Benefits and Compensation

Metrics: 2 Common Errors That Make Them Worthless

Metrics guru Dr. John Sullivan says that human resources managers make two key mistakes when using metrics. Sullivan is a metrics consultant and professor of management at San Francisco State University.

Mistake #1: Metrics in a Vacuum

The first mistake, says Sullivan, blogging on, is that comp/HR managers tend to develop and implement metrics in a vacuum. By "in a vacuum" Sullivan means doing metrics development wholly within the department. That gives you metrics that the comp manager or HR manager likes, but not necessarily those that management likes. He recommends that employers take a collaborative approach. Take a list of your strategic metrics into the CFO’s office and let him or her help you select the best ones.

Ask these questions: Which are easy to understand, which appear to measure business impact, and which will appeal to top management? By involving the CFO, you’ll not only pick good metrics but also end up with a high-level champion who can remove a lot of roadblocks.

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Mistake #2: Too Many Metrics

The second mistake is that managers develop too many metrics and then get bogged down in tracking and interpreting them all. Figure out which ones really matter, he says, and which ones really demonstrate HR’s impact on the business.

First Tier Metrics

Sullivan offers these "first tier" metrics suggestions for six areas of interest:

  • Overall workforce productivity. Measure the percentage improvement in workforce productivity (people costs divided by revenue, then compared to prior years) and also the dollar value of the change.
  • Employee engagement. From survey data, calculate the percentage of employees who "look forward to coming to work every day." (You have to balance engagement against productivity, or your people will burn out and leave, Sullivan notes.)
  • Satisfaction with management. Report the percentage of employees who believe that their bosses exercise expected management behaviors (for example, communication, recognition, offering opportunities for growth and learning, making work challenging and exciting, and showing employees that their work makes a difference).

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  • Recruiting. These metrics are helpful for evaluating recruiting, Sullivan says:
    • Number of days positions are vacant
    • Managerial satisfaction with new hires
    • Turnover rate of new hires
    • Percentage of diversity hires at all levels
    • Dollar impact of a bad hire in a key position
  • Retention. Sullivan also recommends several metrics for measuring retention:
    • Performance turnover in key jobs
    • Preventable turnover
    • Diversity turnover
    • Dollar impact of turnover
    • Managers’ satisfaction with HR and retention
  • Overall HR costs. Finally, says Sullivan, include a measure of HR costs, such as HR cost per employee.

In tomorrow’s Advisor, we’ll look at a Sullivan’s second tier metrics and tell you about an upcoming webinar designed to align you rpay scales with your strategy.