How to Choose the Right Metrics to Measure
By Helen Luketic, CHRP
HR pros are always asking “what metrics should I be tracking?” The answer is always less than satisfying: “it depends”.
You have to look at both your organization and HR strategy in order to choose the right metrics. You have to ask others for input, such as your executive team. It’s also likely that you have to make a judgement call yourself, throwing the silly putty to the wall and seeing what sticks. But choosing the right metrics doesn’t really need to be as difficult as it sounds as there are some metrics that your organization should always track and benchmark.
HR is about optimizing recruitment, retention and productivity
The term “talent management” is vague and tends to generate confused discussion on what it really means. Ultimately, HR is all about managing talent and that boils down to recruitment, retention, and labour productivity.
Think of everything in HR in these terms. Other components of HR such as learning and development, compensation, and employee relations are enablers that help HR recruit and retain the right employees, make them productive, and therefore enable your organization to meet its goals. For example, if training and compensation are properly aligned with your talent management strategy, you will maximize your recruitment and retention efforts. People will stay and grow when they have the skills to do their jobs and the opportunity to get more skills. When done right, the compensation package can ensure employees don’t jump ship and even better, it can motivate them to meet sales or other productivity targets.
What you should always measure
We’ve established that HR functions and programs should work in harmony to optimize recruitment, retention and productivity. If HR exists to optimize these three to ultimately meet the organization’s goals, what does HR need to measure? Here are the magic answers:
1. Retention
Resignations Rates by Employee Performance Level
Yes, you should still track things like involuntary turnover and the retirement rate but instead of measuring the generic “Turnover Rate”, focus on measuring preventable turnover of valuable employees. Your organization should only focus on ensuring that the right people are choosing to work and stay there. Why should your organization spend any time, money or effort trying to retain a poor performer? Let’s not freak out if a poor performer leaves, let’s freak out when a good performer leaves. To bring organizational focus on retaining good employees, separate them out when you report your Resignation Rate.
2. Recruitment
90 Day Voluntary Turnover Rate, 90 Day Involuntary Turnover Rate
1st Year Resignation Rate, 1st Year Involuntary Turnover Rate
New hires make decisions quickly on whether or not they will stay with your organization. Recruits may resign if there was a mismatch between what was sold versus reality (culture, job description), if there is a poor cultural or job fit, or a poor onboarding process. On the flipside, a recruit may be involuntarily terminated if the hiring manager made a poor hiring decision, created an inaccurate job description or did not set up the new employees for success with orientation and training. This list of reasons is not exhaustive!
Whether voluntary or involuntary, an employee typically leaves before the probationary period is over. In entry level roles, they will leave by the 90 Day mark in more specialist and managerial roles, likely within a year. Organizations spend a lot of resources hiring and onboarding employees and yet it’s almost guaranteed that new hires have the highest level of turnover than any other group in the organization. If you can lessen the amount of new hire turnover in your organization, the cost savings could be substantial.
3. Productivity
Human Capital Return on Investment, Labour Cost Revenue Percent
Every organization aims to maintain or improve performance, be it in customer service, sales, revenue and profits, etc. To achieve its goals, organizations may invest in technology improvements or physical capital (e.g. a new computer). These investments show up on the income statement as an expense and end up on the balance sheet as an asset.
When a company invests in employee training, it will appear only as an expense and will receive no recognition as an asset. So why train employees if organizations don’t get any obvious bottom-line value out of it? Organizations train employees to improve productivity; for example, sales training to increase sales. If the training was done right, the value of that training will show up on the financial statements in the form revenue.
HR’s role is to optimize employee productivity to help the organization meet its goals. The Conference Board of Canada says that improving labour force skills (e.g. addressing the skilled-trades gap, promoting lifelong learning, expanding international experience and language skills) is one important way to increase productivity.[1] Therefore, HR has a large role to play in the organization and should validate its role in this arena by measuring the impact of HR activities on productivity.
Not the end of the story
How do HR professionals complete this picture and choose all the metrics they should be tracking? HR needs to:
· understand the organization’s strategy and their impact on it
· understand the range of metrics available to them and how to apply them, and
· involve the rest of the organization.
Ultimately, HR professionals need to become confident that this knowledge base can be built and built relatively easily. Choosing the right metrics for your department isn’t difficult; what’s difficult is overcoming HR’s fear around metrics.
Helen Luketic, CHRP presented the webinar Linking Metrics to Strategy on March 30, 2010.
[1]“Western Canada Productivity, Competitiveness, and Potential.” Conference Board of Canada June 2009
Helen Luketic, CHRP brings more than nine years of HR experience to her current role as HRIS Analyst at Vancity, where she’s assisting the organization implement new HR systems and processes. For her innovative achievements at Vancity, Helen was the recipient of BC HRMA’s 2008 Rising Star Award. In her previous role as Manager, HR Metrics & Research at BC HRMA, she combined her CHRP, B.A. in Economics, HR information systems knowledge and experience in HR metrics to develop the HR Metrics Service and related workshops, presentations and webinars to teach HR professionals about HR metrics and benchmarking.
