It’s a common business joke: HR needs more Excel spreadsheet and less PowerPoint. It is a remark that challenges HR as a “soft skill,” without measurable results. But perhaps the real issue is not whether HR can be measured. The real question: Can HR measure the right things ― the goals of HR best practices that are most meaningful to business leaders?
HR leaders say it can be done, but HR must overcome past perceptions and learn to think and behave strategically to coincide with business outcomes, not just HR outcomes.
“The perennial challenge facing HR is convincing others that it is a strategic player,” posts CourageousHR, providing training courses for HR professionals in Europe and the Middle East. “To help turn this around HR needs to shift its focus away from its transactional and tactical approach to measurement, and move towards a measurement system which emphasizes value rather than volume.”
When it comes to measurement, HR is up against much stiff competition from peers in fields such as engineering and finance. Such fields, with highly process-oriented functions, have long histories of measurable best practices. As a result, these functions often get the lion’s share of attention from data-driven C-suite leaders.
Go back in time, for example. Process improvement toolsets such as Six Sigma, had no difficulty gaining immediate traction in more scientific functions such as finance, engineering and manufacturing, claims a new report on HR best practices cosponsored by HR Certification Institute (HRCI) and Top Employers Institute. Not so for functions such as HR, sales and marketing, or in businesses such as restaurants and tax advice. “That’s because it’s harder to reduce helpful variability in industries and fields that rely more heavily on perceptions, attitudes and opinions,” states the report, Emerging Evidence: Business Performance and the Validation of HR Best Practices.
HR needs a more effective approach to measuring best practices. HR needs to “focus on the big picture business issues, the role of people and, finally, the way in which HR will add value,” writes William A. Schiemann, in A Metrus Group White Paper (HR Metrics: Myths, Best Practices and Practical Tips). “That value proposition can then be translated into top level strategic measures (people and HR scorecard), and refined with input from other key stakeholders (funders, peers and sub-functions in HR).”
Schiemann suggests a measurement strategy that gets at the most important business goals. Here are a few:
Start with the Strategy. What is the unique business strategy that differentiates the organization from many others?
“Once the core measures are agreed to, then it is highly desirable to cascade the concepts to the various units that support the strategy so that each can identify the concepts and measures on which they must focus in order to support the overall strategic measures,” Schiemann notes.
Build the Right Measures. Do the measures help the management track how well the organization is doing to reach goals?
Build the Measures the Right Way. Context is essential. What is truly relevant for your organization?
“Where possible, this might be the place to look at benchmark information, assuming it is truly relevant for your strategy and context. However, it is important to not benchmark measures that will cause you to focus on some other organization’s strategy. If Nordstrom’s — with its customer intimacy model —uses benchmarks of Wal-Mart or other cost driven strategies, potential disaster looms.”
Validate Your Measures. Is the overall value map correct? If not, where does it need to be changed to enhance effectiveness?
“HR Metrics are too often tactical and fraught with incompatibilities among far too many measures,” Schiemann concludes. “Instead, HR measures should be a clearly linked set of a ‘critical few’ measures that tie closely to the business strategy rather than scores of HR benchmark measures that proliferate many ‘best practice’ data bases. Instead, we recommend a focus on identifying a small number of HR measures that are directly connected to the ‘strategic people measures’ of the business.”
Richard W. Beatty, a strategic workforce planning expert, agrees that it’s important to know what’s worth measuring, not just how to measure. A contributing writer to the HR Certification® (HRCI®) e-book compilation, The Rise of HR (available for free download), Beatty provides some guidelines:
HR analytics and metrics “present a significant opportunity to impact the HR profession,” Beatty concludes. “In fact, the effective use of analytics and metrics (through math and statistics) may be the biggest contributor to the building of great, sustainable organizations in the future, as well as a significant HR career opportunity.”
HR best practices, as the study by HRCI and Top Employers shows, can have an impact on business results, and these results are measurable. Although HR does not have a history of measurement as rich as other functions, the future leaders of HR must be able to map HR’s value to business strategy. It is this alignment of HR and business results that holds the most promise for the future of the profession.