them.”
Questions like this, he says, are often reported as being positively correlated with employee engagement and productivity. “If so, what is the recommended solution to improving engagement? Instruct all your sales supervisors to be more inspirational?”
Probably not, Jeong explains, because that approach overlooks the root cause underlying the correlation. “In this case, it may be the supervisors’ level of empathy or communication ability that is a better predictor of worker engagement — and ultimately, productivity and sales.”
Without an examination of root causes, companies risk investing in development programs that focus on the wrong thing. By using analytics to pinpoint the behavioral drivers and developing specific development interventions to address it, organizations can de-risk decision-making and invest in their people with confidence.
5 Evidence-Based Steps for Using Predictive Analytics in Talent Management
At CCL, our analytics-driven solutions helps guide organizations through this process. We partner with clients through the following 5 steps to help them use predictive analytics to adopt development and retention strategies that deliver the biggest payoff:
What does your organization want to achieve? Engage your executive team and other key stakeholders in identifying which business outcomes and metrics are critical to your business strategy. For example:
- Should you focus on increasing customer satisfaction?
- Do you need to emphasize improving worker productivity?
- Should you concentrate efforts on driving more innovation?
No two organizations are alike, and one-size solutions are seldom a perfect fit. Two types of data are critical to connecting the dots between business performance and people performance:
- Business metrics linked to the priorities you established.
- Data on the unique aspects of your environment that set you apart, including your organizational culture, employee experience and engagement, and leadership behaviors and practices.
Once organizational priorities are established and data collection is complete, predictive modeling helps identify the precise people factors that help or impede your most important business goals. Sophisticated analytics point to important linkages and to any gaps in your current leadership practices and behaviors, culture, employee experience, and engagement. This allows you to paint a picture of the specific leader behaviors that are likely to have a quantifiable impact on your organization’s business outcomes.
Now that you’ve connected the dots between people data and key business metrics, you have the insights you need to make smarter investments. You can now take evidence-based steps to strengthen leadership, nurture a culture of engagement, and bring key business strategies to life.
However, “This can be the riskiest step in the 5-step process,” Flink notes.
“How many times have organizations administered an employee engagement survey and then failed to act on the data?” Far too often, the effort put into creating and administering the survey, obtaining the results, and managing and securing the data stops with the final wrap-up communication and message from the CEO.
“Then, nothing happens. That creates real risk for organizations because workers feel let down — they were asked for their feedback and it seems that no one really cares.”
That’s why it’s so important to not just gather data, but use it to invest in a strategic, prioritized playbook. This playbook needs to include specific, measurable actions for improving individual leadership, team dynamics, and organizational cultures. Our predictive analytics tools can inform what this playbook should include and where to prioritize. “But whether you choose to execute using internal resources or external partners, you must act,” Flink adds.
Use follow-up surveys and assessments to document the strategic impact of your action plans and the returns you achieve on your people investments. This final measurement step is critical because it helps you to fine-tune your approach and validate whether you are on the right track. It can also help you build support for further investment.
Targeted Investments in Leadership Development Leads to Improved ROI
Particularly in volatile or uncertain environments, leadership development is key to increasing shared agreement of what an organization is trying to achieve — and a willingness to make the success of the collective a personal priority.
Our experience reflects that when analytics are used to set leadership development priorities, the odds increase that organizations produce a transformational impact on their most important business strategies.
“As the value of human capital goes up and the availability of data skyrockets, it becomes a no-brainer to utilize all of the available data,” Jeong concludes. “The companies who pay attention to data are at a unique advantage in the age of digital disruption.”
Ready to Take the Next Step?
Learn more about how your organization can use predictive analytics for talent management and employee development. Our leadership analytics experts can partner with your HR team unlock the power of your people data.