• Strategy
  • CFO Magazine

The Metric System

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

But the concept has its flaws. For one, rank-and-yank depends on skilled supervisors rendering rational judgments, yet Michelle Malay Carter, vice president at consulting firm PeopleFit, estimates that only about 40% of organizations have the proper structure in place to ensure that the most appropriate person evaluates employees. And since the company would always have a bottom 10%, this strategy inevitably breeds fear.

Then there is the question as to just how dead your deadwood really is: Without broader benchmarking, how can you possibly know that there are better replacements out there? Fortunately, this particular pearl of managerial wisdom “seems to have run its course,” says Carter. But it may provide a useful example of how HR policies do, in fact, matter, and affect the entire organization.

Power to the People

That’s worth bearing in mind as companies grapple with the concept of more-meaningful HR metrics. Over the past decade, as more of HR’s transactional functions have been outsourced and automated, there has been keen interest in developing some sort of ultimate HR tool. A sophisticated system that pulled data from all over the company could enable company analysts — perhaps embedded in the HR department — to assess human capital in much the same way it ranks customers: by how much value they add to the company.

The technology could determine “what head count you’d need to support a new initiative,” says Jason Averbook, CEO of Knowledge Infusion, a consulting firm specializing in HR analytics. The main contribution of HR would no longer be in filling an open IT position as effectively as possible today, but in determining “what kinds of coding skills you’ll need in three years,” Averbook says.

Metrics, however, can go only so far, as Jeff Mattiuz is learning. The vice president of finance at Oberg Industries, a tool-and-die maker that has seen its orders drop 45% in the last year, has turned to metrics in hopes of making some wise head-count decisions. He measures direct-labor utilization, overtime hours paid, company wages against industry benchmarks, and similar measures. The analysis “makes it easy for a numbers person to just cut people, reduce benefits, and restructure,” he says.

Theoretically, that is. Walking the floor of his nonunion shop, Mattiuz can see that some of his recommendations have not been heeded. In this case, don’t blame HR: they are firmly behind him, and acknowledge that some employees don’t have enough work to justify their hours. But the operations managers disagree. “They tell me the statistics are just wrong,” he says, “and I do recognize that numbers don’t tell the whole story.”

That’s part of the story, anyway. “It’s tough when you get down to personalities,” he says. “There are certain employees that managers want to protect, so they shelter them and keep their hours up. I enjoy a healthy debate, but we can’t sustain the business if we don’t make the tough decisions.”

Discuss

Your email address will not be published. Required fields are marked *