Metrics Are Everything— Why, What, and How to Choose

Kim Burns

It’s intimidating. Metrics, those staffing equations and measurement devices that seek to measure human capital performance, are everywhere. Virtually every HR article or presentation includes metrics. Once an industry buzzword, "metrics" has moved from a monthly exercise to a weekly priority. An over-reaction perhaps, but both the business and popular press are reporting that the demand for organization performance data is continuing and dramatically increasing. And it's not just more numbers that are in demand -- but the details behind these numbers called metrics. Indeed, the practice of pitching staffing numbers like breakfast cereal is over. Everyone -- analysts, the market, the government -- are all going to be a lot more careful and demanding.

To date, however, there's been at least one very obvious problem: Though every product or service touts them, almost all human capital performance metrics come with their own definitions and formulas. And that's confusing. At the Staffing Institute, we frequently hear the following questions about metrics:

“Every number seems to be a metric, which ones are most important?”
“Which metrics should I start with?”
“Is ROI the most important metric?”
“Which staffing/HRIS providers have the best dashboards?”

This essay will address these questions, and attempt to unscramble the tangled landscape that surfaces when the mere word "metrics" is mentioned. Granted, most organizations are already behind in their ability to measure and understand human capital, which presents an extra challenge for HR leaders. But at Staffing.org, we believe that the challenges of human capital performance measurement are totally worth embracing. To begin, here are some tips
that will enable you to respond to the challenge of metrics:
 

- Don’t get caught up in the "measure everything frenzy;" just make sure that you're measuring what is important to your customers and that your human capital metrics are directly tied to organizational objectives. For example: Retention - keeping the people you want to keep - is more important than turnover data.
 - Focus on measuring desired outcomes rather than negative statistics. For instance, measure new hire quality
rather than the cost of turnover.
 - Make sure the numbers are right. Check them yourself and then ask someone else to review them. Over
70% of the reported HR performance data that we have analyzed are incorrect.
 - Exploit your existing systems to collect data even if you have to manually calculate the metrics. Use
general ledger data for any financial input; don't keep your own records. You know it's accurate and it will
foot with any accounting reports.
 - If you’re acquiring a new staffing or HRIS system, demand that it calculate real performance metrics before signing the contract. The “metrics” that most of these providers are marketing in the words of a CFO we know, “are just a bunch of HR numbers.”

Metrics Q & A

Every number seems to be a metric, which ones are most important?
Every number is not a metric. The “most” important metrics are the ones that are most important to your customers. Recruiting has received the most attention of all the human capital performance metrics, probably because the acquisition of human capital is both resource-intensive and critical to organizational success.

Which metrics should I start with?

Just start measuring what you’re doing now. As the famous Nike ad admonishes, "Just Do It." Don’t wait another day, because measuring -- just the very act of measuring -- improves performance. It also gives you hard data to report. It's important that you first validate the objectives of an assignment or project and then determine the best metrics to measure those objectives. For example, if your goal is to increase the sales force by 20%, two associated metrics are the number of sales hires and the retention of sales employees. The associated metrics then help to clarify what you need to do to get the performance you want. Understanding candidate flow — applicant to interview, interview to offer, offer to acceptance, and acceptance to start ratios — are important activity indicators that will help you to drive sales hires. Retention is generally more complicated. But recruiting to retain — what Lynn Nemser calls "sticky recruiting" — and focusing on retaining the employees you want to retain are activities that will help drive the desired retention metric.

Is ROI the most important metric?

Although a fundamental measure, ROI is neither a metric nor an activity indicator. Simply put, ROI is the Return/Investment or Benefit/Cost. The more associated costs and benefits that are identified for the same time period, the more accurate and therefore telling the ROI. The ROI should be the key factor in evaluating any notable expenditure or change.

Which staffing/HRIS providers have the best dashboards?

The proliferation of proprietary dashboards crammed with data is of great interest to those obsessed with measurement. Just remember that the dashboards themselves are less important than the data they report, so make sure you understand what is being tracked and the basis of the formulations. Remember, too, that metrics should measure outcomes and results associated with specific objectives. Although much of the dashboard readouts are actually activity indicators, they can be incredibly helpful in providing data to monitor performance so that positive trends can be exploited and negative ones addressed before they undermine performance.

HR Measurement: Why Are We Just Starting to Get Serious

"Why now?" people often ask about metrics and the sudden interest in measuring. Understanding why HR is just beginning to address HR metrics will help us to do a better job, both now and in the future. Here are some of the reasons that human capital performance and HR haven't been measured until now:
 - We didn’t have to. Senior executives accepted HR as a "soft," unavoidable cost of doing business that managed executive compensation, handled employee processing and support, and, hopefully, prevented law suits.
 - There was no sound “metric” starting point. Although headcount, HR staff per 100 employees, and cost per-hire were considered common HR "metrics," they don't stand up to hard business questions and challenges. These early metrics ironically helped to reinforce the belief that HR couldn’t be measured.
 - Can’t measure strategy. HR became obsessed with becoming strategic in the nineties. Although the shift was positive, most of the metrics initiatives that followed tried to measure strategy. Metrics should measure outcomes and results associated with objectives.
 - Too complex. Many of the HR metrics formulations were just too complex to allow ongoing measurement.
 - Too many of them. Some of the first organizations to measure HR tracked over 100 different HR metrics.
 - Lack of standards. Most HR metrics were developed by competing and proprietary consultants and firms.

Although they have certainly all done very good work, the expense and exclusionary nature of working with them has not fostered ongoing HR measurement.

Core metrics should address customer-defined objectives. They should be standard and easy to compare regardless of geography, industry, or size. The right metrics actually drive continuous staffing improvement.