HR Metrics That Matter
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1 May 19-22, 2014, Toronto ON Canada HR Metrics That Matter Presented by Cathy Missildine, MBA, SPHR HR42 5/22/2014 1:00 PM - 2:00 PM The handouts and presentations attached are copyright and trademark protected and provided for individual use only.
2 HR Metrics that Matter Cathy Missildine, SPHR PA SHRM State Conference Cathy Missildine, MBA, SPHR May 22,
3 Organizational Impact 2
4 Competencies Identified by SHRM Research Competency Global and Cultural Effectiveness Leadership and Navigation Critical Evaluation Business Acumen Definition The art of managing human resource regardless of cultural differences both within and across borders. The ability to lead or maneuver initiatives and processes within the organization with great agility Skill in digesting large amounts of data and assessing the value to your work and organization The ability to understand all business functions within the organization and industry From SHRM Elements for HR Success Competencies Identified RBL Group (David Ulrich) Competency Strategic Positioner Definition Understanding external trends social, technological, economic, political, environmental & demographic that affect your industry & translating that to internal decisions & actions Credible Activist Change Champion Building personal trust through business acumen; communicating clear and consistent messages with integrity Making sure that isolated and independent organization actions are integrated and sustained through disciplined change processes; building a case for change and then sustaining change 3
5 Competencies Identified RBL Group (David Ulrich) Competency Human Resource Innovator & Integrator Definition Being able to be innovative and integrate HR practices into unified solutions Technology Proponent Using technology to more efficiently deliver HR administrative systems, as well as to help people stay connected to each other From RBL Group & University of Michigan HR Competency Model Creating HR Metrics that Matter 4
6 Analytical Roadmap Price to Play Poker (what you need) Executive Support The Right Tools The Right People Phase 5 Phase 1 Justification Foundational human capital investments Data collection Reporting Rudimentary tools Distributed efforts Phase 2 Measurement Metrics defined HR Scorecards & Dashboards Leadership accountability Standardization Improvements celebrated Phase 3 Effectiveness Key Performance Indicators Cohesive efforts Process improvement Phase 4 Value Creation Genuine Insights Decisions based on data & learnings Connections between people investment and business outcomes defined Expanded Predictive Models organizational Cultural shifts accountability More sophisticated tools Provided by: STEVE WOOLWINE, PHR, Chief of Staff, Talent and Hunan Capital Services, SEARS HOLDINGS CORPORATION Impact Creating Change Achieving Strategic Goals Congratulations, You have arrived at the true purpose of Analytics! Metrics Hierarchy 5
7 How do You Make a Business Case for Metrics? PhDs in Statistics Not Needed! Keep in mind... Most HR organizations are still at the human capital analytics infant stage Analytics is only one piece of the analytical value chain: DATA METRICS QUESTIONS & HYPOTHESES Analytics Insight Action Curious Human Resources Generalists who are good with numbers are a great start to any HR analytics team! Business Intelligence Understand important factors in the business environment Can present and communicate insight & findings in an easy-to-understand way Can partner with the business to implement change or focus Analytical Intelligence Can ask the right questions Takes initiative to understand the why behind the what Possesses an above average ability to manipulate data to create insight Can quickly learn new software packages Systems Intelligence Understanding of general systems and how and where data is stored HR Intelligence Understands the human capital levers to pull to drive top line and bottom line growth A general understanding of HR laws and regulations Ability to communicate with other HR professionals Provided by: STEVE WOOLWINE, PHR, Chief of Staff, Talent and Human Capital Services, SEARS HOLDINGS CORPORATION 6
8 3 Types of HR Metrics 1. HR Efficiency (HR Tracking/numbers internal HR Dept) 2. HR Effectiveness (HR Programs) 3. Business/Strategic Metrics (outcomes based on investment in human capital Steps in Creating Metrics that Matter Step 1: Define Business Strategy Step 2: Determine How to Execute Step 3: Link HR to Strategy Map Step 4: Create Measures Step 5: Link to Strategic Business Results Step 6: Set Targets Step 7: Communicate Results 7
9 What are you currently measuring in regards to HR/Human Capital? Business-Focused Metrics Recruiting/Hiring: Uncover the labor pools/competencies etc that yield the best hiring decisions Metrics should then focus on: Scores in the hiring process on key competencies % of candidates/hires coming from best labor pools Scores in the hiring process on key personality aspects Time-to-proficiency 6 month performance scores 8
10 Business-Focused Metrics Onboarding: Uncover the key aspects of the onboarding process that most impact >1 year turnover and performance Metrics should then focus on: Scores on the key performance/turnover drivers from your onboarding survey Time-to-proficiency 6-month/12-month turnover Business-Focused Metrics Employee Surveys: Uncover the key attitudes that drive important business outcomes; communicate the key drivers to ALL leaders Metrics should then focus on: Scores on the key business outcome drivers from your employee survey Participation, Knowledge and Behavior Change from your EE survey initiatives 9
11 Business-Focused Metrics Learning (LMS): Uncover the courses that actually drive performance improvement and business outcomes Metrics should then focus on: Participation, Knowledge Gains from those key courses Do NOT focus on general LMS usage that is not a business case. Business-Focused Metrics Succession/Workforce Planning Uncover how your key talent performs on key business drivers (performance goals, competencies, skills, attitudes, personality) Metrics should focus on: Talent pool effectiveness on the key drivers Overall talent bench strength based on performance on the key business drivers Time-to-fill on key leadership roles % of internal hires for leadership roles % of key roles with ready now replacements 10
12 Guiding Principles for Business-Focused Metrics There are no magic metrics that work for everyone Every element on the scorecard must be directly linked to business outcomes HR Efficiency Metrics are fine for Internal HR tracking, but not for senior business leaders HR Metrics must be predictive For every metric (e.g. Time-to-hire): Can I articulate why this really matters to the business? Do I know what a good number should be? Can I articulate the business value of moving this number? Why would senior and front-line leaders care about this metric? Business Leader Approach to HR Metrics 1. HR processes and investments must be directly linked to critical business outcomes (e.g., sales, productivity, customer satisfaction, safety) to understand their impact how they drive those outcomes. 2. By quantifying the relationship between HR processes and critical business outcomes in the past (lagging indicators), algorithms can be created to predict future impact of HR investments (leading indicators). 3. HR must look holistically at all HR processes and potential investments to understand their HR priorities and make investment decisions like other lines of business/functions. 4. When principles 1-3 have been followed, an expected ROI can be calculated to help HR leaders make investment decisions. 11
13 Tell a story High Performance Butterflies Add Turnover % True Loyalists Add Turnover % Low Performance Change Seekers Add Turnover % Morale Busters Add Turnover % Engagement Case Study Large Retail Organization $93 million annual shrink problem HR helped the organization save $14 million in Year 1 using analytics to create a business-focused strategy (actual) Create a business-focused HR Strategy: Empirically link employee data to meaningful business outcomes Identify invisible levers in employee attitudes, skills and behaviors that will drive outcomes Leverage existing data to create the strategic framework Prioritize employee-focused interventions to drive business outcomes Provide customized solutions to drive business outcomes *source Strategic Management Decisions: Scott Mondore 12
14 Data Utilized in the Study Shrink data at store level as an example (used multiple business outcomes in the full study) Employee opinion survey results Performance Mgmt/Competency ratings LMS training data HRIS data dishonesty terminations Store turnover data Customer satisfaction results *source Strategic Management Decisions: Scott Mondore Dimensions of the Employee Survey Engagement Resources Available Job-Person Match Regard for Employees Policies Hours Worked Manager Effectiveness Work Environment Customer Focus Career Development Benefits Recognition & Perf. Mgmt. Scales range from 2-5 items. Alphas range from *source Strategic Management Decisions: Scott Mondore 13
15 Salaried Employee Competencies Employee Development Leadership Strategic Decision Making Cross-Organizational Collaboration & Teamwork Execute With Excellence Achieve Extraordinary Results Individual Ratings for the Store Manager and Assistant Mangers were used. *source Strategic Management Decisions: Scott Mondore Drivers of Shrink Job-Person Match 1a Manager Effectiveness 1b Engagement Ethics Course Participation 2 3 Legend Employee Survey Training Participation Terminations Competency Ratings Shrink Course Participation Dishonesty Terminations Achieve Results Shrink Numbers in paths indicate the intervention priority based on the magnitude of the relationship with shrink. *source Strategic Management Decisions: Scott Mondore 14
16 Further Prioritizing the Levers While all of the levers identified in the model significantly impact shrink, the levers can be prioritized even further based on the magnitude of their relationship with shrink Further Prioritization: 1. Achieving Extraordinary Results 2. Ethics Course 3. Shrink Course 4. Dishonesty Terminations 5. Job-Person Match *source Strategic Management Decisions: Scott Mondore Planned Interventions & Cost Training Build optional shrink training courses for specific roles $300k Recognition & Reward Deploy a store-level incentive program for meeting quarterly shrink goals $5 million Selection Nothing planned OD & Leadership Development Insert shrink focused messaging in a larger customer experience initiative $250k *source Strategic Management Decisions: Scott Mondore 15
17 Recommended Actions to Reduce Shrink TRAINING: Code of Ethics Course Has a direct, significant impact on shrink Opportunity to re-train or conduct refresher courses with managers and employees Senior leaders regularly re-communicate the key messages from the Code of Ethics Sales and Shrink Course Has a direct, significant impact on shrink Currently not mandatory Opportunity to make the course mandatory and retrain managers and employees *source Strategic Management Decisions: Scott Mondore Revised Interventions & Cost Training Enhance and update ethics and shrink course make both mandatory $50k Recognition & Reward Nothing planned Selection Improve selection process for front-line employees background checks & integrity testing $2 million OD & Leadership Development Develop shrink management routines Develop shrink partnering program $50k *source Strategic Management Decisions: Scott Mondore 16
18 Actions Taken and Actions Cut Initial budget was $5.55 million Revised budget was $2.1 million Cut incentive plan Cut major training build Cut shrink focused customer experience programs Data analysis Did not identify pay/benefits as a major driver of shrink Showed the existing training courses were having an impact Did not identify customer focus as a major driver of shrink Showed that dishonesty terminations were a significant driver of shrink Created an HR Strategy with a known impact on shrink *source Strategic Management Decisions: Scott Mondore Contact Us Cathy Missildine, SPHR intellectualcapitalconsulting.blogspot.com Cathy Missildine cathymissildine@intellectual-capital.net 17
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