In recent Insights posts we’ve looked at the role employees play in a business in creating sustainable growth and in giving life to its purpose.
The impact of your employees on your business is undeniable. There’s no shortage of evidence showing highly engaged employees:
Are more productive;
Directly influence customer satisfaction and engagement; and
Have a positive impact on financial outcomes in a business.
We also know that when a business is demonstrably purpose-driven, employee engagement improves.
So it’s important for business owners and leaders to have a deep understanding of the prevailing mood among their employees. And whether the articulated purpose of the business resonates with employees to the point where they'll contribute discretionary effort.
Traditionally, this would be achieved through the use of employee engagement surveys. With the right questions and a deliberateness about following up on the feedback provided, they work well. And they continue to play an important role in measuring engagement levels.
These days there’s another, emerging option. “People analytics” allows a more scientific, data-driven approach to a whole range of employee-related issues including engagement.
For this post, we interviewed Gerhard Diedericks, Owner of Matesis – a business specialising in this relatively new field.
We first asked Gerhard what people analytics is and, just as importantly, what it is not.
“In short” Gerhard says:
“people analytics about making smarter decisions about people. Who to recruit, who to promote, how to structure teams, what kind of development programs and remuneration strategies to put in place.”
The aim is to provide a basis for making these kinds of decisions in a more structured, logical and rational way, so as to minimise the impact of inherent biases.
Gerhard continues, “being smart about people decisions isn’t easy”. In the absence of good evidence, it’s likely that decision-makers will be swayed by a range of cognitive and psychological biases that “make it very difficult to maintain a reasonable degree of objectivity and rationality when it comes to making decisions about people”.
So, in the words of Dan Ariely, a leading social scientist, decision-makers are “predictably irrational” and the avoidance of bias becomes almost impossible.
Gerhard provided this example: “there’s this myth that people don’t leave organisations, they leave managers” he said. There’s so many reasons people move on from a role, but it’s easy to fall back on this myth in search of something or someone to blame. “As a result, many good managers are being subjected to an irrational review process because a star performer leaves” for a reason we can’t be bothered to discover.
In short, we’re “wasting” valuable human capital in a way that would never be allowed with physical capital.
Gerhard suggests businesses would never tolerate “factories standing empty, production lines at half capacity, too little of the inventory they actually need and too much of inventory that’s not required. Yet this is exactly what we see with people – critical roles unfilled, average engagement levels at around 60%, not enough high performers and too many average to low performers.”
That seems to be the norm in businesses today.
If you’re not sure that’s true, think honestly about your own business. Can you hand on heart say your “human capital” is treated with the same sense of value as your “physical capital”?
Honestly?
No…we didn’t think so.
“Being smart about your people decisions is critical for success,” continues Gerhard. He points to the 2020 Ocean Tomo Intellectual Capacity Equity report that estimates:
“90% of the market value of S&P500 companies is made up of intangible assets and the biggest contributor to that is human capital. The knowledge, skills and attributes our people bring to the table. In other words, our people are a pretty big, if not the biggest, source of value for most organisations.”
You’d not think so given the cursory effort many businesses put into really understanding and trying to improve employee engagement.
As we said, people analytics is the emerging discipline that deals with making smarter, and fairer, decisions about people, “delivering better performance outcomes for organisations and greater (and fairer) opportunities for employees. And it does this by applying statistical thinking and a scientific mindset to the ever-increasing volumes of people data.”
With that in mind and given what we know about the impact of business purpose on employee engagement we asked Gerhard how people analytics can help a business that is working on becoming more purpose-driven. He said, “it can help by finding evidence-based answers to questions about the relationship between people and purpose.”
Business owners and leaders might, for example, want to know:
How invested employees really are in the stated purpose of the business;
How motivating that purpose is or is not; and/or
What impact purpose has on employee performance.
“Analytics provides an evidence-based approach around these types of questions that business owners and leaders might otherwise not have, and this will improve their decision-making” said Gerhard. Getting right down to the finest detail, people analytics can also “identify which roles and behaviours in a business have the greatest impact on its ability to fulfil its purpose, and the high-impact moments in those roles that could serve as the basis for purpose-driven talent decisions.”
We were also interested in the extent to which people analytics might be applied in gaining an understanding of how employee investment in the stated purpose of a business might change over time. In answering this question, Gerhard identified three components to a strong business purpose:
Motivational – encouraging a bias for action among employees,
Alignment – giving employees a sense of direction and how their contribution is relevant,
Capability – providing a sense that the skills, knowledge and attributes required to fulfill the purpose are in place.
“People analytics can provide the basis for a continuous listening capability (through surveys, for example) integrating people data with performance and customer data and applying analytical methods to clarify the extent to which the purpose motivates, aligns and enables the workforce.”
In all of this we felt there was a question that needed to be asked.
For some readers, the depth to which people analytics seems capable of digging might all sound and feel a bit “big-brother-ish”. We asked Gerhard how he goes about gathering the information needed for sound decision-making without being seen to be intrusive.
“This is an extremely important question” he said. “People analytics will only have credibility…if it upholds a very high ethical standard. Not every piece of data that can be collected should be collected. Not everything that can be measured should be measured.
"At a very basic level, any personally identifiable information needs to be handled according to required protocols and this is non-negotiable. I would also want to see that People Analytics teams subject proposed studies and data collection strategies to an ethics review.”
We agree those would seem to be sensible safeguards.
It might at first seem that people analytics, given the level of scientific objectivity it brings to people decisions might put the traditional employee engagement survey out of business. “Within the right context and depending on the kind of insights needed, a survey can be a very important and appropriate tool in the people analytics toolbox” said Gerhard.
The first-up challenge for many businesses is to acknowledge the real value that people bring to the table.
Not to simply use catch-cries like “our most important assets walk out the door each evening”, but through action, put people on the same “value footing” as physical capital.
Given the basic human need for your employees to understand how their role contributes to the big picture, clarity of business purpose and making it part of the fabric of the business is an important piece of the puzzle. Keeping tabs on how invested employees are in the business purpose and how engagement levels shift over time (and why) is a key requirement for creating sustainable business growth.
As we’ve highlighted, a big proportion of the value of your business likely rests in your employees.
Do you really know how your employees feel about your business?
Are they helping or hindering your efforts to
achieve a sustainable rate of business growth?
How do you know for sure?
What are you doing to ensure your employees feel as valued as they should?
If this Insight has given you food for thought, you're probably interested in how you can gain clearer insights around employee engagement and its impact on sustainable business growth. That's where GrowthCatalyst can help.
We invite you to contact us to arrange a conversation, face-to-face or virtual.
Alternatively, you can book a time for an initial discussion here.
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