by Mike McCurdy
GEA Executive Director
Getting Out of the Woods: How HR Metrics Contribute to Decisions and Success
Part 1 of this series started with an uncomfortable metaphor – for HR, operating without a system of metrics is like being lost in the woods. You may think you’re heading in the right direction, but it’s easy to get off track. Data and consistent measurement of change are required to monitor and assure that improvements actually occur and organizational goals are reached.
No one likes the idea of being lost in the woods. The only thing that’s possibly worse is discovering that others think of you as someone who would get lost in the woods. Without pushing the analogy too far, it’s quantitative data and metrics that provides credibility in today’s business environment. For senior management, metrics inform decisions. Subjective opinion and “gut feel” for directions really don’t have a place in the corporate boardroom.
Lacking data that links HR performance with the organization’s key performance indicators (KPIs), it becomes easy for corporate leaders to relegate the HR department to the expense column as a cost center. A well-crafted system of HR metrics shows the relationship between human capital initiatives and organizational success. It also increases the visibility and relevance of your contribution in the C-suite. Metrics, correlated with organizational KPIs, are required to prove HR’s relevance in 21st century businesses – to put HR on the same level with Finance, Supply Chain, Sales, and other data-driven departments.
What Measures are Most Relevant to Your Organization?
Where should you focus? The logical answer is on measures that are most relevant to the success of your company. Typically, what you measure will fall into one of two categories:
- Measures of progress – improving efficiencies, revenue/man-hour, employee engagement ratings
- Measures of opportunity – Future performance forecasts, return on human capital, and other data that are valuable for corporate decisions.
Both categories are important. Progress measures can show movement towards corporate goals, performance improvement, or advances towards solution to a problem. Opportunity measures can help managers forecast costs and plan for new investments, new product or service introductions, or expansion.
The metrics you choose should be aligned with short-term and long-term organizational goals. Reviewing business strategy with the organizational leadership and seeking input is part of the process. You’ll want to select the measures that will provide the specific information that is needed for decisions.
The Fine Points of a Working System for HR Metrics
The specifics and details are important. A well-planned system for HR Metrics includes the following:
- Defined data collection methods – What data is available within HR and elsewhere in the company? Data collection methods establish how it will be gathered and compiled.
- Consistent Formulas – Collection and reporting should be consistent. It’s very important to determine how costs will be included. For instance, are recruiting and advertising expenses included in cost/new hire calculations?
- Timely Analysis – Data are most relevant as measures of change. What reporting periods are practical and useful – daily, monthly, quarterly?
- Relevance Checks – Organizational goals and objectives change and HR metrics should change as needed to stay in alignment.
How HR Metrics Can Tell Your Story (and help your Career)
For HR, a well-defined system of metrics provides the compass and map that guide activity and the initiatives that produce and contribute to the organization. Valuable data from HR can help a company out of the woods when problems are identified and progress is measured. It can provide insights for growth and for critical corporate decisions.
Metrics also provide a means for HR to contribute. It may be that a data-oriented approach can help to change the perceptions of corporate leaders. If HR provides consistently provides relevant information that improves performance, they aren’t a cost center. They become a value center.
For 21st century companies, metrics are the language of business. As an HR professional, it’s important to use this language to tell your story. You’re not lost in the woods, but focused in a specific direction and measuring progress as you go. The information you provide can enable decisions, indicate solutions to problems, establish accurate costs and timelines. It will contribute to your organization’s success and to your career.