How to Identify Future Leaders with Talent Analytics
Talent analytics enables organizations to gain incredible insights into their workforce. One of the best applications of this type of analytics is identifying and nurturing potential leaders for your organization. Organizations that are ahead of the game use advanced talent analytics to answer to engage, motivate, and retain future leaders.
How are you making decisions about the talent in your organization? Are you guessing what the best approach is, or do you actually know? What information are you using to make decisions about who the future leaders are at your organization? How are you creating tools that motivate your employees?
Organizations utilizing advanced talent analytics understand the exact science and data behind developing leaders and making talent-related decisions.
If you want to maximize your workforce’s potential, it would be good to understand what talent analytics is and how it can help your organization build a solid leadership pipeline.
What is talent analytics?
Emilio J. Castilla, Professor of Management at the MIT Sloan School of Management, defines talent analytics as “a data-driven approach to improving people-related decisions to advance the success of not only the organization but also of individual employees.” Let’s break that down a little bit more.
To simplify it, think of a regular basketball match. The coach, alongside their analytics team, will have defined the exact shots that each player needs to take, how to manage each player’s fitness, and when to initiate substitutes. The objective of this would be to help players maximize their strengths and improve on their weaknesses.
The basketball team will also have a repository of advanced analytics of prospects (such as college or school players). There will also be data analyzed on coaching efficiency and tactics. This application of analytics in basketball is precisely how you should apply it to talent in your organization.
Talent analytics is often interchangeably used with people analytics or human resources (HR) or people analytics. However, by doing this, it creates a distraction from extracting the real value of talent analytics. HR analytics and people analytics often include employee vacation data, sick leave, salary benchmarks, etc. While talent analytics do have some of these metrics, it is distinct in three ways:
- Talent – It focuses specifically on ‘talent’. A study by McKinsey revealed that 5% of roles in the organization create 95% of the value. Talent analytics thus analyses the entire workforce and deep dives to identify and develop the 5% of individuals that contribute significant value to the organization. Further data analysis also distinguishes between technical leaders (i.e., specialists) and line managers (generalists).
- Motivation – Through software, it gathers insights into an organization and what motivates employees (low, medium, and high potential employees). It allows organizations to understand both the extrinsic and intrinsic motivation of their workers.
- Engagement – Talent analytics also focuses on engagement. It analyses various aspects, such as salary, job, role, engagement levels, and net promoter score (NPS).
It’s a multi-faceted field that should always be driven by the “why” question. Far too often, talent analytics is done as a tick-box exercise instead of a purposeful initiative to improve an organization’s bottom line.
To maximize the usefulness of talent analytics, always link it to business goals and objectives.
Benefits of talent analytics for identifying future leaders
The benefits of talent analytics span as far as an organization is creative and purposeful with the data it collects. Furthermore, it benefits organizations in the following ways:
- Identifying top performers and high potentials – Talent analytics helps identify groups of people that are high performing and have high potential. It helps understand these individuals’ habits, identify leadership competencies and potential gaps, and thus inform decisions for any interventions needed. Talent analytics assessments generally include motivators, unexplored strengths, personality traits, workplace behavior, and engagement score. The outcomes of these can help leaders create opportunities for this group of employees.
- Improved succession planning – Talent analytics also allows you to effectively plan for succession in terms of who will replace people in key positions. A success plan can affect revenue growth when approximately 70% of key positions have replacements ready. As a rule of thumb, you should have three replacements/successors per role. Talent analytics allows for this to be organized on a large scale.
- Filling leadership gaps – Based on multiple sources of data (work history, performance, tenure, social interactions), talent analytics aids you to understand who the future leaders of your organization are. You can conduct various analyses under this category, including team analytics, job-fit studies, and internal and external benchmarking.
Talent analytics is not about having large sets of data, but rather how you utilize this data to make decisions. Gartner found that only 21% of HR leaders believe their organizations are effectively using talent analytics to shape their people management strategies.
Below are companies that have maximized their talent analytics practices:
Google made use of productivity and employee feedback data to get an understanding of employee behavior in the workplace, as well as their workers’ skills. Through comparing this data with productivity metrics, they learned how different leadership styles impacted engagement and productivity at their organization. They were able to identify desirable manager behaviors and used their findings to develop and improve (future) managers’ skills.
One of the key talent analytics metrics is retention. At Visier, through the use of sophisticated data models, they could predict the likelihood of an employee resigning. The indicators of resignation were measured by analyzing metrics such as remuneration, career development, and learning opportunities. The insights of their talent analytics helped them in two ways.
First off, it helped inform which employees were high talent and what type of retention method worked best. Second, they used advanced analytics by measuring things such as ‘recent change in role’, ‘year-on-year salary change’ to inform them of potential resignations and thus plan for succession more effectively.
ArcelorMittal wanted to identify talent gaps in the organization, source for potential successors, and identify future leaders. They used a talent analytics approach that combined performance and personality data to achieve this.
Firstly, they piloted the ArcelorMittal’s University with 300 high potential individuals to understand the different learning styles and motivators in the organization. They also developed a multi-rater assessment tool, which included leadership competencies and rules for leaders to follow. The assessment was distributed online and helped individuals and leaders work on their strengths and weaknesses. The results of the assessment also helped ArcelorMittal develop competencies and an interview guide for future recruits.
Useful talent analytics metrics
Talent analytics provides various models and techniques to identify the next generation of leaders. Below are some of them:
Performance & potential
One of the most useful metrics to identify leadership talent is using the 9-Box Grid. It divides employees into nine groups based on performance (how well they perform in their current role) and potential (how likely they are to perform in the future). Leaders on the 9-box grid generally fall under the “Future Stars” or “Stars” box. Employees identified in these boxes need to be given growth opportunities through job rotations and project management.
Average time since last promotion
It is important for employees and particularly high potential employees to understand growth opportunities within the organization. This can be a factor as to why high potential employees are leaving or why the net promoter score is low. It is also a yardstick for HR professionals to measure the effectiveness of the organization’s development programs.
You can also check your company’s internal promotion rate. The formula to calculate an internal promotion rate is:
Promotion Rate = (Number of promotions / Headcount) x 100
This assesses your potential leaders after a period of development to determine if they are ready for a more advanced role. It measures the competencies critical to success in leadership positions. The baseline data used is internal and external benchmarking of what it takes to be an effective leader. It is also used to diagnose the strengths and development areas for future leaders.
This type of analytics allows you to measure who people in the organization interact with. By visualizing and dissecting formal and informal relationships, you’re able to shape conversations that contribute to your talent development. You can achieve this through organizational network analysis (ONA), which identifies critical relationships in your organization and identifies communication barriers. The outcome of this analysis allows you to make better-informed decisions of interventions and development opportunities.
For example, a leading regional bank in the Asia Pacific successfully used ONA to understand the networking within their existing talent pool and identify employees who could be considered to be added to the bank’s high potential program.
Impact of leadership development plans
Organizations often spend millions on employees’ leadership development plans (such as MBA programs, executive development interventions) without understanding the return on investment. Your analytics strategy should enable you to measure the effectiveness of these plans. A typical analysis of ROI on a leadership development plan would include:
- 360-degree feedback from subordinates, managers, and clients.
- Feedback from participants on the effectiveness of the program.
- Other metrics include job satisfaction, client satisfaction, productivity, costs, and innovation.
Your talent analytics strategy will likely include a combination of metrics. To determine which metrics are important to measure, always understand what you are trying to achieve. For example, if you want to improve retention of your high potential employees, you might want to use turnover analytics to analyze risk of loss/flight risk.
Smart organizations also take the time to have a deep dive into their data. While it helps to have an organization-wide view of your talent, it helps to drill deeper into your data into departments, sub-departments, teams, and then individuals. The use of talent analytics software will help with this process.
Over to you
Understanding your business goals enables you to apply talent analytics in a way that helps you identify future leaders for your organization. This, in turn, allows you to create strategies to develop and prepare them to assume leadership roles.
If you want to learn more about people analytics and future-proof your HR skill set, check out our People Analytics Certification Program!