How can HR metrics help companies grow? (Toughest HR question)

Can link to strategy or demonstrate HR's prowess
By Ian Cook
|Canadian HR Reporter|Last Updated: 05/06/2011

Question: How can HR metrics help companies grow? Our HR department is keen on getting into metrics but we don’t have a clear understanding of what exactly to do with the data once we have it. Any assistance would be appreciated.

Answer: There is an increasing focus on data in business and the ever more sophisticated use of software has led to a whole new discipline — known as business intelligence — that is shaping how organizations make decisions, target investments and track progress against goals.

HR is often left out of the loop with these developments and is missing out on the huge, potential value that comes from adding HR data to this mix. With the advent of better and cheaper human resource information systems (HRIS), more organizations are looking to measure HR. It is better the HR group takes this on rather than have some other part of the organization do the measurement.

Measuring HR helps by making the dynamic interactions and performance of employees tangible and observable. It allows HR to find out what is really happening, focus its energies on understanding the qualitative dynamics of areas with opportunities and challenges, improve the situation and then prove the results to the rest of the organization.

Benefiting from this type of insight is common for organizations involved in the HR Metrics Service, a collaborative venture by the British Columbia Human Resources Management Association, the Human Resource Management Association of Manitoba and the Human Resources Professionals Association.

For example, one organization had a total turnover of about six per cent, a very acceptable level in its sector. However, almost all of the turnover was voluntary and coming from individual contributors with two to three years’ service. This is the point at which people in their organization are fully trained and competent. It is the worst type of turnover possible for this organization, which invests heavily in developing high-level technical skills in this group.

Through the use of measurement and the application of good HR practices, this organization reduced turnover in this area and now understands a lot more about how to retain people in this crucial group.

That’s helping this organization grow its business and deliver the quality of service necessary to succeed. HR data enabled the company to find a problem it did not know about, solve it and report the results. This HR group is now seen as critical to supporting strategy, as opposed to managing transactions.

In terms of getting started with HR measurement, the key thing to keep in mind is where your organization is headed. Once this is understood, HR can choose metrics that link to its strategy or demonstrate HR is helping the organization achieve its goals. HR then needs to collect, process and analyze the data to look for patterns and trends. Straightforward analytical techniques, such as charting to show trends or calculating a variance to show performance against a target, are effective for finding and tracking the patterns or “stories” in the data.

It can also be powerful to look at other organizations to determine if you perform better or worse relative to competitors. Benchmarking is most useful when it drives HR to excel in an area that makes a difference to its organization, not when it leads an organization to copy competitors.

Be mindful not to expect a lot of answers from one set of data and don’t move to action too quickly. For example, vacancy rates and absenteeism vary across the seasons, so a good or bad result in one quarter can be followed by the opposite in the next. It is a dynamic process, so take multiple readings before moving to action.

One last piece of advice — get started. There are a lot of unsolved opportunities within HR measurement and your measurement practice needs to be developed to fit your organization.

It is only by getting started that HRlearns its challenges and opportunities and comes to fully appreciate how measurement can help. Start with something straightforward such as turnover or absenteeism and look at it by job tenure and age group.

Those who have embarked on this journey within the HR Metrics Service are seeing the benefits of their measurement work.

Ian Cook is director of the British Columbia Human Resources Management Association and HR Metrics Service in Vancouver. He can be reached at ijcook@bchrma.org. For more information, visit www.bchrma.org and www.hrmetricsservice.org.

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