It’s one thing to measure; it’s another thing to act. One possible solution, Averbook says, is to staff senior HR positions with people who have come from finance or other areas where ROI analysis and multivariable correlations have long been studied. Other companies may choose to restructure so that the head of HR reports to the CFO or to a chief performance officer.
“We are moving into a world where we have to be much more concerned with competing on the basis of our brainware,” says Rutgers’s Beatty. “The way we manage talent will make a profound difference in a company’s success.” A more sophisticated use of metrics would seem to be essential in establishing a link between popular HR initiatives, such as training, and their impact on corporate performance.
“The language of organizations is numbers,” says Beatty. “HR needs to have the numbers to win arguments with management about where investments need to be made.” And management needs to make sure there is a large enough number in the budget to allow HR to do that.
Josh Hyatt is a contributing editor of CFO.
Open to Misinterpretation
The numbers tell a story — but if you aren’t careful, that story could be a fairy tale.
Like box scores, human-resources metrics offer a few critical data points but virtually no context. So before you start stamping bar codes on workers’ foreheads, you need to be clear about your company’s larger strategic goals — and how the metrics you choose will help you achieve them. There is little point, after all, in devising metrics that help you decide whether an expensive training program is truly effective when the more critical issue may be whether rework is eroding the profitability of specific kinds of projects.
In short, HR metrics can provide definitive answers, but to which questions? Before you order up equations from HR, therefore, ask yourself a few questions:
Are we measuring the right dimension? If you want to calculate the productivity of employees at your call center, don’t study the length of their average call. These aren’t “411″ operators, after all; you want them to take the time to satisfy customers, so customers don’t keep calling back. Instead, consider collecting customer feedback and studying the call-back rate. And do it over time.
Are we too narrowly focused? If you use a simple metric to assess salespeople — how many customers they contact daily, say — you will soon find that your salespeople contact more customers every day than QVC does. But the reps may alienate them by being too aggressive or not providing adequate service. They may even become skillful in passing customers on to another department at frightening speed. “You want to look at one thing — but from different angles,” says HR veteran Cynthia Maltbie.
Will the data tell us anything? This sounds obvious, but plenty of companies benchmark salaries and benefits against others in their industry — some of which are likely not relevant. Being in the same vertical does not mean that you and your rivals have goals, organizational structures, or corporate cultures that are in any way alike. — J.H.