They're Watching You at Work

What happens when Big Data meets human resources? The emerging practice of "people analytics" is already transforming how employers hire, fire, and promote.
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Peter Yang

In 2003, thanks to Michael Lewis and his best seller Moneyball, the general manager of the Oakland A’s, Billy Beane, became a star. The previous year, Beane had turned his back on his scouts and had instead entrusted player-acquisition decisions to mathematical models developed by a young, Harvard-trained statistical wizard on his staff. What happened next has become baseball lore. The A’s, a small-market team with a paltry budget, ripped off the longest winning streak in American League history and rolled up 103 wins for the season. Only the mighty Yankees, who had spent three times as much on player salaries, won as many games. The team’s success, in turn, launched a revolution. In the years that followed, team after team began to use detailed predictive models to assess players’ potential and monetary value, and the early adopters, by and large, gained a measurable competitive edge over their more hidebound peers.

That’s the story as most of us know it. But it is incomplete. What would seem at first glance to be nothing but a memorable tale about baseball may turn out to be the opening chapter of a much larger story about jobs. Predictive statistical analysis, harnessed to big data, appears poised to alter the way millions of people are hired and assessed.

Yes, unavoidably, big data. As a piece of business jargon, and even more so as an invocation of coming disruption, the term has quickly grown tiresome. But there is no denying the vast increase in the range and depth of information that’s routinely captured about how we behave, and the new kinds of analysis that this enables. By one estimate, more than 98 percent of the world’s information is now stored digitally, and the volume of that data has quadrupled since 2007. Ordinary people at work and at home generate much of this data, by sending e-mails, browsing the Internet, using social media, working on crowd-sourced projects, and more—and in doing so they have unwittingly helped launch a grand new societal project. “We are in the midst of a great infrastructure project that in some ways rivals those of the past, from Roman aqueducts to the Enlightenment’s Encyclopédie,” write Viktor Mayer-Schönberger and Kenneth Cukier in their recent book, Big Data: A Revolution That Will Transform How We Live, Work, and Think. “The project is datafication. Like those other infrastructural advances, it will bring about fundamental changes to society.”

Some of the changes are well known, and already upon us. Algorithms that predict stock-price movements have transformed Wall Street. Algorithms that chomp through our Web histories have transformed marketing. Until quite recently, however, few people seemed to believe this data-driven approach might apply broadly to the labor market.

But it now does. According to John Hausknecht, a professor at Cornell’s school of industrial and labor relations, in recent years the economy has witnessed a “huge surge in demand for workforce-analytics roles.” Hausknecht’s own program is rapidly revising its curriculum to keep pace. You can now find dedicated analytics teams in the human-resources departments of not only huge corporations such as Google, HP, Intel, General Motors, and Procter & Gamble, to name just a few, but also companies like McKee Foods, the Tennessee-based maker of Little Debbie snack cakes. Even Billy Beane is getting into the game. Last year he appeared at a large conference for corporate HR executives in Austin, Texas, where he reportedly stole the show with a talk titled “The Moneyball Approach to Talent Management.” Ever since, that headline, with minor modifications, has been plastered all over the HR trade press.

The application of predictive analytics to people’s careers—an emerging field sometimes called “people analytics”—is enormously challenging, not to mention ethically fraught. And it can’t help but feel a little creepy. It requires the creation of a vastly larger box score of human performance than one would ever encounter in the sports pages, or that has ever been dreamed up before. To some degree, the endeavor touches on the deepest of human mysteries: how we grow, whether we flourish, what we become. Most companies are just beginning to explore the possibilities. But make no mistake: during the next five to 10 years, new models will be created, and new experiments run, on a very large scale. Will this be a good development or a bad one—for the economy, for the shapes of our careers, for our spirit and self-worth? Earlier this year, I decided to find out.

Ever since we’ve had companies, we’ve had managers trying to figure out which people are best suited to working for them. The techniques have varied considerably. Near the turn of the 20th century, one manufacturer in Philadelphia made hiring decisions by having its foremen stand in front of the factory and toss apples into the surrounding scrum of job-seekers. Those quick enough to catch the apples and strong enough to keep them were put to work.

In those same times, a different (and less bloody) Darwinian process governed the selection of executives. Whole industries were being consolidated by rising giants like U.S. Steel, DuPont, and GM. Weak competitors were simply steamrolled, but the stronger ones were bought up, and their founders typically were offered high-level jobs within the behemoth. The approach worked pretty well. As Peter Cappelli, a professor at the Wharton School, has written, “Nothing in the science of prediction and selection beats observing actual performance in an equivalent role.”

By the end of World War II, however, American corporations were facing severe talent shortages. Their senior executives were growing old, and a dearth of hiring from the Depression through the war had resulted in a shortfall of able, well-trained managers. Finding people who had the potential to rise quickly through the ranks became an overriding preoccupation of American businesses. They began to devise a formal hiring-and-management system based in part on new studies of human behavior, and in part on military techniques developed during both world wars, when huge mobilization efforts and mass casualties created the need to get the right people into the right roles as efficiently as possible. By the 1950s, it was not unusual for companies to spend days with young applicants for professional jobs, conducting a battery of tests, all with an eye toward corner-office potential. “P&G picks its executive crop right out of college,” BusinessWeek noted in 1950, in the unmistakable patter of an age besotted with technocratic possibility. IQ tests, math tests, vocabulary tests, professional-aptitude tests, vocational-interest questionnaires, Rorschach tests, a host of other personality assessments, and even medical exams (who, after all, would want to hire a man who might die before the company’s investment in him was fully realized?)—all were used regularly by large companies in their quest to make the right hire.

The process didn’t end when somebody started work, either. In his classic 1956 cultural critique, The Organization Man, the business journalist William Whyte reported that about a quarter of the country’s corporations were using similar tests to evaluate managers and junior executives, usually to assess whether they were ready for bigger roles. “Should Jones be promoted or put on the shelf?” he wrote. “Once, the man’s superiors would have had to thresh this out among themselves; now they can check with psychologists to see what the tests say.”

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