HR metrics: Why they need to be used now
The opportunity for HR leaders to move beyond the limits of traditional "lagging metrics" of the past 40 years and start using forward looking tools and analytics has arrived.
Although metrics on ‘time to fill’ and ‘costs per hire’ provide useful data, they do not provide strategic data. And although they identify costs already incurred, they do not provide any value-added information. In fact, many of the traditional data points used today are no longer the exclusive property of HR.
Everest Research reports there are over 4,000 companies offering HR outsourcing services worldwide to their clients and that many of the outsourcing service agreements include reporting on traditional metrics. Yes, there are signs that the outsourcing industry is consolidating, but clearly the trend is not reversing. HR leaders need to recognise this shift in roles and seize the opportunity to retool and transform themselves and their organisations.
How HR analytics change the dimensions of an organisation
HR analytics can provide a skilled business leader with the tools needed to gain insights into not only how something happened, but also what’s most likely to happen in the near future. It extends what HR can measure beyond the cost aspects of traditional service delivery and transaction metrics. HR analytics apply recent advances in decision science, pattern recognition and statistical analysis to push the scope of analytics to measure intangibles such as leadership, corporate culture, employee loyalty and knowledge management—not as static metrics, but as leading indicators to predict future business outcomes.
Jac Fitz-Enz, acknowledged by many as the father of human capital strategic analysis and measurement, noted in his book, The ROI of Human Capital: "As we outsource transaction processing work, we provide an opportunity for the remaining professional staff to shift from producing reports to analysing them."
Career-minded HR executives can actually start focusing on interpreting the data in the reports and becoming outsourcing and off-shoring experts. Today’s successful HR professionals are realigning their roles in the business, along with the services their organisations deliver. They are making time to learn and understand more about what drives revenues and what major markets and skills are needed to grow their business. They are researching and answering questions on programmes that drive better performance and potential gaps in the succession plans.
HR executives, and especially their business partners, cannot ignore the fact that employee costs can be anywhere from 20% to 70% of corporate expense. Learning to measure the return on investment (ROI) in human capital becomes essential, and requires detailed information on employee-based activities. In short, HR executives are becoming better business partners by using HR analytics as a powerful tool to aid realignment within the business. It is a clear change, which is happening across all industries, but we are still in the early adoption phase.
How to get started in HR analytics
To meet this growing demand, business looks to consulting services for guidance in planning and executing their HR analytics strategy. The analytics market is wide open as more and more clients understand the value that HR analytics offers. Our clients are starting to ask good questions based on emerging demographic changes in workforce diversity. They are also becoming more agile in responding to skill shortages in key revenue areas, and many are challenging their business partners to fund initiatives in HR analytics for the answers.
The key to good analytics is good data, and this can be a showstopper for many clients. Many are frustrated with their inability to leverage workforce data to make better operational decisions. The logistics and costs associated with retrieving employee data can be a challenge for many organisations, and many companies have outsourced their recruiting, learning management and performance management services. This means a large portion of the data required for analytics now resides outside their enterprise resource-planning (ERP) platform and, in many cases, with multiple vendors. Retrieving it can be a daunting and costly task for a client, but the changing workforce and demand for new skills requires it.
There are solutions ‘road maps’ to solving this problem. Companies can overcome their data issues by partnering with an experienced firm which has the right combination of consulting resources, data management skills and infrastructure to economically plan, design, map, extract, and load the data to create an in-house, or SaaS solution, to support their growing HR analytics needs.
It is definitely an exciting time as more HR organisations realign themselves to their businesses and use HR analytics to guide their decision-making and planning.