.and how to find them in your systems

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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

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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

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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.

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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

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Background

Background

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--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!!

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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!

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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

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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

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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!]

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The Two Faces of HR

The Two Faces of HR

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--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

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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

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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

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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

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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 Birthdays

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What’s on the mind of the CFO

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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:

ƒ Their transaction system is designed in such a way that it won’t support the data

the data.

ƒ 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

ƒ They are trying to sell you more stuff.

ƒ 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: ƒ Remember, you get what you pay for!

ƒ 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

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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?

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The Case for Headcount (and the Myth of Finance)

The Case for Headcount (and the Myth of Finance)

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--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

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And, it s the basis for the discussion around, What happened last

month to this month?”

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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 )

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-- What Matters To Me

---- What Matters To --

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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

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So…

Are your people an Asset ?

y

p

p

Or are they a Liability?

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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!

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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

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So, What Do I Need To Do?

--l ith f d th ht

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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

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When they re selling a real product, they ll talk about other successes and their references!

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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!)

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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

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Summary

What Gets Measured,

Gets Managed…..

g

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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

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“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

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Contact

Deloitte Consulting LLP Deloitte Consulting LLP 550 S. Tryon St. Suite 2500 Charlotte, NC 28202 b id Rob Eidson Specialist Leader

HR Reporting, Metrics & Analytics

Mobile: + 1 704 618 4093 reidson@deloitte.com

Member of

Deloitte Touche Tohmatsu

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About Deloitte

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"This presentation contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte is not, by means of this presentation rendering business financial investment or other professional advice or services This presentation is not a substitute for such professional advice or presentation, rendering business, financial, investment, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this presentation.

Copyright © 2011 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited

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