Author: Sampat Mishra, Posterity Consulting
Gartner expects the market for BigData and analytics to generate $3.7 Trillion in products and services and generate 4.4 million new jobs by 2015. While most of the talk is about applying BigData to marketing and consumer businesses, there is an even bigger opportunity to apply BigData to Human Resources. (We call it Talent Analytics - now renamed to People Analytics)
There are around 160 million workers in the US alone, and most companys' largest expense is payroll. In fact in most businesses payroll is 40% or more of total revenue, meaning that total US payroll expense is many billions of dollars.
How well do organizations truly understand what drives performance among their workforce? The answer: not really very well. Do we know why one sales person outperforms his peers? Do we understand why certain leaders thrive and others flame out? Can we accurately predict whether a candidate will really perform well in our organization?
The answer to most of these questions is no. The vast majority of hiring, management, promotion, and rewards decisions are made on gut feel, personal experience, and corporate belief systems.
This is like the Vice-President of marketing spending millions of dollars on a new marketing campaign because he or she "always does it this way." It's an obsolete way to make decisions.
Let me give you an example
One of our clients, a large financial services company, operates under a belief system that employees with good grades who come from highly ranked colleges will make good performers. So their recruitment, selection, and promotion process is based on these academic drivers.
Several years ago one of their analysts performed a statistical analysis of sales productivity and turnover. They looked at sales performance over the first two years of a new employee and correlated total performance and retention rates against a variety of demographic factors.
What they found was astounding. The results are shown below.
Fig 1: What really matters in sales performance (financial services company)
If you've done a lot of hiring, you know how hard it can be to assess an individual's likelihood of success.
Well, despite a 30 year belief system which made this company successful, data showed a different story. Once this data was put back into the recruiting process, the company saw more than $4M improvement in revenues in the next fiscal period.
Companies are loaded with employee, HR, and performance data. For the last 30 years we have captured demographic information, performance information, educational history, job location, and many other factors about our employees. Are we using this data scientifically to make people decisions? Not yet.