A metric is simply a way to measure and track indicators of performance. Metrics used in HR are no different. They track the performance of a company’s largest investment – its outlay for human capital. More specifically, HR metrics, or analytics, are frequently used to measure the effectiveness of a company’s investment in recruiting, hiring, training and retaining its employees.
What to Measure
Metrics should be linked to business issues that are important to the company. HR metrics can be employed to help understand the impact of cost cutting, improve customer satisfaction or determine the impact of new technology.
Effective measures show cause and effect relationships. To improve the credibility of HR metrics, the HR professional should use the kinds of language, ratios and formulas used to analyze other parts of the business.
For example, ROI (return on investment) is a universally understood and valued metric. Since the investment in human capital is generally the largest investment a company will make, HR leaders must effectively identify where human resources can best be allocated to meet company goals and ensure that they maximize their investment in hiring, developing and retaining the talent required for the company to be competitive.
Effective metrics help company leaders make fact-based decisions. For example, employee turnover measures indicate how many employees leave the company. But the real impact is the cost of recruiting, hiring and training new employees to replace them. Therefore, a metric that defines the reasons behind turnover – and thus can drive actions to increase employee retention and drive down costs – is even more useful.
Important Considerations
Consider these points when choosing measures:
- Use readily available data.
- Use measures – ratios, formulas, key performance indicators – used by other parts of the business.
- When reporting HR metrics, use language used by business leaders – not human resource jargon.
- Tie metrics directly to business challenges.
- Use only metrics that add value in decision making.
- Keep it simple.
- Compare results to key competitors when possible.
- Measure ROI, cost/benefit ratios and impact on problems identified by business leaders.
- Use hard data – not intuition or feelings – to drive fact-based decision making.
Typical HR Metrics
HR leaders typically report measures for:
- Recruiting
- Employee Relations
- Compensation
- Training
- Morale and employee engagement
In the past, the human resources function was viewed primarily as administrative overhead. In today’s world, however, its role is changing. HR is viewed increasingly as a business partner with important strategic responsibilities. In order to step up to this new role, HR leaders need to be sure that they make fact-based decisions that are backed up by hard data – and that they are measuring the things that are most important to the business.
Source
“Top 10 Best Practices in HR Management”, 2010, White Paper, Business & Legal Reports, Inc., Margaret A. Carter-Ward, Editor in Chief.
Wayne Smith - Wayne Smith is a freelance writer who publishes on business topics and a variety of other subjects. In addition, he provides consulting ...
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