1. Beyond Mere Measurement: Using HR Metrics to Impact Your Organization’s Business Performance Presented by: Keith Dalton, SPHR Presented April 15, 2010 SHRM - JC
2. Overview The Case for HR Metrics An Approach for HR Metrics Scorecards, Dashboards, and Metrics Presenting Metrics to the Business Examples of Metrics Resources Q&A
3. “There are three kinds of lies: Lies, Damn Lies and Statistics” Mark Twain When HR pulls out metrics there can certainly be suspicion by your partners about their use. Especially if HR is holding a business accountable to shared metrics. When we talk about HR metrics what are we trying to achieve?
4. The Case for HR Metrics Change our way of thinking “I’m a business person that happens to be in HR, not an HR person who happens to be in the business” “If you can’t measure it, you can’t manage it Transform the role of HR 4 HR “Evolutionary” Roles Increase HR value to the business
5. Business Metrics Businesses have a variety of ways at looking at how it is doing usually backed by reams of data to make various decisions and to track, report, and communicate that information. Unfortunately, most HR individuals avoid the facts and data running through their organization or choose to ignore it. In other cases they may not find “value” in “the numbers” or in other cases dealing in “hard numbers” isn’t what they view as “HR” work. The point here is that HR can have significant impact to not only what appears on an Income Statement but also to the businesses’ long term success. Human Capital is one of the few assets a business or organization has that appreciates in value versus what most assets do which is depreciate. HR has power and the potential to influence the business bottom line.
6. The Business Approach to Metrics A Common Understanding for All Stakeholders Income Statements Cash Flow Statements Balance Sheets Risk Evaluations Budgets And many more Various Methods of Analyzing Horizontal Vertical Quantitative Qualitative
10. Scorecards, Dashboards, and Metrics Since the focus of our session is about using HR metrics we will briefly review what should be the predecessor process before using metrics in isolation. Typically, the business initiates its strategic goal setting process each year coupled with longer range strategic planning as the first step.
11. Scorecard/Dashboard Process Identify/Define the Business Strategy Develop a business strategy map Link HR activities to the strategy map Create measures Link to strategic business results Set targets Develop HR Scorecard/Dashboard Communicate results
12. Scorecard/Dashboard example This example on the next slide reflects a strategy map based on the business imperatives of a fictional credit union We can see the Strategic Objectives across the top (Be the Financial Institution of Choice, Increase Financial Strength) We can also see the various drivers to support the Strategic Objectives mostly the oval boxes in the swim lanes (Increase efficiencies, Cross-sell products, etc) Additionally, we see the HR Performance Drivers (Job Sat, Customer Sat, Staff Knowledge of CU’s Strategy, etc.) which would be tied to various underlying HR metrics. Lastly, you will notice these HR Performance Drivers have designations of leading or lagging. This ties to another important aspect of HR metrics.
15. Example Leading/Lagging Indicators Let’s consider this baby’s health as what we are interested in understanding in terms of indicators. Leading Indicators speak to What IS Happening and can precede, anticipate, predict, or affect the future. Body Temperature Blood Sugar Levels Cholesterol Levels Blood Pressure Weight Height Lagging Indicators speak to What Happened – typically the result of a change or an event. In almost all cases there is little opportunity to effect the outcome of these metrics. Infectious disease - Flu Diabetes Heart Attack Liver Failure Stroke Death
16. Presenting Metrics to the Business Let’s talk about the other aspect of using metrics with our business partners. If we understand the business strategy we can be effective in communicating HR metrics to the organization. Even if you don’t go through the deeper strategy map process, discussed earlier, you can tie critical metrics to the organization’s goals. You may find your metrics naturally fall where they have direct or indirect impact on revenue or on costs. But what is more important is what action will HR take based on the results? Firms that carefully link HR activities to Business Strategy measured by metrics have a 33% higher return on Total Capital than those that do not. Watson Wyatt Research 2003
17. Building the HR case Justify cost? Increase budget or expand services? Recognition of contribution? A call for action?
18. Building the presentation Presentation must focus on desired outcome(s) What are your business partner’s preferences in receiving data? Hit the high points early Do your homework! If possible, cultivate business champion to sell your organization during discussion
19. Pitfalls to Avoid Identify how your business partners view success Listen for clues about how your HR organization is viewed Where do you bring value to the organization? Providing data that is not relevant/meaningful is worse than providing no data at all! What are the levers that drive business success? Do they connect with HR initiatives? Are they dependent or independent to HR? Know that metrics used aren’t universal for every industry or even company to company Your metrics may change over time
21. Human Capital Measures Staffing Recruitment Internal Movement Staffing Effectiveness Retention Turnover Employee Engagement Cost of Turnover Capability Performance Management Education and Development Management and Leadership Training Comp and Benefits Compensation Benefits Equity
22. Human Capital Measures Environment Absence/Attendance Employee Relations Health and Safety HR Service Delivery HR Profile HR Expense HRIS/HRIT Contact Center Payroll Workforce Demographic Structural Tenure Organizational Effectiveness Productivity Structure Innovation
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Editor's Notes
Words to live by?When HR pulls out metrics there can certainly be suspicion by your partners about their use. Especially if HR is holding a business accountable to shared metrics.When we talk about HR metrics what are we trying to achieve?
First bullet point: The case for implementing HR metrics is strong. In this period of uncertainty, where organizations are continually looking for ways to reduce costs, increase productivity, or even to justify the needs for functions and people, it is critical HR enables better decision-making through facts and data. This requires many of us to radically alter our thinking about how we work with the business. We can no longer ignore the fact we are first and foremost business people. Review Second bullet point: The need to move beyond “basic” support to an organization as a Service Provider or even to move further along the continuum of HR roles is a key method to increasing HR’s role at the table and its value to the business. The four roles HR may play related to metrics and data are (Corporate Executive Board “The Metrics Standard”): Service Provider – Builds repositories and provides information to the line as requested (ad hoc requests, databases capture human capital history)Business Enabler – Provides tools and services that enables real time, consistent, support that increases overall efficiency of the org (Ensures consistency of measurement across org, support data self service within and outside HR, multi-dimensional reports).Business Partner – Educates the organization regarding the impact of human capital on business performance, and identifies opptys for improvement (Identifies trends, Defines oppty with Human Capital interventions, educates the org. about Human Capital trends)Business Driver – Consults with the line providing direction how talent is best managed and leveraged to drive business success (Define Human capital drivers of organizational success, model impacts on organization’s goals, provide Human capital perspective in strategic decisions).
This example reflects a strategy map based on the business imperatives of a fictional credit unionWe can see the Strategic Objectives across the top (Be the Financial Institution of Choice, Increase Financial Strength)We can also see the various drivers to support the Strategic Objectives mostly the oval boxes in the swim lanes (Increase efficiencies, Cross-sell products, etc)Additionally, we see the HR Performance Drivers (Job Sat, Customer Sat, Staff Knowledge of CU’s Strategy, etc.) which would be tied to various underlying HR metrics.Lastly, you will notice these HR Performance Drivers have designations of leading or lagging. This ties to another important aspect of HR metrics.
So to provide additional context about what HR metrics might cover I’ve included several general categories in the next few slides and will share some specific measures which might help illustrate each area.
