Your people problems—Where to start?
Do you notice too many of your new hires in their 30s resign before the end of their first year? Do you have any idea why?
Perhaps you have a different problem. Perhaps your senior skilled people are being poached by the competition.
Or people may leave to join firms which let them work from home, with generous flexi-time—nice work-life balance options which your firm doesn’t offer. But you mightn’t know that’s their reason for leaving.
You may, however, have a different problem. Unknown to you, aspects of your technical systems or corporate culture may demotivate workers, leading to poorer job performance.
For example, a badly designed employee training platform may frustrate employees, who then stop using it. Or you may not offer any training program at all.
Or a poor manager with no coaching skills, low emotional intelligence, or an irrelevant knowledge base might unwittingly sabotage employee engagement, causing low productivity in their department.
If only you knew the precise nature of the negative factor, you could plan to fix it.
There’s one thing these scenarios share. You can use HR metrics to better understand the issues and their contexts—to get to the facts.
What are HR metrics?
People metrics, or HR metrics, are selected statistics or data sets which provide a quantifiable measure of any employee activity. Businesses use HR metrics to ascertain how effective and efficient their policies are.
Metrics should be more than just numbers, though. They should help to compare different data points in useful or helpful ways that build understanding. And the best HR metrics should relate directly to priority business issues.
You can choose parameters for your HR metrics based on any workforce issue you examine. HR metrics can span the entire HR workflow: recruitment, retention, training, performance assessment, career management, compensation, benefits, termination, and organizational effectiveness.
There are hundreds of HR metrics you could measure: headcount, turnover, retention, diversity, engagement, and performance, to name a few.
You can drill down into each of these categories to further break down the metrics. For example, under “Retention,” you might have other metrics:
- “Number of recent hires”,
- “Speed of hiring”,
- “Number of open jobs”, and so on.
How HR metrics helps
Useful metrics for analysis depend on first whittling down the mass of HR data into a manageable amount of relevant data, selected on the basis of the problem you’re trying to understand, or the HR goal you’re trying to achieve.
Strategically important HR metrics vary depending on the industry. For example,
- critical hospital HR metrics might include the Nursing Staff Turnover Rate, which directly affects quality of care for patients; and
- key manufacturing HR metrics might include Employee Accident Rate and Absence Rate, which directly affect productivity of goods in a factory.
Analyzing selective HR metrics helps organizations understand the existing state of play in their labor force, and create, adapt, or transform their workforce strategies accordingly.
HR metrics aren’t only useful for fact-finding—that is, for contextual information, discovery, or diagnosis of an issue. Well-chosen metrics can also provide evidence for a course of action you know is necessary, but need to justify to your executives to get funding approval for change measures.
Why do business leaders ask for HR metrics?
HR metrics help executives see what’s working and what isn’t. It gives them more insight into the people they hire, and into workforce issues. For instance, relevant metrics can help business leaders spot worrisome skills gaps during workforce planning for future business needs.
HR metrics also demonstrate the strategic value HR can bring to the executive table. When HR can quantify employee behavior, analyze it, and use that to generate better quality information, it makes business decision-making more informed and more likely to lead to desired outcomes.
So, how do we make HR data-driven?
To serve up fresh, relevant HR metrics on any issue, there first needs to be a strong culture of data literacy within your HR department.
Your HR employees should be able to understand, interpret, present, and apply data. They should be able to think critically about the data they collect, deduce relevant information from the data, and apply appropriate data for specific purposes.
Most critically, the HR department should be able to translate its data insights and analytics into recommended actions that create business value.
Erik van Vulpen, Digital HR & Analytics thought leader, believes the HR role by 2025 will rest on four core competencies. Two important ones are being data-driven, and having digital integration. Here’s how he defines these terms.
- Data-driven is the ability to read, apply, create, and communicate data into valuable information to influence decision-making.
- Digital integration is the ability to leverage technology to increase efficiency and to drive HR and business value.
Erik van Vulpen breaks down data literacy into five behaviors. For each behavior, he says you may be at an elementary, intermediate, or proficient level.
The five data literacy behaviors are:
- reading data,
- applying data,
- creating data,
- communicating data, and
- practicing evidence-based HR.
Your HR people don’t need miraculous rebirth as statisticians or engineers—they just need to be able to speak and understand the language of data at the level they need for their roles. They can learn the five behaviors of data literacy through hybrid learning approaches including formal and informal training and development.
Data-driven culture starts at the very top. Firms with strong data-driven cultures tend to have top managers who lead by example, and who insist that decisions must be routinely anchored in good quality data. This applies to individual departments such as HR, as well as to the organization as a whole.
Strong data-driven cultures also benefit from a thoughtful selection of metrics, and a commitment to fixing all basic data access issues quickly, so that analysts and others aren’t starved of information.
Data-driven HR matters for several good reasons.
- It helps you understand your labor force better.
- It provides evidence for workforce improvements. As Peter Drucker would say: “What gets measured gets improved.”
- It helps inform smarter workforce and business decisions and strategies aligned to your business goals.
- Organizations that leverage their data and metrics with HR data analytics often report higher profits.
We hope we’ve helped you see why data-driven HR matters so much in today’s competitive and increasingly volatile business environment where you need to make the most from your workforce.
The next step is to explore which HR metrics you should deliver to which internal audiences or business leaders in your organization. For the answer, see our next blog on 7 Essential Metrics for Data-Driven HR.
Pixentia is a full-service technology company dedicated to helping clients solve business problems, improve the capability of their people, and achieve better results.