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HR Metrics

Editor's Note to Readers

Welcome to the second edition of Human Capital Matters for 2014—the digest for leaders and practitioners with an interest in human capital and organisational capability. This edition focuses on HR Metrics. The digest includes a range of material commencing with a couple of articles developed for government agencies in the Victorian jurisdiction. It includes several articles that will expose readers to some of the thinking in the private sector and among consultants with a United Kingdom and United States focus. In addition to these articles you may be interested in the Australian Public Service Commission's Strategic workforce analysis and reporting guide.

Human Capital Matters seeks to provide APS leaders and practitioners with easy access to the issues of contemporary importance in public and private sector human capital and organisational capability. It has been designed to provide interested readers with a monthly guide to the national and international ideas that are shaping human capital thinking and practice.

The inclusion of articles is aimed at stimulating creative and innovative thinking and does not in any way imply that the Australian Public Service Commission endorses service providers or policies.

Thank you to those who took the time to provide feedback on earlier editions of Human Capital Matters. Comments, suggestions or questions regarding this publication are always welcome and should be addressed to: humancapitalmatters [at] apsc.gov.au. Readers can also subscribe to the mailing list through this email address.

Contents

Victorian State Services Authority, A guide to people metrics, June 2010

This edition commences with a guide to people metrics published by the Victorian State Services Authority in June 2010. The objective of this guide is to support the HR function in the use of people metrics, by further enhancing the capability to use people metrics strategically. It was designed to be used with the people metrics dictionary (see below).

Go to “Victorian State Services Authority, A guide to people metrics”

Victorian State Services Authority, People Metrics Dictionary, June 2010

The People Metrics Dictionary provides 47 measures, each accompanied by an information sheet. These information sheets describe the measures in detail and provide a formula from which they can be derived.

Go to “Victorian State Services Authority, People Metrics Dictionary”

Chartered Institute of Personnel and Development (CIPD), Shaping our future, Using HR metrics for maximum impact, 2011

The third article provides a tool designed by the Chartered Institute of Personnel and Development (CIPD) to help organisations identify the most meaningful HR metrics for use in their organisation. The tool is designed for HR and L&D professionals who want to ensure that measurement of HR is aligned with organisational priorities and managers who want to use metrics and measures to maximise return on the skills and abilities of their employees.

Go to “Chartered Institute of Personnel and Development (CIPD), Shaping our future, Using HR metrics for maximum impact”

Snider, E (2014). NCR's three-step workforce analytics process spurs strategic changes, Search Financial Applications, accessed 27 February 2014

NCR, a US-based computer hardware, software and electronics company is focused on turning the theoretical aspects of workforce analytics and planning into practical applications that can increase HR’s contribution to the bottom line. Emma Snider reports on a keynote address given by Kathleen Creech, senior HR business partner and global workforce strategy lead at NCR, to the Human Capital Institute's Workforce Planning and Analytics Conference held in Alexandria, Va 10–12 February 2014.

Go to “NCR's three-step workforce analytics process spurs strategic changes”

Schiemann, W. A. HR METRICS: Myths, Best Practices, and Practical Tips, A Metrus Group White Paper, 2007

The paper focuses on some practical tips in building an approach to identifying the right measures and building an approach to HR metrics.

Go to “HR METRICS: Myths, Best Practices, and Practical Tips, A Metrus Group White Paper”

Visier, FROM HR METRICS TO WORKFORCE ANALYTICS: Five Key Workforce Insights That Every Employer Should Capture for Greater Business Impact White Paper, 2012

This article provides a link to a white paper that discusses workforce analytics related to five critical performance indicators, and the need to discover the connections inherent in these workforce topics so that HR leaders can arm themselves with the intelligence necessary to make changes to optimize their people strategies.

Go to “FROM HR METRICS TO WORKFORCE ANALYTICS: Five Key Workforce Insights That Every Employer Should Capture for Greater Business Impact White Paper”

Victorian State Services Authority, A guide to people metrics, June 2010

In June 2010, the Victorian State Services Authority developed A Guide to People Metrics to support Victorian Public Service and broader public sector human resource functions in their use of data and measurements.

The guide provides an introduction to metrics and people metrics. It guides those working in HR in how to use people metrics to demonstrate the efficacy of HR initiatives in supporting the delivery of the organisation’s strategic goals.

The guide includes:

  • an introduction to metrics and people metrics
  • an overview of the different ways of using people metrics
  • principles to guide identification of people metrics that are meaningful to the organisation
  • a checklist to consider when building a story about the business
  • case studies.

The guide uses the following definition of people metrics:

People metrics, in the area of HR management, provide a quantifiable measure of people activity. People metrics can provide evidence of performance against objectives and goals.

The guide argues that the reason to use people metrics is that they assist HR to speak the language of the executive team. By measuring people management activities, the value to business outcomes can be translated into quantifiable evidence, and presented in a language that resonates with business leaders.

The guide notes that data integrity is critical. It is essential when using people metrics, as evidence of performance against objectives and goals, to establish the accuracy and validity of the data. Importantly, this quality assurance needs to extend to the technical aspect including data extraction, verification and report generation. This verification of data is an ongoing process.

The approach to using people metrics will depend on the situation. It is not always appropriate to spend a lengthy period of time developing a sophisticated approach to issue measurement, and in turn a one-dimensional approach may not be thorough enough for the given situation or audience. How people metrics are integrated, analysed and communicated will need to change to suit the situation and the audience.

The guide explores how people metrics can be used to support the HR roles as a:

  • service provider to the organisation
  • support function for the organisation
  • business partner with the organisation
  • strategic and transformational driver.

As a service provider, HR regularly use metrics in response to requests that include:

  • information to support managers and executives
  • requests for data and information from external agencies
  • preparation of one-dimensional reports of past activities.

Some examples of the types of people metrics that would be used in this role include:

  • a manager requesting a report on absenteeism days per employee
  • the executive requesting a workforce classification breakdown
  • a manager requesting the recruitment cost per hire.

An important role of the HR function is to support the organisation with the tools that enable employees to access real-time services. This support is provided in the administration of a number of online systems that managers and employees can access, to receive information about the workforce.

Some examples of the metrics used in this role may include:

  • the average annual leave or sick leave days of a particular organisational subgroup
  • performance management information
  • a calculation of training days per employee
  • personal development plan prevalence.

The people metrics used in this role report on the current situation, so are only relevant at a given point in time.

The HR function advises the organisation about the impact of the workforce on overall organisational performance and identifies opportunities for improvement.

Some examples of how people metrics may be used in this role may include:

  • a demographic analysis of people employed within the organisation to calculate age staffing breakdown, gender staffing breakdown and staffing rate 50+ years
  • a cross-analysis of people metrics including successor pool coverage, positions without a ready candidate, and leadership development plan rate to inform the organisation’s succession risk
  • a cross-analysis of recruitment, employment brand strength and new hire failure rate, to establish if attraction strategies are being successfully implemented.

HR is a key function alongside finance and other core business areas that can help an organisation achieve its goals and objectives. For HR to be successful in this role, it needs to be aligned with the organisation’s strategy.

The HR professional uses people metrics in order to:

  • define workforce drivers of success
  • communicate the impact that future HR activities could have on the goals and objectives of the organisation
  • proactively identify people issues and influence strategic conversations
  • provide a people perspective in organisational strategic planning.

The guide notes that the selection of people metrics that are meaningful to the business can be a daunting task. However, people metrics are meaningful to the business if they:

  • provide evidence of performance against a business need
  • inform activities toward an organisational strategic objective or goal
  • provide an evidence base for a strategically aligned HR opportunity.

A guide to people metrics

At the time the guide was published the Victorian Government had vested the State Services Authority with functions designed to foster the development of an efficient, integrated and responsive public sector which is highly ethical, accountable and professional in the ways it delivers services to the Victorian community.

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Victorian State Services Authority, People Metrics Dictionary, June 2010

The dictionary is intended to assist organisations develop strategic people reporting measures that can help them to identify trends within their workforce which can directly impact the achievement of organisational goals. The dictionary provides 47 measures, each accompanied by an information sheet. These information sheets describe the measures in detail and provide a formula from which they can be derived. Each sheet contains technical discussion of their application, interpretation, analysis, data sourcing, limitations and targets, which may be best used by experienced HR practitioners.

The information sheets have been customised and reproduced from Corporate Leadership Council 2005, The Metrics Standard: Establishing Standards for 200 Core Human Capital Measures with the permission of the Corporate Leadership Council.

People Metrics Dictionary

At the time the guide was published the Victorian Government had vested the State Services Authority with functions designed to foster the development of an efficient, integrated and responsive public sector which is highly ethical, accountable and professional in the ways it delivers services to the Victorian community.

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Chartered Institute of Personnel and Development (CIPD), Shaping our future, Using HR metrics for maximum impact, 2011

This article provides a link to a tool designed for HR and L&D professionals who want to ensure that measurement of HR is aligned with organisational priorities and managers who want to use metrics and measures to maximise return on the skills and abilities of their employees.

CIPD notes that the practical tool is the fourth in a series of four tools which build specifically on the Shaping the Future insights. This programme involved research over a two-year period and uncovered eight themes that CIPD believe are important for long-term performance.

The tool focuses on insights related to measurement, assessment and evaluation. The work of the CIPD Human Capital Panel suggests that, while it is easy and potentially informative to analyse data based on historical trends, effective HR functions focus on data that is multidimensional and forward-looking which can inform strategic decisions. It is argued that a balance of ‘hard’ quantitative and ‘soft’ qualitative indicators is necessary to inform decisions that take account of managing people within interconnected and complex organisational systems.

CIPD research into the role of line managers shows how measures must be relevant to management issues, aligned to organisational priorities and communicated in ways that meet the needs of managers at all levels in the organisation and so can lead to effective action.

The tool is designed to be worked through sequentially. It is built around the following four areas:

  • identifying where HR can make a strategic impact
  • selecting appropriate metrics from which organisational insights can be drawn
  • effectively communicating insights from metrics for maximum impact
  • the HR function and measurement capability.

The tool also provides an action planning facility to help you identify and take forward key actions to make a sustained improvement to the development and use of metrics in your organisation.

Shaping our Future, Using HR metrics for maximum impact

The Chartered Institute of Personnel and Development (CIPD) is a professional association for human resource management professionals. It is headquartered in Wimbledon, London, England. The organisation was founded in 1913 and has over 130,000 members internationally working across private, public and voluntary sectors.

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Snider, E (2014). NCR's three-step workforce analytics process spurs strategic changes, Search Financial Applications, accessed 27 February 2014

NCR's three-step workforce analytics process spurs strategic changes

The author has reported on a presentation at the Human Capital Institute's Workforce Planning and Analytics Conference held in Alexandria, Va 10–12 February 2014. Kathleen Creech, senior HR business partner and global workforce strategy lead at NCR, shared her team's three-pronged approach to workforce analytics. Creech explained that NCR, a global consumer transaction technology company headquartered in Duluth, Ga., has an extremely varied employee base, which is why workforce analytics are particularly important. The company's approximately 30,000 workers are divided into hardware and software engineers, salespeople, consultants and service representatives, who are called customer engineers.

The author reports that Step one in Creech's process was echoed throughout the conference: Start with the business strategy.

"It's about going back and thinking about [the] business strategy, and then selecting those programs and initiatives that we think most directly will drive it."

From there, the workforce analytics team defines the strategic priorities and desired outcomes of the project. The final step is to determine the metrics that will be used to tackle the problem.

The article discusses the application of the process to an issue involving the work of the company's customer engineers. Desired outcomes included reducing contract penalties, more effectively delivering on service-level agreements and raising customer engineers' employee engagement. Four metrics that were reported on a dashboard each month: customer revisits within three days, first-visit resolution, attrition within the first year of employment, and training. Work is still progressing, however, turnover has been reduced by 9% saving the business approximately $375,000.

NCR's three-step workforce analytics process spurs strategic changes

Emma Snider is the associate editor for SearchFinancialApplications. This is a website provided by TechTarget for Technology Pros. TechTarget (NASDAQ: TTGT) is the online intersection of technology buyers, targeted technical content and technology providers worldwide. TechTarget is based in Boston and has locations in Atlanta, Beijing, Cincinnati, London, Paris, San Francisco, Singapore, and Sydney.

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Schiemann, W. A. HR Metrics:Myths, Best Practices, and Practical Tips, A Metrus Group White Paper, 2007

The paper distinguishes between measures and metrics. Measures are referred to the way in which a particular concept is quantified. A metric is the actual ‘reading’ of the measure at a particular point in time.

The key point is that it is the ‘concept’ that matters most—the measures are the approach to capturing the essence of the concept. For example, Shiemann notes that employee engagement is a concept that has been shown to be highly important in driving employee retention, productivity, and other business outcomes. However, there are many different measures of engagement in the literature. It is asserted that HR metrics or measures are really surrogates for actual concepts that have been identified as being important in organizations.

The white paper notes that some concepts are tangible and others are intangible. Turnover is used as an example of a tangible concept while other concepts such as leadership and engagement are provided as examples of intangible concepts.

The paper goes on to establish the difference between HR measures and people measures. People measures capture information about people drivers or outcomes in the organization that have a clear relationship to achieving organizational goals; they represent the primary human capital and talent factors required to execute the business strategy. Human Resources measures, on the other hand, address processes, competencies, and other factors relating to the HR function.

A particular problem identified in the paper is organisations using too many measures. It is suggested that this is caused by adding on new measures whenever a problem is encountered. The paper suggests that this can be overcome by organisations refocusing on their strategy to:

  • identify their value proposition in the business
  • identify the key results and drivers of their success
  • identify the measures that would best capture the above
  • ensure that they had a good check and balance system in place that provided input from multiple stakeholders (their customers, employees, suppliers, funders, industry benchmarks).

The paper outlines a hierarchy of measures including strategic impact measures, effectiveness or transformational measures and efficiency or transactional measures. Organisations with too many measures were found to have almost all transaction measures and very few strategic impact measures.

The approach to building the right measures described in the paper follows the following steps:

  • Start with thinking about the unique business strategy that differentiates the organisation from others.
  • Develop a value map to capture the relationship among the important people concepts as they relate to the important operational, customer, and financial outcomes needed to be successful.
  • Develop the HR Measures and metrics once the important people concepts and relationships are understood.
  • Populating each of the people and HR concepts with measures that help the management team track how well the organization is doing in reaching its end goals, and how effective various initiatives are in helping to ‘move the dials’ on the outcomes or the drivers of important outcomes.
  • Targets are important for setting future goals, but in order to set targets, it is helpful to have baseline information to understand what the performance on a measure has been in the past.
  • For larger HR organizations, it is possible at this stage to use a cascade process to ask each major HR function (e.g., recruiting, training) how their processes are influencing important people measures.
  • Once concepts, measures, and targets have been decided, it is then important to have measurement owners, disciplined reporting time frames, and a good root cause analysis process to help prioritize gaps, and allocate resources to the most important areas.
  • Validating measures involving linkage analysis is the approach by which one can quantitatively test the hypotheses in the model.

HR METRICS: Myths, Best Practices, and Practical Tips

Dr William A. Schiemann is founder and CEO of Metrus Group, an organisational research and advisory firm specialising in strategic performance measurement and organisational change.

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Visier, From HR Metrics to Workforce Analytics: Five Key Workforce Insights That Every Employer Should Capture for Greater Business Impact, 2012

In February of 2012, HRmarketer Services Group surveyed over 150 U.S.-based employers regarding their workforce analytics practices, preferences and future plans. The majority of the participants worked in an HR role, although a small demographic represented senior management, and other departmental groups such as IT and Finance. The survey was conducted online on behalf of Visier Inc. The results of the survey indicate that there is an acceptance of using workforce analytics in organizations to manage and report HR data. However, the survey also revealed that there is room for greater improvements in the solutions they are selecting to manage and report their workforce analytics.

The white paper discusses workforce analytics related to five critical performance indicators, and the need to discover the connections inherent in these workforce topics so that HR leaders can arm themselves with the intelligence necessary to make changes to optimize their people strategies.

The White paper notes that in order to make those informed business decisions, executive leaders need the right data. This has created a growing demand for workforce analytics, which are more informative, insightful and accurate than ever before. However, organizations continue to struggle answering the most important and fundamental question regarding workforce analytics-what to measure.

The paper discusses the following five key workforce areas that were found to have the greatest impact on business:

  • Critical Talent Retention
  • Recruiting Effectiveness
  • Productivity
  • Compensation and Pay Equity
  • Performance Management

Specific metrics that are identified in the paper to assist in exploring if an organisation is retaining critical talent include:

  • Resignation rate
  • Resignation rate of top performers
  • Promotion rate and promotion wait time
  • Engagement Index
  • Market compensation rate.

Specific metrics identified to explore recruiting effectiveness include:

  • Vacancy rate (i.e position vacancy rate)
  • First year turnover rate
  • New Hire performance
  • Time to fill

The white paper identifies the following metrics to examine productivity:

  • Return on Human Capital Investment
  • Revenue per Full-Time Equivalent (FTE)
  • Profit per FTE.

It is noted that employers might also consider measuring productivity on both an annual and a quarterly basis, and comparing these figures to the national averages that are published by the U.S. Bureau of Labor Statistics, or other bench-mark statistics.

With compensation contributing to the largest share of the total cost of a workforce, it is imperative that HR leaders give considerable focus to make certain their incentive programs are competitive and aligned with business goals.

Metrics identified to consider compensation and pay equity include:

  • Performance-Based Pay Differential
  • Median Performance and Pay Level
  • Direct Compensation and Direct Compensation Increases

The paper notes that performance management is a core pillar of talent management—but organizations cannot hope to manage and improve performance, if they do not possess the analytics to understand performance in their organization. Suggested metrics include:

  • Performance Appraisal Participation Rate
  • Top Talent
  • Low and High Performer Turnover
  • Performance Rating Distribution

FROM HR METRICS TO WORKFORCE ANALYTICS: Five Key Workforce Insights That Every Employer Should Capture for Greater Business Impact

Headquartered in Vancouver, B.C. and San Francisco, Calif., Visier delivers workforce analytics through the cloud to empower HR professionals with the most critical insights for optimizing their people strategy to meet their business strategy.

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