HR Metrics

Moving Beyond Absenteeism & Turnover Stats

Overview Agenda
1. HR Metrics An Introduction 2. What CEOs expect from HR 3. Becoming World-Class HR: Setting up measurements 4. Metrics for HR 5. Wrap-up

HR Metrics An Introduction
Case Study A CEO confides to the HR consultant that he is very frustrated with the HR Division of his company. There seems to be a steady stream of recruits being interviewed but the output and quality of work coming out of one of the companys critical departments is declining and there is a steady change in faces in the department.

HR Metrics An Introduction
Case Study The CEO is aware that HR is collecting information on absenteeism and turnover and is conducting exit interviews however nothing is reported back to him. The strategic and operational plan of the company is hinged on the success of the department in question. He is beginning to believe that HR is not supporting the strategic agenda of the company and is talking about changing the leadership in the HR Division.

HR Metrics An Introduction
Why should we care about HR Metrics? People costs can constitute half or more of a companys expenses but 57 percent of companies dont track the impact of HR on their business Metrics allow fact-based decision making Metrics can change behaviour when communicated throughout a company Metrics clarify what is important.

HR Metrics An Introduction
Why should we care about HR Metrics? HR should care about Metrics because CEOs and Senior Executives care about the impact of HR on performance and they care about numbers and tangibles. Metrics that are aligned with business objectives and operational capability are businessintelligence tools for HR Metrics track the impact of HR on the business and behaviour of people to improve performance.

HR Metrics An Introduction
Some reasons why HR hasnt been measured: We didnt have to Senior executives accepted HR as a soft unavoidable cost of doing business There was no sound metric starting point Although headcount, HR staff per 100, and costper-hire were considered common HR metrics, they dont stand up to hard business questions and challenges and therefore support the belief that HR couldnt be measured.

HR Metrics An Introduction
Some reasons why HR hasnt been measured: Cant measure strategy In the 90s, most metrics tried to measure strategy, which cannot be measured. Metrics should measure outcomes and results associated with objectives. Too complex Many of the HR metrics formulations developed were too complex to allow ongoing measurement.

HR Metrics An Introduction
A Primer on HR Metrics A Metric is using a number to enhance a story or argument an Accountability Tool HR was busy. We filled 45 out of 50 vacancies over a 6 month period. HR Programs are working. Company Turnover in the last quarter decreased from 8% to 6%. Absenteeism this month is 10 days versus 15 days last month.

HR Metrics An Introduction
A Primer on HR Metrics A better and more interesting story if the following questions are answered: How many of the 50 vacancies were key jobs? How long, on average, did it take to fill the jobs? How satisfied were the managers with the recruitment process and results? How many of the new hires reached performance level after 3 months?

HR Metrics An Introduction
A Primer on HR Metrics Metrics can be internal to HR with an Operational and Task Focus How HR Operates: This is the most common approach used today. Examples: We filled 45 out of 50 vacancies. We conducted 20 exit interviews this year.

HR Metrics An Introduction
A Primer on HR Metrics How HR impacts on the organization Strategic Metrics: Consider impact of HR initiatives across the organization and links Metrics to the Business Strategy Contribution of HR to make the business model a reality. Goes beyond activity-based measurements and focuses on metrics that are in synch with business goals. These metrics are reported to the CEO.

HR Metrics An Introduction
Example: Strategic Focus: Recruitment of best in marketplace
HR filled 45 out of 50 vacancies. After 6 months, 40 of the 45 passed probation and performance ratings ranged from Meets expectations to Outstanding. These metrics show that HR recruitment processes are resulting in quality hires for the company. 80% of managers surveyed were more satisfied with the recruiting process than last year as a result of quality hires and retention of top performers.

HR Metrics An Introduction
Example: Strategic Focus: Retention of top talent The turnover rate of our top 25% rated employees is below 5%. Employee Survey results show that the performance bonus system put in place to recognize top rated employees as well as flexible scheduling were the key reasons for the drop in turnover. When compared with our industry, we are well above our competitors.

What CEOs expect from HR

HR Organizational Effectiveness or Strategic Metrics CEOs want to know how HR gives them a measurable competitive advantage over their competitors. Dr. John Sullivans research indicates 15 common key questions. A representative sample are presented to illustrate the nature of these questions.

What CEOs expect from HR

CEOs List of HR Metric Questions 1. Do we attract and hire the very best people we can afford? 2. Do we retain our key/most productive people at a higher rate than our best competitors/ 3. Are the people we have the most productive in the industry? 4. Do we fix our problem employees rapidly or get rid of them if they are too expensive to fix?

What CEOs expect from HR

CEOs List of HR Metric Questions 5. Are our employees satisfied and does this impact productivity and retention? 6. Is our HR department efficient and does it continually improve? HR customer satisfaction data Response time to requests

Becoming World-Class HR Setting up measurements for HR

Important to meet and consult with managers and internal customers to introduce HR metrics into an organization. Also, to clarify and understand the questions and needs of the CEO and other internal customers related to company strategy and HR

Becoming World-Class HR Steps to Set up Metrics for HR

1. Get out in the field to get input It is critical to understand the business objectives of the company overall and those of the individual business units. Business units are your constituents. Ask them what HR or recruiting results will be necessary to help them achieve their objectives.

Becoming World-Class HR Steps to Set up Metrics for HR

2. Get HR in step with a complementary set of objectives Once you know the goals of the various business unit, you can develop objectives with supporting metrics to align HR with them.
For example, if the strategic plan calls for expansion in production and the business plan requires 200 additional employees in the next two years, HR needs to plan a recruitment strategy that builds a pipeline of potential talent and metrics to report on progress.

Becoming World-Class HR Steps to Set up Metrics for HR

3. Get your IT department involved Determine up front what you can and cannot track as well as how youll collect and deliver the metrics that matter. Sophisticated IT systems can deliver dashboards and scorecards for HR metric data.

Becoming World-Class HR Steps to Set up Metrics for HR

4. Get everyone comfortable with the data Sell the metrics approach as a business performance-enabling program. Frequent communication helps to underscore the significance of the metrics program and helps to refine it.

Becoming World-Class HR Steps to Set up Metrics for HR

5. Get started You can spend months debating and analyzing the finer points of implementing a metrics program but its better to get started and refine as you go. A metrics program is never done it needs constant evaluation, tweaking, and sometimes, wholesale change. As the business changes, so does what you need to measure.

Becoming World-Class HR Steps to Set up Metrics for HR

Develop metrics that reflect the company culture and are similar to those reported in the annual report Keep metrics simple Strategic Metrics should be limited to six. Have Strategic Metrics approved by CEO. Develop trend lines for comparison. Compare with industry.

Becoming World-Class HR Back to our Case Study Using Metrics

In the case of our frustrated CEO: HR needs to know what the business plan is and the importance of XY department in achieving overall business targets. Discussions with the CEO and senior executive will clarify the company objectives and allow HR to align HR objectives. HR needs to regularly gather feedback on how satisfied the CEO and senior executive is with HR services including recruitment.

Becoming World-Class HR Back to our Case Study Using Metrics

HR needs to develop recruitment and turnover metrics that indicate the quality of hires and the reasons for turnover. Are the low performers or top performers leaving? What are the reasons for turnover? pay, supervisor, poor fit? Communicating the HR metrics to the CEO will clarify the questions he has, reduce his frustration and concern, and demonstrate the value of HR in achieving the business objective.

Metrics for HR Organizational/Strategic Metrics

1. Revenue per employee: Revenue / Total # of FTE 2. Productivity Ratio: What is our output (productivity) for every dollar of people costs spent? 3. People Profit: The number of people dollars spent in order to get one dollar of profit. 4. Employee Pulse/Satisfaction: What are employees saying? People costs include salaries, benefits, training & HR Dept costs

Metrics for HR Metrics for Employment

1. On-the-job performance of new hires: Have we hired more productive people this year than last year? What is new hire time to productivity? 2. Failure rate: What % of the people that we hire are a mistake? What happens to them? Track number of employees who leave voluntarily before probation or do not meet probation.

Metrics for HR Metrics for Employment

3. Average tenure of those who are hired 4. How many people do we take from our competitors? 5. How satisfied are managers and applicants with our recruitment process and results? Service satisfaction survey to gather feedback sampling mystery shoppers

Metrics for HR Metrics for Retention

1. What is the turnover rate of our key/top performers? Compared to our competitors? 2. What is the turnover rate of bottom performers?

Metrics for HR Metrics for Compensation

1. Do pay increases increase productivity? What impact does a 1% increase in salary have on product produced? 2. Do highly paid people produce more $ of output (relative to their pay?) 3. Is it the $ that causes people to leave (stay?) 4. Which benefit impacts attraction, productivity and retention the most (per $ spent)?

Metrics for HR Metrics for Employee Relations

1. Number of complaints filed per employee per period of time 2. Number of and percentage of turnover attributed to ER conflicts

Metrics for HR Metrics for Training

1. Which training programs have the highest impact on productivity? 2. If you increase training hours in a department, does productivity increase proportionately? What is the percent increase in performance as a result of every $1,000 spent on training? 3. If you increase leadership training, does employee satisfaction increase?

Sources for Metrics

The Saratoga Institute useful source of formulas www.saratoga-institute.com Staffing.org www.staffing.org Dr. John Sullivan www.drjohnsullivan.com

Wrap Up

Questions?