You know the areas of staffing and recruiting that are worth measuring, but how can you become more strategic with your findings? One suggestion: By capturing ‘from’ data as well as ‘count’ data.
In recent years, HR has tried to outsource more of its transactional processes and concentrate on value-added functions. Even as the profession gains credibility with decision-makers, however, HR has been forced to rely on standard metrics that don’t support its changed focus.
HR at one time had almost nothing to work with in terms of metrics, notes Theresa M. Welbourne, Ph.D., associate professor of organizational behavior and HR management at the University of Michigan Business School.
“Then metrics gained attention and importance, and HR began to search for standards that would be reasonable to build a metrics program upon. Now the search is on to customize,” says Welbourne, who is also president and chief executive officer of Ann Arbor, Mich.-headquartered eePulse Inc., which provides technology-based leadership tools.
“Standard metrics justify HR’s existence but don’t help [people working in the function] do their job better,” says Welbourne. “Strategic is more than justifying existence. You need to harvest the nuggets of useful information in all the numbers and get that information to the right people so they can take action.”
The challenge then for staffing and recruiting professionals is to develop metrics that reflect the growing partnership, sensibility and bottom-line impact their function now brings to solving business challenges.
Homing in on Value
Watson Wyatt Worldwide, a New York City-based global consulting firm specializing in human capital and financial management, conducts longitudinal studies to gauge the connection between HR practices and the creation of shareholder value. Called “Human Capital Index” studies, these investigations have shown a direct correlation between some HR practices and value creation for the company. Though it’s obvious that recruiting, staffing and other HR activities contribute to the bottom line, it can be difficult to understand exactly where to focus.
“Most HR scorecards go wrong when they focus purely on efficiency,” says Bruce Pfau, national practice leader, organization effectiveness for Watson Wyatt, and co-author of The Human Capital Edge (McGraw-Hill, 2002). “I can fill a job in two days, but is it with the right person? Cost per hire is a good efficiency measure, but does anybody ask the line managers if they got a good quality hire? Effectiveness and quality measures are very important.”
How To Measure ‘From’ Data
1. Start where you are. Most employers already conduct traditional surveys that sort of take the “pulse” of employees. Instead of just asking questions about managers and HR, add a few questions about opportunities available to the business.
2. Target a small group, first, such as the sales or customer service department. Ask the employees: What opportunities do you see for growth? How do you see customers? What insights do customers provide?
3. Look at the “from” data collected. Figure out how you can apply the same science and rigor to this data as you do to “count” data.
Welbourne says that if practitioners only measure transactions or count data about employees, they’re forced to be reactive rather than strategic. “For instance, when you’re looking at turnover, many other indicators happened before that,” explains Welbourne. “If turnover is your metric, you’ve had to wait and react to that, rather than interact earlier and prevent it.”
Being strategic means interacting and coaching, says Welbourne. It means becoming the detective and finding out the “why” of HR-related circumstances. When practitioners take on this role, “people will want to listen to them,” she says, and the role will help in-source jobs rather than relying on outside consultants to investigate such issues and report findings.
Welbourne believes that metrics development typically comes from the top down. “The CEO dictates strategy, everyone aligns himself, and then we measure degrees of alignment,” she says. “But HR can take on a whole new role when we collect business data from people who are doing the business.
“There are metrics about people, like turnover, absenteeism, productivity, training and so on,” Welbourne explains, “and then there are metrics from people, the open-ended data in the minds of employees, which usually come as complaints and suggestions.
“A bottoms-up strategy is new,” Welbourne says. “You may get information from employees, and because you understand the business strategy, you can go back to management and say ‘our strategy needs to be realigned’ or ‘this isn’t working.’ It’s strategic to just listen,” she says. “Simply relaying numerical data about employees won’t tell managers what to do—both of the types of data can be gathered to give strategic information.
“Turnover is an example of a metric that is ‘about’ people but can be recognized and prevented if HR tracks metrics ‘from’ people,” Welbourne continues. “Research shows that feelings of ownership, involvement and energy predict turnover. If you take weekly surveys, for instance, and find low or ‘out of zone’ data, you can intervene and prevent turnover.
“When you give metrics about the business from their own people, upper management finds that very compelling,” says Welbourne. “And when HR shows up every week with data, they become strategic.”
Customizing Metrics
How can you make sure truly important data are being measured? By aligning metrics with management priorities. According to Watson Wyatt’s latest “HR Scorecard Alliance,” which was released Nov. 13, 2003, the allocation of staff time and resources is considerably out of alignment with the priorities of both senior line managers and HR professionals themselves. For example, of the 2,250 line managers and HR managers and supervisors surveyed, staff selection rated second in importance for line managers, while it was 36th in HR spending; employee retention was ranked third in importance but ranked only 44th in spending. By concentrating on metrics in priority areas, staffing, recruiting and other HR activities can drive action that truly matters to management.
The management team and HR should also be aligned, says Watson’s Pfau, noting that alignment can start by studying the company’s business strategy. “What makes a difference in how you support the business?”
Jay Wilber, executive director, quality network, for the UAW-GM Center for Human Resources in Detroit, says that in the early 1990s, GM had more than 1,000 metrics. “This was a result of years and years of individual divisions doing their own thing,” says Wilber. “We wanted to consolidate our approach—metrics was our Achilles’ heel.”
To streamline, the company created five categories of metrics: safety, people, quality, responsiveness and cost. Additionally, GM moved toward aligning metrics with company goals and objectives. “As an example, in our ‘people’ metrics, we use a PMP [performance management profile] that focuses on specific objectives and goals that feed up to higher goals for North American operations,” says Wilber.
“In the past, the measurement would have been an annual appraisal highlighting certain things I did and would have focused less on bottom-line performance,” Wilber continues. “Today there’s a direct link between what I’m being measured on and what the company is trying to do. What I do in sales promotion impacts market share; how I control the budget will control costs.”
Gathering New Data
As “from” data is used more strategically, all HR sectors must develop ways to capture this information. When eePulse conducted a survey of 1,035 senior leaders in October 2003, it found that “from” data evolved through meetings and discussions, teleconferences, instant messaging, webcasts, voice mail and similar methods.
“Gathering information this way isn’t systematic enough for organizational learning,” says Welbourne. “Data aren’t reaching everyone, nor are they rolling up to key people or whoever is making strategic decisions. We manage ‘count’ data and give reports to senior managers already. We need to take the same science and rigor to ‘from’ data and do the same thing.”
HR departments that want to start measuring “from” people data can ease into it with little difficulty, says Welbourne. “Start where you are,” she says. “Most HR departments do traditional surveys. Add a few questions about the opportunities available to the business and about customers rather than about HR and managers.
“Target a small group like sales or customer service,” Welbourne continues. “What do employees see about their customers or what opportunities do they see for growth?” Executives will engage quickly, since “they respect business data,” she says.
Employees like to see data, too, says Wilber. At GM, quarterly business meetings with employees are held to report on performance of the five metrics GM uses. “You have to give employees measurements they can use to see incremental improvements, and then share these metrics with them on a regular basis. Employees need to see a direct link between what they do on the job and a result.
“Employees love to hear how they’re doing,” Wilber continues. “They appreciate the pat on the back they get when improvements are made.” He asks, “How can employees get to a certain place if you don’t tell them where they are now and the steps necessary to get to the new place?”
Updating Your Focus
“Executives and boards are hungry for HR data,” says Welbourne. “As we come up with new ideas, we’ll have a very receptive audience.
“I’m watching the world of HR outsourcing in full force. Executive coaching is becoming very important, as are consultants, and these are strategic roles. Management is searching for someone to help them; it’s a wonderful opportunity for HR to step in and help,” says Welbourne. “As HR in-sources this type of work, their jobs will change and become much more satisfying.”