Human Resource Metrics: Connecting Human Resource Management with Organizational Performance and the Bottom Line

Human resource metrics have become a requirement for every modern HR department
to show the organizational value of money and time spent on human resource
management training and activities. For human resource metrics to be effective,
they must be the right metrics aligned with business objectives, according
to two human resource management experts who recently led a BLR audio conference.

Ronald Adler, president and CEO of human resource management consulting firm
Laurdan Associates, Inc., says that in measuring human resource management
results, human resource professionals should use the language of the organization.
For example, if the organization uses costs per mile as a measurement, human
resource professional should do the same when it creates human resource metrics
to measure the effectiveness of human resource programs.

Deborah Saks, president of 1 Source Consulting says that human resource metrics
are important to human resource management’s new leadership role, which includes
business professional, leader, general manager, and human resource expert/visionary.

In the role of business professional, human resource managers must approach
business problems as an executive would, moving from a business partner to
a business peer, she said. This role includes critical thinking, root-cause
analysis, and fact-based decision making as keys to measuring return on investment.
This requires HR to be able to dissect balance sheets and annual reports and
use them to construct human resource metrics that provide insight into organizational
performance.

In the role of leader, human resource professionals must ensure that its
competencies are comparable to peer-level executives, according to Saks.

In the role of general manager, human resources must run its department like
a business, Saks said. She said that human resource professionals must run
the best ship in the house with human resource metrics that every other department
should use as a benchmark. The human resource department must be efficient
(internal measurements like employee turnover and healthcare costs per employee),
effective (return on investment), and measure its impact (how it contributes
to overall business results). HR must align its strategy with the business
strategy, she said.

In addition to those roles, human resource management need to have expertise
and vision in the areas that are important to the executive team, Saks said.
Saks said human resource management should concentrate on developing a core
set of human resource metrics that are important to the organization and use
those metrics as a smoke detector to alert the organization of problems.

Adler said that human resource metrics should concentrate on the following:

Human Resource Management Activities:

• Hiring and staffing
• Identifying top performers and linking compensation to performance
• Succession planning
• Training and skills development
• Retention
• Risk exposure of employment decisions

Human Resource Management Outcomes:

• Improved organizational competitiveness
• Increased productivity
• Improved employee satisfaction
• Reduction of risk associated with employment decisions
• Improved ROI

Enterprise Strategic Planning:

• Identification of problems and opportunities
• Development of organizational goals and objectives
• Development of ways to achieve goals and objectives
• Development of an assessment and monitoring system to measure performance.

Adler stressed that when deciding what to measure, human resource metrics
should place emphasis on measuring results instead of activities.