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In 2021, nearly 95% of business leaders said people analytics elevated human resources, according to a Society for Human Resource Management report. But, three years later, deriving value from people analytics — which refers to using data to evaluate human resources processes and employee metrics like productivity, diversity and retention — remains challenging for HR and company leaders.
“There’s certainly been a lot of expectations,” said Stacia Garr, cofounder and principal analyst at RedThread Research. “I would not fully agree, though, that it has not fulfilled expectations.”
Still, she admits that using people analytics effectively can be a struggle for some organizations, which in turn impacts the technology’s market and how companies perceive its value.
The people analytics technology market reached $8.1 billion in 2023. It’s growing, but RedThread Research recently reported growth slowed to 36% this year, down from 50% last year. Net Promoter Scores, or how likely a customer is to recommend their people analytics vendor, also declined.
Here, people analytics experts explain some of the challenges companies face using the technology and what 2025 may hold.
Is People Analytics Living Up to Expectations?
A 2024 survey by The Josh Bersin Company found that while about three-quarters of organizations are investing in people analytics teams and technology, just 10% said they’re consistently achieving the highest level of impact with them.
“I think there are plenty of examples of evidence where it has definitely delivered,” said Heather Whiteman, an associate teaching professor at the University of Washington Information School, who specializes in people analytics. “But, I think there are plenty of people who’ve tried it and not been successful, also.”
She said there was a jump in use and understanding of people analytics during and shortly after the pandemic. “We saw so many people realize, maybe for the first time, just how little they understood about their workforce,” Whiteman said.
Many of those organizations sought data insights, but not all of those attempts were successful, she said. Lately, the draw of people analytics has started to level out.
Whiteman said there’s often a “mismatch of expectations” when companies adopt people analytics. Some incorrectly believe it’s a product they can purchase that will automatically improve the business, but she said people analytics is a mindset, a tool and an approach. Organizations need to use the data to drive decisions, consistently measure performance and make adjustments.
“The companies who are treating it like a magic pill, they’re surprised when it doesn’t work,” Whiteman said.
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The Challenge of Deriving Value from People Analytics
To do people analytics well, HR teams need access to tools and data, but too often, “HR has to justify why it needs data, which I think is a failure,” said Richard Rosenow, vice president of people analytics strategy at One Model.
“The biggest challenge is accessing your data, creating a common data architecture and then being able to get those in the right tools, in the right hands,” he said. “That requires investment in HR.”
The Josh Bersin report shows only 9% of organizations integrate people, operational, work and sales data, and have standardized metrics across the business. Also, just 6% of people managers have the skills to analyze and explain data, and only 12% of organizations offer data interpretation training.
Many HR leaders who’ve been in the industry for a while have “an immense amount of knowledge and insight,” but not always the data skills necessary to use people analytics to make business decisions, Garr said.
Organizations also don’t always have clear goals for adopting people analytics, Whiteman said. “The right approach would be, ‘I’m trying to fix this problem, or we have this opportunity. Somebody go use people analytics to tell me everything that I need to know so I can make the smartest decisions to get what I need to get this outcome.’”
Another issue is that organizations sometimes don’t fully understand their people analytics tool’s capabilities and their true value. RedThread’s report found that 90% of vendors offering the technology claim to include artificial intelligence capabilities, but only 40% of customers believe the AI delivers.
Related Article: HR Tech Investments Aren't Delivering. Technology Isn't the Problem
People Analytics in 2025
Much of the people analytics data and information “remains siloed,” according to the Josh Bersin report. To prevent this, the research suggests transitioning to “systemic business analytics,” which prioritizes, quantifies and addresses important business challenges to enable faster decision-making. For example, this approach could provide insights into specific issues like where a company should build a new distribution center or which characteristics its most successful managers have.
The report suggests that companies that embrace systemic business analytics are three times more likely to exceed financial targets, eight times more likely to achieve high workforce productivity, four times more likely to engage and retain employees, and nine times more likely to adapt to change.
In the new year, more focus will likely be on AI and what’s “under the hood” of people analytics technology, Garr said. “A lot of what gets done, particularly people analytics tech and AI, is data engineering. It's building the models; it's a lot of stuff that just isn't readily apparent on the surface.”
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She believes that in the coming year, more vendors will work on data engineering, structure and governance — “the stuff that’s necessary for where we’re going in the next three, four, five years.”
RedThread’s recent research shows about half of people analytics technology vendors invest in security, accuracy and the ethical and responsible use of AI, but their approaches are evolving, and they’re focused on enabling greater data transparency.
Rosenow says organizations should ensure their HR and people analytics teams have access to high-quality data, that the data is set up properly and that there’s a clear blueprint for how the data is managed. This ensures they can pull out the insights they need to make decisions that impact the business.
“In 2025, I'm hoping some of those upstream pieces get solved, corrected and start to flow properly,” Rosenow said. “That way, once the river is unjunked, the water flows properly, and the waterfall then starts to happen.”
The bottom line is that for people analytics to truly deliver, HR and people analytics teams must be able to come up with data-driven solutions to problems, Garr said. “A people analytics leader being able to say, ‘Hey, I have thought about your problem, and I can help you in this way’ will be incredibly powerful in showing the value.”
