HR Metrics That Matter
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The document discusses HR metrics that are important for companies to track. It begins with an agenda covering the five W's and one H of metrics, mini case studies, industry analysts' outlook, and the top 10 metrics that matter. The presenter then discusses interviewing executives to understand the metrics they watch and how HR can help provide useful data. Examples are given for collecting relevant HR data and metrics from across the organization and correlating it to business goals. The importance of creating dashboards to monitor metrics is also covered. Mini case studies from other companies share the top metrics their executives find most useful and how they track HR's impact on the business.
HR Metrics That Matter
- 1. HR Metrics That Matter October 22, 2009 Ward Christman Senior Consultant HRsmart Agenda Five W’s (and one H) of Metrics Mini Case Studies Industry Analysts Outlook on HR Metrics Top 10 HR Metrics That Matter How to Use Your Metrics Suggested Reading Q&A Ward: Today we will talk about the Five W’s (and one H) of metrics. We will discuss case studies on what other companies do to measure HR programs. We will look at industry analysts and HR metrics. We will talk about the top 10 HR metrics that matter and tips on how to use metrics.
- 2. About the Presenter Ward Christman, Sr. Consultant Ward joined HRsmart as a Senior Consultant in 2002 bringing over 50 clients to the HRsmart family since then. Prior to HRsmart, Ward was the founder and President of JOBNET.c om, one of the first employment sites on the Internet (launched as a BBS in 1992). A Widener University engineering graduate, Ward has been active for over 15 years in many local and national Human Resource organizations such as SHRM, PHRPS, NHRA and IHRIM. http://www.linkedin.com/in/wardchristman About HRsmart HRsmart provides a fully-integrated Talent Management Application suite, which includes applicant tracking, performance management, learning management, career development and succession planning in a single unified platform. HRsmart helps organizations of all sizes attract, identify, develop, motivate and retain top performers. HRsmart is headquartered in Richardson, Texas with operations in the United States, Europe, Canada, Latin America, South Africa, Australia and the Middle East. I have been with HRsmart for seven and a half years working on e-recruiting and Internet-based HR solutions. I am passionate about HR metrics and helping people manage their talent through technology. I help measure the effectiveness of the HR programs you use. Poll #1 Your Role I would like to start out with a poll. What is your role? It looks like most of you are HR generalists but there is a split between groups.
- 3. Poll #2 Company Size What size organization do you work with? It looks like there is an even split there too. The good news is HR metrics can work in any size company. What is a Metric? Noun • A standard for measuring or evaluating something; basis for assessment Adjective • Of or relating to the meter or the metric system Source: Dictionary.com What is metrics? If you look at the delivery of the word, it bases on the metric system. International companies use standard date and time formats.
- 4. Why HR Metrics? HR Metrics is Evolving 1990 1995 2000 2010 Metrics Benchmarking Analytics Prediction Goal: Use metrics to make HR a key asset of the business decision support system. Source: HRsmart HR metrics has been evolving since the 1990s. Benchmarking analytics is about prediction. If you use metrics to help predict the future with confidence, you will be a sought-after adviser with a key seat at the table. Many organizations are looking at how to get the executives’ attention. Top Talent Management Impacts on EBITA Money, Money, Money “Top performing talent management organizations posted earnings before interest, taxes and depreciation, and amortization (EBITDA) that are 15% higher than peer companies.” Source: Hackett Group Research - HRO Magazine; May/June 2007 This is research from Hackett group. Though not that recent, it still holds true, particularly with the slack economy today. It is all about the EBITDA. It is all about the money. For top-performing talent management organizations this is the data executives will often set up to improve EBITDA. It could improve as high as 15%. HR metrics help your company perform better.
- 5. Gartner's Model for Types of Workforce Analytics Solutions Source: Gartner, Inc, Defining Workforce Analytics by James Holincheck, 13 November 2008 There is research from about a year ago from Gartner, a leading top analyst in the industry. If you look at HR metrics for measuring the workforce, workforce analytics is an important part of that. There are different roles needed, but look for ways to engage in decision support, a role typically played by HR analytic professionals. Engaging in decision support can help your organization be more effective. Which HR Metrics? Goal: Find metrics that can align talent with business strategy. Example: Workforce Planning Why is it HOT? • Increased Focus on Internal Mobility and Promotions • Introduction of Career Planning and Career Maps • Debut of Predictive Hiring Workforce Internal Recruiting Planning Mobility Source: HRsmart You want HR metrics that align talent with the business strategy. With the economy today, the focus has been on internal mobility and promotions. It has been about helping people map out their career. Combining recruiting and internal mobility gets you to workforce planning because it helps you predict hiring. If you look at workforce planning as a strategic part within HR metrics, it will help you define which HR metrics to look at.
- 6. Tying HR to the business Capital = Assets available for use in the production of further assets Human Capital Management value curve Retention Performance Value Productivity Loyalty Service Efficiency Source: Knowledge Infusion Tactical Strategic Let us look at tying HR to the business. A recent analysis by Knowledge Infusion plots the value with the tactical versus strategic. You want to move up the strategic arrow towards performance and retention. To do that, you want to leverage the capital in the organization. Capital is the CFO’s language for assets available for use in producing further assets you manufacture. You need people who run the machines and the company. Like most companies now who recognize workers, your organization’s main capital are the people working for you. It is important to use the word human capital as much as possible. Speak the language of your executives. Poll #3 Maturity Level With that, we have another poll. Where do you see your group fitting into current metrics? Looking at the results, almost half of you do the basics and that is great. For those doing the basic and regular HR metrics, pay attention to the top 10 recommendations I will soon give you.
- 7. Who needs to be on the HR Metrics Team? • CHRO – champion & caretaker • CFO – bottom line • CEO – business initiatives • CIO – technology ROI • CMO – brand influence • CSO – top line • HRIS and Talent Management team – data hounds On the HR metrics team should be the top executives, starting with the champion and caretaker with the head of HR. Other executives and chiefs help round out who should be on the team. Do not forget the data hounds, the HIS and talent management team, they will help you get the data you need to do the analytics. What data and what to do with it? • Step 1 – Gather metrics being used by C-Suite • CFO – EBITA, Profitability, etc. • CEO – Customer retention, new market growth etc. • Etc. • Step 2 – Gather metric data from HR team & others • Enlist HRIS and Talent Management team • Partner with operations and IT as needed • Step 3 – Correlate steps 1 and 2! – Create a dashboard to present & monitor What data and what to do with it, breaks into three simple steps. The first step is gathering the metrics used by the C-suite, CFO and CEO. Some may not have a direct tie with HR, which is okay. Step 2 is gathering the metric data from the HR team and others that can help you. You will need support to do that effectively. In step three, you correlate the two and ideally, create a dashboard to look for changes and ways to improve.
- 8. What data and what to do with it? • Step 1 - Interviewing C-Suite – Ask what metrics they watch – Probe for leading indicators (vs. lagging) • Employee engagement • Customer intent to renew or buy again • Employee alignment – Ask what they would watch if they could – Ask how they think HR can help For step one, interviewing the C-Suite is the most important way to get executive sponsors. Ask them what metrics they want; it does not have to be HR metrics, it can be business metrics. You want to probe for leading indicators not lagging indicators. You want to look for employee engagement to see if there is trouble down the road or if things are going smooth. Customer intent to renew or to buy is an important leading indicator that will get the executives excited about what you are doing. Employee alignment, do they align with what the executives care about? If not, why? What are they measuring? Sometimes they do not have the data they want, and until you ask, they may not ask for help. This is your chance to find out what they want to watch if they could. Ask how HR can help. Find out their expectations. What data and what to do with it? Sample Collection Grid CEO CFO CIO CHRO Business Driver #1 New business Cost ROI on Employee containment technology performance Business Driver #2 Speed to Shareholder Security of Retention market value customer data Business Driver #3 Client Retention Business Driver #4 Shareholder value Business Driver #5 Business Driver #6 Business Driver #7 Source: The RODIN GROUP People at the Rodin Group shared a simple collection grid of key business drivers. We can break it down by executives. I threw in some samples. Your executives might share something different. Collect the list as your starting point.
- 9. What data and what to do with it? • Step 2 - Gather data & metrics from HR etc. – HRIS and/or Payroll • Headcount, turnover/retention, tenure • Comp package • Peer comparisons – Talent Acquisition System (Recruiting) • Cost per hire, Time to Fill, etc. – Talent Management System(s) • Inventory skills, competencies • Performance history (HIPOs), work history • Career paths, preferences (relo, FT/PT, etc.) – Other data points related to C-Suite list • Employee Satisfaction ratings – Categorize above by job, division etc. Step 2 is to gather the data and metrics from HR to help to tie in the previous step. If you look at the HRIS or payroll, it should be simple to get head count, turnover and retention tenure. You may not have exact numbers as it changes. The larger you are it may change by the minute. Compensation, compare against peers; if you have a talent acquisition approach, modern recruiting or applicant tracking programs, chances are you already measure these things. Remember the pyramid. This may be not the top of the pyramid it might be the bottom, but that is okay. Your talent management program looks at what skills and competencies you have and performance history. Executives focus on succession planning and work history. Look at the data points related to the C-suite list you collected and at employee satisfaction ratings. Classify these by job and by division. As these things come together, you can draw comparisons to help your executives understand their human capital. What data and what to do with it? Sample Organization Grid CEO CFO CIO CHRO Talent Hire top talent Hire for less ROI on ATS Hire top Acquisition faster cost performers (Recruiting) Performance Goal Management attainment Career Development Succession Planning Learning & Development Comp/Rewards & Recognition Benefits Source: The RODIN GROUP With this grid, we take the key areas of HR and break it down. We take the executives’ wish list and try to compare, relate and correlate the two. As example, the CEO’s chief
- 10. goals might be to hire top talent quickly. You can tie the metrics related to talent acquisition. Collect the necessary information. What to do with the data? • Step 3 – Correlate Steps 1 & 2 – How do I correlate? • Use top 10 list as starting point • Focus on CEO • Look at industry benchmarks and demographics – Make score cards – Make meaningful or don’t do it • Enlist experts (inside and outside) • Leverage technology – Create a dashboard to present & monitor • Use existing tools (Excel, TMS, HRMS, Cognos) • Enlist experts like DoubleStar, InfoHRM, etc. Then, you want to figure out what to do with the data, which leads to step three; correlating steps one and two. I will share with you my top 10 list as a starting point. They are some key business metrics so you can tie HR back to the business. Focus on the CEO. They have the most visibility and the most influence. Look at industry benchmarks and annual awards. Look at demographics and scorecards, make sure it is meaningful data. Enlist experts mainly inside the company and accept help outside too, leverage technology. To correlate the data, look for overlapping areas where you can pull this together, ask for help, and if you can, use technology to support this. Create a dashboard to present and watch. Share it with others and look for changes. Look for direction. If all you have, is Excel available, use that, verify your tools. If you have a talent management or HR program or reporting tools, use those. Ask experts in-house for help. If you need to look outside, some great vendors can help with workforce analytics and HR metrics. Mini Case Studies What are the top 3 HR metrics your CEO or CFO find most useful? – Turnover rates; Headcount; Recruiting – positions filled – DB, VP HR – Turnover rate; Cost per hire; adherence to merit budget – PY, VP HR – RG, VP HR & Strategic Planning: • Scores from Associate Engagement Survey • Associate retention/turnover • Pension and benefits costs – DV, SVP HR: • Overall employee retention (includes engagement) and Turnover (with special emphasis on Sales turnover) • Quality Staffing and the depth of our succession planning candidates (with emphasis on Diversity candidates) • Overall HR costs (e.g., benefits, training, recruiting, relocation, wages, etc.) – …Succession Planning. They are concerned with the number of employees approaching retirement age, the positions in which successor gaps exist. They are also looking at internal vs external hires. Diversity numbers are also key. – DM, Dir. HR Source: HRsmart Survey June 2009
- 11. I would like to talk about some companies where their top executives answered three questions. The first question I posed to them was, what are the top three HR metrics your CEO or CFO finds useful? They were talking about turnover, head counts, filling positions, which is all good information but they do not tie necessarily to the business. Mini Case Studies What is your favorite metric(s) to track how HR is impacting the business? – HR strategic plan project implementation – DB, VP HR – Sales Productivity – DV, SVP HR – RG, VP HR & Strategic Planning • Scores from Associate Engagement Survey • Associate retention/turnover • Productivity and performance measures/ratios (measuring the impact of hiring/staffing effectiveness on the business bottom-line) • Succession plans (gap analysis) – I believe that the metric which shows the best impact on the business is a low turnover rate. This generally means that we are treating our employees well, are offering them opportunities for growth. The businesses benefit by maintaining a talented and skilled workforce. We all know the cost of turnover. – DM, Dir. HR Source: HRsmart Survey June 2009 The second question was what their favorite metrics to track were and how HR influences the business. There was a range from productivity to engagement. Turnover is a gauge; are people happy and do they feel they are effective in their role. I want to share this study with you from this past June. Mini Case Studies If you could have any HR metrics you don’t have today, what would they be? – Client satisfaction re: HR service delivery – DB, VP HR – Development of succession planning candidates correlated to their performance and success to the business. – DV, SVP HR – …the power in metrics is much more around long term trends and the ability to connect business results to what, if any, people metrics have a hand in driving those results. It is about being able to spot outliers and anomalies. Typically that takes a lot of experience and a willingness to swim in a lot of data to try to make sense of it. What can be incredibly interesting one year, is a yawner the next. You need to measure a lot, and then distill to the critical and relevant few. – KG, VP HR – I would like to see employee satisfaction data for the population. This would drill down on the hot buttons – DM, Dir. HR – Better measures of the correlation between HR actions and progra ms and bottom-line business impact over time (recruiting; training; assessment tests; wellness initiatives; compensation and benefits plans/programs; talent management strategies; outside leadership development programs; executive compensation/benefits/perks; reward and recognition programs; organization development interventions; etc.) – RG, VP HR & Strategic Planning Source: HRsmart Survey June 2009 The last question I posed to the leading executives was what HR metrics they wanted if they could have any. Their answers tied to the business; client satisfaction, succession planning and correlating that to performance and success to the business. Knowing what is important to your executives. One executive mentioned something that was important
- 12. last year is not any more this year. Look for things that might change yearly, so you can adapt your measurements. Industry Stats • Which best describes your most immediate area of need for workforce analytics? Source: DoubleStar Here are some industry statistics from DoubleStar when they measured and took polls. Executives felt talent management needed dealing with immediately followed by developing leaders, measuring performance, and helping people to learn and develop. Other areas are far behind in talent management. Workforce Analytics Benchmark Report Source: Aberdeen Group, August 2006 This is from the Aberdeen Group. Although this is a few years old, it is relevant still today. They looked at the best-in-class companies, those performing best on Wall Street with the best earnings. They benchmarked those and compared it to other companies, the industry norms. The best-in-class companies perform the best; they are most profitable. They take the time to look at their workforce and assess their skills. They make sure they have the right means for succession and the next leaders of the organization. This shows executives the most relevant HR data can influence the daily operations of the business. Talent transition, retention and redeployment of talent
- 13. internally, compared to the industry norms is also great information to share with the executives. Key Issues in Human Capital Management Software Strategic Planning Assumption(s) • Through 2012, 50% of customers will consolidate their talent management application portfolio to one or two vendors, as providers get close enough to best- in-class capabilities across the whole talent management application suite (TMAS). • Key Issue: ...relentless administrative process optimization is not enough. Organizations must do more by focusing on strategic processes, including talent management, and by building a more rigorous approach to HCM analytics. Self- service is moving beyond the transactional into the analytical. As organizations grapple with the recession, workforce planning becomes more critical than before. Impact: Many organizations will focus on cost-saving initiatives, often tactical in nature. The leading organizations will focus on improving cost savings, but also will build for future recovery. Planned Research: …plan to explore integrating CPM (corporate performance management) and employee performance management and analytics. Source: Gartner, Inc. Key Issues in Human Capital Management Software by Thomas Otter, James Holincheck, 2009 16 April I pulled some highlights from Gartner’s recent reports that came out in April about human capital management software. I highlighted some key things that might help you in your measurement. When you look at strategic planning, over half of the customers may be loyal to your organizations. Plan to consolidate your talent management applications to one or two vendors. Another driver is workforce planning is becoming more important than ever because organizations are trying to grapple with the recession. They are getting ready for returns prosperity. Strategic planning is a big part at that. Leading organizations will focus on improving cost savings. They look for the future recovery. Explore integrating corporate performance, which is what they do on Wall Street, and employee performance, management and analytics. Defining Workforce Analytics Many companies are making investments in talent management applications. Although these applications provide a good foundation for strategic human capital management, workforce analytics are the key to helping companies maximize the value of investments in human capital. Strategic Planning Assumption(s) •By 2012, 20% of the Global 1000 organizations will have formal workforce decision support programs (including people, processes, and tools). Key Findings •Valid data is necessary, but not sufficient. Getting value from workforce analytics requires giving managers and executives the information they need to make the best decisions about talent. •Workforce analysis functionality can be drawn from human capital management (HCM) applications, business intelligence (BI) applications, specialist workforce analytic applications or a combination of the three. •The use of workforce analytics is not widespread, but early resu lts indicate that companies that deploy them are able to significantly improve their use of human capital. Source: Gartner, Inc. Defining Workforce Analytics by James Holincheck, 2008 13 November Look specifically at workforce analytics. They shared some important information, which can help companies maximize the value of the investments they have in human capital.
- 14. Analytics help only if managers and executives get the information they need. You can be the champion. You can be the caretaker, but make sure managers embrace the data. Create the data and the metrics. Study the metrics and leverage that information to make payroll more effective. Using workforce analytics is not widespread. Early results show companies who use them improve the use of human capital, tying back to helping the business. Defining Workforce Analytics… Cont’d Recommendations • Formulate a workforce analytic strategy to get the most from talent management and workforce management investments. Don't be afraid to start small; many early adopters have found it easier to focus on a few metrics and get those right first to demonstrate value. • When evaluating vendors for operational and executive reporting, ensure that they not only have the infrastructure to pull together the necessary data, but also have a strong understanding of which key performance indicators (KPIs) are important to specific roles. Consultants can help. • All tools require good data. If your organization has data in disparate places with different definitions, then create a common repository of valid and consistent data. Creating an HCM data warehouse/data mart can provide a good foundation. HR should participate in the BI competency center to ensure that workforce analytic initiatives complement BI and performance management (PM) strategies. • Make necessary investments in HR talent with the proper skills, training and tools to do workforce planning, analysis and decision support. Don't be afraid to bring in people without an HR background. Source: Gartner, Inc. Defining Workforce Analytics by James Holincheck, 2008 13 November A key industry analyst observation in the industry is to invest in talent. Make sure people have the skills and training tools to do workforce planning. Support decisions of the organization, decisions made by the executives running the business. Do not be afraid to bring in people without an HR background. Some people in finance and IT have the knowledge to take your data and look for insights that can help relate to the business objectives of your executives. Poll #4 CEO View The last poll is what would your CEO say is the main benefit of HR metrics? Pick the one your CEO would likely pick. The results show attracting and keeping talent is the leading
- 15. area. This is informative and not what I expected from previous webcasts. It spreads evenly. Attracting and keeping talent should be at the top. And now…. … The Top Ten HR Metrics That Matter The top ten HR metrics that matter are not in any particular order. I put them in an order logical to me. Top 10 HR Metrics That Matter: #10 • Goal alignment – Who cares? C-suite will be watching their cascaded goals – Examples: • % of workforce on track with key corporate goals • Completion rate of development plans tied to goals – Track quarterly to plot trajectory – Share metrics via company newsletter – Use to re-align pay for performance plan Goal alignment; what is more important than that? It should be number one. You can turn these around as you wish but start with one that is strong, look at goal alignment. If you look at key corporate goals, and time that to the percentage of the workforce, do people align? Are they completing their development plans that tie to those goals? Are they helping the business achieve its objectives? Help your business leaders get a sense of whether your alignment converges properly or diverges.
- 16. Source: HRsmart This is a radial diagram. Look at critical-impact jobs and decide whether they have the proper competencies to be effective in that role. As example, suppose you are in the oil and gas business. It is important to keep plans running. If you are in the financial business, the analysts deciding what investment to make are important. If you look at the average, you can identify gaps. That is where HR can intervene and support through learning and development other programs to help your organization be more effective. Top 10 HR Metrics That Matter: #9 • Mobility Quotient – Who cares? CHRO, CAO – Compare internal transfers/promotions to external hires • 2:1 ratio is good, higher for large orgs, lower for small firms. • Tie to development plans • Connect to turnover • Tie to engagement Number nine is the mobility quotient. The two top executives interested are HR and perhaps the administrative officer. Look at people transferring internally in promotions compared to external hires. There is a ratio. A 2:1 ratio is good. For every 100 people that transfer internally, you might have 50 new hires. It may vary based on organization and size. Smaller companies may not have the liberty of moving people around as much but it translates into effective workforce, more engaged. You can connect it to turnover; help people develop. Engagement makes for happier customers and more prosperity for the company.
- 17. Workforce Planning Source: HRsmart Workforce planning is about predicting hiring needs. If you predict you will have to fill 10 positions over the next year or three years, you can make hiring action plans. Ensure your organization is ready for the next challenge. Top 10 HR Metrics That Matter: #8 • Training / OD Effectiveness – Who cares? Top line & efficiency watchers – Examples: • Sales training – increased revenues per sales rep • Hourly workers – increased efficiency • Managers – improved leadership ratings, higher employee satisfaction ratings, less turnover, increased efficiency – Generic savings - decrease in: • Turnover • Recruitment • New hire training • Learning curve factors Number 8 highlights people in the training and OD groups. It is about helping them and the organization achieve effectiveness. Where are the top line and efficiency watchers? One of the easiest places to measure things is in sales. Look at revenue, is it going up? Measure the hourly workers that take more calls and achieve higher satisfaction ratings from customers. You can tie customer engagement back to training programs. Look at lower turnover helping save you money. Executives like to hear that. Look for ways you can save money by being more effective in delivering organizational development.
- 18. Source: HRsmart Another example is the training initiatives. Compare your performance ratings. Did the training help the performance? Turn to your executives and say you invested in excellent training and development, the return was wide. Tell them the next time we will ask for more support or funding. You will be in the driver’s seat at that point. Source: HRsmart Look at performance reviews. If people score low in certain areas, compare it with your learning approach. Do you have programs to help people improve those competencies? Most companies do not measure that. Have an online class or provide access to people who are outside the training. It can make a difference in their effectiveness. When you help people improve on their low-performing competencies as much as you help your high potentials, you reach the next step.
- 19. Top 10 HR Metrics That Matter: #7 • Cost avoidance – Who cares? CFO, CEO, CHRO – Workers Compensation / safety claims, managing benefits - 2nd largest expense – Dollars saved per ee by dept./div. based on new programs Number 7 is cost avoidance. Your CFO or CEO cut costs by letting people go but keep your workers’ comp, safety claims and benefits. These are your second largest expense next to payroll. Break it down. Look at dollars saved by every department and division. Tie it back to any new programs you launched to decide if it was effective. If it is working, that is okay. You are measuring the expense. Adjust your programs going forward. Date of Hire Productivity Cost Savings •Recruiting Costs •On-Boarding •Interviewing •Training •Travel •Ramp up •Lost productivity •Lost productivity •Client service •Client service Recruiting for example, should be straightforward. If you look at data of hires as a key initiative you want to improve on, shrink those costs by hiring people faster. After using technology and improving your procedures, your cost savings will improve. Cost cutting is important, but do not forget productivity. The faster you can get people on board and effective in their role, the more productive they will be. That adds to the ROI of your talent and the overall effectiveness of your organization.
- 20. Top 10 HR Metrics That Matter: #6 • Employee Attitude / Satisfaction – Who cares? Employees do! – Happy employees make happy customers – Attitude - leading indicator affecting • Turnover • Customer support / satisfaction • Sales • Productivity / efficiency Number 6 is employee attitude and satisfaction. Employees care. Setting up programs to help make happy employees will help make happy customers. It will help your business. Their attitude will be a leading indicator. This will help you predict the future, which will make you more of a strategic partner in HR. Predict turnover and customer support. If employees are not happy, they will not be nice to the customers. Collaborate with your marketing department to measure those HR metrics. Top 10 HR Metrics That Matter: #5 • Total Compensation as a % of Revenue – Who cares? CFO, CAO, CSO & Shareholders – Measures Productivity – Track against industry comps – Chart by division – break out profits – Analyze by job function, tenure, etc. – Don’t forget to include outsourced help, temporaries, and contractors – Sister metric: Earnings per employee Number 5 is total compensation. Measure it as a percent of revenue. If you are a public company, shareholders look for this information. It measures productivity of the organization. If you are underpaying people, compare against other people in your industry, other companies. Break up profits if you can. Look at different divisions. Look at the compensation tying it into these other things. Look at outsourced help. Some companies spend money on temporary agents and contractors. Put that into the equation because it may help, especially as the economy recovers. Many companies bring in temporaries before hiring somebody full-time. Account for that because you do
- 21. not want false metrics. Many organizations measure earnings for each employee; I propose the total comp by percent of revenue. Top 10 HR Metrics That Matter: #4 • Human Capital ROI – Who cares? CHRO, CSO, CAO, CEO – Productivity – track by job class, tie to product – Performance – tie to business goals, track by tenure, tie to comp – Effectiveness – aggregate individual measures – Development – measure investment, tie to all items above Metric four is human capital ROI, which ties to productivity. If you can break it down by job class, tie it to a product your company offers. Tie performance to goals. Track it by tenure. Track it to comp. You will find value to share with your executives. Measure investment and tie it to the effectiveness of the investments you make in your human capital. Top 10 HR Metrics That Matter: #3 • Retention / Turnover – Who cares? Everyone! – Experience Lost • Track overall % • Track HIPOs separately • Track business critical roles (usually not management!) • Track costs and compare to market – Vacancy costs – Absenteeism is a “temporary” turnover but has similar cost implications – track closely! Number three is critical these days. Retention and turnover is at an all-time low. The economy has something to do with that. When you track your overall percentage, HIPOs get visibility with the executive team. Break them up separately. Compare that against the rest of the organization. Look at the business critical roles, which may be management. Track the costs and compare them to the market. Some critical roles have a bigger impact on the effectiveness of the organization. Look at the cost for vacancies. If you can measure it, you can show the effectiveness tied back to customer or
- 22. employee satisfaction. It can give you the data and the final power to get the funding you need to fill those roles. Absenteeism, people out on disability or maternity are examples of temporary turnover but those have cost implications. Measure that. Balance your workforce to help foster internal mobility and support, which is healthy for the organization. Source: HRsmart Look at something like turnover and compare it to the source of hire. You may find some of your new hires may deliver higher or lower turnover. Simple metrics can help you save money in recruiting. Top 10 HR Metrics That Matter: #2 • Quality of Hire – Who cares? Nobody directly, but everyone indirectly – Track performance ratings against source of hire; monitor over time (entire tenure!) – Utilize 360s or rounded feedback; include customers (internal and external) – Measure internal hires separately; track changes in subordinate performance ratings (if applicable) and tie to cascaded goals The number two metric that matters is quality of hire. When a new hire comes in that is not a good fit, it can damage your organization, especially if they are a transfer from another department. Measure to make sure you have good quality of hires. If you have a bad quality of hires, learn about it sooner than later. Performance ratings, 360s or rounded feedback help. These do not take much time but they can have huge implications in identifying who delivers. Most companies measure internal hires
- 23. separately. Track the changes in performance ratings as people move around. It may give you a sign if there is a problem manager. Tie it to the cascaded goals. That is what executives look at. It would let you hire people that can deliver on those goals. When you tie that to the referral source, you can sharpen your recruiting programs. Source: HRsmart If you use agencies to help supply talent, look at the different agencies involved. Get a sense of which ones deliver performers; that is the supreme test. Source: HRsmart You pay money one way or another to bring people in. If you pay agencies, you want to make sure you get results.
- 24. Top 10 HR Metrics That Matter: #1 • Talent Readiness – Who cares? CEO, CHRO – Measures corporate nimbleness – Closely related to Workforce Planning – Brings together • Recruiting • Retention • Learning & Development • Succession Planning • Performance • Operations, Sales, etc. The number one metric that matters to every organization is talent readiness. It measures corporate nimbleness, the ability to adapt. An executive’s role is to lead and to change direction if needed. When they are ready to change, you want them to predict the future. Workforce planning will help you. Can you get the staff to deliver what your executives want? This is critical to your organization. We need to make changes and try different approaches to our businesses. We need to introduce new business lines and new products. Ensuring the talent is ready to help with this new business objective is critical. It brings together all the key areas in HR, recruiting, retention, development, succession and performance. It brings together all the different business units. How to Use Your Metrics • Choose the metrics most important to your company – Select a few to start – The 20% that drives the 80% (most) value – Make sure your numbers are accurate • Use them as your HR metrics in Quarterly Business Meetings with Senior Management • Compare to appropriate benchmarks both internally and externally • Use Continuous Improvement Source: Bob Keller, Norwood Promotional Products Supremely, you want to pick metrics most important to your company. Start with a few; do not bite off more than you can chew. Look for that 20% that drives the 80% of the value. If you start with step one, interviewing the executives, find out what is important to them. What are they measuring and what do they want to measure? Show them something they are looking for. Give them some insight to help them drive the business.
- 25. Help them feel part of the decision support system. Use them in your HR metrics. Provide updates quarterly with senior management. Get benchmarks among divisions. If it is bad news, you still have to share the bad news. How can you improve your HR roles if you do not have the data you need to measure how you are doing? Know where your organization is going to go if you can supply the talent to deliver on the executive goals. Suggested Reading - HR Metrics • How to Measure Human Resources Management – Jac Fitz-enz, Saratoga Institute, McGraw Hill • Benchmarking, The Search for Industry Best Practices that Lead to Superior Performance – Robert C. Camp, Xerox, Quality Press • SHRM Customized Human Capital Benchmarking Service • http://www.birchtreehr.com/btblog/2009/01/effective-strategies- for-hr-managers-working-with-the-c-suite.html • http://www.indianashrm.org/speakers/handouts/BOB%20KELL ER%20HR%20METRICS%20PRESENTATION%20INDIANA %20SHRM%208-29-06%20-%20FINAL%208-21-06.ppt Source: Bob Keller, Norwood Promotional Products Thank you. Questions? Contact HRsmart: 972-783-3000 marketing@HRsmart.com www.HRsmart.com Contact Ward Christman: 610-431-3165 Ward@HRsmart.com Special Thanks PHRPS Main Line LAN Aberdeen, DoubleStar and Gartner Parente Randolph, Crown Cork, UHS, Vanguard, IKON, AAA Audience Question: We have various HR programs in-house. How can we best correlate our HR data to get meaningful metrics? Response: For the past 10 years, companies in the HR technology field have been buying our programs; some are simply excel spreadsheets. Putting together this data is not easy. Start with what your executives care about and dig around that. Get the support from the executives to get technology to help collect and track that information. Use consultants. If all the HR data and programs are in one talent management program, it is easier.
- 26. Audience Question: Like any initiative, doing HR metrics takes time and money. How can I get my senior team to back up such a request? Response: The first step is to talk to the executive team. Ask them what they find most important to measure related to the business. Ask them how they think HR can help. That will give you metrics meaningful to the business objectives. Report on those and tie it back to profitability or something important to the executives. Relate it and tie to the human capital of the organization. Provide that value to them. Help them predict the future. Make it a simple business case. Audience Question: What is a workforce decision support program? Response: Workforce decision support programs go back to the pyramid Gartner has. Gartner recommends HR teams help with the analytics tying to the workforce decisions. This includes interventions, opportunities and planning. Interventions include layoffs, hiring and expanding people’s roles. Planning is what we will do for the future. Being part of that decision support system is not easy. It comes down to measuring the effectiveness of different HR programs. Know how they relate to the business. Audience Question: What is the best source of benchmarking? Response: There are two benchmarks, internal and external. Many people like to compare themselves to peers in the industry. If you break down the different metrics by job or division, your benchmarks may not be just against your peers in the industry. If you are manufacturing against other manufacturing companies, maybe you have IT engineers too. Compare against IT engineers, they do not necessarily have to be in your specific industry. Once you get the shortlist from the executives, the metrics you want to measure, give them the information they want to make business decisions. Do some basic web searches. Get on Google and look for other organizations that publish some of their data. Enlist a consulting firm to help you identify benchmarks if you need external ones. You want to learn from their expertise and success.