Many business managers, business owners and executives rely on various business metrics to stay on track for attaining business goals and ensuring proper execution of plans, tasks and projects. Most of the business metrics focus on accounting and financials with limited integration of HR metrics, these include: ROIs, operating costs, sales, profit and loss, market share, and so on. But businesses are run by people. People design widgets. People manufacture widgets. People distribute widgets and sell the widgets so that the company stays in operation and profitable. So if running a business is about profit and people, then why do so many organizations overlook keeping track of HR metrics?
I believe companies that choose and stick with the proper HR metrics for their business find it not only it adds value but also plays a key role in driving business decisions that impact the bottom line.
HR metrics follow the same theory and methodology as any other organizational key performance indicator.
Identify what HR functions directly align with corporate strategy by assessing business requirements.
Identify measurement areas. This is done by aligning business goals with HR objectives and actions. From this you will ascertain three-five KPI’s.
Get the raw data, calculate and translate. Greater insight is achieved if you can segment the data by different dimensions (such as demographics, organization structure, functions, employment levels etc).
Analyze the data, evaluate and report on the metric.
Before deciding on what the right key performance indicators are for your organization I believe it is worthwhile to first ask yourself the following three questions:
- what am I truly measuring?
- what do I want the outcome to be?
- and what do I want the number to be?
For example, a turnover metric can be measured many different ways. You could track voluntary, involuntary, monthly or annual turnover. Your business needs determine the “how” and “what” to measure. The time period is dependent on what you want the outcome to be. Meaning, your monthly turnover may look low, thus supporting stability in the workforce. However, on annual basis the number could be high (monthly turnover of 1% annualized is 12%).
Benchmarking and setting targets for improvement is every bit as important as tracking the data. In order to do so, everyone needs to be measuring the same way. Just like accounting and finance that operates under a codified standard for measurement, BC Human Resource Management Association has created a common set of metrics for the profession that is quickly becoming the standard used across Canada. To review these HR metrics and choose the best fit of your company visit HR Standards Glossary.
The Human Resource Associations of Ontario, Manitoba and Alberta have adopted these same definitions.