2015-04-13

The reasons why HR and talent management must champion the use of metrics

Dr. John Sullivan

There are many reasons why HR must learn to rely on metrics. They include:

Improving people productivity has huge economic consequencesIf the business impacts or the costs of HR were minor, there would be little need for comprehensive metrics. But managing employees is expensive. Companies spend, on average, nearly 60 % of all variable costs on their people.  It doesn't take a vivid imagination to realize that if you can improve the productivity of 60% of the budget, the overall economic result to a large company would be easily recognizable.  It is clear that increasing the productivity of the work through better hiring, training and retention means millions of dollars to even a medium-sized firm. The road is clear and the time is right.  HR must now seize this unprecedented opportunity to adopt metrics and to become the next "corporate hero” by demonstrating their impact on business results.

Technology allows managers to shift to “fact based” decisionsIt's time to realize that failing to quantify the business impact of people program results essentially dooms people programs to a life of underfunding and under appreciation.  Why?  Because the world has changed.  It started first with the proliferation of computers, databases and ERP software; most decisions are now “fact based”. Almost everything in business has been reduced to numbers.  For example, product decisions that used to be made by "humans" have now frequently been turned into a metrics driven operation at successful firms like Wal-Mart, GM and Best Buy. The "human protectors" in HR don't want to admit that, in some cases, the limited knowledge, time or experience that people have makes their decisions inferior to those decisions that can be made with the help of technology that uses metrics and sophisticated forecasting techniques.  We might wish that it wasn't true but in fact it is true in more cases then we care to admit that data supported decisions are superior.

 

Globalization and “the speed of business” also force managers to shift to “fact based” decisions

In addition to technology, the globalization and consolidation of companies (through mergers) means that firms are now much larger and their workforces are spread over huge geographic areas. Once you lose the face-to-face contact that is possible in smaller firms, you are forced into the realization that you can’t assess performance “remotely” without metrics and quantifiable goals. Global competition means you must make fast decisions and in most cases…. fast “fact based” decisions are superior to fast “gut” decisions. Great fact based decisions are decisions made by experienced “humans” using the data provided by measurement and metrics!

HR is the last function to fully adopt metricsIf you follow leading business publications you more than likely have noticed stories heralding the dramatic shift in business operations that has occurred during the last decade.  Over the past ten-years many so-called "overhead" functions were called that because they made no direct impact on profitability.  They were treated as second-class citizens because of that lack of impact.  Functions like purchasing, shipping and warehousing were even lower on the funding totem pole than HR.  But something dramatic happened to the world of overhead functions towards the end of the last century. And that was that many traditionally overhead functions got tired of the poor treatment that they receive because they were not "profit centers".  What happened was a transformation almost unheard of in the world of business.  Each of these functions began generating a demonstrateable profit through the use of measures and metrics.  To this day, supply chain, just in time inventory, lean manufacturing, CRM and similar programs are business heroes.  What is their secret to successes?  First it was their courage to admit that numbers and metrics could drive decisions, and second it was the adoption of comprehensive management systems (driven by metrics) to improve service, quality and productivity. Where was HR during the transformation of these other “overhead” functions?  The answer is, unfortunately, following well behind the pack.

Dooming "people programs" to a life of underfundingFunding issues have become one of the key drivers behind the use of metrics.  In a world of extremely tight resources, the primary consideration for the funding of projects and programs is the quantifiable return on investment, ROI for short. It wasn’t always that way, but it is now and it will likely remain that way for the foreseeable future.

You can't tell if you're actually helping employees and improving their lives without metricsAlthough most utilize metrics primarily to build their business case, "people advocates” need them too. As a strong people advocate you care about people and improving the quality of their work and their life. But how can you know what their actual needs are without the use of metrics that identify what is needed? Metrics derived from surveys and focus groups help you understand worker needs and their frustrations. The value of metrics doesn't stop at determining employee needs.  Once you identify their needs and implement your "people programs" to meet them, you aren’t finished. It is also essential that you continue to use measurement systems to ensure that the programs are actually meeting the goals you established. And since people programs are so underfunded, it's also important that you get it right the first time, because there won’t be funds to try something else.  So even if you are a die-hard people advocate, I hope you can now see the value added by using metrics. The metrics don't really dehumanize and they can help you improve your efficiency and responsiveness. Remember in the end, if you don't agree with the metrics, you are still free to "react emotionally" if you so choose. Metrics just give you another option. They allow you to become a fact based decision maker.

As you can see, metrics can have a variety of positive uses and impacts. If you're going to be a champion, you can use metric comparisons to give yourself legitimate bragging rights. They also ensure that you are meeting your customer’s needs and eventually they will lead to giving your firm a distinct competitive advantage over others in your industry.

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Used with the permission of Dr. John Sullivan, Professor of Management, San Francisco State University and a thought leader on strategic talent management and human resource practice. For more information, email [email protected] or visit www.drjohnsullivan.com