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  • CFO Magazine

The New Human-Capital Metrics

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

Carrig credits the support of the entire management team, especially finance, for making these changes possible. The controller team reassesses key metrics at least on a quarterly basis, narrowing a list of hundreds of different types of performance measures down to 25 or 30 and then to an executive dashboard of five to seven goals. At the meetings, senior management determines from the results whether the company is measuring the right ones and “what levers we need to pull,” says Carrig. “Our CFO [John Stubblefield] values human capital and recognizes the need to quantify the work performed by our people. If I were the only one who thought it was important, it wouldn’t get very far.”

Sysco is also piloting some new warehouse training techniques for new hires in 11 of its subsidiaries in the hope of accelerating their performance and tracking results over the next year. “If we don’t see performance,” Carrig says, “we’ll call it a bad idea. Our metrics process is an ongoing evolution.”

Building up talent is also a priority for similarly named Cisco Systems Inc., the San Jose, California-based networking and communications giant. Karen Horn, Cisco’s senior director of employee commitment, says the company recently added a metric that tracks why a person moved within the company to a dashboard of people measures that includes revenue per employee. Through that measurement, executives can spot which divisions in the company are creating new talent. It’s the difference between just noting how many people moved and noting why. The why is where the value is, she says.

Companies are increasingly measuring movement as a metric. High performers tend to want to take on new challenges, and businesses like to promote their best and brightest through the ranks. Tracking movement inside the company is also a way to make sure managers serve as talent “launching pads,” rather than hoarders. Once identified, they can reward those managers accordingly. “The key is to find out which positions we need these superstars in,” San Francisco State University’s Sullivan says.

The Human Factor

Identifying top performers isn’t easy, and using metrics to do so can miss some of the intangible factors that make people excel. Even finance chiefs acknowledge that there’s an inherent challenge with putting metrics around people. “Our human capital is one of the most important assets the company has, but it’s also one of the least predictable,” says CoreStar’s Monteleone. “Everyone has their own personality, skills, and abilities.”

Critics of human-capital metrics contend that people often defy metrics and that humans are too complex to analyze with reams of data and computer programs. Is it dehumanizing, for example, to apply a supply-chain model to recruiting?

But not everyone agrees that human-capital metrics have a downside. Sullivan believes that anything can be quantified, but that fear motivates many to resist. “People in HR are resistant to measurement because they are afraid that they’ll get an ‘F’, they’ll get a zero,” he adds. “If you’re a top performer, you love measurement.”

Another drawback is that identifying which human-capital metrics are meaningful can be hit or miss. For this reason alone, it’s not surprising that managers are hesitant to put too much time and energy into a program in which results may be few and far between. It’s the “80/20 rule,” Monteleone explains. “Twenty percent of the metrics will drive 80 percent of the business.”

Many companies struggle with just getting started, let alone keeping a program going for years on end. Jim Del Rosario, vice president of talent acquisition at Veritude, an HR services company in Boston, says it doesn’t take a massive effort to get started on improving human-capital metrics. “You don’t have to overanalyze or overengineer the metrics,” he says. “Pick a few problem areas and figure out how to start measuring them.” He says that when companies start planning a big-budget endeavor, managers tie one problem to another. “Measuring is more of an investment in time than dollars, and the return on that time can be immense,” says Del Rosario. “Begin with one department or problem, then a bigger enterprisewide metrics program starts to evolve.”

Craig Schneider is a freelance writer in New York.

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