Conclusion
Though this section brings the book to a close, the story of metrics is far from over; before anyone can discuss new and better metrics, it is essential to take the lessons from this book and apply them to your organization. As with our analogy on the development of measuring longitude, HR metrics are essential to the success of an organization. Thus, it is important to understand the dynamics of metrics, which this book has broken down and examined. While we would like to stress the significance of every point this book makes, there are several key points that, at the very least, can serve as a starting point in your quest to develop and implement metrics within your organization.
Business strategies must be considered when building metrics; however, they are not the ultimate arbitrator. It is imperative that the human capital deliverables have a concrete impact on the business strategy. Nevertheless, when developing metrics for your organization, they should be aligned with the objectives, not the strategy. Anybody can design a strategy; the real challenge lies in creating objectives. Once objectives are in place, developing strategy not only becomes easier, it becomes more focused.
It is especially important for HR to be able to incorporate and align itself with the organization-wide mission and objectives. This is because most C-level executives do not believe that HR is currently aligned, particularly when compared with other departments such as accounting. What do these departments have that HR lacks? For one, other departments, or at least as they are perceived, have a better understanding of the corporate goals and therefore are able to match every procedure with those goals. There is a need for HR to establish a strong correlation between human capital and the organization’s objectives.
The motivation for gathering metrics should not come from a desire to have numbers to present at the next executive meeting. Rather they should come from the need to answer the following question: What decision will this metric support? There are literally thousands of decisions made daily by organizations. In order to make sure the correct decisions are made, a decision support system needs to be in place. There are many aspects that help support decisions, including the decision maker(s) themselves.
One of the most common business decision practices involves a cost and benefits analysis. Thus, it is necessary to apply this concept to human capital. This is of particular significance today because, for most organizations in the modern economy, human capital is the single most costly but also most valuable asset they can claim as their own. There are numerous models that attempt to measure the contribution of employees in terms of both production and knowledge. Understanding the positive contributions that employees give an organization must, of course, be weighed against the risks that these employees pose to the organization. Risks, defined as the odds of a negative impact upon objectives, have a broad range of categories. They can be insurable or noninsurable; can have a measurable price tag or be an abstract figure. Regardless of all the various types of risks, as well as ways to quantify risk profiles; this puts the organization in an advantageous position, should something negative or even catastrophic occur.
Understanding the cost and benefits of human capital is a valuable principle to be aware of before wading into the pool of metrics. Another concept that should be thoroughly understood is the ability to understand what other C-level executives want from HR. As mentioned before, aligning the department’s missions and objectives with those of the entire organization is fundamental. However, it is equally important to be able to run the department based on that vision. The employee lifecycle provides management with a framework to work with when applying metrics. The employee lifecycle consists of the following five stages: Attract → Acquire → Develop → Utilize → Separate. Each of the stages is equally important.
Each stage of the employee lifecycle should be measured. However, it is not enough to measure them without the mission and objectives in place. This is a constant point that needs to be reiterated. Mission, objectives, and metrics are the three most important facets of successful human resourcing. Knowing and understanding all dimensions of the Human Capital Blueprint™ helps management to build the missions, objectives, and metrics.
Hiring remains one of the most critical functions of Human Resources, and the need to measure these procedures is paramount. This book stresses not only the need to measure but also to measure correctly—that is, using the right metrics, namely New Hire Quality, Time, Hiring Manager Satisfaction, Recruiting Cost Ratio (RCR), and Recruiting Efficiency. When using the final two metrics, it is important to remember that RCR is the ultimate budgeting and resource allocation tool while Recruiting Efficiency is a comparison tool; the two should not be confused.
According to the 2006 Recruiting Metrics and Performance Benchmark Report, nearly 70 percent of employees cite “professional development learning” as the reason they desire to switch employers. Thus, there is a clear correlation between employee development and retention. How well your organization fares with these concepts can only be known for sure with proper metrics. Being able to develop and retain the employees you want to keep is a key function for HR and is invariably linked to the success of the organization.
A key part of professional development lies in utilizing the skills an employee learns following training, education, or any other type of development that is given. Using metrics to identify the candidates whom your organization most values as future leaders can result in more efficient use of training and development dollars. While policies concerning succession planning and internal mobility are necessary, it is the program as a whole that is best measured.
A key reason for measuring employee performance is because it is so closely tied with organizational performance. That is why metrics must be tied to the mission and objectives of the organization. Employee performance is the result of attributes and performance. Understanding this and of course the organization’s mission and objectives will help you find measures of meaning—ones that both HR and executives can respond to.
Often, however, there are measures that, no matter how important they are to the HR function, executives simply do not have time to hear about. Creating a dashboard solves this problem by summarizing and displaying only the most relevant information, including measures and the respective goals. Your dashboard, like those found in cars, should present data in a simple fashion. Constructing an effective dashboard will help executives to understand the current state of an organization’s human resources.
The dynamics of human capital continue to evolve. However, performance and success will always be linked. The ability to maximize the performance of your human assets relies on the ability to measure their attributes; exploit the strengths, and examine the weaknesses. In the perilous sea of business, is your organization navigating with longitude or is it merely drifting? Without the proper measurement tools, your organization is risking its own existence, competing with organizations that measure, correctly and on time. Measurement arms organizations with a competitive advantage and it is imperative to take it. We have provided you with the framework—it is now up to you to implement metrics into your organization.