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 based on certain traits or characteristics. These can be anything from background variables to characteristics that tell more about what motivates employees. Often background variables are already available within the organization. Consider characteristics such as age, gender and position. Other characteristics you collect through questionnaires. For example, with surveys on topics such as preference for working from home, passions outside work, communication styles and motivations.

Actually, most organizations already use segments. For example, think of segments based on function, job scale, tenure or position. This also divides employees into groups. However, this looks at the organization in a vertical way and it is not a given that these groups of employees also look more alike. Segments, which provide more valuable insights, are created by looking at an organization in a horizontal way.

Important conditions for a good segment include distinctiveness, reachability and stability.

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

Next, the groups must also be reachable. If we cannot explain in which areas the groups of employees differ, then we cannot approach them accordingly. Thus, in order to act, it is important to understand the results of the analysis.

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

An organization wants to provide its employees with what they need as best as possible. Providing each individual employee with exactly his or her needs, however, is impossible. On the other hand, you don't want to offer every employee exactly the same thing. The well-known "one size fits all" is actually more like "one size fits nobody at all.

This is where segments offer a solution, because with them you ensure the right balance between a proliferation of different personal strategies on the one hand and one completely uniform strategy on the other. Employee segmentation helps to better distribute the limited resources employers have by making sure they end up in the right places. Precisely with the employees where the specific resources are most valuable.

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

There is a lot of overlap between consumers and employees. Both involve the characteristics and behaviors of people that we study and try to make sense of. The only difference is the product. Whereas in marketing this is a product that a company sells, in HR it is about the "product" work.

For example, an employee segmentation for HR comes from the question, "What motivates my employees? For example, one group of employees needs flexible working hours much more, while another group gets motivation from tight deadlines. By having a better idea of the segments that exist within your organization, you will know better how to appeal to new employees within certain segments.

An example of large-scale employee segmentation is the case of Starbucks. Starbucks sent out questionnaires to over 140,000 employees to find out what attracted, retained and motivated employees. One result was that three distinct clusters emerged within Starbucks employees. Namely, employees who work to pursue another passion, employees who value working for a socially responsible employer and employees who want to make a career at Starbucks. Starbucks used the results by using employees who fit perfectly into the clusters in their recruitment campaigns!

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

Selecting most impactful variables

In the first step, we look for the variables that are most explanatory for the analysis. For example, we can look for overarching themes within the data. By doing this, we reduce the amount 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

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

The purpose of clustering is to distinguish clusters of employees from other clusters of employees that are very different on certain characteristics. Within clusters, the employees are actually more similar on these certain characteristics.

Constructing personas

Finally, it is important to understand our segments. Here we ask ourselves the question, "What are the key background variables on which the segments differ?

With these insights, we eventually construct clear personas for the different segments. Personas are short descriptions of a fictional employee who fits perfectly into the segment. This way, we get a better picture of the segments and thus give the employees a face.