Metrics that Matter to HR
Metrics that Matter to HR…
and how to find them in your systems
….
and how to find them in your systems
Rob Eidson,
Specialist Leader HR Metrics Reporting & Specialist Leader: HR Metrics, Reporting & Workforce Analytics
Deloitte Consulting, LLPg
Topics for Today
Background
The Two “Faces” of HR: The Two Faces of HR:
Optimize the enterprise’s Human Capital… or…
Manage the administrative tasks for/about our employees
The Case for Headcount and the Myth of Finance
What Matters for Me Doesn’t Matter for You
What I’m not going to do:
Tell you a bunch of HR Metrics theories
Tell you about all the great tools that will solve all your
problems [“in just a few weeks”]
Tell you a bunch of “Best Practices” (based on what I think you
should be doing!!)
Give you a bunch of “Marketing Spin”
Be a Finance or IT guy telling you how to “do HR Metrics”
and/or telling you how HR should be more like Finance.
What I’m going to do
Tell you about some HR Metrics cases: success and failure Tell you about some HR Metrics cases: success and failure Tell you about some of the key challenges around HR Metrics
Give you some tangible steps to implementing metrics for your HR organization
Have some fun.
Tell you how important it is to develop a “discipline of Measurement” inside HR
Background
Background
--HR Metrics Workforce Analytics Predictive Modeling R Scorecards Dashboards Reports Metrics Data HR IT Box Score Best Practices Graphs HR IT Systems Crystal Business Objects Excel Trend lines Activity reports Business Objects Cognos Governance Data Quality BW EPM
etc., etc., etc……. Data Quality
Master Data
It’s overwhelming!!
6
From Strategy to Implementation: The “Wishful” Road Map
Analytics Driven Decision-Making
Often HR has been caught up in the euphoria of new HR tools with incredible potential. HR believed that, as a function of its new HR
t t t i t i d ti
HR Becomes Strategic
system, new strategic metrics and reporting capability was but a few mouse clicks away.
Distribute Reporting Capability
Implement New Metrics &
Reports Note:
glazed over eye
look!
Data Becomes Valid and Clean look!
7
From Strategy to Implementation: Implementation Realities
It’s only during the actual implementation process that HR has discovered the terrain is filled with obstacles, surprises, and
dead-ends
Analytics Driven Decision-Making
dead ends.
HR Becomes Strategic HR Remains Tactical and Administratively Focused
Have to Instead
Distribute Reporting Capability
re-produce all the OLD metrics
& reports FIRST Instead distribute access to transaction system
Implement New Metrics & Reports
Data migration does not clean old data
Reports produce
garbage Can’t
Implement New HR System
Data Becomes Valid and Clean
clean old data garbage
Inconsistent data No data standards
distribute because reports don’t work and
tools are too difficult
8
Key Issues: Part 1
There’s no PERFECT magic wand/silver bullet/easy win!
There s no PERFECT magic-wand/silver-bullet/easy-win!
Metrics that matter to my organization are generally specific to my
organization. A software vendor generally comes up with
- Metrics based on their company’s needs; or
- Their first customer’s needs; or
Their first customer s needs; or
- What their competitor is doing…But certainly not “my company”
Nobody knows HR better than HR
Nobody knows HR better than HR.
AND, “I can’t expect someone to tell me what my metrics are or
should be.”
- Not a vendor
- Not a consultant
9
Key Issues: Part 1 - What To Do:
Ensure there is a “discipline of measurement” within HR -- someone
-- some group
-- who is held accountable and rewarded for applying that discipline
-- and, make sure your HR Leadership, Business Partners, Department heads work with them,… closely!
HR must take ownership. Not:
-- “Finance tells us what to measure” -- the department heads’ admin assistant
-- not the new MBA who was hired to do learning development abdicate to IT (when the system is in everything will be done) -- abdicate to IT (when the system is in, everything will be done). READ / learn / listen & MEASURE [something!]
10
The Two Faces of HR
The Two Faces of HR
--In the HR space, there are two kinds of measures:
1 Human capital metrics which measure the
1. Human capital metrics, which measure the
optimization of the human capital of the
organization
2. Human resource productivity metrics, which
measure the ability/efficiency/effectiveness of the
measure the ability/efficiency/effectiveness of the
HR function to do its tasks (generally
Are we measuring the productivity of the HR function?
Key questions:
• How well does HR handle
Consider:
• Ratio of HR to Employees (e.g., administrative tasks?
• How “effective” is the HR department?
1:100)
• Ratio of HR Business Partners to employees (e.g., 1:500)
Cost of HR per Employee: department?
• How much does HR cost?
• Cost of HR per Employee: (e.g., $1800)
• Cost of various key processes (e.g., Cost/Hire, Cost/learning) • How much has HR reduced its
costs
(e g , Cos / e, Cos / ea g)
• Throughput for various transactions (not all, just the important ones!) • Call center capabilities (how long • Is HR a target for outsourcing?
• What is the “benchmark”?
does it take, volume, escalations, etc.) • Error rates
OR …. Are we measuring, “how well is the enterprise
utilizing/optimizing its investment in its people?”
utilizing/optimizing its investment in its people?
Key questions:
• Are we retaining our new hires? For how
Consider: • Are we retaining our new hires?, For how
long?
• Where are our best new hires coming from?
• Attrition rates
ԟ But, more importantly, attrition rates of key groups: New Hires, Critical
employees, Poor employees, diverse • Who are our best employees? & are we
keeping them?
employees, Poor employees, diverse employees, etc.
• Time to fill, for key jobs
• Rewards for key employees (who, of my key employees is underpaid)
• Who are our most critical employees and are we keeping them?
• How are we rewarding our “best” employees,
key employees is underpaid) • Can I predict attrition (do not look at
voluntary vs. Involuntary, rather, consider Planned vs. Unplanned; or Regrettable
N tt bl )
compared to our “worst”
• How long do key jobs stay open?
vs. Non-regrettable)
• Pipeline #s for sourcing new/key employees in our business. • How much does it cost to have a critical job
What’s on the mind of the CEO?
Will I be able to get enough skilled What is my risk
of losing High Potential Employees?
How are key
H i th t i
enough skilled employees to fill that new factory I’m building
How are key employees being
compensated & are they at risk?
How is the enterprise doing with respect to
Diversity goals?
Do I have the right people?
What is the gap between the Human Capital
I h & th
What is the gap between the Human
Capital resources I
h & th I d?
y
resources I have & those
I need? have & those I need?
What is my turnover & am I losing ‘Lo’ performers at Will I have enough
kill d l t a higher rate than ‘Hi’
performers? skilled employees to
create/develop new product?
What is the
cost of my What is all this l cost of my
What’s NOT on the mind of the CEO?
HR D li C t Optimizing HR’s Performance Where are HR’s desks located HR Delivery Costs Is HR implementing appropriate HR HR’s Organizational appropriate HR Controls Organizational Structure HR’s Delivery Model Call Center Volume Does HR deliver Quality HR Service Benefits sign‐ups Personnel File Audits Transaction Volume Is HR using the latest & greatest tools? United Way Participation Employee BirthdaysWhat’s on the mind of the CFO
Where does the data come from?
• The transaction system (possibly)….
But, ONLY the system of record!
• A data warehouse (possibly)
A data warehouse (possibly)
• BUT first, consider creating the metrics by hand…..
ԟ Many metrics are great ideas, but once you actually put them
on paper they tell you nothing
on paper, they tell you nothing.
ԟ“Gee, it would be really cool if we could see [fill in the blank]”
• What sounds cool in a brainstorming session, may not be meaningful or useful what data is put to paper (or graph or chart or table)
data is put to paper… (or graph, or chart, or table).
• Edison did not put 1000 failures into production… he figured out what worked and put that success into production. Don’t put the cart before the horse!!
• Remember statistical hypothesis testing:
• Starts with an assumption, then we test the assumptions, then we make conclusions and move on to the next test
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Key Issues, Part 2:
Beware of the vendor who say you must have a data warehouse (theirs!) in order to do metrics and the associated reports. That may be because:
Their transaction system is designed in such a way that it won’t support the data
the data.
Their transaction system puts such a drain on the server, that running a report will bring it to its knees. (I’ve heard this a bazillion times over the last 20 years….. It’s becoming less and less valid!)
Th t i t ll t ff
They are trying to sell you more stuff.
They have no idea, but it’s what marketing told them to say. (Similarly, beware the IT function that says you need a Data Warehouse…. )
And especially beware the vendor who gives it to you for free: Remember, you get what you pay for!
And, don’t just consider purchase price, consider Cost of Ownership!
Systems & Data Warehouses are NOT a pre-requisite
to developing metrics, reporting and analytical
Key Issues, Part 3
Why is it that companies know how many widgets they have in inventory,
down to the proton/electron level
down to the proton/electron level.
Yet, they have no idea how many people are being paid by their
company are in their building or are doing meaningful work
company, are in their building or are doing meaningful work.
“If people are our most important asset, then how come we don’t know
how many of ’em we’ve got?”
how many of em we ve got?
The Case for Headcount (and the Myth of Finance)
The Case for Headcount (and the Myth of Finance)
--The Case for Headcount….
Why HR needs to understand it Why HR needs to understand it
Although, not a metric, per se, Headcount is critical to HR:
1) It’s the denominator for most every metric that HR uses.
)
y
2) It’s poorly understood, and really not defined (The Securities and
Exchange Commission requires “headcount” to be input for
corporations The SEC provides no definition no guidance
corporations. The SEC provides no definition, no guidance.
Essentially anything goes.
3) It’s important to understand the components of headcount:
1) What am I measuring “Butts in Seats” or “FTE”? 1) What am I measuring Butts in Seats or FTE ?
2) What kind of FTE (actual, planned, include overtime, not-to-exceed 1.0, etc.)
3) What kind of “heads” am I counting: e g Regular Temps Interns 3) What kind of heads am I counting: e.g., Regular, Temps, Interns,
contractors? And for whom: e.g., Real Estate, Finance, the Business, the CEO, Benefits, a vendor,
And, it’s the basis for the discussion around, “What happened last
22
And, it s the basis for the discussion around, What happened last
month to this month?”
The Myth of Finance
And, similarly, why HR needs to understand it, too
Traditionally, the “ownership” for headcount has been with the
Fi
f
i
f
i
f
Finance function, for a variety of reasons:
HR is not perceived as “accurate” enough (yet, the source of
p
g (y ,
Headcount data is the HR system and the HR admin activity).
And, by-the-way, Finance generally makes more errors.
HR doesn’t know “how” to do headcount (yet Finance typically
HR doesn t know how to do headcount (yet, Finance typically
dedicates 10x the number of analysts to headcount than HR).
Finance follows the month-end cycle, which includes headcount
(even though they source the basic data from HR
and worse
(even though they source the basic data from HR … .and, worse,
make manual adjustments to the data to reflect “reality”).
Finance has the systems to store the data (which they generally
l
d
ll )
23
-- What Matters To Me
---- What Matters To --
Me…--Case Example: Retail Electronics: Fortune 250
Employed 45,885 ees
Winner, Workforce Management’s inaugural Stupidus Maximus Award for firing 3 400 experienced sales people and replacing them with cheaper firing 3,400 experienced sales people and replacing them with cheaper, less-experienced personnel
Resulted in a “modest” 4th Quarter loss of $100M and an overall loss of $200M for the year…
But, the HR director got a $1M retention bonus to ensure continuity during the shutdown. Anyone notice a local Circuit City store lately? lately? 25
So…
Are your people an Asset ?
y
p
p
Or are they a Liability?
If they’re a Liability …..
•
You’re trying to figure out how to have fewer
•
It’s a cost-focused discussion
•
Don’t tell your employees
Don t tell your employees…
(although they probably already know!!)
•
You’re constantly re-organizing and re-structuring
•
Your “measurement activity” is run by Finance
Your measurement activity is run by Finance
And,
•
You’re probably making your Revenue per Employee numbers
look good by replacing Employees with Contractors
look good by replacing Employees with Contractors
•
RPE = Revenue / # Employees
•
To increase it, either increase Revenue …. Or…. REDUCE
employees!
If your people are an Asset
•
You want more!!!
•
You want to know who your best employees are and
•
You want to know who your best employees are and
clone them
•
You want to know who your most valuable employees
are and clone them too
(Note: best <> most valuable)
are and clone them, too. (Note: best <> most valuable)
•
You want to know how to improve your other employees
AND
• Your RPE #s are continuing to rise
Your RPE #s are continuing to rise… because you re
because you’re
increasing your revenue by hiring quality employees
So, What Do I Need To Do?
--l ith f d th ht
What should I do:
• Measure something! • Measure something!
• Measure something IMPORTANT to your CEO!
• Take action based on what you measure… get more information, investigate, identify action plans.
investigate, identify action plans.
• Then keep measuring OR Measure something else!
Create a “discipline of measurement” in the HR Function…. Not a new p task for an Admin Assistant, or a new project for IT.
Remember:
• Don’t believe the “marketing” you read on the Internet. • If it’s too good to be true, it probably is.
• If it were really “that” easy, it would have been done! (And the vendor could give you references!)
could give you references!)
• When a vendor is “selling” a concept, they’ll talk in grandiose generalities and buzzwords.
• When they’re selling a real product they’ll talk about other successes
30
When they re selling a real product, they ll talk about other successes and their references!
Metrics Design Principles
• Simple, easily defined and easily understood metrics.
• Actionable: If something is “wrong”, action can be taken to correct. • They should not easily “gamed”: There is structure in place to make
sure that meeting a specific metric does not cause other significant problems.
• e.g., downsizing to reduce headcount, and then replacing with consultants • e g minimizing “wait” time (3 rings or less) but ignoring “hold” timee.g., minimizing wait time (3 rings or less), but ignoring hold time
• e.g., reducing “Marketing” by moving over to “Sales”
• Every metric ties straightforwardly to the mission of the organization. e.g.,“HR is contributing to the business by…”
• Thresholds can be set, monitored …. and rewarded
• Metrics are meaningful and can be tied directly to the strategy and vision of the organization.
F d d Fi it (A d t t !) • Focused and Finite. (And not too many!)
REAL Best Practices: Metrics and Metrics Sources
Reports and Metrics:
• Solutions always produce “metrics” with backup detail capability
ԟ No detail capability results in significant validation and re-work and, worst of all, loss of credibility!
• No illusions of precision
ԟ e.g., for FTE, use 35.2, NOT 35.23546
• Graphics and exporting capability exist (not just hard copy or pre-formatted soft-copy)
Interfaces and Output
• Data timing is consistent and predictable (and well documented)
ԟ Best approach: Reload every night and then snapshot the data at month-end
Summary
What Gets Measured,
Gets Managed…..
g
Resources
Jac Fitz-Enz: The ROI of Human Capital
Jac Fitz-Enz: How to Measure Human Resource Management
Boudreau/Ramstad: Beyond HR: The New Science of Human Capital
Boudreau/Ramstad: Beyond HR: The New Science of Human Capital
Burkholder/Golas/Shapiro: Ultimate Performance, Measuring Human
Resources at Work
Da enport Competing on Anal tics
Davenport: Competing on Analytics
Michael Lewis: Moneyball
Business Intelligence for Dummies
S
S
f
Balanced Scorecard Strategy for Dummies
“Managing by the Numbers,” Business Week, 9/8/2008,
Stephen Baker, The Numerati
“In the end, you’re just counting things..
What’s new, of course is that many of these ‘things’… are people.”
From the last page of Stephen Baker’s
p g
p
“The Numerati”, September 2008
Contact
Deloitte Consulting LLP Deloitte Consulting LLP 550 S. Tryon St. Suite 2500 Charlotte, NC 28202 b id Rob Eidson Specialist LeaderHR Reporting, Metrics & Analytics
Mobile: + 1 704 618 4093 reidson@deloitte.com
Member of
Deloitte Touche Tohmatsu
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