HR metrics are very useful to measure progress, but which metric matters depends on who you're talking to. Different stakeholder groups care about different things. As such, it's important for HR professionals to evaluate what is important to each of their stakeholders to see what you should be measuring.
What metrics do users want? Let's take a look at some of the most common goals among various stakeholder groups.
HR metrics for CEOs
CEOs are usually focused on high-level goals, such as:
- Maximizing shareholder value
- Increasing revenue
- Lowering labor costs
- Improving the quality of hires
- Increasing productivity
- Reducing turnover
- Increasing employee ROI
HR metrics for CFOs
CFOs are usually focused on the financial performance measures, including:
- Labor costs
- The effect of labor on profit margins
- Operating cash flow as a percentage of net sales
HR metrics for Investors
Investors want a picture of the health of the organization and its decision-making, such as:
- How much is spent/invested on human capital?
- What does the organization do to positively affect the retention of key talent? (And does the organization keep critical talent to meet their goals?)
- What is the leadership depth? How many leaders are coming up in the ranks?
- What is the leadership quality level?
- What is the level of employee engagement?
- Is human capital investment aligned with business objectives?
HR metrics for risk managers
For risk managers, the key issues are the severity of the risks the company faces, the likelihood of those risks coming true, and the frequency of when each type of risk comes up. They look at factors such as:
- The level of compliance with employment laws and regulations
- The impact of loss of critical talent and top performers
- The impact of human capital chain disruptions
HR metrics for government agencies and the courts
Compliance is the key for this stakeholder group. They consider things like:
- The level of compliance with employment laws and regulations
- The culture of compliance within the organization
- Compliance behaviors—what does an organization do when they discover non-compliance?
- Enforcement record
These are just examples of what stakeholders may be looking for. To be effective in using HR metrics, your organization should evaluate what it is important to the stakeholders in your organization.
Aligning HR metrics with external benchmarking
Benchmarking is the continuous study and process of comparing and assessing an organization's practices, processes, and outcomes against internal standards and external best practices. Benchmarking is a learning process that emphasizes improvement—it goes beyond mere comparison. Here are some examples of what various benchmarks your HR metrics could be tied to:
- Professional standards from the Society for Human Resource Management (SHRM). They have ongoing research on performance management and HR metrics.
- Industry standards. These are specific to the industry your company belongs to.
- Baldridge metrics. "Malcolm Baldridge performance awards is a national award given to companies that meet certain standards." Jennifer Burdick told us in a recent CER webinar. "Many states . . . [have] adopted the Baldridge standards." They accept applications from companies that want to be certified. Using these type of metrics is a great way to audit your organization to see where you stand.
- ISO 31000. A set of international standards related to risk management, modeled from the International Organization for Standardization (ISO) model.
- SA8000. SA8000 is an international standard modeled after the ISO standards, but measures areas of social accountability, such as child labor, discrimination, working hours, and more.
The above information is excerpted from the webinar "HR by the Numbers: Use HR Metrics to Measure and Maximize Your Workforce's Strategic Value." To register for a future webinar, visit CER webinars.
Jennifer Burdick the president of CMK Associates, LLC, and is a human resources consultant and trainer specializing in customer service, equal employment opportunity compliance, and investigations and training for small, developing companies, non-profit organizations, and human relations commissions.