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The New Human-Capital Metrics

A sophisticated crop of measurement tools could take the guesswork out of human-resources management.

In the end, CoreStar opted to invest in new IT infrastructure around call-flow management that not only monitors the pull-through rate better, but also better disperses the calls so that high performers field more promising calls and managers have more time to work with subpar employees to raise their performance level. As a result of the investment, Monteleone found that the sales team could take on more call volume at a lower cost to the company. “We were able to increase sales year over year by about 45 percent, but we only had to increase our sales force by 10 percent,” he says.

The shift from HR metrics to human-capital metrics owes much of its anticipated momentum to technology advances. Companies are increasingly relying on databases to gather and organize volumes of information about employees throughout their job life cycles. Online tools allow for prescreening and testing for competency and behavioral targets set by the company. Decision-makers use dashboards to select specific metrics from the database for analysis.

Trial and Error

They also rely on some good old-fashioned experimentation. Mike Bokina, a senior consultant for Saratoga, a PricewaterhouseCoopers’s Human Resource Service offering, says companies need to closely track the results of decisions in order to develop solid metrics in the future. Though the original decisions might be based on business realities or even hunches, measuring the outcomes and readjusting as you go along can lead to correlations between human-capital decisions and strategic results, and metrics to track those correlations. “If I push my training budget, does that have an impact on revenue per employee?” he asks. “If I pay people less, are they as satisfied or committed?”

Sysco Corp., a $32 billion wholesale food distributor based in Houston, found that its compensation system for drivers — paying them by hours worked — didn’t provide as much value to the organization as it could. “The model didn’t necessarily provide better customer satisfaction or profitability,” says Ken Carrig, executive vice president of administration and head of HR. Instead, Sysco changed to a reward structure it calls activity-based compensation. Drivers earn a base pay that’s supplemented with incentives for more deliveries, fewer mistakes, and good safety records.

To be on the safe side, Sysco didn’t roll out the program nationwide. It tested it in certain pilot markets first, and then tracked the results of the operating company. Four metrics were targeted: satisfaction level, retention, efficiency (delivering more cases in less time), and delivery expense. Under the new compensation structure, Sysco found that drivers were not only more efficient, they were also more satisfied. The company’s retention rates for drivers improved by 8 percent, and expenses as a percent of sales went down. After quantifiable results showed the benefit of the change, Sysco rolled out the program nationwide.

With 161 subsidiary companies, Sysco was also frustrated by the gap in HR performance at the operational entities. The executive team constructed a scorecard of a handful of metrics in customer, operational, financial, and human-capital areas, and then aggregated the data to show how subsidiaries were performing better in each measure. From there, Sysco developed a best-practices portal on the company intranet to share the results and build a healthy competitiveness. “If we had trouble with driver retention or shrink of inventory, managers would benchmark their results [internally],” says Carrig. As a result of implementing these practices, whether in human capital or elsewhere, a number of Sysco’s companies moved from the lower 25 percentile to the upper 25 percentile.

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