Thursday, March 3, 2011

Why HR Metrics Don’t Work

Thanks again to Luk Smeyers from INostix, Netherlands for guest posting on our blog. Another great topic.

A few days ago, I was reading a digital summary at FT.com of the brand new 2nd edition of Wayne Cascio’s and John Boudreau’s book ‘Investing in People’. Especially the chapter ‘hitting the wall in HR measurement’ is my absolute favorite. Let me summarize a few of the ideas.

Hitting the wall in HR measurement

Type "HR measurement" into a search engine, and you get millions of results. Scorecards, metrics, dashboards, data warehouses, surveys, benchmarks, and audits in abundance ratios. The spectrum of HR measurement methodologies seems unlimited. The paradox however is that even when HR measurements are executed well, most organizations typically hit a ‘wall’: HR metrics or measures only rarely drive true strategic change! Boudreau’s and Cascio’s figure (see below) shows how, over time, despite more sophisticated measures, the trend line doesn't seem to be leading to the desired strategic results.









A huge gap

Some HR professionals assume that they have strategic impact by - at best – holding line managers accountable for the outcomes of HR metrics. Proudly they declare that top managers’ bonuses depend in part on the results of an HR scorecard. Unfortunately, there is a major gap between the results of the measurements and their actual impact on the organization. Because descriptive metrics – such as turnover, retention, time to fill, illness rate, etc. – just don’t have a strategic impact. These kind of metrics will never give HR the necessary insights to break through the wall.

What can HR do?

• Moving from descriptive metrics to much more insightful analytics to be able to break through the wall (and understanding the differences between HR metrics and HR analytics)

• Developing more insightful analytics to underpin strategic decision making (and linking with bonus absolutely doesn’t make sense!)

• With HR measurements, focusing much more on the organizational impact of HR investments instead of focusing too much on HR efficiency metrics (like HR costs, HR ratios, cost of hiring, etc)

• Moving from an HR scorecard approach to a Business scorecard philosophy.

Luk Smeyers, iNostix, February 2011

5 comments:

Darren Shearer said...

The hitting the wall diagram is something that was first published several years ago. It is a shame that this blog discussing the struggle to be strategic is still relevant to many, I propose that the technology capabilities allow us to do so much more with analytics is available.

3 Abbreviated Steps that despite
1. Getting to know your own IT team and what they can do for you is an expected of function HR, Workforce Analytics & Planning practitioners.

2. The vision that is presented by Boudreau says to me the future is now with analytics – do you have the right practitioners to do this.

3. The right analytics needs the right, “internal marketing”. Ensuring when coming to the table you have something of value to offer. That’s the way to get heard and more importantly invited back.

Darren Shearer
Senior Research Consultant
SuccessFactors

Cathy Missildine-Martin, SPHR said...

Darren:

Thanks so much for reading and providing your valuable insights. It is so good to hear from you again. I have commented many times how much I enjoyed your presentation in DC.

I love your point #3, about internal marketing. I see that time after time...HR has metrics, even good ones. But they just sit in HR and nobody knows about them. It's all about value like you say and now is the time that HR needs toot its' own horn!

Have a great day-
Cathy

Luk said...

The good news is that the book had been sold out and a brand new 2nd edition has been published. That was the reason why FT had written the article. At least, HR is buying the book, not too bad after all :-).

1 addition to Darren's comments:

Very often, I get the question from HR: how do I start with all this? It helps them a lot when I explain the "Building an HR metrics curriculum" from Alec Levenson. You can find it on the website of the Bellevue University, Human Capital Lab. It explains that HR need focus in 3 measurement areas: HR efficiency (the HR numbers), HR effectiveness (the right effect with the HR programs) and HR impact (business outcomes of human capital investments). Have a look at it but you will need (free) registration. Kind regards, Luk Smeyers, iNostix

Stuart Shaw said...

Hi Cathy. I think HR folk are not traditionally ones who think in numbers and perhaps struggle. It is true that measurement has got bogged down in HR efficiency rather than accounting for HR and workforce effectiveness. I also feel that some HR departments are suffering from death by numbers. Quarterly reports are run on a whole number of workforce statistics but with no end goal in mind or an idea of how to turn this information into business intelligence. Therefore reports get put in a filling cupboard never to be seen again. HR needs to understand through using analytics how Human Capital management contributes or detracts from important behaviours such as productivity, innovation and discretionary effort.

Cathy Missildine-Martin, SPHR said...

Stuart:

I so agree with your comment. Thanks for reading. I enjoyed your ebook on HCM. If you have a link, please feel free to post here.

Have a great weekend-
Cathy