hr metrics presentation

Copyright 2007. ICC. All rights reserved. 1

Creating HR Metrics that Matter

March 17th, 2010

Presented By:

Cathy Missildine-Martin, SPHR

Co-Founder & Sr. VP of Sales & Marketing

Intellectual Capital Consulting, Inc.

[email protected]


Agenda

• Business Case for HR Metrics

• Process

• Types of Measures

• Business Impact for Each Measure

• Targets and Communications

• Wrap Up/Questions


Why should HR be concerned about metrics?

Think about your current measures…

Do your metrics matter?


"Stop asking for a seat in the executive office and instead ask yourself: How can I leverage what I know about Human Resources to help shape and serve the strategy of my organization?”

Sue Meisinger, retiring SHRM President and CEO

HR Magazine, June 2008


What if you are able to identify you most productive and most engaged employees so that you can develop a strategy for retaining those individuals through the hard times? That's valuable

What if you have redesigned your performance management system and compensation structure so that you are only rewarding those that are performing? (Thus saving compensation dollars) That's valuable

What if you were able to manage talent shortages and surpluses? By understanding business cycles and tending to "talent pipelines" and current talent inventories, HR can act, instead of just react. That’s valuable

This is our time to SHINE…not WHINE!


Making the Business Case

• Human Capital expense is a company’s greatest expense

• Doing more with less

• Start small (low hanging fruit)

• Better decision making

• Eliminates confusion over what is important (linkage to strategy)


“After 30 years studying HR Departments, I have found the largest single difference between a great HR department and an average one, is the extensive use of metrics.”

Dr. John Sullivan , HR Metrics the World Class Way


Why Now?


Steps in Creating Metrics that Matter

Step 1: Define Business Strategy

Step 2: Determine How to Execute

Step 3: Link HR to Strategy Map

Step 4: Create Measures

Step 5: Link to Strategic Business Results

Step 6: Set TargetsStep 7: Communicate Results

Facilitators

Processes

Products

Technology

Financial

Others

Revenue

Profitability

Market Share

Budget CostSavings

Others

Business ResultsEnablers

Vision and Mission



DashboardMetrics that Matter

contin

uous

monito

ring a

nd fe

edback

contin

uous m

onito

ring a

nd fe

edback

Relationships Linkages

Blueprint for Success

CustomerDrivers

Competing Factors

BusinessStrategy

CustomerDrivers

CustomerDrivers

EmployeeDrivers

OperationsDrivers

FinanceDrivers

“HR Managers must understand the firm’s strategy; that is, its’ plan for developing and sustaining an advantage in the marketplace”

Mark Huselid, Brian Becker, Dave Ulrich, The HR Scorecard

ABC will consistently deliver: products that meet or exceed safety standards; provide outstanding technical

services; and use leading edge technology in the retail/professional market to be recognized as the

number one provider of access controls manufactured in the United States.


Step 1: Define Business StrategyHow do you do that?



IT

Operations

HRSalesMarketing

Engineering

ABC will consistently deliver: products that meet or exceed safety standards; provide outstanding technical services; and use leading edge technology in the retail/professional

market to be recognized as the number one provider of access controls manufactured in the United States.

Why do most strategies fail?


Step 2: How to ExecuteHow do you do that?

How is our department going to assist in fulfillingour company strategy?


Turnover


Man

ag

e

Costs

CU

STO

MER

Focu

s

Reduce certainHR related costs

Effective HR Programs

World Class HR Delivery

Increase customer service skills in

workforce

SuccessionPlanning

HRProcess

Improvement

Create, modelBest practices in HR

Enhance HR StaffKnowledge

& SkillsIn Strategic Areas

Productivity

Retention

Increase employee satisfaction with

HR services

Enhance the value and return

On HR investment

Talent Development

Workplace PlanningImprove

Employee commitment

StrengthenRecruit

& hire of good fit

Strengthen RewardS &

Recognition Program

Enhance diversityAmong workforce

Increase Customer Satisfaction

Increase Customer Retention

HR MISSION: As a Strategic Business Partner, HR contributes to the Company's success by providing innovative HR practices to attract,

retain and engage high performancing, diverse talent.

World Class Talent Development


What Measures are Important?

“The key is to measure both efficiency

(cost and productivity) as well as

effectiveness (quality and value) and

evaluate this mix of metrics in the context of

the drivers of demand for HR’s services.” Richard T. Roth, Atlanta, HR Magazine


Step 4: Create MeasuresHR Efficiency Measures

• Cost per hire

• HR staff per employee

• Days to hire

• Training cost per employee

• Accidents rates

• Name others:

What is wrong with using JUST efficiency measures?


Step 4, continued

HR Effectiveness Measures

• Quality of hire

• Employee satisfaction

• Training quality-Kirkpatrick’s four measures

• Number of hours consulting

• % of employees with certain knowledge

• Name others:

What is wrong with using JUST effectiveness measures?

What type a measure is turnover?


Gap

HR Efficiency Measures

• Turnover by age, tenure, race

• Training level 1 evaluations

• Staffing ratios

HR Effectiveness Measures

• Turnover by performance

• Did behavior change on the job? Results?

• New hire performance at 90 days


Take it one step further…add turnover metric…for a bigger

financial impact

ButterfliesAdd Turnover %

Change Seekers

Add Turnover %

True LoyalistsAdd Turnover %

Morale Busters

Add Turnover %

High Performance

Low Performance

Engagement


HR Value Measures

• HR Expense factor=HR expense/total operating expenses

• Total HR Expenses/Total revenues

• Human Capital ROI=rev-operating exp-com/benefits

comp+benefits cost

• Revenue per employee

• Profit per employee

• Compensation budget variance

• Time to efficiency for new managers and employees


Turnover

Metrics that Matter

FIN

AN

CIA

L

CU

STO

MER

INTER

NA

L

LEA

RN

ING

& G

RO

WTH

Reduce certainHR related costs

HR Programs HR Delivery

Increase customer service skills in

workforce

SuccessionPlanning

HRProcess

Improvement

Create, modelBest practices in HR

Enhance HR StaffKnowledge

& SkillsIn Strategic Areas

Productivity

Retention

Increase employee satisfaction with

HR services

Enhance the value and return

On HR investment

Talent Development

Workplace PlanningImprove

Employee commitment

StrengthenRecruit

& hire of good fit

Strengthen RewardS &

Recognition Program

Enhance diversityAmong workforce

Customer Satisfaction

Customer Retention

HR MISSIONWe provide quality HR services to attract, develop, motivate and retain a diverse workforcewithin a supportive work environment. We do this with an emphasis on customer service

based on consultation and communication

HR VISIONProvide the highest quality support services to make XYZ the company of choice for learning and working.

Customer Sat %

Retention % among protected classes

Performance Rating at 90 days

Cost/hireHR labor/total labor

Revenue Per Employee



You must have a clear connection between your metrics and your

business results

• Can your metric pass the following criteria?

– Does it have a direct/indirect impact on revenue?

– Does it have a direct/indirect impact on costs?

– What is the action that you will take based on the result?


Impact Example-Which ones do C-Suite care about?

Metric Direct Revenue Impact

Indirect Revenue Impact

Direct Cost Impact

Indirect Cost

Impact


Benchmark or not?

Company XYZ HR ScorecardFinancial Employee Sat Training

Current MTD YTD MTD YTD MTD YTDRevenue/emp 1,200.00$ 1,500.00$ 16.50$ Exceeded Expectations 9% 10% Leadership 9% 10%Expense/emp $80.63 $88.31 $89.25 Overall Satisfaction 84% 82% Customer Service 84% 82%Profit/emp $842.00 $871.09 $909.21 Refer a friend 88% 88% Cust Sat Score 88% 88%Variance/Budget -3.9% -4.70% -2.10% Intent to Stay 14 15 Cost/FTE 505.00$ 800.00$ Turnover Company Scorecard

Cuurent MTD YTD vs Bud vs LYOverall Rank

Rank vs LY

HR 10% 12% 18% Revpar 1247.1% 1421.9% (0) 8Hourly 20.0% 24.0% 32.0% Intent to Return- -3.9% 15 21Exec 3% 4% 5% Overall Call Shop -2.4% 800 15Salary 12% 14% 20%

HR

hourly

exec

salary

0102030405060

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Roo

mni

ghts

Day of Month

Current Month Productivity GDS 1-800 # Property Direct


In our experience, when creating measures that matter, you must ask these important questions:

• Is this company a people oriented or manufacturing business?

• Does the metric have an impact on results?

• Does the metric measure efficiency or effectiveness?

• What are your value metrics?

• What action will you be taking based on that metric?


Metric Pitfalls to Avoid

1. Collecting too much data so that you cannot focus on the metrics that matter

– Make sure that metrics are tied back to your strategy

2. Relying on poor data

– Make sure data is objective and statistically sound

3. Focusing on metrics that are short term in nature like those preferred by Wall Street

– Use balance scorecard approach so you have a holistic view

Harvard Business School, Michael Sisk


“Firms that carefully link HR activities to business

strategy, measured by metrics have a 33% higher

return on total capital than organizations

that do not.”

Watson Wyatt Research 2003


5 Metric Must Haves in a Down Economy

1) Revenue generating employees/# Full time employees-This is a critical metric in this economy. This metric speaks to efficiency especially around organizational design and process.

2) Employee engagement index-This measure is critical to track especially in down times as when times are good, the unengaged will be the first to leave.

3) % of employees with favorable performance rating-This number is critical to know during a downturn as we need to make sure we are keeping the best of the best. After the lowest performing employees are let go, management needs to understand the impact of eliminating top performers.

4) Management/staff ratio-As layoffs continue to occur, you may need to understand what the best management to staff ratio is for your company. (span of control and efficiency)

5) HR Service Delivery rating-How is HR performing with its customer? Is HR delivering the services that its customer values?


Most Common Metrics High Performing HR Departments…

1) Revenue per employee (to see trends which will lead to asking "what happened there?")

2) Turnover/Retention by department, supervisor, performance, age, etc.

3) Recruiting: Cost per hire

4) Recruiting: Choose appropriate efficiency measure, response time, time to fill,

5) Recruiting: Average new hire performance rating

6) Total HR expense/total revenues

7) Company and departmental level employee engagement scores

8) Compensation budget variance

9) HR service delivery satisfaction rating

10) Training spend per Full time employee

11) Training: Appropriate results based metric after training i.e. customer satisfaction score

12) % of strategic competencies available in organization


Any Questions?


If you would like to be on our

”Profitability Through Human Capital” blog list:

http://intellectualcapitalconsulting.blogspot.com/

Email me at [email protected]

Follow me on Twitter: cathymartin

Fan Page on Facebook: Intellectual Capital Consulting

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