HR activities, such as training, staffing, orientation, discipline, and benefits, are difficult to directly connect to operational performance metrics, such as sales, profitability, costs, delivery, quality, and service. And they tend to be reactive, not proactive. Consultant Rick Buchman shows you how to connect the dots.
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So they had 4 hours of training; does that mean that profitability is up? asks Buchman, who is president and CEO of Hayward Enterprises, Inc. Buchman co-authored Balanced Scorecard Strategy for Dummies. He offered his metrics tips at a recent BLR®-sponsored webinar.
Start improving your metrics by answering these questions, says Buchman:
- What would you like to have had in place 2 years ago, or even much earlier, that could have helped you with your current issues? (Put it in place now, Buchman says.)
- What metrics would have been able to help you see these and other issues coming, and what steps could you have taken to better equip the organization for the challenges you face today?
Say high turnover is a current problem. Were there indicators? What could you have done?
Buchman’s Strategic Approach to Enabling Better Decisions
1. Employ and integrate a ”System for Management” that:
- Aligns organizational strategy definition and direction to HR strategic initiatives;
- Enables HR metric selection, tracking, and alignment to performance; and
- Provides “flags” or “triggers” in a proactive way for timely decisions and appropriate adjustments.
2. Ensure visibility to critical key performance indicators (KPIs), metrics that show shifts in performance as they are happening, and that trigger decisions points.
3. Design and implement a quick, responsive decision process (This is the bottom line, says Buchman.) that provides flexible, innovative, and practical contingency planning and execution, consisting of several key elements. Among others:
- Management System (Metrics), that is, “intelligence” feed and consolidation that provides for:
- Timely detection (see it),
- Interpretation (understand what is happening and why), and
- Root cause and response (preplanned actions).
- Management “War gaming” scenarios that identify potential contingencies and figure out what to do if/when they occur. No more surprises, because you have thought about it already and planned for it.
- An effective, timely “decision process” in place and active.
- A feedback process to assess and adjust the decision process as appropriate to changing conditions.
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3 HR Capability Requirements of the Organization
Buchman offers three capabilities HR must focus on:
- Technical skills, knowledge, and competencies to design, produce, deliver, and support the products and services
- Other skills and capabilities beyond technical necessary (but not directly related to the product)—leadership, project management, functional competencies (i.e., financial competency, systems thinking)
- HR practice skills, knowledge, and competencies, such as career planning, employee development, coaching/facilitating, problem solving, conflict management, etc.
Layered on top of that are the processes that HR manages and executes to support the organization—staffing/hiring, resource planning, training and development, compensation and benefits, performance appraisals, personnel data management, labor relations, succession planning, etc.
HR Impact Example
Do unfilled positions relate to company performance? How do you measure, how do you know?
What’s the correlation between the number of key open positions and suboptimal performance? Studies in the health care, pharmaceutical, governmental and engineering industries over the past 2 to 3 years have highlighted the following, says Buchman:
- 60% nursing turnover the first year for one healthcare organization cost in the $100 millions
- State and federal jobs unfilled are increasing, resulting in extended hours, inefficiency, additional cost
- Lack of key competencies and technical skills, and lack of stability and consistency for key positions, drive increased costs in product and service design, delivery, and service.
Now you have the link you need between the metric and the bottom line.
Still stuck in the muck with spreadsheets to track HR metrics? Read this free download HR best Practices Report—Overcoming HR Spreadsheet Hurdles. Download now.
Key Contributors
Here are three key contributors to meaningful metrics, says Buchman:
- Quality of Alignment (or misalignment) of Knowledge, Skills & Abilities (KSA) to the needs of the business, especially for the future 3 to 5 years.
- Level of Proactivity vs. Reactivity of Metrics related to sustained performance. We want key indicators not to say we failed, but to indicate before the failure.
- Competitive Advantage, that is, the benefits, bonuses, working environment, everything it takes to get (and keep) the “best of the best.” Where do the investment vs. return lines cross?
In tomorrow’s Advisor, more on metrics, plus we offer a free HR Best Practices Report—Overcoming HR Spreadsheet Hurdles.