Skip to main content
The rise – and risks – of people analytics

By Naemi Groh

People analytics can use the power of data to improve how organisations identify, attract, develop, and retain talent. However, awareness of the associated legal risks is crucial.

Already, algorithms are used in almost all areas of life – be it robotics, self-driving cars or medical diagnostics. Everyday working life is also increasingly data-driven, although many organisations still make HR decisions based on instinct and intuition. But HR departments, too, are feeling the effects of  digitization. Advances in technology and AI mean that increasingly complex algorithms are solving business problems and classic HR issues faster and more innovatively. “People analytics” is becoming one of the most popular buzzwords in HR. 

What is people analytics?

But what is people analytics? In short, people analytics is the application of digital tools and algorithms to people-related data. The aim is to extract ‘actionable insights’ to improve people management processes and enhance operational capabilities (eg through increased efficiencies, cost reductions and risk mitigation). 

While progress has probably been slower than expected, this type of data analysis has become an essential part of people management. 

While 71 per cent of the more than 10,000 interviewed business and HR leaders saw people analytics as a high priority in their organisations according to Deloitte’s Global Human Capital Trends Report 2017, this number had already risen to 84 per cent in 2018, according to Deloitte’s 2018 report, and is expected to continue to increase. 

People analytics tools

As interest in people analytics has grown, the number of tools to filter, connect and analyse data has increased proportionally. 

For example, a technology has been developed, which – with the help of AI – identifies patterns in spoken and written language and derives linguistic, psychological and communication-related features from them. Put simply, the tool identifies and decodes text patterns to assess communicative and individual competencies and character traits. The tool is predominately used in recruiting, with applicants asked to take part in an automated telephone interview with 15 minutes of random questions asked by a computer. Applicants’ answers are then analysed against around 5,000 voice samples to prepare a personality profile. 

Another tool analyses communication data in real-time to understand how people work and to uncover patterns, aiming to help better decisions around organisational health, workplace strategy, and business process optimisation. To collect the relevant data a so-called “sociometric badge” is used. Employees carry around this badge, which has sensors to measure the frequency and duration of face-to-face interactions and can track employees’ movement. Together with other e-mail and chat communication data and data on, for instance, lightbulb usage, results can help optimise communications between different divisions or the use of certain parts of an office building.

People analytics – legal risks

Despite such seemingly endless – and tempting – possibilities, organisations must be aware of the legal risks associated with the introduction and use of people analytics tools. Compliance with local statutory laws is crucial, in particular:

  • data protection requirements (eg under GDPR);
  • labour laws (eg information and consultation rights of employee representatives); and
  • anti-discrimination regulations (eg in relation to potentially biased algorithms).

Companies should also consider the wider implications of such technology or risk serious resistance from employees and/or works councils. 

While the benefits of people analytics are alluring, the risks include severe reputational damage, hefty fines, claims for damages and even criminal charges. Employers should introduce safeguards and compliance mechanisms to reduce the chances of data leakage and abuse.

Naemi Groh

By Naemi Groh

Associate, Germany

Naemi advises national and international clients in all fields of collective and individual employment law.


Further insights on the future of work