A CEO of a large firm walked into a room of 200 human resource professionals one day, when management consultant and author Dave Ulrich was holding a session.
“Great year last year,” Ulrich recalled the CEO saying. “You hired 1,500 people. Eighty per-cent of our managers got 40 hours of training. And 90 per cent of the management team have flexible benefits. Well done.” And he walked out of the room.
“And it hit me like a ton of bricks,” said Ulrich, one of the authors of The HR Scorecard: Linking People,Strategy, and Performance.
“Were they the right 1,500 people? Were the 80 per cent who got 40 hours of training any good? The HR folks puffed their chests and they were proud, but all they measured was activity.”
The call for human resource departments to deliver numbers to justify their work has been a growing drumbeat that HR professionals can’t ignore.
In the United Kingdom, a government task force called Accounting for People has been formed to look into whether human capital measurements should be required of organizations. When the task force issues its recommendations in the fall, some industry observers expect publicly traded companies will be required to report on their workforce metrics.
On this side of the ocean, a study was released showing that while executives may appreciate HR’s contribution to the organization’s overall success, few can back up their appreciation with actual numbers. In a survey of 76 executives in Fortune 500 companies on their views of HR departments, commissioned by Plano, Tx.-based EDS, only 62 per cent said they measure how HR’s performance contributes directly to their companies’ bottom lines.
And although the surveyed executives rank HR’s role in strategic planning highest in importance, the HR functions most measured are employee retention and employee morale.
“This apparent discrepancy indicates that when executives evaluate their HR departments, they are evaluating them on very different metrics than the ones by which they themselves are measured,” stated the study. “Many respondents readily admitted their opinion of how HR was performing was based largely on their subjective impressions.”
HR professionals may be forgiven for being confused. HR departments are already devoting an inordinate amount of work on collecting and analyzing workforce data. Are these data meaningless to their executive colleagues?
David Weiss, author of High Performance HR and partner at GSWconsultants in Toronto, said it’s not the volume of data but the usefulness of data that counts.
“There’s a desire to count everything HR does, but it sometimes can lead HR into an accounting exercise that is really not driven around the strategic imperative of the company,” said Weiss. “And this is almost a waste of time.”
For example, said Weiss, retention is a concern for certain organizations, but even then, executives are concerned about the retention of key talent. Retention data of the entire staff would not be as meaningful as metrics on retention of key talent.
And providing relevant and focused information doesn’t necessarily mean more work — at least, not the data-collecting kind.
That’s because most companies have databases such as PeopleSoft and SAP that can be mined for different insights, he said. Rather, HR professionals need to spend more time and energy thinking about the data. They have to ask very specific questions about what strategic objectives they need to measure, said Weiss.
“The metrics have to be very closely tied with what the organization sets out to do. And in that context, if HR can pick out three metrics — not 50 — that are really coupled with what the organization is trying to do, that would be more valuable than long, detailed reports with numbers that no one can do anything with.”
But not everyone buys this argument for strategic HR metrics.
“Baloney,” said Nick Burkholder. “You can’t measure strategy. What you can do is articulate your objectives and measure these objectives.”
He is president of Staffing.org, a Willow Grove, Pa.-based not-for-profit benchmarking organization.
Burkholder believes that HR should have clear objectives for each of its functions as well as metrics for each of these objectives. But not all the metrics, he added, can be traced to a company’s stock prices or revenues.
Ulrich agreed that HR’s role can’t always be measured in relation to stock prices, but HR should be measured in what it delivers.
“Too often with HR folks, all they measure is what they do. Sales people have learned this. If a salesperson says, ‘I came to work on time every day, I made 10 calls every day, and I presented a product 22 times a day. I’m a good salesperson,’ you’d have to ask, ‘But did you sell anything?’” said Ulrich.
The way to think about what HR should and should not measure, is to break down HR’s role not into two parts — strategy and action — but three parts, with capability as the middle part, said Ulrich.
If a car company decides its strategy is to gain market share through innovation, the next step is to decide what capabilities are needed to make that happen. Then HR must figure out what it must do to build those capabilities.
So if innovation is a needed capability, instead of measuring how many people received training for innovation and how satisfied they were, organizations should seek measures of the innovative capability of staff after the training.
“Did I hire 1,500 people who build the firm’s innovation? Did my training program build innovation? Did my compensation system help innovation? Some of the HR people are afraid to make that leap, but these are the capabilities that an executive needs to see.”
“Great year last year,” Ulrich recalled the CEO saying. “You hired 1,500 people. Eighty per-cent of our managers got 40 hours of training. And 90 per cent of the management team have flexible benefits. Well done.” And he walked out of the room.
“And it hit me like a ton of bricks,” said Ulrich, one of the authors of The HR Scorecard: Linking People,Strategy, and Performance.
“Were they the right 1,500 people? Were the 80 per cent who got 40 hours of training any good? The HR folks puffed their chests and they were proud, but all they measured was activity.”
The call for human resource departments to deliver numbers to justify their work has been a growing drumbeat that HR professionals can’t ignore.
In the United Kingdom, a government task force called Accounting for People has been formed to look into whether human capital measurements should be required of organizations. When the task force issues its recommendations in the fall, some industry observers expect publicly traded companies will be required to report on their workforce metrics.
On this side of the ocean, a study was released showing that while executives may appreciate HR’s contribution to the organization’s overall success, few can back up their appreciation with actual numbers. In a survey of 76 executives in Fortune 500 companies on their views of HR departments, commissioned by Plano, Tx.-based EDS, only 62 per cent said they measure how HR’s performance contributes directly to their companies’ bottom lines.
And although the surveyed executives rank HR’s role in strategic planning highest in importance, the HR functions most measured are employee retention and employee morale.
“This apparent discrepancy indicates that when executives evaluate their HR departments, they are evaluating them on very different metrics than the ones by which they themselves are measured,” stated the study. “Many respondents readily admitted their opinion of how HR was performing was based largely on their subjective impressions.”
HR professionals may be forgiven for being confused. HR departments are already devoting an inordinate amount of work on collecting and analyzing workforce data. Are these data meaningless to their executive colleagues?
David Weiss, author of High Performance HR and partner at GSWconsultants in Toronto, said it’s not the volume of data but the usefulness of data that counts.
“There’s a desire to count everything HR does, but it sometimes can lead HR into an accounting exercise that is really not driven around the strategic imperative of the company,” said Weiss. “And this is almost a waste of time.”
For example, said Weiss, retention is a concern for certain organizations, but even then, executives are concerned about the retention of key talent. Retention data of the entire staff would not be as meaningful as metrics on retention of key talent.
And providing relevant and focused information doesn’t necessarily mean more work — at least, not the data-collecting kind.
That’s because most companies have databases such as PeopleSoft and SAP that can be mined for different insights, he said. Rather, HR professionals need to spend more time and energy thinking about the data. They have to ask very specific questions about what strategic objectives they need to measure, said Weiss.
“The metrics have to be very closely tied with what the organization sets out to do. And in that context, if HR can pick out three metrics — not 50 — that are really coupled with what the organization is trying to do, that would be more valuable than long, detailed reports with numbers that no one can do anything with.”
But not everyone buys this argument for strategic HR metrics.
“Baloney,” said Nick Burkholder. “You can’t measure strategy. What you can do is articulate your objectives and measure these objectives.”
He is president of Staffing.org, a Willow Grove, Pa.-based not-for-profit benchmarking organization.
Burkholder believes that HR should have clear objectives for each of its functions as well as metrics for each of these objectives. But not all the metrics, he added, can be traced to a company’s stock prices or revenues.
Ulrich agreed that HR’s role can’t always be measured in relation to stock prices, but HR should be measured in what it delivers.
“Too often with HR folks, all they measure is what they do. Sales people have learned this. If a salesperson says, ‘I came to work on time every day, I made 10 calls every day, and I presented a product 22 times a day. I’m a good salesperson,’ you’d have to ask, ‘But did you sell anything?’” said Ulrich.
The way to think about what HR should and should not measure, is to break down HR’s role not into two parts — strategy and action — but three parts, with capability as the middle part, said Ulrich.
If a car company decides its strategy is to gain market share through innovation, the next step is to decide what capabilities are needed to make that happen. Then HR must figure out what it must do to build those capabilities.
So if innovation is a needed capability, instead of measuring how many people received training for innovation and how satisfied they were, organizations should seek measures of the innovative capability of staff after the training.
“Did I hire 1,500 people who build the firm’s innovation? Did my training program build innovation? Did my compensation system help innovation? Some of the HR people are afraid to make that leap, but these are the capabilities that an executive needs to see.”
