Introduction
As if they didn’t already face incredible challenges, 300 years ago ships were unable to accurately measure their east–west position. Getting lost was common and many ships disappeared, ran aground, or sank because they could not measure longitude. The costs in life, property, and performance were immense until 1760, when a contest underwritten by the British crown drove the development of a solution.
Human resource performance is the measurement challenge of our time and the implications are analogous to that of longitude. While organizations will quickly benefit from measuring HR correctly, it’s important to understand what we’ve been doing wrong and why HR measurement has lagged well behind that of other organization functions.
Senior executives used to consider HR as a “soft” unavoidable cost of doing business that handled executive compensation, processed employment transactions, hosted employee functions, dealt with employee problems, and, they hoped, minimized lawsuits. Three factors changed this perception: the significant impact of high performance HR, the implications of poor performing HR, and soaring HR operating expenses. This top down demand for HR metrics has faced a number of inextricably linked challenges:
The metrics that we’ve been using are fundamentally flawed, and because they’re flawed they don’t make a positive difference, and because they don’t make a positive difference all HR measurement is undermined. These metrics include the ubiquitous yet meaningless ratio of HR to total employees and the common, yet invalid, cost-per-hire.
Although some consultants have made substantial contributions to HR metrics, the proprietary nature of consulting is in dissonance with developing meaningful metrics. HR metrics should not be exclusive to clients, and many consultants espouse too many metrics and metrics that are too complex to be of practical value. Some consultants also exploit organizations’ obsession with strategy and focus on measuring strategy, while organizations should be focusing on measuring objectives and outcomes.
The HR profession was slow to initiate measurement, and the first initiatives were process and not outcome oriented.
Before we set out to measure HR at work we must understand what metrics are and are not. Metrics are not an end in themselves, but in the end they must be calculated. Metrics are the ultimate arbitrator and should be the final judge of performance. It is important to recognize however, that not all numbers are metrics. Real metrics:
Measure results associated with customer defined performance objectives.
Are limited to three to five specific metrics for any outcome or result.
Drive continuous performance improvement.
Are easy to calculate.
Are easy to compare.
Are periodically reviewed and refined.
This is not the first substantial work on HR metrics. All of us are greatly indebted to the continuing leadership of Jac Fitz-enz, the undisputed father of HR metrics. David Ulrich has always encouraged HR measurement and incorporated metrics into his unparalleled work. Additionally, Robert Kaplan, David Norton, Brain Becker, and certainly Mark Huselid are contributing greatly to this work.
Let’s get to the task at hand, if for no other reason than measuring, just measuring, improves performance.