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!