The State of HR Measurement
by Cathy Missildine-Martin, SPHR
With the conference season just ending, I have had a lot of time to think about what I have learned and heard over the last few months about measurement and Human Resources. I have focused on HR Measurement for the last 10 years, and the journey has been an interesting one.
I believe that analytics for HR can be the strategic weapon HR needs to bring value and insight to the business. Michael Echols, EVP of Strategic Initiatives at the Human Capital Lab, said it best at The Conference Board a few weeks ago, “The opportunity is for HR to create FUTURE value from current human capital investments.” That one statement for me solidified my theory. HR must move past activity-based measures like time to fill, cost per hire, and turnover in order to get to investments that add value and create impact.
I believe a couple of definitions need to be cleared up before I discuss what is happening in the world of HR measurement. Metrics and analytics are used almost interchangeably, but there is a definite difference.
Metrics are simply measurements. For example “Our average engagement level is 80%,” “Our annual turnover is 50%,” “Our average performance score is 60%.”
Metrics track activity, but don’t necessarily show a causal relationship. Metrics alone do not show what affects engagement, what causes turnover and what drives performance.
Human capital analytics examine the effect of HR metrics on organizational performance. In more general terms, analytics look for patterns of similarity between metrics. For example, do high performers leave at a higher rate than low performers and if so, what is driving that turnover? Statistical tests are necessary to get to those answers through analytics.
The journey to HR Analytics has been a long one for HR, with most companies just starting. Below are the phases of a typical analytics journey: (adapted from Steve Woolwine, Chief of Staff Talent and Human Capital Services, Sears Holding Group)
1) Justification-In this initial phase, HR metrics are tracked and have limited reporting. No actions is taken at this stage and data is still quite dispersed.
2) Measurement-In this phase, metrics are better defined. Reporting is now in the form of a dashboard/scorecard, and leadership may have some accountability to the metrics.
3) Effectiveness-At this stage, HR has more sophisticated technology and leadership is widely held accountable for results. Actions are beginning to take place because of the data, and KPI’s are tied to results. Analytics are now being discussed.
4) Value Creation-At this stage, decisions are being made based on analytics, and genuine insights are created. Predictive modeling begins here with an eye on future value creation from HR investments.
5) Impact-This is where the strategic HR professionals really want to inspire the company to be. At the impact phase, change is being created as a result of a predictive mindset, strategic goals are being achieved, and the culture has shifted from being performance based to analytics driven.
In my experience, when asked where most companies are in their metrics journey, phase 1 and 2 are the most common answers. Of course, there are pockets of analytics excellence from companies like Google, Sears, Well Fargo and others, but HR seems to be “stuck” in the early phases of the journey.
I think now is the time for HR to get themselves “unstuck” as HR tasks are still being outsourced and non-HR professionals are making their way into HR departments in companies both large and small. It’s all about supply and demand. The CEO and other C-Suite Executives are currently risk-adverse due to our economic situation.
It’s not that companies don’t have money on their respective balance sheets as we know the money is there waiting to be invested. The issue is the C-Suite want DATA to back up their decisions. With service companies spending at least 60-80% of their operational budgets on Human Capital related expenses, the investment is significant. All CEO’s want to know is this: Should I make this investment and if yes, did my investment pay off?
HR, here is how to get unstuck. Start by understanding your organizational strategy and what the drivers are for your desired results. Make sure you have a team that understands the business and has a curious mind to start asking the right questions. Some questions to consider when moving towards impact:
q How can I use analytics to move the organizational strategy forward?
q What business problem can I solve using analytics?
q Which investments in people should be made in the next 2-3 years?
Next, start small by solving a business problem with data. Make sure you tell a compelling story and not just report rows and columns and data. Tell your leadership team something they didn’t already know and you will have their undivided attention.
HR has been wanting to be strategic, to add value, and to have a seat at the “you know where.” Show impact and your presence will be requested at every single strategic meeting, as they won’t be able to have the discussion without HR.