There is an old story about a chalk mark on a factory floor that sparked improvements in productivity. It goes something like this: The morning shift came to work to discover a chalk number on the factory floor. The workers stood around for a few minutes until they arrived at a conclusion as to what the number represented. They realized that the number represented the previous shift’s production quantity. Additionally, it represented a challenge to the morning shift to show that they could do better. It didn’t take long for the morning shift to rise to that challenge and eventually post their slightly better performance mark on the floor of the factory.
There are several lessons that can be taken from this simple story: the benefits of visual management, the value of competition to spur improvements, data driven excellence, the benefits of teamwork, etc. But the underlying truth is that organizations should be careful to measure and focus on what matters most and forget the rest. Metric quality always trumps metric quantity.
All too often, HR organizations get caught up in measuring HR’s transactional efficiency (time to fill, cost per hire and cost to onboard a new employee). But rarely, if ever, is an HR transactional metric going to lead to a strategic advantage for a business. HR metrics should focus on the human capital component of the business’s larger strategic goals. Metric linkage is critical for HR to have a strategic impact. Put another way, the successful improvement of HR metrics should lead to direct improvements in the company’s bottom line.
Implementing an HR measurement strategy is a key component of transforming the HR department into a competitive advantage. A recent Bersin & Associates report ("The High-Impact HR Organization: - Top 10 Best Practices on the Road to Excellence") shows that HR units that use measurements strategically improve efficiency by 19%. This kind of improvement is affected through the direct linkage of HR measurement to the strategic goals of the organization. The chain should follow this path:
1) Company strategy, supported by…
2) HR strategy, supported by…
3) HR investment in people, tools and processes, measured by…
4) Metrics tied directly to strategic goal achievement.
Measuring to impact strategic change is accomplished by remembering the “big picture” goals for the organization. With the right goals in mind, linking the goals to metrics can be simple. It can be as simple as a chalk mark on the floor.
[The topic of leveraging strategic HR metrics was presented in further detail during a recent webcast, titled “Measuring to Impact Strategic Change”, the replay of which is available here.]