Can HR Do What Amazon Does with Predictive Analytics?
When you shop on Amazon, you are immediately provided with a number of purchase recommendations based on algorithms defined by your previous visits and past purchases. The website predicts:
- what you’ll want to buy,
- what you might buy if prompted to do so, and
- how you’ll respond to their suggestions.
While it’s not quite the same as predictive analytics, it certainly has a measurable impact on Amazon’s ROI.
So how does HR similarly demonstrate an impact on ROI? The two primary ways to do this are to measurably reduce turnover and to measurably improve performance.
Predictive Analytics and Turnover
We all know that there are costs associated with employee turnover, and that reducing turnover is a good thing. But HR departments must do more than just demonstrate a reduction in turnover; they need to be able to identify what is causing turnover and how to reduce that turnover through systematic changes to the organization’s culture. The dated approach of using exit interview data is simply not enough.
Eric Siegel, author of Predictive Analytics, explains how Hewlett Packard’s Flight Risk program employed predictive analytics to determine a correlation between promotion, pay raise, and turnover, allowing them to reduce their turnover rate by 5 percent. A big promotion not accompanied by an appropriate pay raise resulted in attrition.
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Predictive Analytics and Performance
Innovative HR departments are already using analytics to determine sets of skills most likely indicative of best-performing employees, thereby improving who and how they hire. Organizations can take that data a step further, however, and use it to predict productivity issues by identifying positive and negative impacts on performance. This will allow managers to anticipate and mitigate performance challenges before they occur.
According to Bersin, 78 percent of large companies (with 10,000 or more employees) rated HR and talent analytics as “urgent” or “important,” enough to place analytics among the top three most urgent trends, but almost half – 45 percent of the same companies – rated themselves “not ready” when assessing their readiness in HR analytics – among the lowest readiness rankings for any of the 12 global trends.
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Understanding and implementing predictive analytics can be challenging. But employing predictive analytics will:
- positively impact the bottom line,
- improve retention and performance,
- enhance decision making, and
- help companies predict behavior to transform talent management into a science.
No time like now to start down this path.
As the CEO & Founder of East Tenth Group, Michelle leverages 25 years of business and experience as a strategic advisor and executive coach to help drive actionable people solutions and provide practical insights on business strategy to senior leaders. she and her team and are fiercely committed to the development and growth of people and companies because we believe that when people thrive, business thrives.