Correlating Performance and Goals
A company without a mission is like a ship without a compass; whether the captain turns left or right, he must know in which direction his craft is sailing. Even with the sail (technology) in place and the sailors working diligently, without a mapped course the ship will not swiftly reach any desired destination.
Likewise, without a destination in mind, a company can be easily blown off-course by customer budget and staffing concerns. The fundamentals of performance are missions and objectives. Having departmental missions and objectives that correlate with the company-wide mission helps assure that the practices remain focused.
Similarly, the performance of the individual correlates with the performance of the entire organization, just as acquiring a baseball player with high stats will not improve the team’s record if the rest of the players are not training or reaching their potential. A team must be able to work closely together to accomplish their goals.
It’s not just the top performers that are essential for company-wide success. For example, Barry Bonds is arguably one of the greatest home run hitters of all time, but the San Francisco Giants are not a perennial powerhouse like the Yankees. Individual employees need to have clear work objectives, which are based on their departmental and company-wide mission. The metrics by which they are measured should both fit into their individual performance measures and directly relate to the broader corporate objectives.
It is also important to consider performance measurement within the context of a firm’s mission. Malcolm Gladwell highlights this idea in his recent New Yorker article entitled “Game Theory,” where he describes the book The Wages of Wins by economists David J. Berri, Martin B. Schmidt, and Stacey L. Brook.
According to their work, most of the statistics used to evaluate a player’s effectiveness are not relevant to the team’s overall mission: winning. “The economists have developed a metric or ‘algorithm’ that they call a Win Score, because it expresses a player’s worth compared to the number of wins his contributions bring to his team.” (Gladwell 2006) It is important in the development of any metric that performance is not measured relative only to peers or some other generic benchmark, but rather incorporates the objectives and overall mission of the department and organization.
Developing a framework for assessing the connection between individual performance and corporate success is the charge of the Human Resources department as a whole. Identifying and measuring the cost of human capital and its relationship to corporate performance can be done through a variety of processes. In most cases it behooves Human Resources to focus first on their mission, develop specific objectives, identify a clear strategy to accomplish the objectives, and then measure their performance with metrics. The evaluation process is cyclical, since each step should follow from the last and metrics are then used to evaluate the overall mission, objectives, and strategy.
Establishing the mission for staffing and human capital management is as critical as establishing the mission for the organization as a whole. The mission objectives will quickly materialize and strategy often seems initially clear, but getting it right takes detailed, consistent and regular measurement.
Applying metrics to staffing and human capital measurement is the key to avoiding complaisance and getting the process right. A process that is as involved and subtle as measuring human capital requires a great deal of rigor and should incorporate much more than broad generalizations.
Assessing the performance of individuals requires more than a rough, entirely qualitative understanding of how their performance affects overall corporate performance. Just as early sailing vessels relied on astronomy and the astrolabe to chart their uncertain courses, qualitative staffing assessments help identify obvious areas for improvement in staffing, but they will almost certainly omit the finer details necessary to specific, actionable improvements in staffing objectives and strategy. Developing metrics that assess staffing objectives and strategy will help companies chart a more precise and accurate course.
Some factors to keep in mind when measuring individual performance are goals, self-awareness, empathy and relationships, capacity, external factors, organizational compatibility, influencer impact, compensation and other requirements, motivation, aspirations, and potential.
Often, technology affects the performance and function of the individual. For example, it used to take several pilots and co-pilots to operate a passenger plane. With the current on–board computers and radar systems, a passenger plane generally requires only one pilot and one co-pilot to operate.
Staffing metrics may be likened to John Harrison’s nautical chronometer that provided superior sailing navigation accuracy in the eighteenth century as compared to the astronomical approaches that were used up to that time. However, as Dava Sobel explains in her book, Longitude: The True Story of a Lone Genius Who Solved the Greatest Scientific Problem of His Time, Harrison struggled for many years to win widespread acceptance for his chronometer.
Staffing metrics are also gaining increased popularity as professionals seek to improve their processes, but they are still underutilized by many firms. However, the increased accuracy and precision of staffing analysis through metrics may place these quantitative measures in the records of staffing history just as the triumph of the chronometer placed it in the records of maritime history.
Because implemented metrics that are well-designed help bridge the divide between the corporate mission and individual performance, they should be used in assessing the employees, or what is termed the human capital cycle, within staffing operations. The human capital cycle is an essential process within staffing and serves as the framework for developing, deploying, and improving the human capital of the firm. We can define the closed loop human capital cycle as acquisition, performance (including performance indicators and performance results) assessment, development, retention, and change of human capital within the organization. The cycle of human capital corresponds to staffing effectiveness and has the power to increase or diminish corporate profitability.
Human capital within the organization may be divided into several categories such as part-time and full-time employees, exempt and nonexempt employees, interns, consultants, and contractors. No matter how the human capital is divided, the closed loop cycle and the way in which it is acquired, assessed, performed, developed, retained, and changed depends heavily on the mission and objectives of staffing operations. Within this context, appropriate metrics should be developed for each company to analyze the entire human capital cycle.
The performance of human capital is the most obvious application for performance metrics, but should be divided into performance indicators and organizational results. Metrics should also be readily applied to human capital assessment, such as the readiness, depth, turnover vulnerability, diversity, and succession planning of an organization’s human capital. However, straightforward metrics may also be applied to the acquisition, development, retention, and change management of human capital.