In the 1990s, marketing was practically the same as what some HR departments are now: a creative, artistic discipline where decisions were made based on personal experience and intuition.
However, marketing has already integrated analysis and data into its day-to-day management.
Now HR departments of all organizations are recognizing the need to become strategic departments and integrate analytics into daily activity. Just like in marketing, they are already beginning to attract the best employees, group them into teams to be more effective, develop their talents, make them loyal, and reward them using knowledge acquired from People Analytics.
While talking about the techniques used in People Analytics (HR analytics), we owe a lot to marketing for having paved the way.
The area of Customer Analytics can probably boast of the most well-developed analytical procedures to date.
Today, in both online and offline marketing, we measure and analyze everything under the sun. Every sale, every mouse click, and every conversion on a website are logged. You can predict the value that a customer can bring to your company, the risk of losing each client, and the likelihood that a segment of your customers will buy a product if you launch a certain campaign. This chapter includes return on investment, analysis of client loss, reviews, NPS, lifetime value, RFM, clustering, and much more; later chapters explain how to put them into practice.
In human resources employees are often referred to as "internal clients." The common denominator between marketing and human capital management is analyzing human behavior.
People are the overlap of marketing and HR analytics. It's no wonder we've been copying all the important advances in the field. The infographic below summarizes what we have copied from marketing.
1. Marketing has been there and done that
In the 1990s, marketing was practically the same as what some HR departments are now: a creative, artistic discipline where decisions were made based on personal experience and intuition.
But since then, marketing has undergone a fundamental change by integrating analytics into business practices.
The old "spray and pray" method of acquiring and retaining customers quickly became obsolete. The best companies gradually began to put aside those old instinct-driven practices and began using analytics.
Today in most successful companies, marketing is inseparable from analytics and constantly leverages the power of data intelligence.
Human Resources is following in marketing's footsteps.
2. Return on Investment (ROI)
HR leaders, not just the CEO and CFO, need to think in terms of return on investment and profit. A basic marketing ratio is the return on investment (ROI) — the profit you make from an investment. In purely economic terms, it is a way of considering gains in relation to the capital invested. The human capital of a company also needs investment.
A high ROI in human capital means that the money invested in the people of the organization has generated high profits for the company.
3. Business Case
A "business case" is a document that summarizes the main aspects of a transformative project and is often used to justify investment in a project. Other departments (such as marketing) are able to demonstrate with data that they provide greater value with their services. If HR cannot provide the data that demonstrates the positive economic impact of their proposed investments, management is obligated to allocate funds to other departments that are able to do so. Therefore, it is critical to present "business cases" to justify investments.
4. Recommender systems... of careers
Recommender systems have become more and more popular in different areas of marketing. There are recommendation platforms of films, music, news, and all kinds of products and services. One of the better-known ones are the shopping cart recommendation systems for e-commerce sites. In People Analytics, we use recommendation algorithms to reveal the most relevant features for each position in an organization and generate automatic recommendations for career development.
5. Simulations “What if...?”
A "What if?" simulation is a powerful business analytics tool that assesses how strategic, tactical, or operational changes can impact the business. Through different scenarios, you can perform a real analysis of the processes before putting them into practice. People Analytics can answer questions like:
-How would the manufacturing time be reduced if we doubled the number of people?
-What would the cost/benefit ratio be if we reduce the process time of a specific activity?
-How would altering shifts affect operational costs and service levels?
6. eNPS Employee Net Promoter Score
The Net Promoter Score (NPS) has become the fundamental metric to quantify customer satisfaction for many companies. Along that same line, the mission of having motivated and happy employees also has its metric: the eNPS (employee NPS).
Companies that have achieved substantial improvements in customer experience through the NPS have already begun to apply the same methodology to measure and improve the employee experience. Although fewer studies have been made, they are finding that the eNPS has the same degree of correlation between the metric and company earnings as what they discovered when analyzing the data of the NPS (for customers).
7. Employee Lifetime Value
Employee lifetime value (ELTV) is a prediction of the net profit attributed to an employee through the permanence of that person in a given position. Once again, this metric is taken from marketing. In ELTV, there are normally three metrics: cost, performance, and job abandonment. All three are combined to help you make decisions.
8. Survival and Churn Analysis
Survival analysis, which is widely used in marketing orginated from healthcare. It is generally defined as a set of methods to analyze the time until an event happens. The event may be the death of a patient or the loss of an employee. All have one principle in common: There is a common pattern of deterioration that affects any population. In any single year of our life there is an associated probability that an event will happen. Likewise, in an organization, staying longer than a month is something associated with over 90% of employees. But staying longer than ten years in the same company, only 10%. Survival analysis helps to more accurately segment groups of employees that are above or below an organization's normal survival ratios.
9. RFM Recency-Frequency-Monetary
RFM analysis is a marketing technique used to segment customers using three fundamental metrics: recency, frequency, and monetary value. These three metrics are the most important factors in customer segmentation.
The RFM technique is widely used in the field of marketing, but has not traditionally been applied in any other field. In People Analytics, we have borrowed this technique for the field of commercial segmentation.
10. Segmentation with Clustering
Just like with customers, we can group employees into similar categories to help define loyalty actions that best suit their specific needs. Clustering allows us to segment by real behaviors, based on interests, motivations, knowledge, and attitudes, and not by sociodemographic criteria.
By analyzing the available employee data (performance evaluations, previous experience, surveys, assignments, etc.) clustering algorithms find associations that allow us to group the employees into segments of people who share similar characteristics.
11. Predictive Models for Selection
Several predictive algorithms that have had a long history in marketing are used to help identify the particular attributes of the candidates in order to improve the selection of people in an organization. For example, the variables associated with competencies, learning ability, or motivation contribute to the prediction of which employees will have high levels of performance and loyalty...
12. Predictive Models for Turnover
When a valuable person leaves your company, there is always a loss involved, both economic (the cost of hiring another person and providing all the necessary training that is specific to your organization) and emotional, because of all the ties that that person had created with other co-workers.
Customer loss analysis has been used reliably for marketing. In People Analytics, we have successfully implemented a job abandonment analysis that predicts the potential loss of an employee and the causes that led to it in time to take preventative action.
Takeaways
In order to attract, segment, grow, retain, and reward customers, marketing took full advantage of analytics to fully understand its customer base and optimize the whole customer life cycle and customer relationship management. That's how marketing analytics was born.
Human resources is now going the same route. Many of the techniques that were successfully used over the nearly 30 years of this transformation in marketing are now being implemented in human resources with the same transformative results.
