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Metrics and Human Resources

  By Steve Bareham, Editor

Simply stating that HR is an important organizational function often doesn’t cut much ice with people in charge of budgets, especially when those people lack HR knowledge and training. So, it’s smart to be able to articulate benefits in ways that reveal why an organization is better off with a planned process than without one.

Money-minded people will concur that employees are the greatest asset of any organization, but in the next breath, they will also note that staff is also the greatest expense. So, the natural inclination of most finance administrators is to minimize staff numbers and to also minimize any and all expenses related to staffing, even expenses such as training.

HR staff and departments are often placed on the debit side of the ledger, i.e. not as revenue generators like sales and marketing. In the main, HR is seen as costing money, not as something that can add value. Negative perceptions (fear, distrust) also arise because HR staff:

  • conduct performance evaluations
  • change job descriptions
  • are involved in labor negotiations.
  • administer benefits plans that are often seen as inadequate, too expensive, etc.
  • handle payroll—who hasn’t seen mistakes on their cheques!

In some ways, it’s unfortunate that HR involvement has been forced, in many organizations, and for administrative convenience, to accept responsibility for things like benefits, pensions, payroll, records, policies, regulations, negotiations, handling grievances, and the like. These involvements often alienate staff from the more humanistic and constructive elements of human resources and staff have difficulty rationalizing differing perceptions—too bad.

But, wishing that such administration functions had never been merged with HR management doesn’t do much good at this point—there’s no going back.

There is also no way to change the fact that the business world is dominated by people concerned with quantifiable metrics. Metrics in business refers to things that can be measured to gauge innumerable performance criteria: return on investment, customer churn rates, employee productivity, how training costs relate to increased revenue generation, etc. etc.

Metrics are typically categorized: measurements of quantity, quality, time, money and satisfaction. It’s been said that metrics can change behavior by driving action to change; "what gets measured gets done" is an oft-repeated phrase that underscores how numbers provide impetus to direct behavior. Many business-minded managers now link their compensation and contract renewals to metrics, so these people are totally all in while many HR people are less so—often much less so!

The disconnect between business types and HR types can be explained, in part, by the fact that metrics, by definition, are quantifiable, while much of HR is qualitative and having to do with emotions, subjectivity, etc. Humans are, after all, psychological creatures whose actions, attitudes, and behaviours, are often difficult to quantify. For example, it’s difficult to quantify how much impact a motivated, loyal, and productive workforce has on the fiscal bottom line. Everyone knows the impact is significant, yet it defies quantification. Wringing statistics from good morale is just plain difficult.

But difficult doesn’t mean it should not be attempted whenever and wherever possible. Using measurement metrics as catalysts can be an incentive for more HR people to start thinking of HR in terms of business case fiscal potential, to use the concept of metrics to point thinking and planning in the right directions, and to zero in on actions that can actually make quantifiable differences.

There are areas where clear metric linkages can be drawn to bottom lines:

  •  reduced labor costs without negative impacts on productivity or morale
  • higher productivity from training and education
  • reduced turnover
  • lower recruitment and selection costs (compared to comparable organizations)

How many people should be employed?

Perhaps the most obvious and most important metric is to really understand optimal staffing levels since these link directly to budgets. If an organisation doesn’t know how to conduct proper job analyses, it’s easy to have too many, or too few, people on payroll, thus stressing staff needlessly.

Too many employees is a waste of fiscal resources, plus, underutilized staff members often descend into bad morale because they’re bored, so it’s a double negative whammy.

Alternatively, if the staffing pencil is too sharp, the opposite misjudgement is made and staff members are overstretched, making it difficult to meet production or service deadlines at appropriate levels of quality—and staff members burn out.

HR staff can prove their worth in this single area alone if intelligent processes optimize staffing levels.

Having a process in place that enables the organization to retain trained and skilled staff also deserves a note. It’s expensive to advertise constantly for new staff, then time is required to get them in for interviews, to conduct interviews, to make the selections, and to then train where skills may be lacking, all the while productivity may be less than what is was before with the staff members who left. High levels of staff turnover are costly fiscally and in terms of time and morale.

Trained HR staff can report metrics on how many people leave compared to other organizations, why they leave, and what it costs the organization.

There is also the issue of a rapidly changing labor force as baby boomers will soon begin to exit into retirement by the millions (90 million in North America). From where will the next generation of managers come? It’s an issue that requires significant thought and planning and that clearly falls into the purview of HR.

Several key questions need to be researched, answered and prepared for by HR staff, and being proactive in these areas will win favor from senior fiscal managers who have foresight:

  •  what will be the most in-demand knowledge and skills in five years or ten?
  • high demand careers can be very competitive in terms of expected compensation and availability—how can you plan for that so you are an employer of choice?
  • how will a changing labor environment fit into training and promotion systems?
  • can hard-to-find expertise be obtained through consultants or contracts to meet skills/experience deficits?

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