HUMAN RESOURCES MANAGEMENT (HRM) METRICS

AND ANALYTICS CHARLES COTTER

MAY 2016

www.slideshare.net/CharlesCotter

TRAINING PROGRAMME OVERVIEW

• Introduction to and review of prominent and strategically relevant HRM Metrics

• Building a business case for the value/benefits of HRM Metrics

• Application of key HRM Metrics – Workforce Planning; Learning & Development and Employee Engagement Metrics

• Transforming from Metrics to (Predictive) Analytics

• There is a low degree of awareness of the impact of HRM programs whether, positive or negative, because HR leaders have not been delivering metrics that show the value of their programs or investments.

• If HR professionals don’t measure their function’s effectiveness and providing decision-making leaders the data they need, HR will continue to be undermined and eventually sidelined when it comes to having a seat at the table – strategic business partner.

• Quantification issue - metrics enable leaders and decision makers in organizations towards more efficient and better delivery of HR services

• “Based on corporate culture, organizational values and strategic business goals and objectives, human capital measures indicate the health of the organization.” (Lockwood, 2006)

INTRODUCTION TO HRM METRICS

• Metrics are simply measurements. Metrics track activity, but don’t necessarily show a causal relationship.

• HRM Metrics - Measurements used to determine the value and effectiveness of HR strategies.

• Human capital analytics examine the effect of HR metrics on organizational performance. In more general terms, analytics look for patterns of similarity between metrics.

• By using analytics over time, you can become predictive.

DEFINING THE FUNDAMENTAL CONCEPTS

• What type of HRM Metrics does your organization currently utilize?

• Describe the organizational impact, level of maturity and credibility (as perceived by executive management) of these HR Metrics

• What does your organizational HR Metrics architecture look like?

• Refer to pages 43-46 in the Learner Manual. Review the benefits of HR Metrics. Is there a business case for applying HR Metrics? Argue from a viability, feasibility and sustainability perspective.

INTRODUCTORY HRM METRICS QUESTIONS?

BALANCED SCORECARD

EXAMPLE: STRATEGY MAP

EXAMPLE: STRATEGY MAP

BROAD CATEGORIES OF HRM METRICS

• Refer to page 1 in the Learner Guide

Workforce Demographics

HR Efficiency

Remuneration

Skills Development, Training & Education

Productivity

Provisioning and Recruitment

Risk Analysis

Staff Retention

FREQUENTLY USED HRM METRICS (PWC)

STRATEGIC HRM METRICS THAT CAN BE REGARDED AS BEST PRACTICE

• Refer to pages 46-48 in the Learner Manual

First-tier metrics

Second-tier metrics

• 2nd Tier metrics are still important, but they tend to be less valued among senior executives.

HOW DO I MAKE A SUCCESS OF MY METRICS?

• A point-in-time measurement very often appears to be meaningless, unless you can compare it to a set standard or benchmark, and/or view its position in a trend that may be emerging.

Put it in the right context

Asking the right questions

Framing of my results

Reports the complete story

Always strive for improvement

HOW TO USE HRM METRICS EFFECTIVELY?

• Measure what is important

• Involve Key Stakeholders

• Work out the implications

• Drill down to meaningful chunks

• Convince and Influence

• Dig deeper and explore the root causes

• Set achievable goals for improvement

• Own the goals in partnership with the line

• Ensure action takes place as a result

• Keep the momentum going

SOURCES FOR INFORMATION COLLECTION, RETRIEVAL AND ANALYSIS

• Employee and management surveys and interviews (for employee contentment, communications, rewards system)

• Performance appraisals (to measure productivity, attendance)

• HRM records (to track communications, turnover, recruiting efficiency, retention, promotions, and succession planning)

• Employee files (to research productivity, attendance, training)

DEFICIENCIES IN HUMAN CAPITAL MEASUREMENT

• Logic

• Analytics

• Measures

• Process

10TYPICAL STATISTICS OBTAINED IN COMPILING HRM METRICS

• Refer to pages 6-7 in the Learner Guide

Revenue factor, which is company total revenue divided by the amount of full time employees

Human capital value added (revenue minus operating expense and cost of compensation/benefit divided by the total amount of full time employees)

Human capital return on investment: Revenue minus operating expenses and cost of compensation benefit divided by cost of compensation/benefit

Total compensation revenue ratio which is cost of compensation/benefit divided by revenue

Labour cost revenue ratio, which is cost of compensation/benefit plus other employee costs (bonuses, mileage paid, incentives) divided by revenue

10TYPICAL STATISTICS OBTAINED IN COMPILING HRM METRICS

• Training investment factor equals the total cost of training divided by total amount of training attendees

• Cost per hire, which includes advertising, agency fees, relocation, and others divided by operating expenses

• Health care costs per employee (total health care cost divided by total amount of employees)

• Turnover costs, which is equal to hiring costs plus training costs plus other costs (turnover rate during first year of employment is key)

• Voluntary separation rate is the total number of people who quit or retired divided by the total amount of employees

KEY HRM METRICS

• Productivity (refer to pages 14-15)

• Remuneration and Compensation (refer to pages 17-18)

• Sourcing and Recruitment (refer to pages 20-24)

• Staff Retention (refer to pages 26-29)

• HR efficiency (refer to pages 31-32)

• Skills Development and Training (refer to page 34)

• Workforce Demographics (refer to pages 36-38)

PRODUCTIVITY MEASURES• Present x Productive

• Q: Are your employees contributing to the success of the organization? Are you connecting human capital & business measures?

• Specific metrics:

Return on Human Capital Investment

Revenue per Full-Time Equivalent (FTE)

Profit per FTE

• Productivity measures on an annual and a quarterly basis

• Compare to national averages

SOURCING AND RECRUITMENT MEASURES

• Time to fill vacancy x Quality of hire

• Q: Are you recruiting new talent of a high calibre? Are they staying? Are they performing?

• Specific metrics:

Vacancy Rate

First Year Turnover Rate

New Hire Performance

Time to Fill

• Business-impact shortfalls in capacity

• Consistently increasing organization’s performance through improved talent

STAFF RETENTION• Rate of Turnover x Retention of critical top talent

• Q: Is your top talent / your vitally important workers / your competitive advantage – resigning, or at risk of resigning, at a greater rate than your less crucial employees.

• Specific metrics: Resignation Rate Resignation Rate of Top Performers Promotion Rate and Promotion Wait Time Engagement Index Market Compensation Ratio

• Overall tenure trends

• Career development

LEARNING ACTIVITY

• Review the HR Metrics (pages 14-38).

• Identify and prioritize the most crucial and strategically relevant measures.

• Justify your rationale.

• Present a summary of your group discussion.

HRM METRICS PROCESS

• It includes involving HR in overall business strategy

• Enlisting leaders outside of HR to help develop the KPIs. Collaborating with business managers to ensure KPIs link to business unit strategic goals

• Focusing more attention on links between people measures and intermediate performance drivers (e.g., customer satisfaction, engagement etc.)

• Increasing manager acceptance through training programs and concrete action plans

• Working with HR to simplify metric and automate data collection.

BEST PRACTICE PROCESS GUIDELINES

CURRENT: HRM-BASED WORKFORCE PLANNING ARCHITECTURE

REQUIRED: BUSINESS-BASED SWP ARCHITECTURE

• Inventory of available organizational core competencies?

• Inventory of organizational scarce skills?

• Mission critical organizational jobs (to enable strategy achievement)?

• Critical employee segments (to promote business continuity/sustainability)?

• Competitivity and readiness of organizational talent pipeline?

• Identification of organizational talent gaps?

CLEAR VIEW?

• #1: Aligned with organization’s strategic business plans and priorities.

• #2: Future-focused, adopting a strategic, medium to long-term forward-looking approach.

• #3: Pro-active, sensitive and responsive to (internal and external) environmental change and trends.

• #4: Provides accurate and reliable (clear view) talent planning/management information e.g. available core competencies; scarce skills; critical jobs and employee segments and talent gaps.

• #5: Collaborative, well coordinated and partnering effort (HRM has co-opted business partners e.g. line managers to the process).

DIAGNOSIS: 10 BEST PRACTICE GUIDELINES FOR EFFECTIVE SWP

• #6: Integrated (bundled) with other HR value chain processes e.g. Recruitment, Succession Planning, Retention and Leadership Development.

• #7: Generates meaningful business intelligence which shapes, informs and influences business planning and supports strategic decision-making.

• #8: Integrates both scientific (HRM metrics, predictive analytics and strategy maps) with artistic (planning) principles.

• #9: Dynamic - regularly and systematically monitored, reviewed, evaluated and adapted (committed to continuous improvement processes).

• #10: Yields a positive ROI, with tangible/demonstrable outcomes and impact i.e. creates sustainable HCM competitive advantages

DIAGNOSIS: 10 BEST PRACTICE GUIDELINES FOR EFFECTIVE SWP

• Individual Activity:

Diagnose your current Workforce Planning practices against the ten (10) best practice criteria.

• Group Discussion:

Identify gaps and recommend improvement strategies.

LEARNING ACTIVITY

LEVELS OF SWP MATURITY

• Although 92% of companies have some level of workforce planning, only 21% take a strategic, long-term approach to addressing the talent demand, talent supply and the actions necessary to close the gap between the two.

Only 11% of organizations have currently reached Level 3 of Maturity. Only 10% have reached Level 4.

• Only 25% of workforce plans are effective at helping business leaders forecast revenue and operating budgets.

• Only 27% of workforce planning processes are conducted by recruiting and staffing departments. The majority of workforce planning processes are owned by individual business leaders – so they are disjointed from recruiting and even HRM.

RESEARCH-BASED (BERSIN) REALITY CHECK

HOLISTIC SWP PROCESS

SYSTEMS VIEW - SWP PROCESS ILLUSTRATED

• Group Discussion:

Review the previous slide (effectiveness of WFP).

By referring to each process step, indicate how each one can be improved.

Present a summary of your group discussion.

LEARNING ACTIVITY

L&D METRICS

• Measures of training activity (concerning how much training and development occurred with the focus on formalised, structured learning)

• Measures of training efficiency (concerning the extent to which training and development maximises resources in pursuit of its mission)

• Measures of training results (concerning how well training and development achieved its goals)

DEFINING TRAINING ROI FORMULA

ROI is a key financial metric of the value of training investments and costs. It is a ratio of net benefits to costs, expressed as a percentage.

The formula can be expressed as:[(monetary benefits – cost of the training) / cost of the training] x 100

ILLUSTRATION: TRAINING ROI PROCESS

TRAINING EVALUATION – KIRKPATRICK (4-LEVELS) AND PHILLIPS (5-LEVELS)

LEVELS OF LEARNING EVALUATION

DIAGNOSIS OF CURRENT TRAINING AND DEVELOPMENT PRACTICES

• How efficient is the training process; is the attendance of scheduled training programmes good and are learners satisfied post-training? – LEVEL 1: EFFICIENT

• What is the submission rate of PoE’s and is there a good success rate? – LEVEL 2: EDUCATIONAL

• What is the degree of transfer and application of learning to the workplace and improved behavioural change and performance? – LEVEL 3: EFFECTIVE

DIAGNOSIS OF CURRENT TRAINING AND DEVELOPMENT PRACTICES

• What is the impact of training programmes on organizational business results and metrics e.g. productivity; competence; customer service etc. – LEVEL 4: VALUABLE

• What is the Return-on-Investment (ROI) of the training programmes? Do the benefits exceed the costs? – LEVEL 5: ECONOMICAL

• To what extent do training programmes directly contribute to the achievement of strategic objectives; drive innovation; generate business solutions and create sustainable competitive advantages for the organization? – LEVEL 6: STRATEGIC

• Are employees COMMITTED to the organization?

• Are employees proud to work for the organization – company/brand ambassadors? CITIZEN

• Do employees put forth extra/discretionary effort to help the organization and their colleagues achieve business objectives? COMRADE

• Are employees enthusiastic and passionate about their work/jobs? CREATOR

• Are employees CONNECTED (intellectually and emotionally) to their work/jobs – offer value add?

DIAGNOSIS: THE 5 C’S OF EMPLOYEE ENGAGEMENT

• Gallup’s Q12 survey:

#1 Role clarity and expectations

#2 Resources – materials and equipment

#3 Role optimization and opportunities

#4 Receipt of recognition and praise

#5 Managerial care and interest

#6 Encouragement of personal and professional development

DIAGNOSIS OF EMPLOYEE ENGAGEMENT

• Gallup’s Q12 survey:

#7 Opinions and inputs are valued

#8 Job/task significance

#9 Fellow employee commitment to performance excellence/quality

#10 Collegial and harmonious working relationships

#11 Managerial interest in career progression and development

#12 Ample opportunities to learn and grow

DIAGNOSIS OF EMPLOYEE ENGAGEMENT

THE STRATEGIC IMPERATIVE OF EMPLOYEE ENGAGEMENT

ENGAGEMENT’S EFFECT ON 9 KEY PERFORMANCE INDICATORS

Is HR?

HRM METRICS AND ANALYTICS PROCESS

TRANSFORMING TO PHASE 5: IMPACTFUL PREDICTIVE ANALYTICS

Source: The State of Workforce Analytics and Planning 2014 Survey Report

Source: The State of Workforce Analytics and Planning 2014 Survey Report

TALENT ANALYTICS MATURITY MODEL (BERSIN BY DELOITTE)

Source: Visier WFA Usage Survey, 2012

Survey - Areas to improve to expand workforce analytics capabilities

Source: The State of Workforce Analytics and Planning 2014 Survey Report

Source: The State of Workforce Analytics and Planning 2014 Survey Report

Source: The State of Workforce Analytics and Planning 2014 Survey Report

for workforce metrics and analytics

- With low satisfaction rates

TRANSFORMING HRM TO A DATA SCIENCE-DRIVEN FUNCTION

• Describe how your organization can transform to the most sophisticated level: Impactful Predictive Analytics.

• Present a summary of your group discussion.

LEARNING ACTIVITY

CONCLUSION

• Key points

• Summary

• Questions

CONTACT DETAILS

• Charles Cotter

• (+27) 84 562 9446

• charlescot@polka.co.za

• LinkedIn

• Twitter: Charles_Cotter

• http://www.slideshare.net/CharlesCotter