Employee segmentation

Issue

Every employee is unique, but some employees have more in common than others. Employees who are more similar often want similar things from their work. That makes it useful to distinguish between these groups within your workforce. This is where employee segmentation comes in.

What is employee segmentation?

Employee segmentation is a method by which you place employees in clearly distinguishable groups with similar employees. These groups are also called segments.

Employees are similar regarding certain traits or characteristics, ranging from background variables to characteristics that tell more about what motivates these employees. Often, background variables are already available within the organisation. They include characteristics such as age, gender and position. Other characteristics can be collected through questionnaires, using surveys on topics such as preference for homeworking, passions outside work, communication styles and motivations.

Actually, most organisations already use segments, for instance based on position, salary scale, type of employment or rank. While these sorts of segments also divide employees into groups, they only look at the organisation from a vertical perspective, and it is not a given that the groups of employees they yield are actually more alike. Segments that take a horizontal approach to an organisation provide more valuable insights.

Key conditions for good segmenting include distinguishability, accessibility and stability [Harvard Business Review].

Distinguishability

One can only segment if the differences between groups are visible. If the groups are too similar and indistinguishable, segmentation is not possible.

Accessibility

Next, the groups must be accessible as well. If we cannot explain in which areas the various groups of employees differ, we cannot approach them based on their differences. So to be able to act, it is important to properly understand the outcomes of the analysis.

Stability

Finally, stability is an important factor. We don’t want the segments to be a snapshot of the workforce but to provide sustainable insights over a longer period of time.

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Why employee segmentation?

Any organisation strives to meet its employees’ needs in the best possible way. However, providing every individual employee with their exact individual needs is impossible. On the other hand, no one wants to offer all employees the exact same things either; the famous axiom that ‘one size fits all’ in reality often comes down to ‘one size fits no one at all’.

This is where segments offer a solution, in that they help you strike the right balance between a proliferation of different individual approaches on the one hand and a single, completely uniform strategy on the other. Employee segmentation helps to better distribute employers’ limited resources by ensuring that they end up in the right places, i.e. precisely with those employees where these specific resources create the most value.

Sample applications of employee segmentation in HR

Segmentation is a well-known concept in marketing, where it is often used to distinguish groups of consumers and then approach them by segment. In HR, however, it is still a relatively new method.

Yet, there is a lot of overlap between consumer marketing and people management: both involve studying and interpreting the characteristics and behaviours of people. The only difference is the product: whereas marketing focuses on an actual product sold by a company, in HR the ‘product’ is labour.

An example: suppose that an employee segmentation in HR is based on the question ‘What motivates my employees?’ Suppose that the outcome is that one particular group of employees has a much greater need for flexible working hours, while another group is motivated by tight deadlines. Having a greater understanding of the segments that exist within your organisation will enable you better to appeal to new employees that fit within each of these particular segments.

Starbucks case

An example of large-scale employee segmentation is Starbucks. The company sent out questionnaires to over 140,000 employees to find out what attracted, retained and motivated their employees. From the answers, three distinct clusters of Starbucks employees emerged: employees who work to pursue another passion; employees who value working for a socially responsible employer; and employees who want to have a career at Starbucks. Starbucks used these results in their recruitment campaigns by deploying employees who fit perfectly into these clusters.

Data-cascading methods for employee segmentation

The process of employee segmentation can be divided into three different phases: selecting the most impactful variables from the data, segmenting employees and constructing personas.

Selecting the most impactful variables

In the first step, we look for the most explanatory variables for the analysis, e.g. overarching themes within the data. By doing so, we reduce the number of variables, which drastically improves the model. Once we have prepared the data and chosen the best variables, we can get to work on the actual segmentation.

Segmenting employees

We use clustering-based segmentation. In clustering-based segmentation, the number of clusters is unknown in advance and becomes clear through the clustering process.

The purpose of clustering is to distinguish various clusters of employees that differ vastly on certain characteristics. The employees within each cluster are actually more similar on these particular characteristics.

Constructing personas

Finally, it is important to understand our segments. So we ask ourselves the question ‘What are the main background variables on which these segments differ?’

Using these insights, we eventually construct clear personas for each segment. Personas are concise descriptions of a fictional employee who fits the segment perfectly. They allow us to get a better picture of the segments and to give the employees a face.

How can AnalitiQs help you?

AnalitiQs is specialised in the implementation of employee segmentation and can help your organisation in all thinkable phases of the process, from optimising a questionnaire for data collection on intrinsic motivation values to creating personas for the various segments. All steps are presented to you in clear management reports or through well-organised dashboards.

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