Employee Segmentation
One of the core requirements in marketing and product development is an understanding of the target market of potential customers. Typically a firm will have several target groups, known as segments.
The days of ‘one size fits all’ approaches is over. Segmenting the workforce is important, especially in tough economic times as it enables you to be as effecient and effective as possible, getting resources and initiatives to those most likely to respond / benefit.
There are several ways to segment employees:
Segments based on observable traits
This is the most common way organizations segment their workforce, but it is also probably the least effective. (This approach has similarities to demographic segmentation which has fallen out of favour in customer marketing). Examples of this type of segmentation would be segmentation based of location, gender, grade etc.
Segments based on workforce criteria and behaviours
More effective is segmenting based on criteria such as high performers or those with critical skills. You might also want to segment based on recorded behaviours such as recent job change or overseas assignment. What this type of segmentation does help with is enabling the firm to focus on what is important to it. What it doesn’t show is what is important to the individual concerned.
Segments based on employee needs
Segmentation based on groups of employees with similar needs is necessary if you want to influence employees. If you subscribe to the view that employees are free agents and only choose to stay if they feel that what you offer is better than their alternatives (and we do) then the implication is that you need to understand their needs, and actively work towards meeting them. Furthermore, for recruitment purposes you need to create an offer which fulfils unmet needs in the market.
The majority of customer segmentation techniques these days have customer needs as a foundation, mostly because it’s been found to be the most effective. In an ideal world you’d be able to offer a unique offer to each group (often called mass customisation) but a good intermediate step is to offer a manageable number of propositions to targeted groups. To do so you need to be able to break your target group into manageable segments who share similar needs.
What makes a good segment?
Distinct and Identifiable – segments need to be sufficiently different to make it worthwhile developing separate approaches.
Reachable – you have to be able to target them directly (see note below)
Stable – they segments themselves should be constant. This is not the same as them comprising the same individuals; employees will move between segments as their lives and careers change
Valuable – the groups have to be useful in enabling you to target messages & actions. A segmentation where you need to use the same approach with each segment isn’t useful. For this reason you often need to segment for a particular purpose
Overcoming issues with reaching employees
Reverse Segmentation
Reverse segmentation is a technique where the segmentation is based on something like need which is hard to see and then mapped onto identifiable attributes. First you create targeting units based on groups with the same combination of identifiable factors (eg if you use Gender (2), Grade (say 5 levels), Business unit (4) and function (6) then the number of targeting units is 2x5x4x6=240). You map your need, or need group onto each targeting unit and then use a clustering technique to group the targeting units into manageable segments.
Reverse segmentation enables you classify each individual in a meaningful way, taking observable traits and understanding when to target messages based on needs.
Legal issues don’t have to be a barrier
In some locations the legal environment means you have to treat employees equally. This often results in reinforcing the ‘one size fits all’ approach to HR. It doesn’t have to.
Think of the way advertising works. An advert will be designed for a target group but can be seen by many (think broad advertising such as TV or outdoor). What the advertiser does is ensure that the message is appealing to the target group, the others will likely ignore it (we are all great at ignoring advertising that isn’t relevant).
The smart HR person in these markets uses a similar technique – make an ‘offer’ that is appealing to the target group but make it available to all. Non-target groups will not find it interesting and therefore ignore it and target groups will be attracted to it.
UPDATE, June 2020
We’ve published a new article that goes into more detail about how to segment employees.