HR measurement increasingly sophisticated

Quality of hire growing area of interest: Report
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 06/15/2010

As HR practitioners seek to demonstrate the effectiveness and impact of hiring processes, quality of hire is gradually receiving more attention and growing in sophistication as a metric, according to a report from the Conference Board of Canada.

Forty per cent of respondents formally assess this area through performance reviews (57 per cent), probationary period assessments (55 per cent), surveys or feedback from hiring managers (12 per cent), interviews with hires (10 per cent), formal testing (nine per cent) and reference checks or resumé evaluations (nine per cent).

While HR has been collecting data around time-to-fill and cost-per-hire for years, that doesn’t necessarily say anything about the quality of the people coming into an organization, said Ruth Wright, associate director of leadership and HR research at the Conference Board of Canada.

Managers can provide feedback on an individual level, but the information can be more powerful on a collective level.

“It’s really about how you convert that information into intelligence that matters for your particular organization and your particular context,” said Wright. “We’re still wrestling with this and we have a long way to go before we can streamline down to a core set of metrics that are universally helpful.”

Yet less than one-half (43 per cent) of respondents to a 2008 survey of 167 organizations have well-established formal systems and processes for collecting HR metrics and measurement data. And only one-quarter use metrics and analytics to link investments in HR to business outcomes, according to Valuing Your Talent: Human Resources Trends and Metrics, which is compiled from Conference Board surveys.

On a qualitative level, in the past six months, there’s been a big shift in appetite among organizations to purchase and find new software to help with analytics, said Allison Cowan, a senior research associate at the Conference Board.

“Many (employers) are really trying to move away from the more traditional HR information systems and get more sophisticated,” she said. “It’s really on the rise.”

In looking at human capital trends and challenges, accessing key metrics and benchmark data to support business and strategic planning and evaluating key HR practices and outcomes using a talent management framework, the report focused on several processes, including talent acquisition, rewards and engagement.

Acquiring talent

In the area of acquisition, one in five employers reported difficulties in recruiting quality candidates, an increase of 11 per cent from a 2005 survey. And 80 per cent had difficulty recruiting quality candidates with critical and hot skills.

Time-to-fill and cost-per-hire metrics are widely used to track the efficiency of selection and hiring processes, said the report. These tend to increase with position level as executive positions take an average of 71 days to fill at an average cost of $41,000 while senior executive positions take 91 days at a cost of $67,000.

In looking to demonstrate the effectiveness of hiring processes, vacancies filled from within is a common metric that assesses the effectiveness of both hiring processes and employee learning and development initiatives, said the report.

Hiring within is more common in the executive and management ranks where vacancies, on average, are filled from within nearly three-quarters of the time. That proportion drops when looking at senior executive positions, where one-half are filled externally.

“Maybe organizations are not being as effective as they could be in terms of developing people for the top jobs. On the other hand, it can bring a real jolt of energy and new strategy and vision and so forth to bring someone in from outside,” said Wright.

Rewards strategies

Most respondents (80 per cent) believe their organization’s total rewards strategy is well-developed and articulated and 71 per cent feel the strategy is well-integrated and aligned to drive strategic objectives.

With the economy improving, flight risk becomes a concern yet again for employers, so communicating those rewards is key, said Wright.

“Opportunities open up, you want to keep that glue nice and sticky so that employees reflect upon everything they have, in terms of culture and the broad reward in the broadest sense of satisfaction and wellness and quality of work-life and all these things that make you think twice about jumping,” she said.

Many organizations (76 per cent) turn to incentive plans to drive organizational performance but only 56 per cent measure the relationship between incentive compensation and overall performance, found the survey. One-third measure the relationship with customer satisfaction while 31 per cent measure the relationship to employee engagement or satisfaction.

“It’s a very difficult thing to measure,” said Cowan. “Many of them are desperately trying to measure that impact, others are saying they’ve grown tired of trying to measure that impact, that it just makes sense. There’s a bit of a divide in that regard.”

Engagement

Respondents list employee engagement among the top HR priorities for the short and long term. The top four drivers of engagement are recognition (25 per cent), career opportunities (23 per cent), management effectiveness (20 per cent) and development opportunities (20 per cent). But there are other proxies and work climate indicators that reveal engagement, said Wright, such as absenteeism, retention and turnover.

“Those are kinds of stalwarts you can track over time,” she said. “They are very much affected by the business cycle, so you’ve got to factor that in when you’re looking at annual turnover or absentee results.”

The overall absenteeism rate for 2009 was 6.6 days per employee (with 5.6 in the private sector and 8.1 in the public sector), up from 6.5 days in 2005. Voluntary turnover fell to 8.2 per cent in 2009, down from 9.7 per cent in 2008, but rates were higher in the private sector (9.1 per cent) than the public sector (5.7 per cent), said the Conference Board report.

“Turnover is a proxy for so many things and that’s why it’s tricky, you always have to look at it in the context of several other things that are going on,” said Wright.

There has been a substantial increase in the prevalence of supportive practices to help employees balance work and personal lives, found the report. Ninety-seven per cent of the organizations surveyed offer employee assistance or family assistance programs while 61 per cent offer wellness programs.

Years ago, employers were worried about high employee assistance program (EAP) rates, “now an organization is pleased to see the service being utilized and employees are getting help where they’d like,” said Cowan.

Nearly two-thirds of respondents (62 per cent) include workplace health objectives in the corporate strategy and 63 per cent have a health and wellness champion at the senior management level, found the survey. However, only 30 per cent measure the effectiveness of these programs while 11 per cent measure return on investment.

“It’s a perennial challenge, to articulate that business case on wellness,” said Wright.

The most common methods to assess workplace health are the usage rates of EAPs (79 per cent), occupational health, safety and security metrics (68 per cent) and absenteeism statistics (67 per cent).

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