Thinking Like an Economist

Google’s pioneering use of data more than a decade ago to improve how the company found, engaged and retained employees helped popularize people analytics for human resources.

But you don’t need to be a tech giant to incorporate analytics into your hiring and HR practices, according to workforce industry economists speaking at a session titled “The Real Economics of HR Technology: Using Big Data to Drive HR Decision Making” during the HR Tech Conference on Wednesday.

In fact, employers that aren’t using analytics to improve recruiting and other aspects of people management put themselves at a distinct disadvantage. A tight labor market that is intensifying competition for workers, technological innovation, the evolution of how work gets done and changing labor demographics make it imperative to plan for the future, and analytics are the best way to do that, economists said.

“CHROs have to think like economists,” said Ahu Yildirmaz, co-head of ADP’s Research Institute. Not just CHROs, but the entire C-suite should be using data to understand how best to allocate talent resources to optimize their workforce and increase margins, said Yildirmaz, who produces ADP’s monthly employment reports and other research.

Smaller employers might not have the budget to hire a data scientist. But they can use analytics built into existing payroll, applicant tracking or core HR management systems applications to test hypotheses about workforce practices to see if the data that results bear them out, said Andrew Chamberlain, chief economist at Glassdoor, the jobs and employer review site.

In addition to internal analytics, economists urged HR teams to track macroeconomic trends and use benchmarking and publicly available data for decisions and planning. When Glassdoor recently investigated changing benefits for its own employees, the company looked up academic research on organizational psychology. Instead of simply changing offered benefits based purely on costs, “we looked at the psychology of what people really care about that would drive satisfaction,” Chamberlain said.

In particular, panelists suggested organizations use analytics to track employees’ skills and matching that data against external job growth forecasts to identify types of skills or positions they’ll need to develop in the future to fill any gaps. Using analytics to pinpoint people for internal training gives employees a chance to grow, costs less than hiring from the outside and could create new roles within HR, such as learning managers, said Josh Wright, chief economist at iCIMS, a producer of talent-acquisition software.

Incorporating outside data sources into workforce analytics also makes it easier to show a hiring manager that a talent problem they’re dealing with isn’t specific to the company but a part of a larger trend, said Tara Sinclair, an associate professor of economics at George Washington University and senior fellow at the Indeed Hiring Lab. That, in turn, could help facilitate a discussion about aspects of the situation the hiring manager might be willing or able to change, she said.

Michelle V. Rafter is a Portland, Ore., business reporter covering workplace issues and technology. To see her tweets from #HRTechConf follow @MichelleRafter.