Organizations are evolving faster than ever, and too many managers and HR leaders operate under the assumption that what they are doing is working. But is your company truly keeping up with the global economy that is emerging around it?
To determine which strategies are working, leaders need to measure the efficiency and effectiveness of programs and then translate the results to decision makers in the language they know best: cost effectiveness. By applying a value or cost factor against your workforce measures, companies can expose opportunity gains or losses, which are the building blocks of sound decision-making. The keys to obtaining the right information for this level of decision-making are in your metrics.
Which Metrics Are Important?
Metrics allow HR to provide evidence of its strategic impact. In most organizations, people costs are the highest variable budget expense. Therefore, HR faces an imperative to prove its economic value to the company through the use of metrics.
Almost everything associated with HR can be measured, but smart managers focus on several key areas, which we will outline below, that carry the biggest cost and make the most impact. When CEOs and CFOs see that these larger areas are running smoothly, they know that the rest of HR is operating efficiently as well.
Most HR metrics focus on productivity, retention, recruiting and employee relations. Of these key metrics, productivity is the most important. When HR can demonstrate, through metrics, that the company can produce its products or services at a lower labor cost (due to efficient hiring, retention, etc.), the team has proven its value to the organization. HR will also demonstrate that its metrics are insightful tools in the company’s decision-making arsenal.
Organizations have a number of metrics to use for decision-making, but the following are usually found at the top of their lists:
Workforce productivity: Employee ROI is the total dollar amount spent on labor costs divided by total revenue.
Compensation: Tie worker pay to their output or productivity to justify salaries and promotions.
Employee engagement: Engaged employees will stay longer and produce more.
Training ROI: Demonstrate that there is a high correlation or connection between the number of hours a worker receives in training and their productivity.
How Can You Do More With Your Metrics?
The examples above are just a few of the HR metrics that are commonly tracked. This type of traditional measurement requires someone to either infer cost or value by essentially putting two and two together.
However, success in today’s fast-moving business environment requires that we move from a traditional model of providing purely retrospective information and using best guesses for decision making to one of providing forward-looking and insightful measurement and analysis that can be used to make key decisions. The businesses that make decisions based upon a careful blend of both data and informed intuition will set themselves apart from the growing competition. Their organizational performance will be driven by measuring, reporting, and managing key strategic and HR metrics.
By tapping into sources such as payroll, productivity, and past performance, and combining these with factors like time and labor, and capacity planning, companies can monetize opportunity to expedite decision making. Doing so makes your metrics even more valuable since they will not only provide an accurate snapshot of past performance, but also a window into your organization’s future.
Which programs and strategies does your organization need to measure for the best decision-making metrics? Get in touch with ZeroedIn today to discuss ways to turn your key metrics into a powerful strategic tool.