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The Metric System

CFOs who want better workforce analytics should be prepared to put more "R" in "HR."

In 2002, when Lee Gelb advocated a rigorous productivity analysis of Starbucks employees, her belief in the value of metrics was regarded as quixotic or worse, by many people in human resources. True, F.W. Taylor had pioneered what came to be known as “scientific management” through detailed labor studies nearly 100 years before, but within HR the idea that productivity could be assessed as if workers were robots flew in the face of the department’s ostensible people-first mission.

And top management wasn’t interested, anyway. Gelb, senior vice president of human resources at Starbucks, soon found that her goal of using sophisticated metrics to track, rank, and analyze the ROI on recruitment and development of every employee garnered little support anywhere in the company. “We really had to put up a good fight,” recalls Gelb, who left the stimulant supplier seven years ago. “Management agreed that it was important, but they wouldn’t give us any money for it. So we set out to prove to them that such programs would save money and reduce turnover.”

Remember, this was 2002 — with $3.3 billion in revenues, Starbucks had already risen to become the world’s fastest-growing brand, according to Interbrand’s rankings. Between 2000 and 2003, the number of stores nearly tripled, from about 2,300 to 6,600. “We were spending an enormous amount of money on executive recruiters, with not very good results,” recalls Gelb. That capital outlay, she argued, would be better invested in additional training for homegrown talent.

But while corporate took great pride in touting its higher level of “employee satisfaction” — which, the theory went, gave profits an extra shot by reducing turnover and thus the costs of entry-level training — it was far less certain about programs that would help staffers move up the ladder. “It’s wonderful to keep people,” says Gelb, “but everybody needs training. We shouldn’t have been putting people in positions where they were going to fail because they didn’t have the experience or expertise.” Fortunately, even without the budget she sought, Gelb was able to tap into expert advice because “outsiders were anxious to work with us. They thought they would gain a lot by having an association with Starbucks.”

Most companies aren’t in that position. In fact, just figuring out what to measure and how to measure it has often proven to be more than most companies could tackle. Even a basic metric like turnover wasn’t useful unless HR could figure out, using surveys perhaps, why employees were leaving. “HR didn’t know what to measure, or what to do with the measurements they had,” says Richard Beatty, a professor of human resources at Rutgers University.

HR, in short, settled into a comfort zone, delivering a handful of rudimentary metrics that usually failed to connect employee performance to corporate performance. Certainly none of those measures helped senior executives respond to the economic collapse. The relationship between finance and HR, often strained to begin with, got worse, since the failure to deliver meaningful metrics reinforced the suspicion that HR was far more interested in lavishing empathy on workers than applying brainpower to the business. Executives were more apt than ever to tune out HR suggestions about improving “work/life balance” or bettering “employee engagement” scores, since they had no idea how such efforts would rescue the company’s earnings per share.

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