HR Metrics Are Meaningless

Photo by William Iven on Unsplash

I came across another article this week on HR metrics. Based on the title, "Which HR Metrics Will Matter in 2019?", I thought, "Great!" But once again, I was severely disappointed.

But first, what is a metric? If you look it up in the dictionary, it will tell you it relates to the metric system of measurement. However, as used in business, a metric translates data into some chart or graph that helps with decisionmaking. What were the Big 3 metrics cited in the article? Labor turnover (voluntary resignations), Absence rate, and Number of employees per HR staff member. ARRGGH!! The other measures mentioned in the article as useful are also not where we should be focusing our attention (although there are some good reasons to look at them on occasion.)

Most of the metrics I see in HR departments are busyness metrics--how much of something was done. Other metrics are efficiency metrics--how fast or how cheaply is a process done. I am not saying there is not some value in those, but the value is limited, and truly, the only people who should care are the people in HR. We should be concerned with reducing workload and being efficient with our resources. But from a company leadership viewpoint, I want to know impact. If the results aren't there, then I don't care how efficient the process is. If the results aren't there, I don't care how busy you are.

The problem with HR metrics is that it is very difficult to measure the impact of HR processes and generally, HR policies and practices do not operate in a vacuum, so it is tricky to try to isolate the impact of specific HR programs.

Fundamentally, HR is there to help the workforce be more productive and to leverage the talents of the people in the organization to help the organization achieve its objectives. Wouldn't you agree?

I can see a reason to track turnover. But the value in turnover is not the overall number. Personally, I like to see both voluntary and involuntary turnover. Voluntary turnover can indicate cultural, management, and compensation issues. But more importantly, who is leaving? Critical skill turnover is more important to me than turnover as a whole. When are people leaving? If shortly after hire, we need to look at our hiring and onboarding processes. Is there some other timeframe that seems to have a higher percentage of people leaving? Why? Involuntary turnover in good economic times can indicate poor hiring practices.

But I don't really care about the other two measures cited in the article. What might I look at instead? Every organization is different so I would expect the measures to be different. However, two that should be considered are Revenue Per Employee (this varies hugely by industry) and Employee Engagement. I look at revenue versus profit because although employees have a big impact on the revenue brought into the company, management determines how much of that revenue turns into profit. I would track employee engagement because study after study has shown higher engagement means higher returns.

There are other possibilities, but they should be based upon each business's unique niche and business objectives.

Winning the War for Profit

Warning! This post contains shameless self-promotion, as well as a modicum of useful information.

In an earlier post, I talked about leadership training as often pursued by companies, versus leadership training that actually works.

I recently released a short eBook (paperback to follow in a few months), Winning the War for Profit: Developing Leaders Where It Really Matters, that contains a roadmap to leadership development at the first-line supervisor level, as that is the place where (in my opinion) it can do an organization the most good.

Here's a short excerpt from the book that highlights why I think this is such an important topic:

"Here are just a few other reasons to focus on your supervisors:

• The right managers contribute 48% more profit than average managers (Frontline Managers, 2014)
• Managers account for at least 70% of the variance in employee engagement scores across business units. (Beck, 2014)
• Businesses say that manager and supervisor involvement was "extremely important" or "very important" to the success of their change efforts (Manager/Supervisor's Role in Change Management, 2016)
• Total Return to Shareholders (TRS) over a 3-year period is 286% higher for those companies with a high level of employee trust versus those with a low level of trust, according to Watson Wyatt.
• Ninety-one percent of employees rated their relationship with their immediate supervisor as "very important" or "important" to their job satisfaction. (SHRM, 2016)

"If you are still stuck on the first bullet, you should be. That statement, by itself, should justify every penny of investment you make in your supervisors." 

Winning the War for Profit shows businesses how to select, train and support first-line supervisors. The information is transferable to leadership development at all levels of the organization, but there are some unique aspects to that first leadership rung, so I wanted to focus on that.

The next book, Leadership in the Trenches: Developing Your First-line Leadership Ability, will be focused on the specific skills required by first-line leaders and will be useful for organizations to use in their training programs or for first line supervisors to use independently. Look for that book around 1 October.

You can find Winning the War for Profit on Amazon.

People as a Source of Competitive Advantage

As you can easily tell by the title of this blog, I believe an organization's people are the source of competitive advantage for most companies.

You may say, "No, my company's competitive advantage is in our cutting-edge technology." Who designed that technology? Who markets that technology? Your people. So fundamentally, your company lives or dies on the knowledge, skills and efforts of the people who work for you.

This blog will focus on how to turn the talents of your employees into profit by improving their performance. I hope you will follow this blog and add your thoughts and comments along the way.