Monday, November 24, 2008

A Metric That Matters to Me!

This week is about giving thanks and with this year of uncertainty and change, I have a wonderful story about some very kind people.

I sent an email last week to everyone in my Outlook database, about 800+.  The net of the email was about a charity in Atlanta, Samaritan House needing some assistance.  I am on the board for Sam House and over the past few years we have held a Christmas party for hundreds of homeless men and women.  We sing, we give out gift bags and we serve lunch.  This year, donations were down.  After I sent a plea to my contacts, in an matter of hours they donated toothbrushes, toiletries, hats, gloves, socks, underwear, etc.  We are very close to having our goal of 300 gift bags.

So, my initial goal was to have 300 gift bags, I thought that was the "metric" that mattered to me.  It was not.  The metric that matters to me is the number of big hearts people in this country still have when times are tough.  I have heard, "You know budgets are tight, but they are always those that need more."  And that is so true.  I have had people to donate a few items all they way up to 300 toothbrushes.  The sense of community and the sense of mission was almost overwhelming when all the emails and calls came pouring in.  I did not expect it.

Yesterday, I heard something that rings so true in this story for me.  "We are all just co-workers in the area of service."  I just want to thank all my co-workers in this effort!

I can't wait to see the faces of the men and women on the day of our party, December 19th.  I know we will make a difference in one of their lives.  Happy Thanksgiving!

Tuesday, November 18, 2008

Can HR REALLY be a Profit Center?

In recent discussions I have heard two schools of thought regarding how HR can be viewed as a profit center:
1) By reducing costs such as absenteeism, turnover, and bad hires, HR can add more to the bottom line
2) HR can add value to the organization by increasing revenue

I believe we are getting pretty good at number one and we must continue to do so and measure those efficiencies. My question is how does HR contribute to a revenue increase?

Consider this example by James Perry and Russell Lobsenz:

Let's assume that 2,500 staff members or 25% of a 10,000-person company consists of sales professionals. Now, assume that 10% of the sales force outperforms its peers by 100% and that the annual per person sales quota is $500,000. This means that 250 sales people would be selling $1,000,000 per year and contributing $125 million more in sales than their peers (250 top performers X $500,000 = $125 million). Assume that HR has the ability to differentiate the competencies or unique behaviors of the 250 sales people considered to be top performers. With this competency profile in hand, tools can be developed and used to predict future sales performance. This profile can then be used to optimize recruiting, selection, performance management, and training and development systems. If the number of top performing sales people could be improved by 5%, or an additional 125 sales people contribute $1,000,000 in annual sales, revenue would increase by $62.5 million ($500,000 X 125). Now, let's assume HR invests $2 million on interventions, such as software tools for improved performance evaluations to develop the next 5% of top performers. The ROI would be 31 times the $2 million investment! Is there a CEO or CFO anywhere in the world that wouldn't make this investment?
Now, that is a great example of how HR can become a profit center. 1) HR is aligned to the goals of the organization, 2) HR holds people accountable for results, 3) HR tracks performance, and 5) HR systems(training, performance, compensation, etc) are linked to each other and the goals and objectives of the company.

HR is now ready for their very own Human Capital Profit and Loss Statement.

What do you think?

Monday, November 10, 2008

5 HR Metrics that are MUST HAVES in This Economy

We are definitely in unchartered territory. I believe that the way we have done business is and will change forever. The words accountability and productivity will be key going forward.

What does this mean for HR? I am not sure how all of this will all play out, but I do know HR will need to be accountable like we have never been before. How can HR assist with accountability and productivity? One way is to be a metrics champion to show accountability not just for HR but enterprise wide.
Below are 5 metrics to add to your current HR measures. If you do not measure anything now, I would start with these 5 metrics.

Here are 5 metric "must haves" for HR:
1) Revenue generating employees/# Full time employees-This is a critical metric in this economy. This metric speaks to efficiency especially around organizational design and process.

2) Employee engagement index-This measure is critical to track especially in down times as when times are good, the unengaged will be the first to leave. I know many factors affect engagement, HR should own this metric and provide coaching to line managers on how to improve this metric. What if the unengaged just happen to be your top performers?

3) % of employees with favorable performance rating-This number is critical to know during a downturn as we may have to make staffing decisions if a layoff needs to occur. We need to make sure we are keeping the best of the best. After the lowest performing employees are let go, management needs to understand the impact of eliminating top performers.

4) Management/staff ratio-As layoffs continue to occur, you may need to understand what the best management to staff ratio is for your company. (span of control and efficiency)

5) HR Service Delivery rating-How is HR performing with its customer? Is HR delivering the services that its customer values?

I know some of these measures HR may not have direct control over. But, HR does have influence on all these measures. Are there others that you are using? Please let me know by commenting or emailing me. I am interested to see which measures are being used during these crazy times.

You will notice that I did not list days to fill or cost per hire or any turnover measures. I believe we have discussed those so much already and they are currently measured by most companies. HR needs to move past these measures and think about those that are important to the business. I am not saying to quit measuring those things, I am saying add value metrics to them, so that HR can show value and efficiency and a true understanding of the business.

Thursday, November 6, 2008

Show Me Your Performance

The elections are over and now it is show time. Obama has the daunting tasks of making a difference and performing on his CHANGE promise. We will all be watching in the coming months..gauging his performance.

Which brings me to employee performance...of course, I had to tie that in somehow. I think now more than ever performance is the new mantra for HR. With layoffs occurring on an hour by hour basis at some point we will have shed ourselves of our bottom performers. When this occurs how will we decide who stays and who goes?

It has to be:

• Who is performing the highest?
• Who is adding the most value: (as defined by the customer)

So, how will we be able to measure this or tell who is performing and adding value? We should say our super duper performance management system. We all know this is a very big lie.

In a recent Wall Street Journal article, (subscription needed) Samuel Culbert suggests, "Get Rid of the Performance Appraisal." Culbert suggests a "two-side, reciprocally accountable, performance preview." The emphasis is on PREVIEW which is based on the future. The premise is you will be setting an employee up for success not reviewing failures. I LIKE IT.

ACTION ITEM: Review your current performance appraisal system and determine if it is success focused.