Human Resources (HR) today is transforming into a strategic business function as opposed to an administrative department. Among this transformation is the increasing adoption of data in driving human capital strategies. Ask any business leader today and they are all likely to mention the same thing: data and people analytics are the key metrics to a thriving business.
High quality employee data is a powerful tool that empowers leaders to identify opportunities, find operational efficiencies and spearhead initiatives to strengthen the bottom line. There is no doubt that data can provide valuable insights into the organisation’s existing HR strategy, while facilitating future enhancements. According to research by Bamboo HR on What Your Executive Team Wants from HR Reports, it found that more than half of the surveyed executives (82%) have indicated that HR metrics are somewhat useful, useful, or extremely useful for their organisation. However, the biggest challenge that most HR leaders face is the lack of technical knowledge to maximise the value of HR metrics. To address this problem, here are 3 tips on how HR leaders and executives can utilise HR metrics strategically and effectively.
Linking HR metrics with HR analytics
HR metrics and HR analytics may sound similar to most but both capture and measure different aspects of human capital. According to the Society For Human Resource Management (SHRM), HR metrics are operational measures, typically used to measure how effective, efficient, and impactful an organisation’s HR processes or initiatives are. HR analytics, on the other hand, marry data and HR metrics to help HR and business leaders understand or predict how changes may affect outcomes, eventually guiding business decisions.
Simply put, HR metrics tells business leaders what is going on within specific HR verticals. This could be in relation to existing turnover rates, return on human capital, costs of labour, compensation per full-time headcount, etc. HR metrics essentially collects critical employee and HR data that feeds into HR analytics. That, in turn, allows HR leaders to find answers within the data to address key human capital questions.
Understand the questions before looking at the metrics
While HR metrics can be used to measure performance, it is key to understand the underlying problem or new strategies that these HR metrics are meant to address. For example, high turnover rates are bad, and low turnover rates are ideal. But what does that mean? Is it because of poor recruitment strategies? Is it limited to a certain demographic or department? The initial HR metric gives HR leaders a start to digging down deep to the root of the problem.
To maximise the power of these HR metrics, the first step is to understand the “why”. Why are key talents leaving the organisation? Why are employee engagement levels low? The benefit of using HR metrics is that they substantiate these “whys”, ensuring that key decisions are backed by facts as opposed to hunches. These key human-capital decisions are then likely more credible and “sellable” when proposed to senior management as well as employees.
Build a business case
HR metrics tell the numbers but they are meaningless to business leaders and employees if they do not tell a story. HR leaders need to be able to show relevance using the data from HR metrics. Simply put, focus on building a business case for the department.
What should go into a HR business case then? Some key points to consider are: what are current issues that the organisation is facing throughout an employee’s lifecycle? How are these issues impacting the organisation’ bottom line? Will HR metrics provide more visibility on these issues? Building a business case helps HR leaders to isolate specific human capital problems, leverage on HR metrics to support hypotheses and hunches with facts, and ultimately, convince senior leadership on new initiatives or decisions.
HR metrics form the groundwork for people analytics, and provide valuable inputs for key people decisions. It is imperative to ensure that HR metrics capture accurate and quality data as these indicators are reflective of the organisation’s current people strategy. HR metrics and people analytics are powerful tools for any organisation, and nailing these indicators will allow HR and business leaders to bring out the full potential in employees and be the driving force that the organisation requires.