HR Analytics and Metrics: Scoring on the Business Scoreboard

Numbers are often the language of an organization. But for many, numbers are a foreign language, as well as a reason that many college students choose to major in the soft sciences and avoid more rigorous math-based subjects (or major in HR so they can “work with people”). However, HR analytics and metrics present a significant opportunity to impact the HR profession. In fact, the effective use of analytics and metrics (through math and statistics) may be the biggest contributor to the building of great, sustainable organizations in the future, as well as a significant HR career opportunity.

To build an effective metrics system, HR needs to first consider the organization’s context. Too many HR functions seek “available” metrics instead of strategic metrics that fit their organization. Choosing strategic metrics involves discerning the firm’s strategy, its competitive environment, and the workforce’s role in realizing its strategic success. We should also realize that, in an ever-changing business environment, organizations only change when people change their decisions and behavior. Well-designed metrics can also change behavior.

Workforce metrics are strategically important for firms because the workforce is most firms’ single largest expenditure—and the least scrutinized in assessing its impact on value creation. More slack likely occurs in the management of the workforce than in any other organizational asset. Most other resources have relatively well-tested metrics that are designed to impact the firm’s success: Financial resources are held accountable through budgets, material resources with supply chain metrics, time by schedules, etc. But what is the metric system for allocating and holding accountable the firm’s most expensive resource? The challenge is to identify the metrics that enable workforce decision-making, which impacts the firm’s strategic success and sustainability.

Commonly available HR metrics seldom impact the firm’s scorecard. Even if a firm is “world class” in its implementation of traditional ways to measure the workforce (e.g., turnover, job satisfaction, time to fill, cost per hire, etc.) the firm is unlikely to become world class. Commonly used metrics constitute “metrics jeopardy,” providing answers to questions the firm should not necessarily be asking. Metrics should be answers to questions! If you don’t ask the right questions, you will never get answers that allow you to successfully intervene and produce the desirable result. The real purpose of metrics is to intervene and assure that the firm’s strategic targets are realized. Seldom do traditional HR metrics provide this possibility.

STRATEGIC INTERVENTIONS AND CONCLUSIONS
Metrics are answers to questions. If you don’t ask the right question, it is difficult to get a useful answer, especially one that can lead to actions for a more desirable outcome.

HR metrics should help deliver business results. Be certain to understand what information might enable you to make better workforce decisions. Once you have data, ask, “What is this data telling me?” All data tells a story—what is the story that gives insight and points toward appropriate action?

We should also remind ourselves that not all data is quantitative. Qualitative data often enables us to identify organizational mysteries to solve, anomalies to resolve, or questions to ask. However, making progress in resolving those issues may require quantification. Then plan your intervention: What will you differently? If you want different, you must do different. Once you have intervened, ask, “What difference has my intervention made?” Here is where metrics earns its keep, by enabling a firm to assess if it is on target or in the ditch, by suggesting what corrective action might be taken, and by measuring the effectiveness of the corrective action. One final caveat: As the context of your organization changes (e.g., changes in strategy, competitive challenges, new entrants, or technology advances), your workforce metrics will also need to change.


Learn more about how to develop strategic metrics, read the full article at www.riseofHR.com.