Thursday, March 3, 2011

Why HR Metrics Don’t Work

Thanks again to Luk Smeyers from INostix, Netherlands for guest posting on our blog. Another great topic.

A few days ago, I was reading a digital summary at of the brand new 2nd edition of Wayne Cascio’s and John Boudreau’s book ‘Investing in People’. Especially the chapter ‘hitting the wall in HR measurement’ is my absolute favorite. Let me summarize a few of the ideas.

Hitting the wall in HR measurement

Type "HR measurement" into a search engine, and you get millions of results. Scorecards, metrics, dashboards, data warehouses, surveys, benchmarks, and audits in abundance ratios. The spectrum of HR measurement methodologies seems unlimited. The paradox however is that even when HR measurements are executed well, most organizations typically hit a ‘wall’: HR metrics or measures only rarely drive true strategic change! Boudreau’s and Cascio’s figure (see below) shows how, over time, despite more sophisticated measures, the trend line doesn't seem to be leading to the desired strategic results.

A huge gap

Some HR professionals assume that they have strategic impact by - at best – holding line managers accountable for the outcomes of HR metrics. Proudly they declare that top managers’ bonuses depend in part on the results of an HR scorecard. Unfortunately, there is a major gap between the results of the measurements and their actual impact on the organization. Because descriptive metrics – such as turnover, retention, time to fill, illness rate, etc. – just don’t have a strategic impact. These kind of metrics will never give HR the necessary insights to break through the wall.

What can HR do?

• Moving from descriptive metrics to much more insightful analytics to be able to break through the wall (and understanding the differences between HR metrics and HR analytics)

• Developing more insightful analytics to underpin strategic decision making (and linking with bonus absolutely doesn’t make sense!)

• With HR measurements, focusing much more on the organizational impact of HR investments instead of focusing too much on HR efficiency metrics (like HR costs, HR ratios, cost of hiring, etc)

• Moving from an HR scorecard approach to a Business scorecard philosophy.

Luk Smeyers, iNostix, February 2011

Post a Comment