As a speaker and attendee at the recent SHRM conference in Orlando, I detected three current major areas of interest in the field of staffing management. One area of focus among staffing professionals is background checking, a staffing process step that has taken on even greater significance in light of recent security and economic developments. The second is ongoing discussion around the broad issue of assessment, and the availability and efficacy of assessment and testing tools. The third major areas of interest ó the subject of my conference presentation and of this article ó is the burgeoning focus on metrics. It’s easy for all of us to agree that making our organizations more metrics-driven is a worthy goal. Yet amid all the discussion, there is, ironically, a lack of a systematic approach to metrics. So let’s take a step back to explore not the choice of which metrics to track, nor even how to track them and analyze them, but instead, what are the characteristics of a good metric? What Is a Good Metric? We use metrics as a basis to make decisions on and focus our actions. To be effective and reliable, the metrics we decide to use need to have five key characteristics. Each metric must be:
- Aligned with business: In a Corporate Leadership Council survey, 62 percent of respondents cited “to better align HR strategy with corporate strategy” as the number-one goal for HR. More than half the respondents in a Towers Perrin study considered “shifting HR’s role to help address critical business issues” as the most significant challenge for HR leadership. Clearly, HR alignment with business goals is a priority to measure and improve upon, but it is also difficult to achieve. First, corporate business targets (direction set by the CEO) and HR strategies need to be synchronized, and then translated into the tactics HR implements.
- Actionable and predictive: A good metric must provide information that can be acted upon. Too often, HR measures for the sake of measuring, without really thinking, “What do I do if the metric is lower or higher?” A clear plan of action and causality relation is a key element for successful metrics tracking. A metric that merely measures finite or completed actions, not ongoing activity, is only of forensic interest. Metrics must be regarded as a trend and must trigger appropriate action. The issue with many data points is that they are usually lagging indicators ó in other words, they show what happened in the past. A metric that, when analyzed, can forecast the direction actions should take in the future is called a leading indicator. Presenting leading indicators that can drive aligned action is where strategic HR is going.
- Consistent: A good metric is consistent in what it measures. Comparisons are made of equally weighted criteria. Cost per hire, for instance, has been a popular HR metric. Yet a SHRM/EMA Staffing Metrics study identified more than a dozen components included at widely varying degrees by different companies to calculate cost per hire. Make sure that the data included in any metric you use is defined at the outset and remains consistent. Otherwise, the value of its comparison is useless.
- Time-trackable: A good metric must be able to be tracked over time. It is not a snapshot of an activity at one moment in time. One example is the number of job applications received per week. That metric can be tracked and graphed to see both the weekly trend, as well as a monthly, quarterly, or longer interval, and forecast whether there will be a shortage or not. The frequency of reporting for a metric varies with different metrics. We recommend that the time-to-fill metric, for instance, should be reported weekly. Metrics addressing longer-term evaluations, such as hiring manager satisfaction or new-hire performance, could be tracked quarterly or annually.
- Peer comparisons: In addition to analyzing internal performance, good metrics should be able to be compared to external benchmarks among a peer group. That peer group may be another business unit within your company, another company similar in size or location, for instance, or an industry benchmark. A metric viewed only as an internal measure may not reveal the need for improvement until tracked against an external benchmark. Conversely, that metric may show superior performance when viewed in a wider context. A good peer comparison metric allows for additional analysis of benchmark performance. Benchmarking by quartile can be another beneficial indicator of relative performance.
Common Mistakes The utilization of metrics in your staffing management process requires commitment and resource allotment, so it is important to do it right. As your staffing department endeavors to become more metrics-driven, beware of errors in the design and use of metrics. Common mistakes include:
- Metrics for the sake of metrics (not aligned)
- Too many metrics (no action)
- Metrics not driving the intended action
- Lack of follow up
- No record of methodology
- No benchmark
- Underestimation of the data extraction
The Way to be a Strategic Player Good metrics are the way to become a strategic player. Gathering, analyzing, and presenting pertinent information to upper management is the single strongest means HR has to meet the goal of providing critical input on strategic business issues. With good metrics and the technology to track them, the raw data and information from standard reporting can be analyzed further. Ad-hoc reporting can drill down to produce deeper knowledge on specific initiatives. Statistics can be computed to feed models, make predictions, and drive decisions and actions based on intelligence. Staffing management process and performance optimization based on powerful intelligence drawn from good metrics will deliver proven value and real ROI, and make you become an invaluable strategic player within your organization.