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Does HR use the right metrics?

Posted on from Henley Business School

Demand for insight in the modern world has never been greater. At the same time, supply against this demand is increasingly lagging behind, says Professor Nick Kemsley of Henley Business School.

HR finds itself at the centre of a huge need

In the world of people and organisation, this effect has been more prominent than most, and has been further amplified by a lack of recent investment in capability in HR functions already struggling to react to a tide of complexity.

But I don’t want to paint a picture that this is outside of HR’s control. In fact, my own view is that much of the current situation is a self-inflicted wound, and a result of failing to take advantage of a massive opportunity area in which other functions like Finance and Marketing have had far more success. Finance have become teacher’s pet because they give the leaders of business the insights they need in a language they understand. So why does HR struggle to add value in this space when, arguably, no other function has access to as much data?

HR is information rich and insight poor

INSIGHT = INFORMATION x CONTEXT

In this simple statement lies so much that is wrong with HR’s approach, meaning that the metrics and analytics we present to the wider business have little impact and do not enhance our credibility as a function. This disease has three key symptoms:

Business versus HR context – there needs to be a much better connection between what matters to our organisations and what matters to HR. A lack of strategic workforce planning capability in HR means that it is hard for HR functions to know what best to measure, or to move past generic measurement.

Internal versus external data – Marketing know how to do this. They are experienced in segmentation and gathering information about what these segments want. In HR, however, we have an over-dependence on internally-generated data relating to existing employees, typically through mass-market tools such as engagement surveys. We need to make more of internal data by segmenting it and looking at what it says in the context of the people and organisational risks to the business; and generate more external data via focus groups or external partners to help us understand what potential “career consumers” want.

Process versus outcome – HR loves process, but this love also extends to what we measure. Many of our metrics actually measure process not outcome, making it hard to say if we are doing the right thing. HR tends to focus on whether or not the performance management process steps have been delivered on time, and then focus on ratings, without ever checking if the objectives that are being set and rated are in fact the right objectives.

A ubiquitous succession planning metric is % critical roles with ready-now successor. In fact, all this metric really does is to count empty boxes. It doesn’t tell us what actually happens. A better metric is when a critical role becomes available, on what % of occasions is it filled by a person on the succession plan? I have personally witnessed a figure of 98% in the former metric become just 8% in the latter. Process measures are part of what we need to do, but when we focus too much on them to the exclusion of outcomes, we not only lose relevance but we paper over risks to the business.

HR has data, but often doesn’t know what question to ask it – or what to do with the answer. Nowhere is clearer than via a quick exploration of HR Data Packs created for senior leadership meetings. We tend to lead with data we understand and have, rather than working out what data we need and the best way of getting it. Have we worked on our data to interpret it to what is important to the organisation? Does it yield insights into why productivity is too low? Does it give clues as to why we are slow getting products to markets or highlight risks to the strategy? Or does it just tell us that the proportion of women versus men is the same as last quarter?

A new HR Information System doesn’t buy insight

Systems and data analytics programmes can manipulate data, but they cannot replace the human need to know what question to ask in order to unlock value from it. Only the transition from data to information can really be revolutionised by systems – all other transitions are dependent upon someone knowing what to look for, or what an answer might mean. 

There are two broad types of individual data capability – macro (being able to deal with high level, unformed data) and micro (being able to understand the validity of data). HR tends to lack both. HR needs to move from unenthusiastic amateur to competent professional in some of these areas, or at least make sure it has access to and is leveraging these skills elsewhere in the business.

I would like to see every HR function re-examining its approach to data and analytics from root to branch, in order to take advantage of the insight its organisations so badly need in the people and organisational space. Only when they have developed better context and put into play the right questions, can HR begin to benefit from an increase in credibility and perceived value. It will be able to talk the language of risk, of cause and effect and of return on investment much better than now; and as such, make a case for a bigger slice of pie.

Right now, this is working against us. Many leaders know that we have a habit of not covering ourselves in glory in this area, so are happy to shoot us down, knowing that we can’t defend ourselves. 

 

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