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?I?n an information-thirsty age, the demand for data is phenomenal and, with “big data” (datasets that are too large to be stored in traditional databases) being the latest jargon to infiltrate our HR community, it’s probably a good time to take stock of what data we are collecting, why we are collecting it, and how we can use it to gain competitive advantage.The largest overhead cost for most organisations is the people they employ. As a result, the ability to monitor key workforce metrics easily and accurately is essential, particularly in light of recent economic uncertainty. A pertinent example of exactly why this is so important comes from a global retail organisation we worked with that had no visibility on its current talent processes. By gathering data and presenting it in dashboard format, it became clear that, with a workforce of more than 50,000 and turnover averaging 70 per cent, the cost of maintaining current staffing levels was a staggering $35 million (£21.5 million) a year. None of this would have been evident without the exposure of certain key workforce metrics.Whether created using Excel or HR software systems, dashboards are a great way of displaying workforce metrics in a highly visual and easy-to-understand manner – they are typically created to consolidate information from multiple sources, with the key metrics presented on a single screen so they can be monitored at a glance. Dashboards have been used within HR for a while now, but the majority still tend to focus on measuring HR operations. This is perpetuated by the fact that this type of data is often the most readily available to us – even the most rudimentary core HR and talent management system usually now comes with a set of “standard reports” that illustrate simple HR statistics and chart the progress of typical HR processes such as performance reviews. While these types of metric are useful in ensuring that HR operations remain on track, they are not very compelling from a business point of view and are only immediately relevant to the audience that is producing them. What is it that counts?
For metrics to be effective outside HR and have impact in the wider organisation, they must align with the business strategy and, ultimately, be relevant to the executive group and its associated corporate objectives. True strategic value comes from metrics that go beyond the measurement of typical task-based activities and combine HR data with other business data such as financial data, market conditions and competitor benchmarks. Done well, this can clearly demonstrate the impact that HR is having on the execution of business strategy and can be used to draw conclusions about the future direction of the company. When making the shift from providing rudimentary information to generating strategic insight, there are a number of points to consider. Start by putting yourself in the shoes of the chief executive – what metrics would tell you that you are on a path to success or that you need to consider doing something else? Typically you will be looking at how workforce initiatives affect shareholder value, sales revenue and return on investment. Another retail company we worked with had an ambitious international growth plan but the metrics, focused on promotion rates and staff turnover, revealed that its plan was being inhibited by the limitations of its graduate scheme – staff hired through the scheme were not being promoted at the level needed or were leaving the organisation. This was vital news for the CEO.Carry out stakeholder interviews to clarify what information is important to the various roles within your organisation and remember to keep the focus on strategic metrics that have a direct impact on corporate objectives and results. For instance, if the business strategy is growth, then metrics that reveal promotion rates may be key.When building a business case to support the establishment of an organisational project, there is often a heavy focus on the financials, but the use of HR metrics can be a great way to punctuate a compelling story for investment. Pointing out cost savings or missed revenue opportunities can grab your audience’s attention – and a tangible cash figure on a dashboard tends to focus the mind. This works particularly well with retention and recruitment metrics where revenue may be lost, for example, by not meeting new hiring targets within a specified timeframe or because of the cost of hiring replacement staff owing to increasing turnover rates. A good example of how analytics can be linked to the bottom line comes from global food-service company Sysco. According to a Harvard Business Review article, the company was able – by keeping track of the satisfaction levels of delivery associates over a six-year period – to improve its retention rates from 65 per cent to 85 per cent, saving nearly $50 million (£30m) in hiring and training costs. In other areas, including learning and development, it is good to look at return on investment – again with tangible cash figures, wherever possible. An example would be percentage increase in performance as a result of every £100 spent on training.Provide context
Without context, metrics are bordering on useless. Declaring that employee engagement is at 58 per cent doesn’t raise many eyebrows until you know that it has dropped 30 per cent in the past year and that it is 25 per cent lower than that reported by your competitors. Providing benchmarked comparison data for your metrics is important. Typically it should be done over significant time-based milestones (eg, annually or quarterly) – both internally (geographically or across departments) and externally (direct competitors, industry averages, industry leaders).Also bear in mind that simplicity wins over complexity every time. Neuroscience has shown us that the prefrontal cortex, the executive function part in our brain that handles planning and decision making, is prone to information overload and can typically only cope with seven (plus or minus two) processes at once. Keeping your dashboard’s focus to five or six key points, at most, should maximise impact and ensure your information is optimised in a brain-friendly way. Bring changes and trends to the forefront, rather than merely quoting numbers and facts; the aim is to tell a story. Include forecasts wherever possible so that, with a relatively quick glance over the dashboard, a reader can visualise the direction of the organisation. It should be easy for people to make the connection between your metrics and the corporate objectives on which they have an impact, but there is no harm in explicitly highlighting this in chart titles or dashboard headings.The goal of an HR dashboard shouldn’t be limited to presenting data and trends; it should also be used to provoke thought and prompt action. A good sign that a system is operating maturely is that it allows us to take this data and use it to make better decisions about how to manage the workforce. While correlation does not imply causation, there should always be room on your dashboard for logical deductions alongside recommended actions that seek to resolve issues or take advantage of opportunities. And remember, measuring strategy execution is not an open and shut case – it requires planning and continual tweaking.
The path to providing high-quality information on talent can seem quite daunting as there are so many different metrics to consider. Yet, as companies demand more and more from their talent, increasingly sophisticated workforce analytics methods are being adopted. Often this does require an expansion in HR capability and in some cases new roles are being created within HR operations that are being filled with people who come from a more analytical background, such as finance or marketing. It’s a shift that should be embraced rather than feared, as not only is it helping us to manage the workforce data more effectively, but it is also helping to make HR more visible within the organisation as a contributor to the execution of business strategy.Even if you are not a numbers guru and your data is not squeaky clean, the application of solid business acumen and a focus on the impact that HR initiatives have on business strategy will go a long way to increasing the value of your HR dashboards. Top tips for getting started with HR analytics
Source SuccessFactors, successfactors.co.uk