Creating HR Metrics that Matter March 17 th , 2010 Presented By: Cathy Missildine-Martin, SPHR Co-Founder & Sr. VP of Sale...
Agenda <ul><li>Business Case for HR Metrics </li></ul><ul><li>Process </li></ul><ul><li>Types of Measures </li></ul><ul><l...
Why should HR be concerned about metrics? Think about your current measures… Do your metrics matter?
 
&quot;Stop asking for a seat in the executive office and instead ask yourself: How can I leverage what I know about Human ...
What if you are able to identify you most productive and most engaged employees so that you can develop a strategy for ret...
Making the Business Case <ul><li>Human Capital expense is a company’s greatest expense </li></ul><ul><li>Doing more with l...
“ After 30 years studying HR Departments, I have found the largest single difference between a great HR department and an ...
Why Now?
Next Steps Steps in Creating Metrics that Matter Step 1: Define Business Strategy  Step 2: Determine How to Execute  Ste...
Facilitators Processes Products Technology Financial Others Revenue Profitability Market Share Budget Cost Savings Others ...
Step 1: Define Business Strategy “ HR Managers must understand the firm’s strategy; that is, its’ plan for developing and ...
Step 1: Define Business Strategy How do you do that?
Next Steps Steps in Creating Metrics that Matter Step 1: Define Business Strategy  Step 2: Determine How to Execute  Ste...
Step 2: Determine How to Execute  IT Operations HR Sales Marketing Engineering ABC will  consistently deliver : products t...
Step 2: How to Execute How do you do that? How is our department  going to assist in fulfilling our company strategy?
Next Steps Steps in Creating Metrics that Matter Step 1: Define Business Strategy  Step 2: Determine How to Execute  Ste...
Turnover Step 3: Link HR to Strategy Map Manage   Costs CUSTOMER Focus Reduce certain HR related costs Effective HR Progra...
Next Steps Steps in Creating Metrics that Matter Step 1: Define Business Strategy  Step 2: Determine How to Execute  Ste...
What Measures are Important? “ The key is to measure both efficiency  (cost and productivity) as well as effectiveness (qu...
Step 4:  Create Measures <ul><li>HR Efficiency Measures </li></ul><ul><li>Cost per hire </li></ul><ul><li>HR staff per emp...
Step 4, continued <ul><li>HR Effectiveness Measures </li></ul><ul><li>Quality of hire </li></ul><ul><li>Employee satisfact...
Gap <ul><li>HR Efficiency Measures </li></ul><ul><li>Turnover by age, tenure, race </li></ul><ul><li>Training level 1 eval...
Take it one step further…add turnover metric…for a bigger financial impact Butterflies Add Turnover %  Change  Seekers Add...
HR Value Measures <ul><li>HR Expense factor= HR expense/total operating expenses </li></ul><ul><li>Total HR Expenses/Total...
Turnover Metrics that Matter FINANCIAL CUSTOMER INTERNAL  LEARNING & GROWTH Reduce certain HR related costs HR Programs HR...
Next Steps Steps in Creating Metrics that Matter Step 1: Define Business Strategy  Step 2: Determine How to Execute  Ste...
Step 5: Link to Strategic Business Results <ul><li>You must have a clear connection between your metrics and your business...
Impact Example-Which ones do C-Suite care about? Metric Direct Revenue Impact Indirect Revenue Impact Direct Cost Impact I...
Next Steps Steps in Creating Metrics that Matter Step 1: Define Business Strategy  Step 2: Determine How to Execute  Ste...
Benchmark or not?
Company XYZ HR Scorecard
In our experience, when creating measures that matter, you must ask these important questions: <ul><li>Is this company a p...
Metric Pitfalls to Avoid <ul><li>Collecting too much data so that you cannot focus on the metrics that matter </li></ul><u...
“ Firms that carefully link HR activities to business strategy, measured by metrics have a 33% higher return on total capi...
5 Metric Must Haves in a Down Economy 1)  Revenue generating employees/# Full time employees -This is a critical metric in...
Most Common Metrics High Performing HR Departments… 1) Revenue per employee (to see trends which will lead to asking &quot...
Any Questions?
If you would like to be on our  ” Profitability Through Human Capital” blog list:  http://intellectualcapitalconsulting.bl...
Intellectual Capital Consulting’s focus in working with clients is to evaluate, develop and transform their intellectual a...
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  • What are you currently measuring in HR?
  • Clearly defined strategy What are the HR deliverables Translate deliverables into strategy Identify metrics
  • Absence rate Health care cost per employee Turnover rate Turnover costs
  • HR expense factor=HR expense/total operating expenses Human Capital ROI=Revenue-operating exp-comp and benefits/comp+benefits cost Revenue factor=revenue/#of FTE
  • Put in better ones
  • HR expense factor=HR expense/total operating expenses Human Capital ROI=Revenue-operating exp-comp and benefits/comp+benefits cost Revenue factor=revenue/#of FTE
  • Entering into a new market Growth Differentiation Low cost leader Vision What organization want to become in future. Mission What is the purpose of the existence of the organization. Objectives Objectives are the targets towards which management is directed. Strategy The process of determining appropriate courses of action for achieving organizational objectives An organization’s mission or purpose is the answer to the question &amp;quot;why?&amp;quot; Different questions will illicit different facets or flavors of mission.  For example Why are we doing this?  Brings out purpose, motives, and intention. What’s vitally important about our work?  Begins to identify the values and interests that drive the organization. With what aspects of this work do I most identify?  Is there a cause or purpose -- the bigger picture -- beyond the work itself?
  • Put in better ones
  • We are working with companies so this does not happen in companies
  • We are working with companies so this does not happen in companies
  • HR Metrics Presentation

    1. 1. Creating HR Metrics that Matter March 17 th , 2010 Presented By: Cathy Missildine-Martin, SPHR Co-Founder & Sr. VP of Sales & Marketing Intellectual Capital Consulting, Inc. [email_address]
    2. 2. Agenda <ul><li>Business Case for HR Metrics </li></ul><ul><li>Process </li></ul><ul><li>Types of Measures </li></ul><ul><li>Business Impact for Each Measure </li></ul><ul><li>Targets and Communications </li></ul><ul><li>Wrap Up/Questions </li></ul>
    3. 3. Why should HR be concerned about metrics? Think about your current measures… Do your metrics matter?
    4. 5. &quot;Stop asking for a seat in the executive office and instead ask yourself: How can I leverage what I know about Human Resources to help shape and serve the strategy of my organization?” Sue Meisinger, retiring SHRM President and CEO HR Magazine, June 2008
    5. 6. What if you are able to identify you most productive and most engaged employees so that you can develop a strategy for retaining those individuals through the hard times? That's valuable What if you have redesigned your performance management system and compensation structure so that you are only rewarding those that are performing? (Thus saving compensation dollars) That's valuable What if you were able to manage talent shortages and surpluses? By understanding business cycles and tending to &quot;talent pipelines&quot; and current talent inventories, HR can act, instead of just react. That’s valuable This is our time to SHINE…not WHINE!
    6. 7. Making the Business Case <ul><li>Human Capital expense is a company’s greatest expense </li></ul><ul><li>Doing more with less </li></ul><ul><li>Start small (low hanging fruit) ‏ </li></ul><ul><li>Better decision making </li></ul><ul><li>Eliminates confusion over what is important (linkage to strategy) ‏ </li></ul>
    7. 8. “ After 30 years studying HR Departments, I have found the largest single difference between a great HR department and an average one, is the extensive use of metrics.” Dr. John Sullivan , HR Metrics the World Class Way
    8. 9. Why Now?
    9. 10. Next Steps Steps in Creating Metrics that Matter Step 1: Define Business Strategy  Step 2: Determine How to Execute  Step 3: Link HR to Strategy Map  Step 4: Create Measures  Step 5: Link to Strategic Business Results  Step 6: Set Targets Step 7: Communicate Results
    10. 11. Facilitators Processes Products Technology Financial Others Revenue Profitability Market Share Budget Cost Savings Others Business Results Enablers Vision and Mission
    11. 12. Step 1: Define Business Strategy “ HR Managers must understand the firm’s strategy; that is, its’ plan for developing and sustaining an advantage in the marketplace” Mark Huselid, Brian Becker, Dave Ulrich, The HR Scorecard ABC will consistently deliver: products that meet or exceed safety standards; provide outstanding technical services; and use leading edge technology in the retail/professional market to be recognized as the number one provider of access controls manufactured in the United States.
    12. 13. Step 1: Define Business Strategy How do you do that?
    13. 14. Next Steps Steps in Creating Metrics that Matter Step 1: Define Business Strategy  Step 2: Determine How to Execute  Step 3: Link HR to Strategy Map  Step 4: Create Measures  Step 5: Link to Strategic Business Results  Step 6: Set Targets Step 7: Communicate Results
    14. 15. Step 2: Determine How to Execute IT Operations HR Sales Marketing Engineering ABC will consistently deliver : products that meet or exceed safety standards; provide outstanding technical services; and use leading edge technology in the retail/professional market to be recognized as the number one provider of access controls manufactured in the United States. Why do most strategies fail?
    15. 16. Step 2: How to Execute How do you do that? How is our department going to assist in fulfilling our company strategy?
    16. 17. Next Steps Steps in Creating Metrics that Matter Step 1: Define Business Strategy  Step 2: Determine How to Execute  Step 3: Link HR to Strategy Map  Step 4: Create Measures  Step 5: Link to Strategic Business Results  Step 6: Set Targets Step 7: Communicate Results
    17. 18. Turnover Step 3: Link HR to Strategy Map Manage Costs CUSTOMER Focus Reduce certain HR related costs Effective HR Programs World Class HR Delivery Increase customer service skills in workforce Succession Planning HR Process Improvement Create, model Best practices in HR Enhance HR Staff Knowledge & Skills In Strategic Areas Productivity Retention Increase employee satisfaction with HR services Enhance the value and return On HR investment Talent Development Workplace Planning Improve Employee commitment Strengthen Recruit & hire of good fit Strengthen RewardS & Recognition Program Enhance diversity Among workforce Increase Customer Satisfaction Increase Customer Retention HR MISSION: As a Strategic Business Partner, HR contributes to the Company's success by providing innovative HR practices to attract, retain and engage high performancing, diverse talent. World Class Talent Development
    18. 19. Next Steps Steps in Creating Metrics that Matter Step 1: Define Business Strategy  Step 2: Determine How to Execute  Step 3: Link HR to Strategy Map  Step 4: Create Measures  Step 5: Link to Strategic Business Results  Step 6: Set Targets Step 7: Communicate Results
    19. 20. What Measures are Important? “ The key is to measure both efficiency (cost and productivity) as well as effectiveness (quality and value) and evaluate this mix of metrics in the context of the drivers of demand for HR’s services.” Richard T. Roth, Atlanta, HR Magazine
    20. 21. Step 4: Create Measures <ul><li>HR Efficiency Measures </li></ul><ul><li>Cost per hire </li></ul><ul><li>HR staff per employee </li></ul><ul><li>Days to hire </li></ul><ul><li>Training cost per employee </li></ul><ul><li>Accidents rates </li></ul><ul><li>Name others: </li></ul>What is wrong with using JUST efficiency measures?
    21. 22. Step 4, continued <ul><li>HR Effectiveness Measures </li></ul><ul><li>Quality of hire </li></ul><ul><li>Employee satisfaction </li></ul><ul><li>Training quality-Kirkpatrick ’ s four measures </li></ul><ul><li>Number of hours consulting </li></ul><ul><li>% of employees with certain knowledge </li></ul><ul><li>Name others: </li></ul>What is wrong with using JUST effectiveness measures? What type a measure is turnover?
    22. 23. Gap <ul><li>HR Efficiency Measures </li></ul><ul><li>Turnover by age, tenure, race </li></ul><ul><li>Training level 1 evaluations </li></ul><ul><li>Staffing ratios </li></ul><ul><li>HR Effectiveness Measures </li></ul><ul><li>Turnover by performance </li></ul><ul><li>Did behavior change on the job? Results? </li></ul><ul><li>New hire performance at 90 days </li></ul>
    23. 24. Take it one step further…add turnover metric…for a bigger financial impact Butterflies Add Turnover % Change Seekers Add Turnover % True Loyalists Add Turnover % Morale Busters Add Turnover % High Performance Low Performance Engagement
    24. 25. HR Value Measures <ul><li>HR Expense factor= HR expense/total operating expenses </li></ul><ul><li>Total HR Expenses/Total revenues </li></ul><ul><li>Human Capital ROI= rev-operating exp-com/benefits </li></ul><ul><ul><ul><ul><ul><li>comp+benefits cost </li></ul></ul></ul></ul></ul><ul><li>Revenue per employee </li></ul><ul><li>Profit per employee </li></ul><ul><li>Compensation budget variance </li></ul><ul><li>Time to efficiency for new managers and employees </li></ul>
    25. 26. Turnover Metrics that Matter FINANCIAL CUSTOMER INTERNAL LEARNING & GROWTH Reduce certain HR related costs HR Programs HR Delivery Increase customer service skills in workforce Succession Planning HR Process Improvement Create, model Best practices in HR Enhance HR Staff Knowledge & Skills In Strategic Areas Productivity Retention Increase employee satisfaction with HR services Enhance the value and return On HR investment Talent Development Workplace Planning Improve Employee commitment Strengthen Recruit & hire of good fit Strengthen RewardS & Recognition Program Enhance diversity Among workforce Customer Satisfaction Customer Retention HR MISSION We provide quality HR services to attract, develop, motivate and retain a diverse workforce within a supportive work environment. We do this with an emphasis on customer service based on consultation and communication HR VISION Provide the highest quality support services to make XYZ the company of choice for learning and working. Customer Sat % Retention % among protected classes Performance Rating at 90 days Cost/hire HR labor/total labor Revenue Per Employee
    26. 27. Next Steps Steps in Creating Metrics that Matter Step 1: Define Business Strategy  Step 2: Determine How to Execute  Step 3: Link HR to Strategy Map  Step 4: Create Measures  Step 5: Link to Strategic Business Results  Step 6: Set Targets Step 7: Communicate Results
    27. 28. Step 5: Link to Strategic Business Results <ul><li>You must have a clear connection between your metrics and your business results </li></ul><ul><li>Can your metric pass the following criteria? </li></ul><ul><ul><li>Does it have a direct/indirect impact on revenue? </li></ul></ul><ul><ul><li>Does it have a direct/indirect impact on costs? </li></ul></ul><ul><ul><li>What is the action that you will take based on the result? </li></ul></ul>
    28. 29. Impact Example-Which ones do C-Suite care about? Metric Direct Revenue Impact Indirect Revenue Impact Direct Cost Impact Indirect Cost Impact
    29. 30. Next Steps Steps in Creating Metrics that Matter Step 1: Define Business Strategy  Step 2: Determine How to Execute  Step 3: Link HR to Strategy Map  Step 4: Create Measures  Step 5: Link to Strategic Business Results  Step 6: Set Targets Step 7: Communicate Results
    30. 31. Benchmark or not?
    31. 32. Company XYZ HR Scorecard
    32. 33. In our experience, when creating measures that matter, you must ask these important questions: <ul><li>Is this company a people oriented or manufacturing business? </li></ul><ul><li>Does the metric have an impact on results? </li></ul><ul><li>Does the metric measure efficiency or effectiveness? </li></ul><ul><li>What are your value metrics? </li></ul><ul><li>What action will you be taking based on that metric? </li></ul>
    33. 34. Metric Pitfalls to Avoid <ul><li>Collecting too much data so that you cannot focus on the metrics that matter </li></ul><ul><ul><li>Make sure that metrics are tied back to your strategy </li></ul></ul><ul><li>Relying on poor data </li></ul><ul><ul><li>Make sure data is objective and statistically sound </li></ul></ul><ul><li>Focusing on metrics that are short term in nature like those preferred by Wall Street </li></ul><ul><ul><li>Use balance scorecard approach so you have a holistic view </li></ul></ul><ul><ul><ul><ul><li>Harvard Business School, Michael Sisk </li></ul></ul></ul></ul>
    34. 35. “ Firms that carefully link HR activities to business strategy, measured by metrics have a 33% higher return on total capital than organizations that do not.” Watson Wyatt Research 2003
    35. 36. 5 Metric Must Haves in a Down Economy 1) Revenue generating employees/# Full time employees -This is a critical metric in this economy. This metric speaks to efficiency especially around organizational design and process. 2) Employee engagement index -This measure is critical to track especially in down times as when times are good, the unengaged will be the first to leave. 3) % of employees with favorable performance rating -This number is critical to know during a downturn as we need to make sure we are keeping the best of the best. After the lowest performing employees are let go, management needs to understand the impact of eliminating top performers. 4) Management/staff ratio -As layoffs continue to occur, you may need to understand what the best management to staff ratio is for your company. (span of control and efficiency) ‏ 5) HR Service Delivery rating -How is HR performing with its customer? Is HR delivering the services that its customer values?
    36. 37. Most Common Metrics High Performing HR Departments… 1) Revenue per employee (to see trends which will lead to asking &quot;what happened there?&quot;) ‏ 2) Turnover/Retention by department, supervisor, performance, age, etc. 3) Recruiting: Cost per hire 4) Recruiting: Choose appropriate efficiency measure, response time, time to fill, 5) Recruiting: Average new hire performance rating 6) Total HR expense/total revenues 7) Company and departmental level employee engagement scores 8) Compensation budget variance 9) HR service delivery satisfaction rating 10) Training spend per Full time employee 11) Training: Appropriate results based metric after training i.e. customer satisfaction score 12) % of strategic competencies available in organization
    37. 38. Any Questions?
    38. 39. If you would like to be on our ” Profitability Through Human Capital” blog list: http://intellectualcapitalconsulting.blogspot.com/ Email me at [email_address] Follow me on Twitter: cathymartin Fan Page on Facebook: Intellectual Capital Consulting
    39. 40. Intellectual Capital Consulting’s focus in working with clients is to evaluate, develop and transform their intellectual assets into a capital advantage. ICC, an Atlanta-based woman-owned enterprise, has been in business for 10 years and its founders, Cathy Martin and Barbara Hughes, bring a wealth of experience to their clients. Cathy Martin, Co-founder and SVP of Sales & Marketing At a time when HR was about paychecks, picnics and employee of the month, Cathy was about focusing on performance. She brings this philosophy to ICC, as this experience has given her a real understanding of the issues facing companies today. This translates well in her work with executives in the areas of productivity, retention, training, staffing and strategic implementation. Barbara Hughes, Co-founder and SVP of Operations & Strategy As one of the first women to broker risks at Lloyd’s of London, Barbara gained valuable international business experience in Europe and Canada. Barbara’s executive background in strategy, process transformation and research helps ICC create innovative tools and techniques that enable clients to seize opportunities that improve processes and enhance overall results.
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