HR by the Numbers: Use HR

Metrics to Measure and

Maximize Your Workforce's
Strategic Value
Presented by:

Ronald Adler
Laurdan Associates, Inc.

Jennifer Burdick
CMK Associates, LLC

Thursday, August 22, 2013

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10:30 a.m. to 12:00 p.m. Pacific

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HR by the Numbers: Use HR Metrics to
Measure and Maximize Your
Workforce's Strategic Value
Presented by:
Ronald Adler
Laurdan Associates, Inc.

Jennifer Burdick
CMK Associates, LLC

August 22, 2013

The Current Role of HR

As organizations recognize the value of their human
capital, HR management is increasingly expected to
provide quantitative and qualitative information about:

The valued added by the organization’s human capital;

How human capital increase competitiveness;
How human capital helps the organization achieve its
business objectives; and
How to assess and manage human capital related risks.
 HR Metrics: Question

“What is the best strategic HR Metric?”

HR Value Proposition
“[HR Leaders] must evaluate their value as created
in the eyes of stakeholders – customers and
investors as well as managers and employees –
and focus less on what they do and more on
what they delivery…and build value-added HR
practices and competencies that align with and
help accomplish strategic goals.”
The HR Value Proposition, Brockbank and Ulrich
 The Current Role of HR
From management’s perspective, HR should:
1) Demonstrate its ability to support companywide
initiatives
2) Monetize HC related activities and results
3) Make the linkage between investments in human capital
and organizational results
4) Identify and assess human capital related risks
5) Provide HC related information that allows the
organization to make business decisions
6) Help link business decisions to the right results

HR Metrics: A Tool in HC
Management
• The goal of HR metrics is to help communicate the
achievement of these goals and to provide predictive
business intelligence.

• As Jac Fit-enz, noted scholar and HR metrics expert,

notes: “… 70% of communications are persuasive in
nature…Success at HR requires using numbers to
persuade others.”
 What Are HR Metrics?
• “HR Metrics” is Misnomer – should be “business
metrics” that measure the impact of human capital
• Standards of measurement to assess Human Capital
value, costs, productivity, efficiency, performance and
progress, and human capital outcomes
• HR Analytics: The use of data and trends to predict
future occurrences and the help management make
better decisions
• Key Performance Indicators (KPIs)

Trends in HR Metrics
• Higher expectations for HR Professionals
– HR professionals must have necessary business
acumen to achieve strategic objectives
• Increased use of HR Analytics
– Qualitative and quantitative measures to make
decisions AND obtain desired results
• Increased standardization of the HR profession
– International standards
• Greater attention to risk assessment and management
 Trends in HR Metrics
• Transition from Cost/Efficiency Formulas to Impact
Analysis, Risk Assessment and development of
priorities
– How does Human Capital contribute to the Bottom
Line?
– What are the right levels of investment in HR?
• ROI & Cost/Benefit Analysis
• Assessing missed opportunities
– Why missed?

Why Do HR Metrics Matter?

• Determine and measure risk exposure
– Risks: Inherent, residual, material

• Allow HR to communicate value

• Allow HR professionals to communicate, speak the

business language

• Identify responsibilities and assign accountability

 HR Metrics: Importance
• The recession refocused management’s attention on
revenue generation, asset value, expense control, cash
flow, profitability, competitiveness, and risk management.

• Metrics play a critical role in ensuring that management’s

attention is focused on those factors that contribute to
the organization’s survival, sustainability, and success.

• Metrics respond to a growing list of stakeholders .

HR Metrics: Limitations
Unfortunately for HR practitioners, there are hundreds of
HR metrics to choose from. As Albert Einstein noted:
“Everything that counts can’t be measured and
everything that can be measured does not count”

Thus the acid test of HR metrics:

Do your metrics result in a “so what” or
an “Ah Ha” response?
 HR Metrics: Limitations
“An organization cannot possibly assign
a meaningful financial value to an intangible asset
like ‘a motivated and prepared workforce’ in
a vacuum because value can be derived only in
the context of the [organization’s] strategy.
What a company can measure, however, is
whether its workforce is properly trained and
motivated to pursue a particular goal.”

Robert S. Kaplan and David P. Norton

HR Metrics: Telling Your Story

• HR Metrics are about telling a story about your organization.
Like other stories, your story:
– Must have context
– Should consider historical information (lagging indicators)
– Should report current information (coincident indicators)
– Should indicate possible future events (leading indicators
and predictive analytics)
 HR Metrics: Telling Your Story

• Your story:
– Should consider its audience (there is a growing
list of internal and external stakeholders and users
of HR metrics)
– Should engage the audience and motivate action

HR Metrics: Telling Your Story

• What stories do your metrics tell about your

organization’s human capital and HR
management?

– Question: Is anyone listening?

 HR Metrics: Enhancing
Communications
• Dr. John Sullivan notes that the reason few executives pay
attention to HR is that most HR metrics “are simply not
compelling.”
• He notes five “Differentiators of Great Metrics”
– Formal planning
– Compelling format
– Visibility
– Relevance
– Emphasis on dollar impact

HR Metrics:
Strategic-Business Context
1) How does your organization produce revenue?

2) How does human resources add value to your

organization?

3) Are HR activities and employment practices aligned with

your organization’s strategic and business goals and
objectives? How do human resources impact these
objectives?
 HR Metrics:
Strategic-Business Context
4) What are your organization key business measurements and
metrics? How does your organization measure success?
What’s on your organization’s scorecard?
General Rule of Metrics #1 : Organizations measure what
they treasure.
General Rule #2: What gets measured, gets done.
General Rule #3: Critical metrics have an owner.
General Rule #4: To have value, metrics should have a target
to be compared to.

HR Metrics:
Strategic-Business Context
5) How do human resources impact your organization’s key
business measurements and metrics?
6) What are your organization’s business imperatives, i.e.,
what distinguishes your organization in the marketplace?
How do HR activities and employment practices impact
these imperatives?
7) What are your organization’s risks and opportunities?
How do HR activities and employment practices impact
these risks?
 HR Metrics:
Strategic-Business Context
8) What decisions do you want to influence?

9) Can you connect the dots between the metric and

decision making ?

10) What happens if your organization misses the target?

HR Metrics:
What Do Users Want?
• What do CEOs say they want?
– Maximize shareholder value
– Increase revenue
– Lower labor costs
– Improving the quality of hires Note: According to a survey
by Staffing.org and the HR Metrics Consortium, “new hire
quality” was rated by C-Level executives as the most
important HR performance metric.
 HR Metrics:
What Do Users Want?
• CEOs (cont)
– Increasing productivity
– Reducing turnover
– Increasing employee ROI
• CFOs
– Financial performance measures, including:
• Labor costs
• The effect of labor on profits margins
• Operating cash flow as a % of net sales

HR Metrics:
What Do Users Want?
Investors:
-- Investment in human capital
-- Retention of talent
-- Leadership depth
-- Leadership quality
-- Employee engagement
-- Human capital responsiveness
-- Alignment of human capital investment with business
objectives
 HR Metrics:
What Do Users Want?
Risk Managers:
Key issues: Severity, incidence, velocity or risk
-- Level of compliance with employment laws and
regulations
-- Impact of loss of critical talent and top performers
-- Impact of human capital chain disruptions

HR Metrics:
What Do Users Want?
Government Agencies and the Courts:
-- Level of compliance with employment laws and
regulations
-- Culture of compliance
-- Compliance behaviors
-- Enforcement record
 HR Metrics:
What Do Users Want?
External Organization Benchmarks:
-- Professional standards
http://www.shrm.org/hrstandards/Pages/default.aspx
-- Industry standards
-- Baldridge
-- SA8000
-- ISO 31000
-- “Best places to work”

HR Metrics:
What Do Users Want?
• Note:
• Benchmarking is the continuous study and process of
comparing and assessing an organization’s practices,
processes, and outcomes against internal standards
and external “best practices.”
• Benchmarking is a learning process that emphasizes
improvement.
 HR Metrics: Common Problems
• Are siloed; are not interrelated
• Typically viewed as discrete measurements
• Used to measure activities rather than results
• Based on the assumption that human resources are an expense
• Based on data that are inaccurate or untimely
• Measures inappropriate time periods

HR Metrics: Common Problems

• Inappropriate level of analysis
• Failure to consider the internal and external factors, e.g.,
opening a new store or business cycles, that affect the metric
and the analysis
• Incorrectly assigning accountability based on the metrics
• Liabilities are created by the data collected — and by the data
not collected
• The past may not predict the future
 HR Metrics: Risks
1) May put the organization on notice of compliance
deficiencies
2) Creates discoverable information
3) May create misleading or inaccurate information…may lead to
faulty decisions
4) May be compared to external standards and benchmarks

Business Metrics: Commonly Used

Metrics
• Total revenue
• Operating revenue
• Expenses
• Operating expenses (OE)
• Profits
• Net operating profits (NOP)
 HR Metrics: Responding to
Customers and Stakeholders
• HRCI: “SPHR and PHR Body of Knowledge”
– Core knowledge: Qualitative and quantitative methods and
tools for analysis, interpretation, and decision-making
purposes (for example: metrics and measurements,
cost/benefit analysis, financial statement analysis)

HR Metrics: Responding to
Customers and Stakeholders
• HRCI: “SPHR and PHR Body of Knowledge”
– Provide data such as human capital projections and costs that support
the organization’s overall budgets.
– Perform cost/benefit analyses on proposed projects. SPHR only
– Develop and manage an HR budget that supports the organization’s
strategic goals, objectives, and values. SPHR only
– Must have knowledge of elements of a cost-benefit analysis during the
life cycle of the business (such as scenarios for growth, including
expected, economic stressed, and worst case conditions) and the impact
to net worth/earnings for short-, mid-, and long-term horizons
 Additional
HR Metrics
Other HR Metrics:
1) Time to hire, time to productivity, time to competence
2) Cost of Hire (see standard on SHRM website)
3) Revenue per FTE, Revenue per Human Capital Expense
4) Profit per FTE, Profit per Human Capital Expense
5) ROI
6) Turnover Rates
7) Turnover Costs

HR Metrics: Acid Test

Acid test of HR metrics:

Do your HR metrics result in a “so what” or
an “Ah Ha” response?
 Questions?

Ronald Adler, M.B.A., President-CEO

Laurdan Associates, Inc.
301.762.5794
radler@laurdan.com
Jennifer Burdick, President
CMK Associates LLC
410.467.5462
jennifer.burdick@verizon.net

Disclaimers

*This webinar is designed to provide accurate and

authoritative information about the subject matter
covered. It is sold with the understanding that the
publisher is not engaged in rendering legal, accounting, or
other professional services.
*This webinar provides general information only and does
not constitute legal advice. No attorney-client relationship
has been created. If legal advice or other expert
assistance is required, the services of a competent
professional should be sought. We recommend that you
consult with qualified local counsel familiar with your
specific situation before taking any action.
 Speaker Biography

Ronald Adler
Ronald Adler is the president and CEO of Laurdan
Associates, Inc., a veteran-owned human resources
management consulting firm specializing in HR audits,
employment practices risk management, HR metrics
and benchmarking, strategic HR, and unemployment
insurance cost management issues.

Jennifer Burdick
Jennifer Burdick the president of CMK Associates, LLC,
and is a human resources consultant and trainer
specializing in customer service, equal employment
opportunity compliance, and investigations and
training for small, developing companies, non-profit
organizations, and human relations commissions.