People Analytics Maturity Linked to Better Financial Performance, Research Shows
Exciting research shows the causal link between people analytics and improving the business performance of enterprise organizations.
In the new book Digitalised Talent Management: Navigating the Human-Technology Interface (published by Routledge), research by Janet H. Marler, PhD., Professor of Management at the University of Albany and Lexy Martin, Principal Research and Customer Value at Visier shows the causal link between people analytics and associated best practices in improving the business performance of enterprise organizations.
Let’s dive deeper into Marler and Martin’s research, and how organizations can use the findings to increase financial success.
People analytics maturity is key to higher financial performance
People analytics maturity is measured by the People Analytics Maturity Index (PAMI). This is the sum of counts and scores of how people analytics is performed, types of users, the role of data in decision-making partners in success, and the degree and extent of change management in an organization.
Marler and Martin found that changes to people analytics maturity have a significant impact: a 10% improvement in PAMI is associated with a 7% return on assets and an 8% increase in profit margin.
Their findings extend a 2020 research study conducted by Visier on the financial impact of people analytics, which found that Visier customers employing people analytics strategies were outperforming their peers in both return on equity and revenue per employee. The report found:
The average return on equity across all industry sectors in the U.S. was 15.4%, however for publicly-traded Visier customers, the average return on equity was 23.6%–more than 50% higher
Similarly, Visier customers generated an average of $125,000 more revenue per employee, resulting in $775,364 per employee, against an average of $650,797
What people analytics maturity means
It’s clear that increasing people analytics maturity is a positive thing. The authors of the article propose that organizations can do this, in part, by increasing the number of user types and data sources, and by improving change management practices. Organizations have the power to collect more workforce information than ever before and democratize this data across the whole organization to improve talent decision-making.
Visier’s own research found organizations that are advanced in their use of people analytics and adoption practices have consistently outperformed their peers in using analytics to improve retention, employee satisfaction, diversity and inclusion, and talent acquisition. This work, plus the broader use by people managers, integration of financial data, and use of change management contribute to an overall economic advantage, with the financial improvement proving to be quite significant.
“This research draws a very clear line between the adoption of people analytics and improved financial impacts, which is what we would expect, given how high-quality information about people can lead to much better decision-making,” said Stacia Garr, Co-founder and Principal Analyst at RedThread Research.
What business leaders can do
Today, HR leaders and people managers are facing a perfect storm of challenges related to a global pandemic and newly distributed teams; a reckoning on race, equality and diversity; and a talent crisis that has made recruiting and retention harder than ever before.
According to Garr: “The need for people analytics increased dramatically over the past year, with more organizations looking to understand their people—and the subsequent financial impact of those people—better.”
Marler and Martin’s research has proven that organizations with strong people analytics and talent management capabilities see better financial performance than their competitors. Without a robust strategy for people analytics, HR leaders and people managers are missing opportunities for substantial business advantage.
How to apply this research to your overall business strategy
Check out this expert roundtable featuring Lexy Martin, one of the authors of this study, Paul Rubenstien (Chief People Officer, Visier), Dave Weisbeck (Chief Strategy Officer, Visier), and Ian Cook (VP, People Analytics, Visier).
The discussion includes actionable takeaways on how to envision people analytics use throughout your business–from the C-suite to individual people managers–and best practices learned from over 7000 Visier customers on building a business case for people analytics and advancing your organization's capabilities with people data.
On the Outsmart blog, we write about workforce-related topics like what makes a good manager, how to reduce employee turnover, and reskilling employees. We also report on trending topics like ESG and EU CSRD requirements and preparing for a recession, and advise on HR best practices how to create a strategic compensation strategy, metrics every CHRO should track, and connecting people data to business data. But if you really want to know the bread and butter of Visier, read our post about the benefits of people analytics.