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The Metric System

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

“HR people have the responsibility for a very expensive resource — the workforce,” says Beatty. “But in the end, what does HR deliver?”

Pressured by the downturn, senior management now wants to know why HR can’t behave more like its functional siblings — IT, say, or purchasing — and identify moves that will maximize the company’s human-capital investment. Where are the inefficiencies in the company’s talent supply chain? If employees are “the company’s most important asset,” as HR executives oft proclaim, why isn’t that asset being coolly assessed like any other?

“Company executives are all over HR saying, ‘Give me something that will impact quarterly results now,‘” says Drew West, product marketer at Kronos, which makes workplace-measurement software. More than that, they are also asking HR for help with understanding the future. “This recession came out of the blue for many organizations,” says Kevin Martin, vice president and group director at Aberdeen Group. “Now they want to plan for the unexpected. They want to look more than 18 months out and assess how the people they have will map to what they need.”

The fact that CFOs suddenly want more out of HR is a complete reversal of how they’ve usually viewed it: as a locus for cost-cuts. Is now really the time to spend money on recruiting? Do programs that help employees develop additional skills matter when there are so few jobs for them to go to? Is there a CFO anywhere who wants to hear about the long-term value of staffing up a given area at a time when revenue-per-employee is under scrutiny?

Thus HR must confront a major change in expectations as it seeks to demonstrate exactly how it boosts productivity, fattens margins, or indisputably sharpens the company’s competitive edge. But that kind of change may have to come from without as well as within. C-suite executives may have to provide a clear mandate, and funding, to propel HR to the next level.

Bottom Up
HR has always been a backward-looking function, serving up measurements of long-established processes and practices, or interviewing people as they leave rather than as they advance. If anybody expected much more of the function, they certainly didn’t say so at budgeting time.

“Within HR, the sense was that we always had potential that was going unrealized,” says Cynthia Maltbie, founder of HR firm People Logic and former executive vice president of human resources at Fidelity Investments. “HR has not been an incredibly well-funded area, and we needed to have funding to pay people to do the deeper analytical work. So rather than take a leadership role, we tended to be more oriented toward fulfilling the agenda an executive would set. We tended not to step out boldly.”

And, really, what would they have said anyway? In recent years it has become fashionable for top management to mimic GE’s iconic CEO, Jack Welch, who preached a staunch up-or-out approach. Welch praised HR as a critical function, arguing that its job was to rank employee productivity and fire the bottom 10%. Otherwise, the presence of those laggards would drive top performers away, planting the seeds of the company’s implosion. Welch’s fundamental rank-and-yank philosophy caught on (though the target percentage varied), in part because of its simplicity.

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