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People Analytics: Intuition or Insight?

Feature Article | November 13, 2017 by Andrea Diederichs Hot Story

People analytics: For some, it’s a hot potato. For any HR department, including SAP’s, it’s daily routine. Dr. Christian Schmeichel, COO, Global Human Resources, told us what people analytics is all about.

The digital transformation is impacting all aspects of an organization, and HR is no exception. One of the hot trends right now is people analytics, which refers to the systematic analysis of HR data to inform decisions. It’s not surprising that people analytics is causing a certain amount of concern – after all it touches highly sensitive and person-related data. So now is a good time to find out how people analytics is used at SAP and what happens with the insight it provides.

Christian Schmeichel, chief operating officer for Global Human Resources, talked to SAP News.

Q: Why is people analytics such a hot topic for HR right now?

A: It’s not an entirely new concept for us. We’ve been gathering data to help us track our key indicators for years. It’s just that the digital transformation and advances in technology mean that we now have new ways to do this more systematically and easily in practice.

What do you want to achieve with people analytics?

We’re committed to making our HR operations more data-based; for the simple reason that we want to offer better, more tailored services for employees and managers. Being able to draw on a broader reservoir of information helps us turn raw data into “smart data”. To give you an example: Just as online shopping portals work with data-driven personalized product recommendations, we’ll be able to use data to make better training recommendations for employees.

We also want to increase transparency. That means giving decision-makers higher-quality data to support them in managing their organizational units. By doing so, we can help them make their decisions more fact-based; that is, to form as neutral a judgment as possible rather than relying purely on intuition.

Is intuition such a poor judge?

No. On the contrary. But it’s all about getting the right mix. Humans will always do the deciding. But analytics will help them make better decisions because those decisions will be based on rock-hard, neutral facts.

Will employee data be analyzed at individual level?

In order to create better HR programs, it’s neither necessary nor helpful to analyze data at the level of the individual employee. In this context, we work exclusively with datasets that are aggregated and fully anonymized. We do this in full compliance with data protection regulations and with the consent of local and global data protection officers. This is not about analyzing individual data, it’s about uncovering larger data patterns and finding answers to specific questions.

You mentioned just now that you want to use people analytics to create better programs for employees. Could you give us an example?

We have to remember that we’re operating in a highly competitive environment in which we need to stand out as an attractive employer. Employee retention is therefore one of the areas that require special attention.

With this in mind, we recently conducted a pilot project based on predictive analytics with selected groups of employees in APJ and America. Predictive analytics is a subsection of people analytics that allows us to “see into the future”: By uncovering data patterns, it reveals the trends that need careful monitoring. Thanks to predictive analytics, we were able to identify factors that indicate whether employees are more likely to stay at the company or to leave it soon.

This insight helps us tackle unwanted attrition more effectively. One possible response could be to offer employees better, more tailored options for personal development. These might include new learning formats for experts or targeted talent management based on SAP Talk.

How important is people analytics for SAP customers and other companies?

Our customers are increasingly focused on people analytics. It’s just as important for them as it is for us. The fact that we are internally heavily focused on this topic has two main advantages: Firstly, our feedback on the usage of analytic tools directly impacts the development of new features and functionalities, which are then also made available for our customers. We also show our customers how we use our tools internally to help drive people analytics. When HR staff talk directly to HR staff, it makes these sorts of product demos much more authentic. Our internal focus on people analytics thereby benefits our external customers.

Why is people analytics important for early talents?

We are all becoming increasingly familiar with the benefits of digitalization, whatever our age. Online banking, online shopping portals, online streaming services, whenever and wherever. We expect the same result at work as we do in our everyday lives, and why should it be any different? Companies that are focused on “in” topics such as people analytics can be very appealing to early talents, not only because it improves the experience of the working world, but also because it gives employees an opportunity to participate in cool and innovative topics, and help shape the future of work. This is how employers like SAP make themselves more attractive.

Will the time come when algorithms make HR decisions?

That’s a very important question, because it’s something we’re all uneasy about. Clearly, we’re witnessing some pretty impressive technological advances in this area right now. Having said that, I don’t think that in the near future we’ll see a machine or an algorithm making the final decision on the matters we’re discussing here. Rather, we in HR see data analysis as ideal preparation for making a decision because it gives the human decision-maker a solid foundation of factual data on which to base that decision. Intuition and gut feeling are part of that process as well. Those human attributes will always play a role, and rightly so.

What would you say to employees who are not completely at ease with the idea of people analytics?

As I have already mentioned, we focus on data patterns and trends, not on drilling down to the employee level. Another crucial factor is that we are addressing the topic of people analytics in close cooperation with our colleagues in SAP Enterprise Analytics. This means, firstly, that we use SAP’s own tools and therefore follow the corresponding standard processes. And secondly, that global and local data protection officers or workforce representatives are involved at early stage. We are not permitted to analyze data until they give us the go-ahead.

You mention the benefits for employees and managers. But what’s in it for you and your colleagues in HR?

People analytics is an important means to an end, but it is not an end in itself. We want to leverage data to get better answers to the kinds of questions that we in HR typically deal with anyway. Our aim is to do the best possible human resources management. That includes improving the experience of employees who use HR services. After all, at the end of the day, that’s how our success is measured. One of our KPIs in HR is the satisfaction level among our internal customers  ̶  SAP’s managers and employees.

What role will the human touch play in the future?

We have found that effective and innovative HR work requires both the digital and the human touch. You have to combine these two elements to get the best possible result. Technological innovations give us the flexibility we need to do that.

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