Newsletter July 2007

HR Metrics

All too often measurement and reporting in HR consume a lot of resources without delivering significant (proven) benefit.
The problems are often very similar between different organisations:

To many things are measured
Measurements are changed frequently thus not allowing to track a development over time
Managers don’t know what the numbers actually mean
HR-Metrics are inward looking and not relevant for the business strategy
No actions are taken because HR is too busy with day to day business and reporting or because it is not taken seriously by the business

The British magazine "Human Resources" (www.hrmagazine.co.uk) dealt with this problem in last year’s March issue presenting four interesting case studies in the article "Measurement with meaning". The essence of this article is that HR-functions, who make a difference for the business, make sure that

there is a clear line of sight from what they measure to the business objectives
action is taken on the results of the measurement
they focus on a few important metrics to be constantly monitored

According to this article, Carphone Warehouse came to some very tangible insights for their company such as:

A new sales assistant who leaves after 6 months instead of staying for 12 months (about the time when full productivity is reached) costs the company 4800 GBP in lost profits.
Cutting down the time new retail staff needs to become fully productive by 2 months (e.g. through better training) would save the company 1.5 million a year

These and similar insights allowed HR to make "significant investment in training".
Unfortunately few organisations have tangible links between HR-reporting and business benefit and many HR professionals are lost in a sea of numbers without being able to derive real actions.

So what does all this mean for HR and what role does the HR information system play here? We recommend the following rough structure:

People responsible for HR metrics and for HR strategy should work with the business strategy unit and / or colleagues from other functional strategies to derive a few KPIs to be constantly monitored and worked on. The links between these HR metrics and business objectives have to be well understood and constantly observed. Most importantly: there has to be a clear understanding which actions have to be derived from these numbers. Otherwise, they are obsolete.
The HR metrics team develops tools to measure these KPIs, break them down to the operational level and allow line managers to control the contributions of their departments where necessary. As this type of reporting is repeated many times and is closely linked to strategic business objectives, custom development to guarantee high quality and timeliness can pay off quickly.
The HR metrics team should also be able to measure and report upon other than the core KPIs to deal with ad hoc requests and to provide valuable input to the discussions with the strategy teams. As these tasks are not repetitive and done by experts, they do not need a very high level of automation as long as the data can be obtained in a reasonable time.
Beyond this type of strategic HR reporting, lower level line managers and operational HR staff certainly need additional reports to support their day to day business (things like leave entitlement overview, flextime accounts, jubilee lists etc.). These tools should be provided online at low cost using plain vanilla whenever possible. Nevertheless, these tools need a certain level of user friendliness. They also must be standardized to allow comparisons, keep costs low and put HR professionals in a position to advice line managers on their use. Users, particularly line managers, have to be trained to use them as a management tool, that is: to derive the right actions, when necessary.

If you are looking for help to redesign your HR reporting or HR information system, contact us: kontakt@iprocon.de

Back to Newsletter 07/2007