People analytics comes to the fore as layoffs loom

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If there’s one positive to come out of the mass firings at Twitter, it’s that Elon Musk has drawn attention to how things should – or definitely shouldn’t – be done when it comes to restructuring a workforce. Since taking the helm at the social media giant, Musk has laid off half the workforce in a dramatic – and seemingly haphazard – fashion.

Twitter isn’t the only company to be in the news with mass lay-offs; many other tech companies, and other industries, are also going through a similar process. At such times, people analytics really comes to the fore, ensuring that decisions are based on data, and not the instincts of a charismatic leader – or anyone else’s gut feel. And in such times, people analytics experts have the opportunity to bolster their circle of influence.

The current wave of restructurings has been expected and was predicted by Crunchr’s CEO Dirk Jonker at the beginning of the year. In a thought leadership piece, which was published in February, he wrote how he doubted there was a Great Resignation occurring. Rather, he explained, this was a catching up of the job moves that would have occurred if there hadn’t been a pandemic. Companies that were responding to fears of a Great Resignation, and making rash hiring decisions, would soon come to regret it when the economy took a turn for the worse, he wrote. And that is where we find ourselves now, in a challenging macro-economic environment where companies are now having to make tough decisions. 

Unlike Musk’s approach of a seemingly arbitrary approach to restructuring the company, people analytics can inform business decisions with data, and also have an impact on the income statement. If we take a step back and revisit Economics 101, it is not just focusing on the bottom line – by cutting the costs of the workforce – that can improve a company’s financials; they can also focus on the top line. People analytics can help with this and improve a company’s revenue.

For business leaders that are choosing to focus on the top line, they need to ask the right questions about how to increase revenue and increase their sales capacity. Some questions to ask their people analytics teams could be: Who are our best commercial people? What are the best hiring channels? And for the talent you already have: Do we retain our best sales folks and what is driving this retention (pay, career opportunities, etc.)? If it is career opportunities: what is the promotion rate i.e. how long are people waiting on average for a promotion? By infusing sales data, core HR data, and recruitment data into your analytics solution, you can find out.

Finally, you will unfortunately also need to look at cost savings and the people that will be impacted by them. That means HR can use people analytics to answers questions such as: What is the cost impact of a hiring freeze? If we need to reduce the number of managers: where in the org is the span of control too low? Or where in the organization have SG&A ratios grown out of place? The output of these analyses could unfortunately even lead to forced lay-offs, but at least the analytics ensure that there is a clear business rationale behind it rather than gut feel.

These are just some of the questions you can ask of your data in order to improve your organization’s top and bottom line and demonstrate how people analytics can improve a company’s income statement even in the most challenging of economic times.

Written by

Ralf Bovers

Head of Marketing