What Are You Worth? Measuring Your Value-Add Through HR Metrics

Editor's Notes

• #2: First of all, I would like to thank everybody for taking a couple of hours out of your evening to be here with me tonight. Just as important, I’d really like to thank Patrick Knight for coordinating this and inviting me here to speak with all of you about something that I’m very passionate about…metrics. But, not just metrics…even more importantly, how to show your value as an HR practitioner. Does anybody know what metrics are?Show of hands. Who currently uses metrics in your organization?Why do you track and analyze metrics?Those are all good reasons. As I stated earlier, metrics are something that are very important to me. We’ve all heard about that dreaded table and we’ve heard more than enough about how to gain a coveted seat at that illustrious table. I’m really sick of hearing about that table! Aren’t you?It’s time for us, as HR practitioners to stop whining about not being invited to the table and start bumrushing our way there…to demand the right to be there. To prove that we belong there!Now, I am not telling you to go to work tomorrow, walk up to your CEO and demand a seat. What I am telling you is to prove your value and make it impossible for leaders to not consider HR as important, if not the most important member at the table. How do we do that, you say? Well, that is why we’re all here today.Today, I will be talking about what you, as HR professionals are worth and how you measure your value-add to your organization through the use of HR metrics.
• #3: First, we’ll briefly talk about what HR metrics are and why they’re important. I’ll provide you with an overview of HR’s role in metrics and analytics and the connection between organizational strategy and HR. Next, we’ll complete the puzzle and I’ll give you examples of how HR can bring value to the organization through the use of metrics. Finally, we’ll discuss how you can define and implement metrics within your organization. Now, I didn’t want to come here with a bunch of fancy PowerPoint slides and handouts. I wanted us to have real discussions about metrics, what’s happening in your organizations, and things you can go back to work tomorrow and do. There are thousands of great metric calculators out there. SHRM has a plethora of them. Do a google search for HR metrics and you will find pages and pages of metric examples. The information is out there for you. What I want to do today is equip you with the knowledge and information you need to go back to work tomorrow and better show your value.Before we begin, I want to take a few minutes to talk about why you are here tonight and what you hope to get out of this presentation. Anybody?
• #4: So, what are metrics? You said that they are ___________________. Simply put…metrics are a way to quantify, measure, and track key performance indicators. In HR, metrics are used to measure and track the performance of the company’s largest investment… HUMAN CAPITALSo, why do we track metrics? Why are they important? You said that you track metrics because ________________. We track metrics to understand where we are currently and where we need to be and to better define how we are going to get there. There’s a saying that goes “If you don’t know where you’re going, how will you know when you get there? Metrics help you understand when you have reached your destination. When you’ve met your goal. So, what metrics so we track? This is the easiest question to answer. There is no thought, in-depth research, or gut-wrenching discussions needed to answer this question. If I asked you what metrics you should track, how would you answer that question? Quick! Exactly! We track those metrics that are most important to the organization! So, how do you know what metrics are most important to the organization? Well, that’s simple too. Stay tuned. I’ll tell you exactly how to know what metrics are most important. Ok…so now that we know why we track metrics, why they are important, and what metrics to track, what in the world do we do with all of this data? We’ll talk more, towards the end of my presentation on how to take what you measure and make it mean something. Something that you can understand and something that you can easily relay to the leaders within your organization.
• #5: Now, based on the show of hands earlier, it would appear that quite a few of you are/are not currently using metrics in your current role. Now, think back just 5 years ago. How many of you were actively using metrics on a daily basis? Not many, right? HR has historically been looked at more as an administrative function. We processed new hires, made sure employees were paid, and that they had benefits. We were never looked at as making a strategic impact within the organization. Now, that’s shifted. HR has moved from an administrative role to a more strategic role. HR is looked at to provide solutions to organizational issues, to recommend and implement initiatives that will assist the organization with meeting its goals and being a key player in achieving the company’s organizational strategy. Going back to that seat at the table, company’s are beginning to understand that HR is a not a necessary evil, but we are a truly valuable and needed resource. How did this shift occur? We started speaking the language of the business. HR professionals began realizing that we are not operating in a vacuum. We have an opportunity to make and impact and we are taking that seat at that doggone table!What do we mean when we say “speaking the language of the business”? What do company’s focus on? They focus on revenue, profit growth, market share, productivity, those things that can be easily and quantitatively measured. Early on in my career, I worked for a CFO who would constantly come into my office and ask me if we had a win. I never quite knew what he was talking about until one day, after months of working on projects and implementing various initiatives, he came into my office and asked me what HR was doing for the organization. He further went on to state that the CEO was not convinced that the HR function was necessary and that he didn’t see my value within the organization. His thought was that he could pay anybody to process employment paperwork. Why did he have to pay for HR when he could just have an admin do the work? I looked at my CFO incredulously. Here I had been armpits deep in creating and implementing a effective recruitment process, redesigning the sales compensation plan and researching and instituting a more robust benefits plan and my boss was sitting here talking about value? I couldn’t believe it. But then, after I showed him all the progress we had made, all the changes we had implemented and the positive effect they had on the employees, how we had reduced turnover, decreased employee and organizational benefit expenses, and created a compensation program to better attract the level of employees that we needed to take the company to the next level, he got it. But, he did share with me some information that has stayed with me, that made me interested in metrics and eventually helped to fuel my passion.He told me that I needed to talk about the wins. That I needed to communicate what HR was doing and the positive impact we were making. He spoke about it in terms of financials and said that if he, as the CFO, did not present financial reports to the organization to show how he was decreasing costs, improving our credit rating, or raising financial capital, then what would be his value? He made me realize that it wasn’t enough to simply do the work and implement the changes, but that I needed to quantify and communicate the results.We, HR, have a direct impact on these data-driven decisions. Data is the key to proving our value within our organizations. Somebody once said that numbers don’t lie. I’m not sure who said it and I’m not sure that I necessarily agree as data can be manipulated and our metrics are only as good as the data that we collect. But, what matters is that this is the language that our leaders know and understand and as such, we need to make sure we are speaking the same language.
• #6: So, what is the connection between the organizational strategy and HR?Well, first, HR should have a strategy. Just like the organization has specific goals and objectives that it must meet, so should HR. But, in order to be the most effective, HR’s strategy should mirror the organization’s strategy. See, what most people don’t realize is that HR is the one department that has the greatest ability to affect change within the entire organization. Whereas Sales may only be able to impact the growth of the organization and Accounting may only be able to impact the Financial Health of the organization, HR can positively impact all three areas. Business leaders still haven’t quite caught on to this, and that is one of the reasons the right metrics are so important. With the right metrics in place, we can show business leaders how we’ve impacted the organization and what initiatives are most important for achieving the organizational strategy. Let’s take a look at how HR strategy mirrors organizational strategy. Let’s say you worked for a company whose organizational strategy had a focus on growth, financial health, and talent management. HR’s strategy can then be to focus on talent acquisition and looking at ways in which we can better attract and retain our human capital. HR can then look at their costs and how they can better manage and even decrease recruitment, training, and benefit costs. This can be done by decreasing or eliminating the use of recruitment agencies, smarter, more targeted recruitment advertising, and possibly restructuring the benefits offerings to lessen the overall organizational costs. When it comes to Talent Management, well, that’s a no-brainer. Now you’re talking HRs language!We can look at performance management and training. We can ensure that our managers have the tools and resources to properly coach their employees to better perform and we can design and facilitate training programs that give our employees the necessary skills to succeed. These are all strategic initiative and they are all measurable!
• #7: Now, we’ve talked a lot about how HR can bring value to the organization through metrics. But knowing that we need to collect and analyze data is not enough. In order for us to truly bring value to the organization through the use of metrics, there are a few things we need to understand. First, you must understand WHY you’re measuring. If there is one pet-peeve that I have, it is those that measure just for the sake of measuring. I have spoken with HR practitioners about metrics and what they have instituted in their organizations and they will tell me something about measuring the number of employees the number of times it takes to reach a candidate once a resume has been submitted, or something else just as foolish. When I ask them why they chose that as a metric, they tell me something about a Manager who wanted to know how long it took them to reach a candidate or the fact that they were tasked with identifying metrics and this is what they thought was important. When I drill further and ask them what they hope to discover, improve, or increase/decrease with these metrics, they look at me like I’ve grown another eye in the middle of my forehead! Why are you measuring anything if you don’t plan to do something WITH all of that data? When deciding to track and analyze metrics, you should have an end result in mind. Remember back a few slides when we talked about how will you know when you’ve arrived, if you don’t know where you are going? You must start with the end result in mind. And once you have reached that end result, you have to put an action plan in place to do something with all of those metrics. There is nothing worse than gathering, analyzing, and communicating all of these metrics just to continue doing things the same way. Even if, through this process, you find that you are exactly where you thought you would be, there has to be room for improvement, right? There always is…Don’t just sit on the information you uncover. Do something with it!Once you’ve determined why you are measuring, you must understand WHAT you are measuring. Remember that whatever metrics you choose to analyze, they must relate to the business, they must be important to the leaders of the organization, and the should be easy to gather, easy to analyze and easy to disseminate. Metrics are no good to anybody if you spend more time trying to track down and collate the data that the time you took to implement the initiative. If you can’t easily collect the data then you need to look at your systems and processes and see where the breakdown exists. The HR data that you need to measure should be easily accessible. Once you’ve gathered the data, it should be easy to analyze. Don’t make the process difficult. There is no need for that. Aside from the rare few of us, we are not mathematicians or statisticians. Just because we are analyzing quantitative data, that does not mean we have to make it difficult. Keep it simple silly! And probably the most important of these is the fact that the date should be easy to disseminate. You need to be able to clearly educate the leaders of your organization on what the data means and what you plan to do with the information. Business leaders are busy. They don’t have time for long-winded explanations. Your data should explain itself, for the most part. If it takes more than a few minutes of explanation, then you’ve made it too difficult.
• #8: So, let’s review the steps to defining and implementing HR metrics into your organization. First, the organizational strategy is defined and communicated by the leaders. Let’s say that the organizational strategy is to:Cut CostsImprove customer satisfactionDevelop new technology to remain competitiveOnce the organizational strategy has been defined, HR should define its strategy. Using this example, HR’s strategy may be to:Decrease Recruitment CostsIncrease Customer Service TrainingSource and Hire Better TalentWith this information in hand, we can define our HR metrics. We may decide to implement the following metrics:Decrease recruitment costs by 20%Increase performance levels of CSRsIncrease the % of new hires performing above average by the end of the 1st year by 45%These metrics will give you the outline that you need to put in place plans and initiatives that have meaning to the organization and that make a positive impact to the company’s overall strategic objectives. Now, let’s look more closely at these metrics in action.
• #9: When talking about recruitment costs, let’s say, for example that you have gathered all of your costs for 2009. Remember, in order for you to accurately and effective use metrics, you must have a baseline…some data that shows where you were. So, once you’ve gathered your recruitment cost information, you can plug it into a simple excel spreadsheet (or do a google search for recruitment cost calculator and you will find all sorts of these) and create a graph. Now, we know where we are. So, if we say we want to decrease our recruitment costs but a certain percentage, we said 20%, then you know that you have to decrease costs by $29,150. Therefore, your target for next years total recruitment costs should be roughly $116,600.
• #10: So, the following year…And you are tracking this information through-out the entire year right? You’re not just waiting until the end of the year to try to go back and gather all of this information, are you? Good…Ok…so the following year, after you have diligently tracked your data, you can input the same categories of information into your spreadsheet to see where you stand. So, let’s say you’ve increased your Recruiter’s salary due to a yearly merit increase. This, in turn, increases, the overall benefit costs since we are measuring benefits as a percentage of salary. But, instead of flying your recruiter out to regional offices, you invest in a digital webcam and start conducting Skype interviews. This change lowers recruiter travel and entertainment costs. Then, through various targeted search techniques, you’ve relied less on search firm fees, decreasing your costs there. Due to those Skype interviews, you have been able to decrease your candidate travel and entertainment expenses. Now, maybe your Recruiter has caught the social media bug and is relying less on job postings and paid job ads and is networking, doing boolean searches on google or tapping into their ever-expanding LinkedIn network to source and recruit candidates, thereby decreasing advertising costs. You attend one less job fair this year, but remain dedicated to college recruiting (which remains the same) and employee referrals (which increases). All other costs remain relatively the same. At the end of the year, your efforts have netted you a cost reduction of $26,162. Not quite 20% but not bad either. The savings are roughly 18% over last year. But, now with this data, you can speak in terms that your leaders understand. When going to the table and showing your worth, you can communicate with facts. Stating that your department has saved the organization almost 18% in just one area is nothing to be shy about. But, without the data, and without the metrics, you would be unable to have these conversations. The same can be said for the other two metrics we chose to track.
• #11: We wanted to track the change in performance levels of customer service reps from one year to the next. Our HR strategy was defined as increasing CSR training. We have identified through needs analysis that these are the three areas where the CSRs are not meeting organizational standards:Complaint ResolutionCall Time# of Call BacksThrough specially designed training to target these key areas, we have been able to increase our complaint resolution statistics, decrease our call times down from 5.3 minutes to 1.5 minutes, and decrease the amount of time customers have to call back due to the same issue from 3 down to 2. Again, more ammunition for you to take to this ever elusive table you all seek!Now, let’s look at the last metric…
• #12: We said we wanted to increase performance of new employees after the 1st year. We’ve collected and analyzed our baseline data for 2009. We then can input our data for 2010 and graph the results. The data is acquired through the annual performance review process. Due to the increased coaching and training we have provided to our managers and employees, they are better equipped to manage the performance of their employees. HR has also had an impact on these results through their targeted recruitment efforts and the increase in quality hires. All of this is just fuel for the value-add fire. Now that I have equipped you with vast amounts of knowledge, let me leave you with a few key points to remember…
• #13: Metrics should give the whole picture, including quantity, quality, time, cost, and effectiveness.Focus on key areas where change is necessary.Develop a benchmark to use for evaluating progress towards goals.Set goals and establish metrics for measuring progress.If possible, compare company metrics with similar measures from key competitors.Use the language of your leadersHard metrics (real data) are better than soft metrics.HR metrics should be directly related to important business issues.Metrics should be easy to understand, and data should be readily available.Don’t keep metrics a secret.Use metrics to identify trends and head off problems on the horizon.Don’t be afraid of metrics or of measuring data.