Making measurement pay
If you only look at what is, you might never attain what could be. The rule applies across the board: be it in business, sport, education, development or growth, you cannot manage what you don’t measure. If you want to monitor improvement, then you need to measure what you do.
Human resources is no different. People are one of the most valuable assets in any organisation, and as managers of human capital, an effective HR department contributes significantly to the strategic goals of the organisation.
HR’s challenge is to provide business leaders with actionable information that helps them make strategic decisions about company direction, investments, financial and marketing strategies for the continuous improvement and growth of the organisation.
Developing appropriate HR measures, together with an effective process for managing them, is crucial for an organisation to understand and reap the contribution of its human capital.
There is a distinct relationship between HR policies, people management policies, employee engagement, proficiencies, behaviour and business results. The purpose of measuring HR is to help the organisation continuously improve and to ultimately achieve its strategic objectives.
Aspects like leadership development, talent strategy, workforce planning, onboarding, learning and development, performance management, career and succession management, remuneration and benefits, and company culture are all measurable in some way. Measuring enables the links and fundamental relationships between these variables to be tracked, and therefore managed, effectively.
Strategic alignment of business objectives with HR processes is vital for company growth. Keeping up to date with what competitors are doing, how the market is changing, and how the organisation is faring is essential, and HR’s role of channelling internal procedures ensures the alignment necessary to enable the necessary leadership development, workforce planning and other metrics for success.
“Some measurement criteria are more tangible than others, and therefore easier to measure. As long as HR maintains a strategic role within the organisation, then measuring the various areas becomes critical for business improvement,” says Trish Subbramoney, HR manager at McCarthy VW/Audi.
Measuring outcomes of programmes is important. Time scales and budgets need to be carefully considered, and outcomes for projects should be clearly identified so that proper adjustments can be made to meet the needs of the organisation.
There are many ways to measure the success of a programme. One way is to compare current results against previously collected data, and to update the data periodically to measure against past successes. Comparisons between old and new data provide information on what programmes and policies impacted the data, what the outcomes were, and how things can be modified to improve processes.
“Five-year plans, for example, are essential for business strategy, but they need to be flexible year-on-year to allow for and be adaptable to market pressures and changes. The only way you can be able to make such changes is if you’re measuring yourself against where you were last year, and against benchmarks in the industry.
“Measuring yourself against your own standards is only so useful, but benchmarking is fundamental. Unless you keep a record of what your competitors in the market are doing, you will never improve. Five years down the line you’ll be sitting with an outdated strategy and dwindling away behind your competitors.
“Initially measurements may be a nightmare to collect, but they’re a dream when you are able to make sense of and apply them correctly,” says Subbramoney.
The strategic tracking of measurements is key to determining a company’s return on investment. While some of the less tangible metrics will not be cold, hard facts that fit perfectly onto a spreadsheet, there remain three important focus areas that provide crucial information for HR: performance, experience and effectiveness.
Workforce planning, for example, is not an easily measured metric, but it requires continuous monitoring to meet changing demands within an organisation’s employee body. HR departments need to play a strategic role in the organisation’s alignment and direction, its leadership and succession planning, recruiting and training the best possible talent, as well as establishing a high performance culture that steers employees towards the achievement of the company’s mission.
The workforce plan should be regularly measured for its success in meeting performance, experience and effectiveness. While performance will measure the time, speed, cost and volume against the plan, effectiveness will measure whether the plan is achieving the fundamental HR requirement for the organisation: having the right people with the right skills at the right time.
Performance management is another metric that requires careful measurement, and yet is not simple to implement.
Key issues include ensuring the performance drivers of every department are linked to the mission, objectives and outcomes of the company’s big picture, and communicating those drivers throughout the organisation to get acceptance from every employee.
All activities need to link with the overall goal of the organisation. Effective performance management helps ensure that all activities within the company support the overall mission and business objectives by always linking actual results back to plans at every level of the organisation.
Probably the most intangible aspect to measure within the organisation is culture. A company’s culture can be its strength or its weakness — it can make or break a company. The first step in measuring a company’s culture is to determine whether its people know, and believe in, its values. Assessing something as abstract as culture is impossible using metrics; an assessment of employees’ knowledge, perceptions and behaviour may instead be used as a gauge.
Developing effective processes for measuring and monitoring HR is critical if organisations are to understand and optimise the contributions of their staff for better business performance.