Sunday, September 28, 2008

Which Metric can HR REALLY Impact?

In today’s chaotic environment with most of the economic metrics declining, which metric can HR focus on? Now more than ever performance matters. We hear about a different company laying off workers on a daily basis. It is critical that we keep our highest performing talent and that we hire the best performing talent.

So, this job is easier said than done. You have to start with a performance management system that is tightly linked to the company's strategy. While our economy recovers, this is an excellent time for HR professionals to dust off the old performance management system and make sure it supports the goals and objectives of the company.

A great performance management system:

1) Is linked to goals and objectives of the company

2) Is based on successful behaviors linked to organizational and job specific competencies

3) Is understood by managers and employees

4) Is administered fairly and consistently

5) Is focused on development and not punishment

6) Is simple

7) Is objective with a balance of qualitative and quantitative measures

I believe HR can have a direct impact on performance and creating a sound performance management system is one way to do that. Training, measurement, and process improvement are other ways HR can assist the company is getting a real bang for the buck!

One important factor in a performance based organization is that the CULTURE has to be performance based as well. Going from a culture where mediocrity and average is acceptable takes time and patience. (this topic is for a different blog, on another day! just felt compelled to mention it!)

With companies focused on the bottom line and trying to do more with less, performance is critical and I feel will be HR's focus for many years to come.

Saturday, September 20, 2008

Making Engagement Data Have Meaning

"Thank You" to the person who suggested this topic for me to write on.  I will have to admit we learned how to make engagement data meaningful the hard way.  In our early years as consultants we were convinced that more charts and graphs equaled better information.  Well what we know now, is that more charts and graphs equals a nap for our clients. 

I think the best way to make employee engagement data meaningful is to make it actionable.  Here are some tips on how to make the data actionable:

1) Ask questions that are specific enough so that you know what to do if you score high or low on that question.

2) Analyze the data so that you know exactly what DRIVES engagement.  This does require some extra statistical steps (correlations, factor analysis) but it is worth it.  These DRIVERS will enable you to focus on what is really important.

3) Report the data in a way that is meaningful to your audience.  Use the "killer slide" concept.  Tell the data story in one or two slides at the beginning of the presentation.  Spend the rest of the time ACTION PLANNING around what to do about the data. 

4) Use the right metric for engagement data.  Instead of using mean scores, because after all that is just an average, report data using % favorable instead.  Percentage favorable is the % of respondents that gave a question a favorable rating.  For example, on a 5 point scale, the respondents that scored a question a 4 or a 5, would be considered favorable.

5) You need to track engagement data over time to really make the data have meaning.  By understanding how scores move and why, you will be able to become predictive with your data.  By combining other data points like turnover and customer satisfaction your data becomes intelligence that is critical to the business.

Many times after a survey is completed, the engagement data is put away until the next time a survey is delivered.  I say take that data and use it, you will be surprised what you learn.

Monday, September 15, 2008

What does AGE have to do with EngAGEment?

The answer to that question is… everything! Does this scenario sound familiar in your organization?

The Veterans and Boomers that have been with your organization for 20+ years are quite frustrated with the “new kids” coming onboard. “They just don’t work as hard as we do.” “They aren’t loyal to this organization” “They have not paid their dues yet”
For this first time in history we have 4 distinct demographic groups in our work places:

1) Veterans
2) Boomers
3) GenXers
4) GenYers

With these very different generations, how do we keep them engaged and loyal to our companies? The first consideration is to understand how each group views the workplace. (double click on table for a larger view)

Just as we target our customers’ needs based on demographics, we will need to do the same for our employees. It is no longer “one size fits all” when it comes to careers, rewards, and job content. Companies with this mentality are going to find themselves without talent in a world where talent is in short supply. So, how will you think and act differently regarding the changing workforce? Is your Human Resource Department ready for this challenge?

The first step is to analyze employee engagement by generation and to understand the differences in scores. Then, like a detective search for root causes of differences so that you can take action based on that data. For example, if you find that Xer's prefer time off to a monetary bonus for a job well done consider giving employees a choice when it comes to rewards.

ACTION ITEM: Start analyzing your employee engagement data by generation!

Friday, September 12, 2008

The $6 Million Dollar Employee

What if you had the ability to predict the value of an employee over his tenure with your company? That intelligence sure would make employment decisions like hiring, firing, and training a lot easier.

For many years, marketing professionals have been calculating Customer Lifetime Value (CLV). CLV is defined as the present value (usually expressed in currency) of future profits that can be calculated based on current customer profits and customer behavior. There are many variations in models but most contain the following components:

• Time- period over which lifetime value will be calculated

• Interest rate

• Cost to attract, service and retain customer

• Revenues

To calculate CLV, sum the revenue, subtract costs, and take the present value over the specified time period. This information allows managers to determine if customers are profitable or not. This is a great way to get rid of your non-profitable, high maintenance customers.

Fast forward... over the last year, many articles have been written about using this same methodology for Employee Lifetime Value. Wow, wouldn't that give a new meaning to performance management?

By using a similar methodology as above for employees, companies can track employee value over their employment life cycle. For example, ELV may be lower in the first few years of employment due to ramp up and training but higher in the later years due to increased loyalty, commitment and deepened relationships.

HR can play a critical role in ELV. By learning to calculate and track employee value, HR can assist management in understanding how employees add value. HR can then focus on those VALUE enhancing activities like training, skills development, and career development. By calculating the ROI on these activities through a metric like Employee Lifetime Value, HR has a great way to show its own value!

Monday, September 8, 2008

13 "Must Haves" for Employee Surveys

According to, the use of employee surveys is trending upward. The following examples demonstrate real financial impact of strong employee engagement:

  • Data from Best Buy shows that stores where employee engagement increased by a tenth of a point (on a five-point scale) experienced a $100,000 increase in annual sales.

  • JC Penney has found that stores with top-quartile engagement scores generate roughly 10% more in sales per square foot than average and 36% more operating income than similar-sized stores in the lowest quartile.

So now that you see the WHY behind tracking employee engagement data, here are the 13 "Must Haves" when you start an employee engagement project:

  1. Shared goals-Make sure upper management is onboard with the idea and that the goal for everyone is continuous improvement

  2. PR-Communicate the upcoming survey to the employees explaining the reasons for the survey and to set expectations for the follow up of results, confidentiality, etc.

  3. Questions-Make sure you are prepared to take action based on the questions you ask. Even if that action is monitoring that question, make sure you know what you will be doing with the data.

  4. Delivery-Make sure respondents have access to the survey. Many times production and field workers do not have Internet access. Have paper copies available for those groups.

  5. Language-If you have multiple languages represented in your employee population consider survey translation. Meanings do get confused and you want to avoid survey error.

  6. Response rate-Monitor response rates and publish those to employees encouraging 100% participation.

  7. Data analysis-The data has to be analyzed in a way so that action can be taken. This means that the onion must be peeled back so that the data is meaningful to those taking action.

  8. Data story-DO NOT USE ENDLESS CHARTS AND GRAPHS. Tell an effective data story beginning with 2 killer slides that gets to the POINT in a succinct, understandable way. (see post: How to tell a GREAT data story)

  9. Communicate again-Be sure to discuss survey results with employees. Also, any action items that have been planned as a result of the data should be reported as well.

  10. Action planning-Don't stop the process after the last report out. Make sure you managers are involved with action planning to improve and/or maintain scores.

  11. Remeasure-After actions have been taken, go back and remeasure to track results

  12. Get predictive-Begin analyzing historical data and other relevant company data to be able to produce intelligence like Best Buys and JC Penny.

  13. Include engagement scores on HR scorecard and Company Scorecard

Action item: Talk to management about employee survey, 4th quarter 2008!

Wednesday, September 3, 2008

Don't Forget Your Intangibles

Jac Fitz-Enz has been working in the field of HR Metrics for over 30 years and is considered the guru in HR Metrics. In a recent article he co-authored, "Managing Tomorrow, Today." Fitz-Enz raises an excellent point about intangibles being a LEADING indicator for desired business results like profit and revenue.
"Intangibles are becoming increasingly important in business. Many of them are people-based because people are variable assets not subject to general accounting rules." Fitz-Enz

Many times we measure the things that are easy and popular. For example, we measure turnover because that is an issue for many companies. But if turnover is the problem, the metric that we use is a lagging indicator...turnover %. This metric has occurred in the past month, quarter or even last year. (note: turnover analyzed in a more granular way with other key data points can also be a leading indicator )

So what would the LEADING intangible metric that we should pay attention to in regards to turnover?
  • Employee engagement, satisfaction, loyalty (whichever one you use)
  • Customer satisfaction

Remember the Sears study, the "Employee-Customer Profit Chain," the premise being that employee behavior predicts customer behavior thus affecting the bottom line. It is important to understand the behaviors associated with positive employee engagement so that those behaviors can be measured and tracked. When we see a change in the intangible metric, like employee satisfaction, we then should then see a change in turnover, and other metrics as well. The key is to get predictive and take the data to the analytics level. Instead of reporting turnover DATA, analyze it further and report turnover INTELLIGENCE.

Action Item: Start tracking employee engagement NOW if you are not already!