Study Reveals 'People Impact Gap' Costs U.S. Businesses $1.8 Trillion Annually
On October 14, 2022, the People Intelligence Alliance released research indicating that the 'People Impact Gap'—the disconnect between available people data and frontline decisions—costs U.S. businesses approximately $1.8 trillion annually. The estimate is based on research by Marler and Martin across more than 200 companies and extends to approximately 3,000 large organizations in North America.
Vancouver, Canada — Advocating for data-driven organizations, thePeople Intelligence Alliancetoday released new research identifying the “People Impact Gap” — the disconnect between available people data and frontline decisions — estimated to cost U.S. businesses$1.8 trillion annually。
“The cost of the People Impact Gap represents revenue forgone by organizations whose leaders are unable to make better data-driven decisions about hiring, retention, productivity, and employee performance,” said Ian Cook, Managing Director of the People Intelligence Alliance. “Few leaders adopt an evidence-based approach to understanding and activating the employees who make businesses successful. In our research released today, it is clear that business leaders who leverage people data achieve better business outcomes.”
The People Intelligence Alliance conducted this research in August 2022, with cost estimates based on research by Janet Marler, Professor at the University at Albany, and Lexy Martin, a People Intelligence Alliance board member and Principal Researcher at Visier. Marler and Martin studied the use of people data in solving business problems. They collected results from more than 200 organizations and found that organizations with higher levels of capability in applying people data to business problems achieved higher profit margins and higher returns on assets. Top-performing organizations achieved returns on assets 137% higher than their peers. They compared the market average revenue per employee with that of organizations that use people data more maturely in decision-making, finding a gap of $125,000 per employee per year.
The People Intelligence Alliance extended this research to understand the economic scale of the opportunity presented by the People Impact Gap.
In North America, there are 3,700 organizations with more than 3,000 employees. Through a series of studies related to the use of people data in business, the People Intelligence Alliance determined that approximately 700 organizations are currently effectively bridging the People Impact Gap. This means that approximately 3,000 organizations of similar size have not yet applied people data to solving important business problems.
Based on the $125,000 per employee per year revenue difference established in the Marler and Martin research, each organization faces an opportunity of approximately $625 million. If 3,000 organizations were able to bridge their respective People Impact Gaps, the annual impact in North America alone would reach $1.8 trillion.
Organizations such as Providence are demonstrating how business leaders can monetize the capital locked in the People Impact Gap. Providence is a U.S. healthcare system with more than 100,000 employees. The organization leveraged its data on people, different types of work, work experience, and retention patterns to achieve annual savings of $6 million through just one program. This outcome helped increase compensation for a significant number of Providence's hourly workers. In the overall analysis of the program, the organization's financial position improved significantly, and its employees received higher wages.
Cook added: “Although the People Impact Gap is worth $1.8 trillion in economic terms, in the view of the People Intelligence Alliance, its true value is immeasurable. Beyond the financial gains, taking a more evidence-based approach to employees brings very real human benefits. The right way to start bridging the gap is to bring the right business leaders together with HR leaders, focus on a key outcome, and then make the right investments in talent and technology to achieve the goal.”
People Impact Gap Cost Methodology
In August 2022, the People Intelligence Alliance examined organizations in North America with more than 3,000 employees, arriving at a list of approximately 3,700 organizations. Based on survey data from Deloitte,HR.comand Insight222, approximately 700 (18%) of this group have good people analytics maturity. This leaves 3,000 organizations with low or no capability in using people data. The average size of these organizations is 5,000 people. This means 3,000 organizations each with 5,000 employees are missing out on $125,000 in revenue per employee, together representing an economic opportunity of $1.8 trillion.
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About the People Intelligence Alliance
The People Intelligence Alliance is an advocacy body of data-driven organizations dedicated to addressing the “People Impact Gap” in U.S. businesses. This gap stems from a lack of data, exacerbated by complexity, scale, and the physical distribution of teams. People Intelligence Alliance members study this data to inform business leaders on how to seize the opportunity presented by their people data. Their results are reflected in cost savings, revenue gains, and a more people-centric approach to business. To learn more, visitwww.peopleintelligence.org。
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