HR Metrics: A Core Competency,

a Strategic Skill
HR Metrics

“Everything that counts can’t be

measured and everything that can be
measured does not count.”
Albert Einstein
HR Metrics: New Organizational
Expectations
 Human capital is increasingly recognized as a
critical organizational asset
 This shifts the organizational emphasis from
expense control and reduction to ROI and
asset enhancement
 HR is increasingly being expected to provide
quantitative, as well as qualitative, information
about the organization’s human capital
 SHRM Human Capital Measurement/HR Metrics
Special Expertise Panel: Key Trends (2005)

Increasing use of metrics in measuring:

1) Staffing and recruiting
2) HR outsourcing
3) Medical health care/cost management
4) Work force planning
5) Using HR technology
6) Elevating HR to a decision science
7) Educating the HR profession
HR Metrics: Rules
 What gets measured, gets done … if the
results of an activity are not measured, the
activity is not being managed
 Organizations measure what they treasure
 HR metrics should be business metrics
 HR metrics are the messenger, not the
problem
HR Metrics: Why?

 An essential element of strategic management

 A requirement for budgeting and planning
 The initial step in benchmarking
 The basis for assessing organizational and
individual performance
 Supporting data in holding managers and
employees accountable for their performance
 Compliance
HR Metrics: Audience, Users, and Partners

Senior management, specifically the CEO,

CFO, COO, and CIO
The Board of Directors (Sarbanes-Oxley has
increased the Board’s interest in HR metrics)
Internal and external auditors
Investors, stockholders, and the financial
community
HR Metrics: Audience and Users (contd..)

Insurers
Governmental agencies
Plaintiffs and the courts
NGOs and other third parties
HR Metrics: Purpose

“… 70% of communications are persuasive

in nature … Success at HR requires using
numbers to persuade others.”
Jac Fit-enz
HR Metrics: Enhancing Their Value

 HR metrics: should be aligned with

organizational objectives
 Should emphasize measuring results and
outcomes, not just activities
 Should be used to help make decisions
going forward
 Should have executive buy-in and
sponsorship
HR Metrics: Enhancing Their Value
(contd…)
 Should have credibility with users and
stakeholders
 Should use data that are timely, reliable,
valid, repeatable, and verifiable
HR Metrics: Common Problems

 Typically viewed as standalone measurements

 Used to measure activities rather than results
 Based on the assumption that human resources
are an expense
 Use data that are inaccurate and/or untimely
 Measure inappropriate time periods
HR Metrics: Common Problems (contd..)
 Inappropriate level of analysis
 Short-term perspective of analysis
 Failure to consider the internal and external
factors, e.g., opening a new store or business
cycles, affecting the metric
 Incorrectly assigning accountability based on
the metric
 Liabilities created by the data collected – or
not collected
HR Metrics: Determining the Right Metrics

 How does the organization make money?

 What factors impact sales?
 What factors impact expenses?
 What factors impact the bottom line?
 What business metrics are currently being used
 Who are the organization’s major stakeholders?
 Who are HR’s customers?
HR Metrics: Determining the Right Metrics

 What is the current level of HR

sophistication of management?
 What is the level of competency of your
HR team
 What is the willingness of HR’s partners,
especially the CFO and the IT department,
to provide assistance
 What data is available
HR Metrics: Commonly Used Metrics

 Metrics are categorized in a number of

ways. The SHRM publication:
Competencies for the New HR,
(Brockbank and Ulrich, pg. 88) identifies
“Efficiency” and “Effectiveness” measures.
HR Metrics: Commonly Used Metrics (contd..)

 Efficiency measures include:

 Cost of hire
 Time hire
 Employee satisfaction with pay and benefits
 Training costs per employee
 Health care cost per employee
 Labor costs per revenue dollar
 Compliance with EEO and employment laws
HR Metrics: Commonly Used Metrics (contd..)

 Effectiveness measures, which help assess the

“contributions of HR,” include:
 ROI
 The impact of HR on corporate culture
 The impact of HR on competitiveness, market
share, and profitability
HR Metrics: Commonly Used Metrics (contd..)

 The SHRM Human Capital Benchmarking

Study includes the following key metrics:
 Employment Metrics
 Time-to-fill
 Cost-per-hire
 Number of positions filled
HR Metrics: Commonly Used Metrics (contd..)

 The SHRM Human Capital Benchmarking Study

includes the following key metrics (con’t):
 HR Department Metrics:
Total HR staff
 HR-to-employee ratio
 HR expense
 HR expense to operating expense ratio
 HR expense per FTE
HR Metrics: Commonly Used Metrics (contd..)

 Other HR metrics:
 Organizational financial data: revenue and profits
by unit and per FTE

 Employment data: Accession rate, headcounts,

percent-of-applicants-hired, cost of hire, time-to-
hire, time-to-competency, average length of service,
and retention rates. Note: According to a survey by
Staffing.org and the HR Metrics Consortium, “new
hire quality” was rated by C level executives as the
most important HR performance metric.
HR Metrics: Commonly Used Metrics (contd..)

 Other metrics (con’t)

 Compensation data: total compensation, total
compensation-to-revenue, and total-compensation-
to-profits

 Turnover data: stability rate, instability rate,

turnover rate, cost of turnover, unemployment
insurance tax rate
HR Metrics: Commonly Used Metrics (contd..)

 Other metrics (con’t)

Risk performance data: cost-or-risk-per-hour-
worked, cost-of-employment-related-claims-per-
hour-worked, workplace-injury-per-hour-worked
Productivity
ROIs
HR Metrics: Best Practices

 Create an HR-business metrics team

 Identify and catalog HR-business metrics
currently in use
 Determine how these metrics are currently
being used; what message they convey about
what the organization considers important; and
what consequences – intended or otherwise –
have resulted from there use
HR Metrics: Best Practices (con’t)

 Ensure that currently used or proposed

metrics are aligned with current and FUTURE
organizational objectives
HR Metrics: What Metrics Do CEOs consider Important

 Maximizing shareholder value

 Productivity
 Quality of Hires
 Employee engagement
 Labor costs/revenue
 Employee ROI