Sunday, July 08, 2007

On HR Metrics

A century's worth of MBAs would seem sufficient to propagate a by-the-numbers approach into every nook and cranny of the business world, but it hasn't worked out that way. By most accounts, companies have done a respectable job of mastering financial metrics, but have largely taken a flier on measurements of operations or intangibles such as customer satisfaction or brand loyalty.

Fifteen years ago the advent of the "balanced scorecard" sought to redress this imbalance by demonstrating how nonfinancial metrics could be captured and used to help managers "see their company more clearly — from many perspectives — and make wiser long-term decisions," according to its creators, Robert Kaplan and David Norton. But despite the popularity of that approach at a strategic level, many consultants and academics say it left thorny questions unaddressed at more tactical levels.

Use of HR metrics for measuring the impact and efficacy of practices and policies seems to be similar problems. Measuring the Intangible has multiple challenges and the success lies in identifying the top metrics which captures the critical indicator of organizations deliverables. Identifying key HR functions like recruitment metrics, training metrics, performance management and employee engagement metrics are widely believed to capture the deliverables for HR function.

As Sullivan rightly said “The most common error that I find is that of HR managers trying to create and implement metrics in a vacuum. Instead, I recommend a collaborative approach, in which you take a list of strategic HR metrics that you can live with to the CFO and let him or her select the specific ones that are most likely to measure business impact and be easily understood and considered strategic by top management. By letting the CFO play a role in the selection process and allowing them to make the final decision on what metrics you will move forward with, you eliminate many of the roadblocks you may encounter — and you'll recruit a high-level champion at the same time.

It’s important to understand how you are reviewing and analyzing the metrics and then setting new measurable realistic targets to improve on the key metrics. Sometimes we intend to address too many issues at the same time and then loose focus. Metrics under functions like recruitment and employee engagement which has a more direct impact of business performance can be linked to organizations overall metrics and also made performance measures for various roles so that it has a more direct linkage with individual and organizations goals as well.

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