HR analytics

Even if you aren’t ready to embrace big data (or don’t need to) there is still an important
role for data and its analysis in the HR function.
Typically, organisations go through a number of phases in developing their analytic
capability. First is standard reporting, eg what is staff turnover, how many people do we
employ, where etc. Second is bespoke descriptive or simple analysis such as ‘if
turnover is high which departments or teams is that in?’, using simple query and
tabulation tools. The next stage might be to investigate whether this is due to the type of
jobs and people being employed in the high turnover parts of the organisation or
whether it is down to poor management which may require some form of statistical tool
such as regression analysis. The fourth stage starts to look forward and involves
predictive analytics where a statistical model could be built showing which people in the
organisation were at risk of leaving. The final stage is to embed the prediction and
modelling directly into a decision process such as whether to employ someone or not.
Organisations can be at different stages for different issues. So, for example, an
organisation can be quite sophisticated at estimating future resource needs through
well-established workforce planning but they may be less good at predicting who are
going to be the best long-term bets from their latest graduate intake.
So if you have lots of data (or just some), what sorts of questions might you ask? How
about ‘what is it that our best managers do that the rest don’t?’ In what is now a well-
known study, Google asked this question in 2009 and a couple of years later had their
answer, which perhaps at face value doesn’t have too many surprises in it, but now they
know the facts based on their own data. The one surprise was perhaps that, even in a
very technical organisation, technical expertise was last in the eight factors they
identified. Unsurprisingly for a data-led organisation, Google does many studies such as
this including determining the optimum recruitment process. They stress though that not
all organisations are like them so other businesses should find their own way through
the analytics world.
In another example of analysis of people-related
The key when looking to develop your HR analytical capability is to start with what the
business is trying to achieve and consider what people-related questions you would
really like to know the answer to. For example, what types of employee sell best to
which segments of customers, or what training methods work best (improve job
performance most) for helping law enforcement employees spot potential threats, or
how do we get a higher hit rate at recruitment for high performing staff. The questions
will depend on your own organisation but successful HR people will increasingly answer
these by drawing on insights from data rather than individual or collective perceptions
(biases).
manipulating and analysing the data. It is also essential that the results are
communicated back to the business in a clear, actionable way. These steps are not
unique to HR but they are challenging for a function which has, to date, not been heavily
data driven and has in many cases yet to develop in some or all of these areas. The

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skills needed to be successful reflect these steps and are an intriguing mix of technical,
commercial and interpersonal. In simple terms they are:
■ translating business issues into data analysis questions
■ gathering, structuring, storing and manipulating data
■ standard analysis of data using simple queries and tabulations
■ analysis using advanced statistics and machine learning (neural networks etc)
■ presenting results back to the business in a clear, compelling way.

Back in the 17th century, John Dryden wrote, “He who would search for pearls
must dive below.” Although the author did not have advanced data analytics in
mind, the quote perfectly describes its essence. Together with ScienceSoft,
let’s find out how deep one should go into data in search of much-needed and
fact-based insights.

Types of data analytics

There are 4 different types of analytics. Here, we start with the simplest one
and go further to the more sophisticated types. As it happens, the more
complex an analysis is, the more value it brings.

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Descriptive analytics
Descriptive analytics answers the question of what happened. Let us bring an
example from ScienceSoft’s practice: having analyzed monthly revenue and
income per product group, and the total quantity of metal parts produced per
month, a manufacturer was able to answer a series of ‘what happened’
questions and decide on focus product categories.

Descriptive analytics juggles raw data from multiple data sources to give
valuable insights into the past. However, these findings simply signal that
something is wrong or right, without explaining why. For this reason, our data
consultants don’t recommend highly data-driven companies to settle for
descriptive analytics only, they’d rather combine it with other types of data
analytics.

Diagnostic analytics
At this stage, historical data can be measured against other data to answer
the question of why something happened. For example, you can check
ScienceSoft’s BI demo to see how a retailer can drill the sales and gross profit
down to categories to find out why they missed their net profit target. Another
flashback to our data analytics projects: in the healthcare industry, customer
segmentation coupled with several filters applied (like diagnoses and
prescribed medications) allowed identifying the influence of medications.

Diagnostic analytics gives in-depth insights into a particular problem. At the

same time, a company should have detailed information at their disposal,
otherwise, data collection may turn out to be individual for every issue and
time-consuming.

Predictive analytics
Predictive analytics tells what is likely to happen. It uses the findings of
descriptive and diagnostic analytics to detect clusters and exceptions, and to
predict future trends, which makes it a valuable tool for forecasting. Check
Science Soft’s case study to get details on how advanced data analytics
allowed a leading FMCG company to predict what they could expect after
changing brand positioning.

Predictive analytics belongs to advanced analytics types and brings many

advantages like sophisticated analysis based on machine or deep learning

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and proactive approach that predictions enable. However, our data
consultants state it clearly: forecasting is just an estimate, the accuracy of
which highly depends on data quality and stability of the situation, so it
requires careful treatment and continuous optimization.

Prescriptive analytics
The purpose of prescriptive analytics is to literally prescribe what action to
take to eliminate a future problem or take full advantage of a promising trend.
An example of prescriptive analytics from our project portfolio: a multinational
company was able to identify opportunities for repeat purchases based on
customer analytics and sales history.

Prescriptive analytics uses advanced tools and technologies, like machine

learning, business rules and algorithms, which makes it sophisticated to
implement and manage. Besides, this state-of-the-art type of data analytics
requires not only historical internal data but also external information due to
the nature of algorithms it’s based on. That is why, before deciding to adopt
prescriptive analytics, Science Soft strongly recommends weighing the
required efforts against an expected added value.

What types of data analytics do

companies choose?
To identify if there is a prevailing type of data analytics, let’s turn to different
surveys on the topic for the period 2016-2019.

For the 2016 Global Data and Analytics Survey: Big Decisions, more than
2,000 executives were asked to choose a category that described their
company’s decision-making process best. Further, C-suite was questioned
with what type of analytics they relied on most. The results were the following:
descriptive analytics dominated (58%) in the “Rarely data-driven decision-
making” category; diagnostic analytics topped the list (34%) in the “Somewhat
data-driven” category; predictive analytics (36%) led in the “Highly data-
driven” category.

The survey findings are in line with ScienceSoft’s hands-on experience as

they show the need for one or the other type of analytics at different stages of
a company’s development. For example, the companies that strived for

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informed decision-making found descriptive analytics insufficient and added
up diagnostics analytics or even went as far as predictive one.

For another survey, BARC’s BI Trend Monitor 2017, 2,800 executives shared
their opinion on the growing importance of advanced analytics. The term
advanced analytics was the umbrella term for predictive and prescriptive
analytics types.

According to the 2018 Advanced and Predictive Analytics Market Research,

advanced analytics was for the first time considered “critical” or “very
important” by a majority of respondents.

Within the BARC's BI Trend Monitor 2019 survey, C-suite still named
advanced analytics among the most important business intelligence trends.

What types of data analytics does your

business need?
To define the right mix of data analytics types for your organization, we
recommend answering the following questions:

 What’s the current state of data analytics in my company?

 How deep do I need to dive into the data? Are the answers to my
problems obvious?
 How far are my current data insights from the insights I need?
The answers to these questions will help you settle on a data analytics
strategy. Ideally, the strategy should allow incrementally implementing the
analytics types, from the simplest to more advanced. The next step would be
to design the data analytics solution with the optimal technology stack, and a
detailed roadmap to implement and launch it successfully.

You may try to complete all these tasks with the efforts of an in-house team.
In this case, you’ll need to find and train highly qualified data analytics
specialists, which will most probably turn lengthy and pricey. To maximize the
ROI from implementing data analytics in your organization, we advise you to
turn to an experienced data analytics provider with a background in your
industry. A mature vendor will share the best practices and take care of
everything, from the analysis of your current data analytics state and selection
of the right mix of data analytics to bringing the technical solution to life. If the

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described approach resonates with you, our data analytics services are at
your disposal.

Predictive analytics has become a popular concept, with interest steadily rising over the
past five years according to Google Trends.

Increasingly often, the idea of predictive analytics (also known as advanced analytics)
has been tied to business intelligence. But are the two really related—and if so, what
benefits are companies seeing by combining their business intelligence initiatives with
predictive analytics? How does business intelligence compare with predictive analytics?

>> Related: The 4 Common Challenges of Predictive Analytics <<

What Is Predictive Analytics?

Predictive analytics refers to using historical data, machine learning, and artificial
intelligence to predict what will happen in the future. This historical data is fed into a
mathematical model that considers key trends and patterns in the data. The model is
then applied to current data to predict what will happen next.

Using the information from predictive analytics can help companies—and business
applications—suggest actions that can affect positive operational changes. Analysts can
use predictive analytics to foresee if a change will help them reduce risks, improve
operations, and/or increase revenue. At its heart, predictive analytics answers the
question, “What is most likely to happen based on my current data, and what can I do to
change that outcome?”

Real World Examples of Predictive Analytics in Business Intelligence

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For many companies, predictive analytics is nothing new. But it is increasingly used by
various industries to improve everyday business operations and achieve a competitive
differentiation.

In practice, predictive analytics can take a number of different forms. Take these
scenarios for example.

Identify customers that are likely to abandon a service or product. Consider a yoga
studio that has implemented a predictive analytics model. The system may identify that
‘Jane’ will most likely not renew her membership and suggest an incentive that is likely
to get her to renew based on historical data. The next time Jane comes into the studio,
the system will prompt an alert to the membership relations staff to offer her an
incentive or talk with her about continuing her membership. In this example, predictive
analytics can be used in real time to remedy customer churn before it takes place.

Send marketing campaigns to customers who are most likely to buy. If your
business only has a $5,000 budget for an upsell marketing campaign and you have
three million customers, you obviously can’t extend a 10 percent discount to each
customer. Predictive analytics and business intelligence can help forecast the
customers who have the highest probability of buying your product, then send the
coupon to only those people to optimize revenue.

Improve customer service by planning appropriately. Businesses can better predict

demand using advanced analytics and business intelligence. For example, consider a
hotel chain that wants to predict how many customers will stay in a certain location this
weekend so they can ensure they have enough staff and resources to handle demand.

How Does Predictive Analytics Work?

An accurate and effective predictive analytics takes some upfront work to set up. Done
right, predictive analytics requires people who understand there is a business problem
to be solved, data that needs to be prepped for analysis, models that need to be built
and refined, and leadership to put the predictions into action for positive outcomes.

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Any successful predictive analytics project will involve these steps.

First, identify what you want to know based on past data. What questions do you
want to answer? What are some of the important business decisions you’ll make with
the insight? Knowing this is a crucial first step to applying predictive analysis.

Next, consider if you have the data to answer those questions. Is your operational
system capturing the needed data? How clean is it? How far in the past do you have
this data, and is that enough to learn any predictive patterns?

Train the system to learn from your data and can predict outcomes. When building
your predictive analytics model, you’ll have to start by training the system to learn from
data. For example, your model might look at historical data like click action. By
establishing the right controls and algorithms, you can train your system to look at how
many people that clicked on a certain link bought a particular product and correlate that
data into predictions about future customer actions.

Your predictive analytics model should eventually be able to identify patterns and/or
trends about your customers and their behaviors. You could also run one or more

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algorithms and pick the one that works best for your data, or you could opt to pick an
ensemble of these algorithms.

Another key component is to regularly retrain the learning module. Trends and patterns
will inevitably fluctuate based on the time of year, what activities your business has
underway, and other factors. Set a timeline—maybe once a month or once a quarter—
to regularly retrain your predictive analytics learning module to update the information.

Schedule your modules. Predictive analytics modules can work as often as you need.
For example, if you get new customer data every Tuesday, you can automatically set
the system to upload that data when it comes in.

Use the insights and predictions to act on these decisions. Predictive analytics is
only useful if you use it. You’ll need leadership champions to enable activities to make
change a reality. These predictive insights can be embedded into your Line of Business
applications for everyone in your organization to use.

Predictive analytics has its challenges but can lead to priceless business outcomes—
including catching customers before they churn, optimizing business budget, and
meeting customer demand. It’s not magic, but it could be your company’s crystal ball.

Bringing It All Together: Using Predictive Analytics to Influence

Business Outcomes

All companies can benefit from using predictive analytics to gather data on customers
and predict next actions based on historical behavior. This information can be used to
make decisions that impact the business’s bottom line and influence results. If you’re
ready to learn more about predictive analytics and how to embed it in your
application, request a demo of Logi Predict.

What is Descriptive Analytics?

Descriptive analytics looks at data statistically to tell you what happened in the past.
Descriptive analytics helps a business understand how it is performing by providing
context to help stakeholders interpret information. This can be in the form of data
visualizations like graphs, charts, reports, and dashboards.

How can descriptive analytics help in the real world? In a healthcare setting, for
instance, say that an unusually high number of people are admitted to the emergency
room in a short period of time. Descriptive analytics tells you that this is happening and
provides real-time data with all the corresponding statistics (date of occurrence, volume,
patient details, etc.).

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What is Diagnostic Analytics?
Diagnostic analytics takes descriptive data a step further and provides deeper
analysis to answer the question: Why did this happen? Often, diagnostic analysis is
referred to as root cause analysis. This includes using processes such as data
discovery, data mining, and drill down and drill through.

In the healthcare example mentioned earlier, diagnostic analytics would explore the
data and make correlations. For instance, it may help you determine that all of the
patients’ symptoms—high fever, dry cough, and fatigue—point to the same infectious
agent. You now have an explanation for the sudden spike in volume at the ER.

What is Predictive Analytics?

Predictive analytics takes historical data and feeds it into a machine learning model
that considers key trends and patterns. The model is then applied to current data to
predict what will happen next.

Back in our hospital example, predictive analytics may forecast a surge in patients
admitted to the ER in the next several weeks. Based on patterns in the data, the illness
is spreading at a rapid rate.

What is Prescriptive Analytics?

Prescriptive analytics takes predictive data to the next level. Now that you have an
idea of what will likely happen in the future, what should you do? It suggests various
courses of action and outlines what the potential implications would be for each.

Back to our hospital example: now that you know the illness is spreading, the
prescriptive analytics tool may suggest that you increase the number of staff on hand to
adequately treat the influx of patients.

In summary: Both descriptive analytics and diagnostic analytics look to the past to
explain what happened and why it happened. Predictive analytics and prescriptive
analytics use historical data to forecast what will happen in the future and what actions
you can take to affect those outcomes. Forward-thinking organizations use a variety of
analytics together to make smart decisions that help your business—or in the case of
our hospital example, save lives.

In 2014, Gartner placed prescriptive analytics at the beginning of the Peak of Inflated
Expectations in their Hype Cycle of Emerging Technologies. According to Gartner, it will
take another 5-10 years before prescriptive analytics will be common in boardrooms

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around the world. But what is prescriptive analytics, how can we use it and how can it
help organizations in their decision-making process?

Prescriptive analytics can be seen as the future of Big Data. If we see descriptive
analytics as the foundation of Business Intelligence and we see predictive analytics as
the basis of Big Data, than we can state that prescriptive analytics will be the future of
Big Data. Earlier, I already explained the difference between these three types of
analytics, but let’s have a small recap: descriptive analytics means looking at historic
data, ranging from 1 minute ago to years ago. It can be compared as looking in the rear
mirror while driving. Predictive analytics means using all that data to make a prediction
about where to go; it is the navigation that tells you how to drive and when you will
arrive. Prescriptive analytics is the self-driving car, that knows exactly what the best
route is based on infinite data points and calculations. Not surprisingly, Google’s self-
driving car makes extensive use of prescriptive analytics.

Prescriptive analytics uses the latest technologies such as machine

learning and artificial intelligence to understand what the impact is of future decisions
and uses those scenarios to determine the best outcome. With prescriptive analytics it
becomes possible to understand and grasp future opportunities or mitigate future risks
as predictions are continuously updated with new data that comes in. Prescriptive
analytics basically offers organizations a crystal ball. Prescriptive analytics will become
really powerful when it has developed into a stage where decision makers can predict
the future and make prescriptions to improve that predicted future, without the needs for
Big Data scientists.

Although prescriptive analytics is really still in its infancy, we see more and more use
cases being developed. Also several Big Data startups focus especially on prescriptive
analytics. The most well know is Ayata. They use patented software to predict what is
going to happen, when it is going to happen and why it is going to happen. They focus
primarily on the oil and gas industry, but there are more use cases of prescriptive
analytics. Prescriptive analytics is used in scenarios where there are too many
variables, options, constraints and data sets. Without technology it is too complex for
humans to efficiently evaluate those scenarios. Also when experimenting in real-life is
too risky or expensive, prescriptive analytics can come to rescue. Let’s have a look at
three of the possible use cases:

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Travel and Transportation Optimization
A key characteristic of prescriptive analytics is the need for many large data sets. The
travel industry is therefore an industry that sees a lot of potential in the latest addition of
analytics. Online travel websites, such as airline ticketing services, hotel websites or car
rental websites, have turned to prescriptive analytics to sift through multiple complex
iterations of travel factors, purchase and customer variables such as demographics and
sociographics, demand levels and other related data sources to optimize their pricing
and sales.

Other applications in the travel industry are segmenting (potential) customers based on
multiple data sets to understand how to spend the marketing dollars. More accurate
targeting of course results in higher conversion rates and to be able to make detailed
segments, a lot of different variables are required. The InterContinental Hotel Group for
examples uses 650 variables to determine the best price/product combination for the
right customer.
Another use case of prescriptive analytics is route optimization for the logistics
industry. UPS is the best example of this and be analysing and combining hundreds of
data source can push 10.000s route optimizations per minute to all of their trucks. This
saves the company millions of dollars on fuel a year.

Oil Production Through Fracking

In the past years, fracking has taken an enormous flight, especially in the United States.
In 2013 alone, $ 31 billion was spent on suboptimal frack stages across 26,100 U.S.
wells. In order to know where to frack, make the process safer and to optimize the
fracking process, massive data sets (up to petabytes of data) are required. Data sets
such as sounds (of fracking and drilling), images (seismic, well logs), videos (cameras
monitoring the fracking and sensors measuring all kinds of variables), text documents
(notes by drillers) and other kinds of data have to be analysed in real-time to
recommend the most optimal fracking location and process in order to have the best
result.

Improving the Healthcare Industry

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Also the healthcare industry deals with massive amounts of different data sets that need
to be analysed. When healthcare providers combine data sets such as patient records,
medicine information, economic data, demographical and sociographical data, health
trends, hospital data etc. they will be able to offer better healthcare for less money, they
will be able to improve future capital investments for new facilities or hospital equipment
and improve the efficiency of hospitals.

Combining so many different data sets can also be used to offer doctors
recommendations in the best possible treatment for a patient. Thanks to combining and
analysing multiple data sets, the Aurora Health Care Centre was able to improve
healthcare and reduce re-admission rates by 10%, thereby saving $ 6 million annually.

Also pharmaceutical organizations can benefit from prescriptive analytics by improving

their drug development and reduce time-to-market for new medicines. Drugs
simulations can improve medicines faster and it becomes easier to find the right patient
for clinical trials based on multiple variables.

Prescriptive analytics is the future of Big Data, but it is still a long way away before it will
be common language. The potential is enormous, but it also requires massive amounts
of data to be able to make correct decisions. Only a handful of organizations and
industries have that amount of data and data sets to make something useful out of it
with prescriptive analytics. However, in 5-10 years will be as normal as Business
Intelligence today.

Image Credit: TairA/Shutterstock

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