How Can You Align HR Metrics with Company Strategy?

Metrics let people make decisions based on objective information rather than simply guessing or going by instinct. Metrics also let people know what is important to the organization, since a metric that is tracked will be analyzed. As such, HR professionals need to be keenly aware of the information they are providing to the C-suite. Is it information that is useful in strategic decision making? If not, how can that be changed?

HR metrics have historically often focused on the past. For example, HR metrics often include things like turnover or time to hire. These data are useful, but look only at raw info depicting what has happened, as opposed to assessing the “why” behind the data. Assessing the “why” is what will allow business leaders to make decisions accordingly. This is where HR professionals have an opportunity to change what metrics are presented and really make a strategic impact for the organization.

Let’s take a look at some of the ways HR can take a more strategic view with the metrics they present.

Transforming HR Metrics: From Turnover to Strategic Hiring and Retention Data

Turnover metrics are one of the cornerstones of HR reporting. Turnover figures are of course important. But HR can take a more strategic view by moving beyond simple turnover data. For example, instead of looking at turnover rates for the organization as a whole, consider breaking turnover down into key roles and focusing on data for key roles. This move alone can make the data more useful to decision makers within the organization.

Another way to move beyond simple turnover data is to begin finding why people left and what programs make people stay. This moves the data from quantitative to qualitative. One way to do this is to give current employees surveys that ask about employee satisfaction. Let the employees rate programs and give information on what programs or benefits they value. This can allow you to make connections between the programs that affect retention. Likewise, find out why employees are leaving. Conduct exit interviews to discover what changes can be made to reduce turnover. Use these data in HR reporting.

Transforming HR Metrics: From Time to Hire to Time to Be Productive

Time to hire and cost per hire are common HR metrics, but taken alone, they are difficult to act on. To take a more strategic view, look at the time it takes for a new employee to become productive and start contributing to company profitability. Look at the satisfaction level with the hiring process and the caliber of new hires.

This change is both qualitative (focusing on time to be productive) and qualitative (hiring satisfaction and talent level of new hires). This change in focus lets management see whether current recruitment programs are bringing in the right employees.

Here are some examples of the metrics that can be used:

• Time to be productive (based on measures of employee skill level at set intervals)
• Percentage of new hires who stay beyond the probationary period (shows fit with the organization)
• Performance ratings of new hires after 6 months (or some other appropriate time frame for your business)
• Manager satisfaction level with quality of new hires

By moving to metrics that show the quality of new hires, the metrics can be aligned with business goals and can help the business make better hiring decisions.

Transforming HR Metrics: Include HR Metrics Related to Revenue and Profit Goals

Traditionally, HR metrics have focused on data related to turnover, absenteeism, and the like. The key to being more strategic is to tie the information to business goals. For example, a business may have a specific goal around annual profit levels or revenue levels. If the HR department can present employee data that tie into these company goals, the data will be more relevant and actionable. Here are some examples:

• Profit-oriented HR metrics:
  • Time to full productivity (Don’t forget trend data too: Are you hiring more productive people now than in the past?)
  • Profit per dollar of wages or vice versa—wages spent per dollar of profit generated
• Revenue-oriented HR metrics:
  • Revenue per employee
  • ROI on new programs or on training employees

Remember to show trends in the metrics so that you can see how the data change over time.

Transforming HR Metrics: Focus on Competitiveness

Another often-missed aspect in HR metrics is competitive information. A metric is more useful when there is a point of comparison or benchmark.

HR professionals have a lot of options when it comes to including competitive data in employee metrics. Here are a few examples:

• What salary level do you use compared to the market averages? Higher? Lower?
• How does your retention rate for key roles compare to the industry average or to your closest competition for talent?
• How does your productivity rate (or time to be productive) compare?
• What is your employee satisfaction rate? What is the industry average?

Moving to Metrics that Have Strategic Impact

To make this move to more strategic HR metrics, the first step is to clearly understand the organization’s goals and objectives. Then you will best be able to assess which HR metrics can be updated to help make strategic decisions.

Once the right metrics are chosen, be sure to get accurate data. The metric will be useless if it’s not accurate because it won’t be credible and the message will be lost (even if the trend is accurate).

Next, find ways to effectively communicate the metrics to the people that can use it in decision making. If necessary, train people on how the data are presented so that everyone is on the same page.

Finally, be sure to review the metrics used on a regular basis. Talk to the stakeholders to ensure that they’re getting the information they need, and update the HR metrics as needed to reflect changing business realities and goals.
 

About Bridget Miller:

Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.