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Predictive Analytics for Human Resources
Jac Fitz-enz, John R. Mattox II · 2014
In a sentence
A practical, step-by-step guide to applying descriptive, predictive, and prescriptive analytics to human capital so HR can uncover the causal drivers of workforce outcomes and connect talent decisions to business value.
Written by the father of HR metrics, Jac Fitz-enz, and analytics practitioner John Mattox, this book demystifies predictive analytics for human resources by showing that analytics is first a logical mental framework and only second a set of statistical operations. Through a running case study of the 'Retain & Grow' talent initiative, it walks readers from gathering efficiency, effectiveness, and outcome data, through descriptive dashboards, correlation, regression, and structural equation modeling, all the way to predicting individual productivity and profitability. It teaches not just the statistics but the salesmanship, sponsorship, change management, and questioning discipline needed to build an analytics unit or culture, sell it to the C-level, and turn disparate data into actionable business intelligence. Grounded in frameworks like the Talent Development Reporting Principles and Boudreau and Ramstad's optimization model, it argues that people are best measured not as inert assets but through the efficiency, effectiveness, and outcomes of their processes—and that the future of HR belongs to those who can 'manage tomorrow today.'
The four lenses
- Science
- Statistics
- Systems
- Strategy
The model
A causal model expressing how HR design levers and questioning discipline shape talent conditions and psychological/behavioral states, which are captured as efficiency and effectiveness measures and drive business outcomes such as productivity and profitability. Follows the Design Levers/Conditions -> Psychological & Behavioral States -> Outcomes structure, grounded in the book's efficiency-effectiveness-outcomes framework and its correlation/regression case.
Analytic Questioning Disciplinedesign lever
The front-end practice of asking logical, relevant questions to isolate the true problem and its purpose before running any statistical analysis, clearing away bias and irrelevancies.
Data Infrastructure and Qualitycontextual condition
The availability, ownership, standardization, format, and cleanliness of human capital data across disparate systems, which determines whether meaningful analysis is feasible at all.
Executive Sponsorship and Salesmanshipcontextual condition
The degree of C-level support, championing, and persuasive selling of analytics that secures resources, access to data, and organizational buy-in for talent analytics initiatives.
Talent Development and HR Program Investmentdesign lever
The resources HR invests in recruiting, onboarding, training, coaching, and development matched to assessed skill gaps to build workforce capability.
Hiring Efficiencybehavioral pattern
The speed and cost with which open positions are filled, including time to fill, cost to hire, and salary associated with positions, reflecting process efficiency in talent acquisition.
Workforce Competency and Speed to Competencybehavioral pattern
The extent to which new hires possess required technical and business competencies and how quickly they reach a minimum performance threshold on the job.
Employee Engagementpsychological state
The psychological state in which employees feel they are thriving, valued, challenged, and contributing to the organization's mission, reflecting fulfillment of needs for trust, hope, worth, and competence.
Employee Performance Ratingbehavioral pattern
Manager and sponsor judgments of individual performance and potential, typically captured on a nine-box scale at 90 days and 365 days, distinguishing high, capable, and low performers.
Employee Retention and Turnoveroutcome metric
Whether employees stay with or voluntarily depart the organization, with turnover concentrated among high performers being especially costly to replace.
Workforce Productivityoutcome metric
The amount of billable or output-generating work employees perform relative to time worked, a primary behavioral outcome linking talent quality to business results.
Business Profitabilityoutcome metric
The ultimate financial outcome, computed from productivity and salary, representing the bottom-line value that human capital generates for the organization.
How they connect
- analytic questioning discipline → influences business profitability
- data infrastructure quality → moderates workforce productivity
- executive sponsorship → moderates talent development investment
- talent development investment → predicts workforce competency
- hiring efficiency → predicts workforce productivity
- workforce competency → predicts workforce productivity
- employee performance → predicts workforce productivity
- employee engagement → predicts employee retention
- employee engagement → correlates workforce productivity
- workforce productivity → predicts business profitability
- employee retention → influences business profitability
- employee performance − influences employee retention
The process
The book's overall operating playbook guides Human Resources professionals in transforming their function from a cost center focused on descriptive reporting to a strategic partner that uses predictive analytics to drive business value. The playbook begins with securing executive sponsorship by framing analytics initiatives in terms of top-level business priorities like revenue growth and profitability. Once buy-in is achieved, the next phase involves establishing a formal, dedicated analytics unit with the right structure, standardized metrics, technology, and reporting architecture. The core of the playbook is a detailed, end-to-end process for executing predictive analytics projects. This technical process moves from defining a critical business problem and collecting the right data to applying statistical models like regression to uncover the key drivers of outcomes such as productivity and retention, ultimately enabling data-driven talent decisions that optimize organizational performance.
Gain Executive Support for an Analytics Initiative
To secure the necessary funding, resources, and organizational backing for an HR analytics project or the formation of a dedicated analytics function.
When to use: When launching a new predictive analytics initiative that requires significant investment or a shift in organizational strategy.
Step 1Research C-level priorities and top-of-mind issues.
Entry: An idea for an analytics project has been formulated.
Exit: The project's potential value is clearly aligned with a known executive priority.
In: Company strategic plans, Executive communications · Out: Alignment of the analytics proposal with a key business issue
Step 2Recruit a sponsor or champion from the executive team.
Entry: The project's value proposition is defined.
Exit: An executive has agreed to act as a sponsor for the initiative.
In: Project proposal · Out: Executive sponsorship
Step 3Prepare a compelling business case and sales pitch.
Entry: A sponsor is in place.
Exit: A complete presentation is ready for the C-level decision-makers.
In: Pilot project data (if available), Market research · Out: Presentation deck, Business case document
Step 4Deliver the sales pitch to decision-makers.
Entry: A meeting with C-level executives is scheduled.
Exit: A decision on funding and approval for the initiative is made.
- Approve or reject the proposal.
In: Business case, Presentation · Out: Approval and funding for the analytics initiative
Establish an HR Analytics Function
To build a permanent, dedicated analytics unit within the HR organization to provide ongoing, actionable intelligence to the business.
When to use: After receiving a mandate from senior management to create a formal analytics capability in HR.
Step 1Formulate the unit's vision and goals.
Entry: Executive mandate to create an analytics unit is secured.
Exit: A formal vision and set of goals for the unit are documented.
In: Executive mandate · Out: Vision statement, List of goals
Step 2Establish standard definitions for metrics.
Entry: Vision and goals are defined.
Exit: A documented set of standard HR metrics is approved.
Out: Standard metrics dictionary
Step 3Design new reporting formats and schedules.
Entry: Standard metrics are defined.
Exit: Templates for new reports and dashboards are approved by users.
In: Stakeholder feedback · Out: Report and dashboard templates
Step 4Establish the database architecture.
Entry: Reporting needs are defined.
Exit: A functional data architecture is in place.
In: Data requirements · Out: Integrated database
Step 5Acquire and implement technology tools.
Entry: Database architecture is established.
Exit: Analytic tools are installed and functional.
In: Budget · Out: Analytics technology stack
Step 6Staff the team and design project workflows.
Entry: Infrastructure is in place.
Exit: A skilled team and defined operational processes are established.
Out: Staffed analytics team, Standard operating procedures
Step 7Launch, test, and refine outputs.
Entry: Team and processes are in place.
Exit: Initial set of analytics products are validated and in use.
In: User feedback · Out: Validated reports and analyses
Step 8Implement and continuously monitor the function.
Entry: Initial products are validated.
Exit: The analytics function is fully operational and has a continuous improvement process.
Out: A fully functioning HR analytics unit
Execute an HR Predictive Analytics Project
To use data and statistical methods to answer a specific business question, predict future talent-related outcomes, and provide actionable recommendations to improve performance.
When to use: When a specific business problem or opportunity has been identified that can be addressed through data analysis.
Step 1Define the business problem and scope the analysis.
Entry: A business problem has been identified as a candidate for an analytics project.
Exit: A clear research question and a list of required data types are defined and agreed upon with stakeholders.
In: Business problem statement, Stakeholder input · Out: Completed logic model, List of Key Performance Indicators (KPIs)
Step 2Gather and prepare the data.
Entry: KPIs and data requirements are defined.
Exit: A clean, validated, and integrated dataset is ready for analysis.
In: Data from HRIS, finance systems, etc. · Out: A single, clean data file for analysis
Step 3Conduct descriptive and exploratory analysis.
Entry: A clean dataset is available.
Exit: A clear understanding of the data's characteristics and initial patterns is established.
In: Cleaned dataset · Out: Dashboards, Descriptive statistics reports
Step 4Build and test predictive models.
Entry: Exploratory analysis is complete and hypotheses are formed.
Exit: A statistically valid predictive model (e.g., a regression equation) is created.
- Which variables to include in the final model.
In: Cleaned dataset, Hypotheses · Out: Predictive model, Statistical test results (e.g., r-squared, p-values)
Step 5Interpret the model and generate actionable insights.
Entry: A predictive model has been validated.
Exit: A set of clear, data-driven insights and recommendations is formulated.
In: Predictive model · Out: Actionable insights, Business recommendations
Step 6Report findings and apply the model.
Entry: Insights and recommendations are formulated.
Exit: Stakeholders have received the findings and the model is being used to inform decisions.
In: Actionable insights · Out: Executive presentation, Predictive scores for new cases
The story
The reader An HR, talent, or learning professional (or analyst/manager) who wants to add measurable value to their organization and earn credibility with business leaders.
External problem
HR generates activity and cost reports but cannot connect talent decisions to business outcomes like productivity, retention, and profitability.
Internal problem
They feel overwhelmed, ignorant, or powerless in a world of Big Data and fast computers, fearing they lack the statistical expertise to be taken seriously.
Philosophical problem
Running HR on anecdote and biased, out-of-date speculation while ignoring available data does a disservice to the organization and its shareholders.
The plan
- Clarify vision, brand, and culture and ask logical questions to define the true problem and its purpose.
- Identify and gather efficiency, effectiveness, and outcome metrics, securing data ownership and quality.
- Display data in descriptive dashboards and reports, then relate it to internal and external forces.
- Build predictive models using correlation, regression, or structural equation modeling to find causal drivers.
- Sell the effort to the C-level with a sponsor and translate insights into financial outcomes and prescriptions.
Success
- HR provides actionable, financially framed intelligence that executives use for decision making.
- Talent inputs are optimized to improve productivity, retention, and profitability.
- The analyst gains credibility, a seat at the table, and possibly a permanent analytics unit or culture.
- The organization avoids costly bad hires, wasted training, and disengaged workers by managing tomorrow today.
At stake
- HR remains a report-generating mill vulnerable to staff and budget cuts.
- Costly, redundant 'mosquito-swatting' at recurring problems wastes scarce resources.
- Bad hires, ineffective leaders, and high turnover erode competitive advantage and shareholder value.
- Suboptimized or embarrassing outcomes that can cost someone their job.
Chapter by chapter
ch08p01Epilogue (part 1/3)
The epilogue reflects upon the critical importance of leveraging predictive analytics in human capital management to drive organizational efficiency and effectiveness.
ch08p02Epilogue (part 2/3)
The chapter explores the efficacy of various hiring sources and methods through the lens of predictive analytics, highlighting the essential role of data-driven insights in human resources decision-making.
ch08p03Epilogue (part 3/3)
Prediction in the realm of human resources and analytics is fraught with uncertainty; yet, as we harness the power of data, the future of organizations will be redefined through intelligent insights that leverage human potential alongside technological advancement.
- Historical predictions about technology serve as cautionary tales underscoring the fragility of forecasting; organizations must blend imagination with data.
- Future organizational success hinges on the ability to leverage predictive analytics effectively within HR processes.
- The concept of the Lorenz attractor illustrates how complex hiring patterns can be modeled, revealing insights crucial to talent management.
- Automation will revolutionize HR roles, shifting focus from administrative functions to strategic human capital planning.
Questions this book answers
- Where do I start with human capital analytics and what tools do I need?
- What should HR measure, and how do efficiency, effectiveness, and outcome metrics relate?
- How do you move from descriptive reporting to predictive and prescriptive analytics?
- How do you gather, own, clean, and analyze human capital data across disparate systems?
- How do you sell analytics to the C-level and build an analytics unit or culture?
Glossary
- Analytic Questioning Discipline
- The rigor with which an organization asks logical, relevant front-end questions to isolate the true problem and its business purpose before undertaking statistical analysis.
- Data Infrastructure and Quality
- The availability, standardization, integration, format suitability, and cleanliness of human capital data required to perform valid analysis.
- Executive Sponsorship and Salesmanship
- The degree of C-level support, championing, and persuasive selling that secures resources, data access, and buy-in for analytics initiatives.
- Talent Development and HR Program Investment
- The resources HR devotes to recruiting, onboarding, training, coaching, and development, ideally matched to assessed individual skill gaps.
- Hiring Efficiency
- The speed and cost of filling open positions, encompassing time to fill, cost to hire, and associated salary.
- Workforce Competency and Speed to Competency
- The extent to which employees possess required technical and business competencies and how rapidly new hires reach a minimum performance threshold.
- Employee Engagement
- The psychological state of thriving, feeling valued, challenged, and connected to the organization's mission, reflecting fulfillment of needs for trust, hope, worth, and competence.
- Employee Performance Rating
- Managerial and sponsor judgments of individual performance and potential distinguishing high, capable, and low performers.
Related in the library
- People Analytics Data to Decisions
- The New HR Analytics: Predicting the Economic Value of Your Company's Human Capital Investments
- 12_ The Elements of Great Managing
- Armstrong's Handbook of Strategic Human Resource Management
- First, Break All the Rules_ What the World_s Greatest Managers Do Differently
- Fundamentals Hrm Bauer
Tools these methods power