People data: The risks, rewards and opportunities for businesses

25 Oct 2018

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Employee data analytics is growing rapidly, offering new opportunities to better hire, manage, retain and optimise the workforce, writes Deloitte’s Andrea Fouche.

We are witnessing seismic changes in the workforce, the workplace and the technologies used in the world of work. Based on Deloitte’s 2018 Human Capital Trends survey of more than 11,000 business and HR leaders across 140 countries, we believe that a fundamental change is underway.

The use of workforce data to analyse, predict and improve performance has exploded in practice and importance over the last few years, with more growth expected. In our Global Human Capital Trends survey, 84pc of respondents viewed people analytics as important or very important, making it the second-highest-ranked trend in terms of importance.

But what explains this surge? We see three converging forces:

  1. A growing emphasis on workforce issues such as productivity and employee engagement is raising CEO-level questions about the best way to manage people.
  2. Big HR investments in people analytics are yielding many new sources of data, with more than 70pc in the midst of major projects to integrate data into decision-making.
  3. Organisations are growing more anxious about their ability to protect employee data. This year, only 10pc of our respondents felt that their companies were ‘very ready’ to deal with this challenge.

The power of people data

The people data revolution has finally arrived. 69pc of organisations are building integrated systems to analyse worker-related data. Leading companies are monitoring people data from many sources, including social media (17pc), surveys (76pc), and integrated data from HR and financial systems (87pc). Creative organisations are mining this rich variety of sources to create a comprehensive ‘employee listening architecture’, providing new insights about the employee experience as well as job progression, career mobility and performance.

Advanced analytics can now track and analyse a dizzying amount of employee data, including data harvested from voice communications, personal interactions and video interviews. Even the sentiment of employee emails can now be measured and monitored, with several vendors now offering organisational network analysis (ONA) software that interprets email traffic to monitor stress levels and help spot fraud, abuse and poor management.

Risk v reward

Analytics tools offer tremendous opportunities but, in the face of the benefits, many executives may be slow or reluctant to recognise the potential risks. Organisations are approaching a tipping point around the use of people data, and those that tilt too far could suffer severe employee, customer and public backlash.

Some organisations are now considering the mere existence of data to be a risk. This is behind requirements in the European Union under the new General Data Protection Regulation (GDPR), which came into effect in May 2018, requiring organisations to delete personal data immediately when no longer relevant. Companies that do not comply could face penalties as high as €20m or 4pc of annual turnover – creating strong incentives to take data protection seriously.

But what risks are most pressing in our 2018 survey? This year, 64pc reported that they are actively managing legal liability related to their organisations’ people data. 60pc said that they were concerned about employee perceptions of how their data is being used. However, with only a quarter reporting that their organisations were managing the impact of these risks on their consumer brand, fears over employee privacy appear justified.

Emerging concerns

Data security is a long-standing risk, but there are new risks as well. Some experts worry that algorithms and machine-based decisions could actually perpetuate bias due to flaws in the underlying data or algorithm itself. Understanding the potential for this type of risk is critical to preventing a new source of bias from seeping into an organisation’s hiring or promotion processes.

The marriage of people data and algorithm-based artificial intelligence (AI) raises such concerns to a new level. Just as people may never know why a certain advertisement pops up on their web browser, business leaders are beginning to realise that data-driven decisions are not guaranteed to be understandable, accurate or good.

Even advanced technology companies such as Facebook and Twitter have discovered that AI without humans can be “stupid”. As such, HR organisations must be rigorous in monitoring ‘machine-related’ decisions to make sure they are reasonable and unbiased.

Protecting your people data

Despite the potential risks, the promise of people analytics remains too valuable for organisations to pass up. For example, GE, Visa, IBM and others are developing a suite of analytics tools that find ‘non-obvious’ job candidates and recommend training. GE’s HR analytics team is using data that tracks the “historical movement and relatedness of jobs” to help employees identify potential new opportunities across the company, regardless of business unit or geography.

We predict explosive growth in the coming year for smart products that leverage employee data. The spectrum of risks associated with the use of data can and should be effectively managed. Strategies such as anonymisation and encryption can allow organisations to make effective use of people data while managing the risks associated.

It is now clear that companies using people data and analytics, and vendors that provide these services, need robust policies, security and open communication to address the risks. These elements should work together to create a secure organisational context for the use of people data – one that reduces the likelihood of leakage, error and abuse.

One important aspect of managing the risk of people data analytics is to know where all personal data resides. Mapping the flow of personal data to and from systems, especially those connected to analytics engines, is essential for creating transparency and proper protections.

Organisations need to understand the trade-offs involved in the accelerating collection and use of employee and workforce data. Most have good intentions, but these troves of data also raise significant risks. Companies must be vigilant about data quality, security and the accuracy of machine-driven decisions. While this is a relatively new challenge for HR, it is rapidly, and rightly, becoming a top priority.

By Andrea Fouche

Andrea Fouche is a manager in the Human Capital team within Deloitte’s consulting department. She has nine years’ experience helping clients drive business effectiveness through people and performance consulting within both the private and financial services sectors. She has a deep interest in the future of work and the implications thereof for organisations, individuals and communities.

Deloitte is now calling all HR and business leaders to participate in the 2019 Global Human Capital Trends survey, available here.