Maximize Impact with Business-Focused HR Metrics

September 7, 2016

Maximize Impact with Business-Focused HR Metrics

Analytics should be used in organizations to uncover the key people drivers of actual business outcomes (e.g. sales, profits, turnover). Instead, most organizations are using analysis to just create more reports and more metrics.  Misguided metrics typically focus on HR efficiencies, such as time-to-hire or a staffing ratio. Efficiency metrics are solid ways to measure just that—efficiency. Cost centers measure their effectiveness by showing greater efficiency. If human resources wants to be a business partner (rather than a cost center), it must show business impact. Before your monthly HR metrics report balloons into 200 pages, consider following a few guidelines to maximize business impact.

  1. There are no magic metrics that work for everyone.

    Although a lot of HR leaders get excited about what the latest Silicon Valley company is doing differently in the realm of HR and measurement, it is important to remember that all organizations are different in many ways. The people issues that drive business results in one company may not drive results at another. There are no magic bullets that work everywhere—and HR threatens its own credibility by chasing shiny objects. Organizations have their own people data and business data that can be combined and analyzed to see the connections between the two. These connections are how metrics should be built.
     

  2. Every element on the metrics scorecard must be directly linked to business outcomes.

    Why measure something if it doesn’t impact anything? It is a fair question that does not often get posed to HR leaders. True analytics allow you to understand exactly which HR processes, attitudes, skills, competencies, etc. drive actual business results. If you are measuring something that cannot be shown to impact business results, it is likely not worth it to spend time every month measuring it.
     

  3. HR Efficiency Metrics are fine for internal HR tracking, but not for senior business leaders.

    We hate to break it to you, but your time-to-hire metric is not at the top of the CEO’s list of things that she is concerned about. Yes, track it internally within HR but the C-suite wants to know what you are doing that is improving the business. If you are just reporting internal efficiencies, then HR will continue to be a cost center (not a profit center) that can really only show value by cutting costs and programs and overhead. To be business-focused, your metrics must speak to what the C-suite cares about.
     

  4. Benchmarks don’t mean a whole lot.

    Many HR leaders can’t exhale without a benchmark score. “I know how we performed, but what about the benchmark?” In reality, all that question is really saying is “we want to measure ourselves against average.” Who wants to be average? Not anyone in your C-suite. Plus, no one actually knows what these benchmarks mean to the business. For example, do you know how much higher than the benchmark you need to be in order to have a competitive advantage? You sure don’t because it is impossible to answer that question. Or, do you know how much lower than the benchmark you need in order to have a competitive disadvantage? It’s impossible to answer that question as well. So track benchmarks, but don’t make big decisions based off of them.
     

  5. For every metric (e.g. time-to-hire) ask yourself:
  • Can I articulate why this really matters to the business? By using analytics you can articulate the business impact—but also critical is translating that impact into simple language for all leaders.
  • Do I know what a good number should be? Not an “average” benchmark score, but a number that shows business impact.
  • Can I articulate the business value of moving this number? The C-suite will want to know what the cost and the impact of investing in improving the metric is.
  • Why would senior and front-line leaders care about this metric? Ask yourself this question for every metric on your scorecard. If you can’t explain it in a few seconds with actual data, it may not be a good metric.
The Authors: 

Scott Mondore, Ph.D., is a managing partner of Strategic Management Decisions (SMD) and is the coauthor of Investing in What Matters: Linking Employees to Business Outcomes and Business-Focused HR: 11 Processes to Drive Results, both published by SHRM. He can be reached atsmondore@smdhr.com or @ScottMondore