QUESTION:

The management team in our organisation is eager to utilise human capital data more effectively; can you give us some ideas on how we may achieve this?

ANSWER:

As labour costs continue to rise and the challenge of acquiring talented professionals in all sectors continues to grow, the importance of HR metrics continues to increase. At Frontier Software we have been helping clients to do more with their human capital data for many years.

Many organisations have placed a considerable investment in their Human Capital Management Solution - they store a plethora of employee data in its database. Many hours of data entry occur every week to keep the system updated. Yet the majority of organisations aren't able to utilise the data to make informed decisions regarding their workforce.

If the HR department is eager to be seen as a strategic player on the management team, then HR metrics are the ideal platform for HR professionals to demonstrate workforce value to management. Many organisations use a balanced scorecard, or something similar, to measure business performance. So you might consider including HR data in these measurements.

Some baseline metrics may include:

Cost per Hire - What does it cost to source new employees (agency fees, staff costs, advertising)? When analysing this type of information you may find that some roles cost less to recruit. Looking at recruitment costs per division or department over a three-year period can sometimes uncover issues
with managers.

Time to Hire - The data that comes from these simple metrics may uncover the roles that are quicker to fill, but it could also uncover patterns with recruiters and those that fill roles quicker! This could save costs and enable you to use higher performing recruitment services.

Turnover Costs - Most organisations know that it is cheaper to keep an employee than recruit from the outside. Yet when we see the actual costs, the information can be more meaningful and help to justify investments in training and talent management.

Revenue Factor - A simple calculation of Revenue/Total Full-Time Employees can be extremely powerful, as can HR expenses as a percentage of operating costs.

Often, management is surprised to find the depth of information available in their HRIS. All that is required to get started is a flexible reporting tool and a strategic perspective of the information required by the enterprise for informed workforce decision making.

It's good to have a firm understanding of your organisation's goals and plans, as that can assist in identifying the metrics that will add value to senior management. When embarking on a HR metrics project, it is ideal to consider:

  • What reporting tools are available and how can we analyse the data?
  • What data needs to be gathered?
  • What metrics are important and which ones will support management with decision making?
  • How can the data be used?

Once you have an understanding of that information, it's important to consider the type of metrics you are creating. It's also critical that your reporting looks at historical data as well as your current data - and, if possible, looks to the future to understand business needs. If you are able to capture the skills needed for future projects, it will be easy to determine the available skills within the organisation and diagnose where further training can meet future needs.

If the goal is to transform workforce data to drive decision making, it's crucial to provide only the metrics that are of value to management - information overload can often make the data difficult to interpret.

The true value of workforce metrics is in the measurement. HR practitioners have the ability to measure the success of day-to-day operations as well as new initiatives. The value of metrics can be accelerated when the data is analysed against industry benchmarks - for example, the ability to compare your organisation's metrics against those of businesses of the same size in a similar industry will allow you to identify strengths and weaknesses.

Gathering and analysing HR metrics can be time consuming. To ensure your organisation is maximising the investment it's imperative to gain a firm understanding of where this data can add value - because once you have the correct information, it will transform the effectiveness of the HR function.