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Is predictive analytics set to replace human intuition?

The hype around data and analytics lead many executives to assume answers to difficult questions.The most hyped one being is predictive analytics set to replace human intuition? Other questions being How much to raise prices? Where to establish a new retail store? Whether one product will beat another? It can be found through aggressive number crunching. However,that doesn’t mean that expert judgment and managerial intuition are obsolete. In fact, the full potential of predictive analytics can be unlocked only when combined with business intuition.

Predictive analytics methods have historically been used by firms to study historical data in order to anticipate opportunity and risk. Analytics have long been utilized by a number of different industries, including financial, marketing and healthcare — consider credit scores, company sales goals, and healthcare plans. There have now been hundreds of studies that prove that simple statistical prediction from an optimal regression equation is much more accurate than intuitive prediction alone. We, humans still need to come up with the hypotheses to be tested, but instead of intuition being the end of it, intuition is just the beginning of the equation, with predictive modeling testing potential interventions.

The most notable of studies included one by Meehl and Grove where they conducted 136 studies into the accuracy of judgment of experienced managers. Initially it was found that in all but 8 cases the power of predictive analytics significantly beat the manager’s intuition.  It was found in a post study review that these 8 losses were due to random sampling errors. So a regression equation beat the manager every single time.

Recruitment

Predictive modeling in HR focuses mostly on finding predictive patterns of employee turnover, performance and workforce planning. Forward looking, it combines algorithms, historical information and data mining to solve problems, realize an outcome or answer a question. The probability an individual or a sub group of employees is likely to resign from a position depends on what mixture of skills, experience and competencies would most likely guarantee a high performing new hire or promotion. With this information, analytics can be applied to predict how successful different courses of action will be.

Learning and development

Predictive analytics can be used to identify wide trends, such as which competencies are easiest to learn, and which skills might benefit a company in the near future. It can also be used on a micro scale, to identify the approaches to training that will most suit a particular employee, and when they will next be ready for a significant learning opportunity.

Talent management and retention

People often don’t have a good grasp of what will really make them happy in a job and what will incentivise them to stay. Predictive analytics can identify trends in when employees leave, factors leading to retention, and how accurate particular answers from employees are likely to be. It can also use existing data to identify how likely particular groups of employees are to resign at any given time, allowing HR and managers to plan interventions.

Organizational change

Habits are the biggest barriers to organizational change. It can be incredibly hard to convince someone, however rational they might be, that the way they have been working is not the best way. Marketing has shown that analytics can identify not just habits but the points when people are most receptive to changing them. This information could be invaluable in planning significant organizational reorganization and business improvement work.

There are plenty of data sets – separation numbers, productivity, absence, engagement and exit survey. The last two are often under-valued for deep analysis as they are not backed by easy formula. Organizations using predictive analytics will gain an edge over those who don’t, and no company can afford to be left behind.

Editor’s note: Learn how human intuition and analytics when clubbed together helps in understanding customer behaviours. Register for the upcoming two-days Big Data Analytics now.

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