First of two parts
When you survey the most frequent users of analytics and metrics in the corporate world, not surprisingly, you find that HR ranks at the very bottom.
Compared to finance, which is ranked No. 1, human resources compares poorly with only half of its functions being classified as advanced users and three times more HR functions are classified as non-users.
HR shouldn’t be surprised to learn that the executive team came in No. 2 because they (along with finance) are at the forefront of demanding more metrics and analytics from HR. The remaining business functions, operations, R&D, marketing, and sales all had a higher percentage of advanced metrics users than HR in this excellent 2013 AMA/i4cp study.
I have been a public advocate of talent management and talent acquisition shifting to a data-based model for decades but the transition at most corporations has been slow, expensive, and painful. Because I give regular presentations on analytics and metrics, I’ve been able to capture a long list of reasons why firms should shift to a data-based model.
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So, here are some of the credible reasons that resonate with most HR audiences as to why your corporate talent function should embrace metrics and a data-based decision model.
Why every firm needs to go to a data-based HR model
To increase profit – last year a study by the Harvard Business Review group found that advanced user firms that most effectively managed their workforce using analytics improved their firms profit by as much as 65 percent.
- Metrics allow you to demonstrate your business impacts – Working with the CFO’s offices, it is possible to quantify the dollar impact that HR actions have on business goals. Quantifying the business impact in dollars makes it easy to compare your business impacts to those of other more visible business functions.
- Numbers are the most effective way to influence managers and executives – Executives and managers are frequently fanatical about numbers, so numbers can be used to influence them and to change their behavior. As Google has found, “the best thing about using data to influence managers is … it’s hard for them to contest it. For most people, just knowing that information causes them to change their conduct.” Since a great deal of people-management work is done by managers, provide them with whatever numbers and data that might be required to make them more compliant.
- Continuous improvement is likely and error rates will go down – Metrics drive and allow for continuous improvement. As illustrated by this classic HP slogan, “You can’t improve what you don’t measure … and generally … whatever you measure … improves.” The stark reality of metrics forces many to realize that there is much left to be done. Because metrics also highlight errors, the use and distribution of metrics will dramatically increase the number of major errors and weak decisions in your function (i.e. bad hires, preventable turnover, delayed terminations etc.).
- Increased focus among your employees – The practice of selecting what to measure and what not to measure unambiguously lets everyone know what’s important and what is of lesser importance. Gathering and reporting metrics as the effect of getting everyone focused on the right things.
- A wide distribution of your metrics increases everyone’s attention – Widely distributing to every manager a best-to-worst ranked list of each manager’s or groups performance on a particular HR topic helps at least the lower ranked managers to focus on the problem. Widely distributing metrics reports also increases best practice and problem sharing across boundaries and between the best and the worst performers. It may also create some healthy internal competition, and yes … some embarrassment among the lower performers, which may set a fire under them.
- Metrics allow you to find out if existing approaches are working – Metrics can help HR leaders see which of their existing programs and tools are working and which ones are not (so that you can stop using them or fix them).
- Metrics allow you to assess the effectiveness of new programs – You should require all new talent programs to have goals and performance metrics. If you do, both program leaders and executives will be able to quickly see the effectiveness of new HR programs.
- It is better to be prepared — Given a choice, is almost always better to be prepared … than to be surprised. Metrics help you understand what has happened and what is happening now, so that HR and managers can prepare for things that are trending.
- It makes your function appear more businesslike and results-oriented – Because so many other business units have long ago made the shift to a data-based decision model, it makes HR appear to be more businesslike and results-oriented when it finally makes a shift.
- “Off the top of my head” can be replaced with “I know” responses – HR has a long history of giving “off-the-top-of-my-head” answers, providing “gut” opinions and relying on past practices that may no longer be valid. In order to give accurate advice, HR must use data so it can make informed decisions and know what works and what doesn’t. Perhaps Google says it best: “We want people management decisions to reach the level of engineering decisions.”
- Metrics identify hidden causes – If HR goes beyond typical “what-happened metrics” and goes further and gathers what I call “Why metrics” (why something happened) it can identify the hidden or root causes of HR problems.
- Metrics help you accurately funnel resources into those high-business-impact areas – Once you know the highest-business-impact programs and the ones that are not working, you can more accurately allocate your budget and staff to the areas where they can have the highest impact and ROI.
- Metrics speed up and increase the consistency of talent decisions – If you periodically gather and report metrics, your decision-making will be noticeably faster as well as more consistent and accurate. And because most metrics are in electronic form, it’ll be much faster and easier for decision-makers everywhere to have access to the same data and information.
- Metrics will increase funding/executive support – Since CFOs love metrics, incorporating them into your plans and proposals will increase the likelihood that you will get more executive support and funding. If you report the ROI of individual talent programs, you will be able to compare their effectiveness to those of other business functions.
- Metrics force you to use the CFO’s language and logic — Those in HR have a long history of using soft words in place of numbers. Metrics force you to use the language of business (dollars and numbers) and to present the information in a way that’s consistent with the business presentations of other functions.
- Employees also benefit from metrics — Top-performing employees demand that you keep score (champions always keep score and they love accountability). Employees will have to suffer through fewer surprises because their performance level, successes, and errors will be measured and reported to them periodically.