This article is excerpted from Chapter 12 of Business-Focused HR: 11 Processes to Drive Results (SHRM, 2018).
Research provides good, theoretical advice on how to build and implement HR scorecards in organizations. Unfortunately, HR leaders have taken a sharp detour in their quest to find the magic metrics they should measure. Misguided metrics typically focus on HR efficiencies, such as time-to-hire or a staffing ratio. Efficiency metrics are solid ways to measure just that—efficiency. Cost-centers measure their effectiveness by showing greater efficiency. If HR wants to be a business partner, it must show business impact and the steps to take are straightforward.
Executives want to believe in the value of their employees, but they often struggle to understand how the HR function truly drives value through the organization's people. Typically, HR will chip in with an employee engagement score that is not a business outcome. Alternatively, they may offer metrics around rates of turnover; however, these statistics tell us nothing about what is actually driving turnover.
Creating sound metrics around the activities that HR does to drive business outcomes will solidify accountability and give HR leaders an opportunity to reach the status of Trusted Advisor and to have a respected voice in the boardroom.
Here are three key steps that build upon what the researchers said and that will make the HR scorecard business-focused.
1. Every element on the scorecard must be directly linked to business outcomes.
To be business-focused, this step is the most critical one for a scorecard. Remember, each organization is unique. What drives business outcomes on the people side in one organization may not drive business outcomes in another. Thus, analyzing your data and connecting it to business outcomes that matter in your organization is imperative. Human resources still does not have a standard set of agreed-upon metrics as does, for example, accounting. This is not a bad thing for HR because different people-focused initiatives will have different effects on business outcomes. Innovation may be a competency that is critical at Google; however, it may not matter as much for employees at the local power company.
The beauty of taking this customized, analytics-driven approach is that it will make you more credible. Imagine showing your HR scorecard to the senior team and being able to statistically demonstrate the cause-effect relationship to business outcomes and the return on investment (ROI) for each metric. Can you do that now? Some HR efficiency measures might be appropriate. For example, if you can prove that faster time-to-hire leads directly to better hires, then great—put it on the scorecard. Alternatively, if you can prove that faster time-to-hire leads to poor hiring and that a slower, more structured process results in better hiring decisions, then put the latter process on the scorecard. Your HR balanced scorecard needs to contain metrics that hold your HR leaders accountable for the effective implementation of the initiatives that you have discovered drive your business outcomes.
What has typically been done in the past and what is done today is strikingly different. In the past, you may have identified "survey participation rate" and "days to fill a job" as key metrics. These are noteworthy, but are they connected in any way to improving the organization? Do we have any analytics behind them to "sell" them to front-line managers? Linking all elements of the HR scorecard to critical business outcomes helps attract buy-in from managers across all levels of the organization and to ensure the relevance and sustainability of your measurement processes.
2. If it is a significant driver of business outcomes, put it on the scorecard.
If you have implemented an HR initiative, it is likely that it will touch all, or almost all, your workforce. Management at all levels wants to know if these initiatives are making a difference—the scorecard is a great way to communicate that impact. Creating metrics is as much about the numbers as it is about the buy-in and communication of the metrics. The outcomes of your analysis on each of the HR processes will reveal the type of metrics to include in the scorecard. For example, if participation in work/life flexibility programs contributes to lower turnover rates and increased productivity, then a goal around participation rates in this program would be a valuable metric to include on the scorecard. Training participation carries much more weight as a metric if it brings with it an explanation of how employee participation drives key business outcomes.
3. Communicate the value of the scorecard to senior and front-line leaders.
In our experience working with front-line managers, a majority tend to be skeptical of HR initiatives and scorecards because they know that such initiatives equate to additional items on their to-do list. By walking front-line managers through the connections between what you are asking them to do and their business outcomes, you will gain the buy-in you are looking for.
Scott Mondore is co-founder and managing partner of Strategic Management Decisions, based in Atlanta. He is a predictive analytics expert, technology innovator, best-selling author and speaker with over 17 years of experience in the areas of HR technology, analytics, strategy, talent management, measurement, organizational development and customer experience.
Please visit the SHRMStore to order your member-discounted copy of Business-Focused HR: 11 Processes to Drive Results (SHRM, 2018) by Mondore and Shane Douthitt.
Predicting Business Success: Using Smarter Analytics to Drive Results by Mondore, Hannah Spell, Matt Betts and Douthitt will be released at the SHRM 2018 Annual Conference & Exposition.
Earn SHRM-CP/SCP recertification credits by listening to Mondore's SHRM webcast "Predicting Business Success."
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