Have you been tasked with proving the ROI of your people analytics program? Start here.
Traditional return on investment (ROI) calculations often fall short in capturing the full value of people analytics. While efficiencies and cost savings are important, they represent a narrow view of people analytics' potential and value.
If you've been asked to defend your people analytics business impact, you must start with a broad approach before diving into the weeds. These 3 mindsets are just the beginning, but they're critical.
Traditional ROI calculations typically focus on two components: estimated savings through system efficiencies and reductions in attrition, or faster time-to-fill job postings. While these metrics are useful, they can be misleading.
Establishing a direct cause-and-effect relationship is tricky. For example attributing savings from reduced attrition doesn't tell the whole story, especially in a volatile job market. Additionally, measuring people analytics effectiveness may require factoring in the cost of implementing advanced technologies.
So it's important to reinforce that the value of people analytics infiltrates the entire workforce experience and efficiency, which should not be measured strictly in financial terms.
The mission of people analytics is to foster continuous improvement in talent decisions, leading to better organizational outcomes. So people analytics should be evaluated based on its ability to drive better talent decisions across the organization. This broader perspective encompasses not only financial outcomes, but also benefits various stakeholders, including employees, customers, and the community.
By focusing on the overall impact on organizational effectiveness and stakeholder satisfaction, people analytics can be seen as a critical driver of long-term success. This approach encourages investments that enhance the quality of talent decisions and support the organization's strategic goals.
A more practical and effective approach to measuring people analytics value is through a 3-pronged framework:
By focusing on key users and high-impact deliverables, this model ensures people analytics teams align and prioritize their efforts to meet organization needs.
Of course, these are just the beginning steps in the complex task of assessing the effectiveness of your people analytics program. If you're ready to dive into the specific metrics and tools that will help you make a solid case for people analytics based on data, we're here to help.
Download our comprehensive guide, Measuring the Value of People Analytics. You'll discover the various lenses you need to look through when calculating people analytics ROI in general, as well as specific formulas for key metrics. Plus, you'll see how we calculate the value of a small people analytics portfolio based on the value-utilization framework.