By Dave Weisbeck

Three HR metrics pitfalls to evade.

Workforce analytics interactive

I had the pleasure of spending considerable time at Business Objects’ Paris headquarters, located near an island known as La Grande Jatte, which was made famous in the painting A Sunday on La Grande Jatte by Georges Seurat. If you look closely at the painting, it will appear as a large series of painted dots, but if you look from across the room you will see a vibrant painting of people relaxing in a park by the Seine River.

Visiting La Grande Jatte always reminded me that, like points in a Seurat post-impressionist masterpiece, data is most useful when framed within the right context. Patterns only emerge when we apply the right focus, and when the visualization of data is critical to discovering insights. There are many complex driving forces that can affect a company’s bottom line -- such as the impact of promotion wait times on engagement among top performers -- and it’s important that business leaders are presented with a clear picture of how these multiple factors affect productivity and growth.

And yet knowledge about the workforce is typically limited to isolated metrics, such as time-to-fill for vacant positions. This leaves organizations with a significant gap between HR activities and overall business priorities: According to a recent report by the Aberdeen Group, 35 per cent of enterprises lack visibility into the workforce skills required to support future business strategy.

The relationship between overall business strategy and critical HR

functions -- such as recruitment, employee retention, and rewards programs -- takes more than a handful of numbers to understand. Here are three HR metrics pitfalls to avoid, with advice on how to address them by bridging overall business strategy and tactics through analytic approaches.Mistake #1: Using time to fill and cost of hire data to gauge recruitment success

It is not uncommon for HR leaders to measure recruitment success using time to fill and cost of hire metrics. But these numbers do little to answer the more pressing question your CEO is likely to have: Are we hiring the right people?

To adequately understand whether this goal is being met, look beyond how fast or cost effectively positions are being filled. Instead, analyze the business impact of shortfalls in capacity, whether new hires stay with the organization, and whether their performance exceeds or lags that of other employees. Figure Above. Visualization of the recruiting pipeline with a focus onreferrals

Where to start? First, build a recruiting pipeline view (See Figure 1) to understand the lifecycle from requisition to offers accepted. With a complete view, you can understand what stages are causing delays in filling positions. Secondly, connect your candidate sources to your employee performance evaluations, so you can both understand the

12HR Strategy and Planning Excellence presented by HR.com | 02.2014

quality of hire, but also determine what sources are performing the best. Finally, segment your hiring by identifying those positions that drive business results and are time-critical to hire. For each of these, develop a detailed understanding of the KSAs (Knowledge, Skill and Attitude) required for top performance. Use this as a template against which to find internal candidates and source external hires.Mistake #2: Using general turnover rates to build talent reten-tion strategies

It is rare to come across an HR leader who hasn’t already added the extra step of segmenting turnover into its various sub-elements such as voluntary turnover, involuntary turnover, retirements, and resignations. What surprisingly few organizations have done is taking the further step of segmenting the workforce to focus on the talent required to be competitive and aligning goals on expected turnover.

Start by determining what truly regrettable turnover is. The first place to look is to identify top performers and key talent not only through areas like performance rating, but also through goal attain-ment, scarce skills, key positions, and manager and peer recogni-tion. Secondly, look to turnover that is costly, or can be a leading indicator of other issues, such as new hire turnover. Once you have a clear picture of which turnover is regrettable, the additional step is to identify appropriate targets. Turnover rates across organizations will vary greatly for a number of reasons, but at a minimum look to segment by functions as, for example, the finance function is often stable compared to sales function.

With a clear understanding of who within your organization is really driving business success, you can look at insights about why regrettable turnover is occurring. Measuring turnover is always a lagging indicator, and the goal isn’t to know how many people are leaving, but to implement change to ensure regrettable turnover is minimized. To determine drivers of turnover, it is important to cor-relate resignation with things like compensation ratio, promotion wait time, pay increases, tenure, performance, and training opportunities. This provides insight into how different employee populations are responding to their work experience, which helps ensure program investments are not wasted on a one-size-fits-all approach. Mistake #3: Using salary metrics to manage workforce costs

According to the Society for Human Resource Management (SHRM) research, about 70% of an organization’s expenses are at-tributable to workforce costs. The traditional approach to managing such costs has been to acquire market surveys of salary information, which are further refined to internal pay bands, and this data is used through metrics such as market compensation ratio, or compa ratio to analyze the workforce. Particularly, when this information is com-bined with other sources, such as performance data, it can provide for significant insight such as: Are top performers differentiated? Are the salary targets being adhered to? Is salary enabling the company to be competitive in the labor market? But, salary is only one piece of workforce costs.

True workforce costs, often called the total cost of workforce, are a combination of numerous inputs. This generally includes: • Direct compensation: pay in the form of salaries, commissions,

and bonuses• Indirect compensation: financial rewards for employees in-

cluding benefits, relocation costs, retirement plans, equity, and employee services• Contingent workforce costs: financial costs associated with

provisional workers• Supporting infrastructure: the costs of the HR function, but

often allocations from IT and facilities for contingent and non-contingent workers

Where to start? Direct compensation and indirect compensation provide for the bulk of workforce costs, and with employee benefit costs becoming a rising concern for many organizations, these two categories can provide HR leaders with business impacting insight. With a solid foundation of cost analysis in place, HR leaders can move beyond managing the salary review process to being a key col-laborator in business planning. A critical step is building workforce costs into the workforce planning process. With workforce planning that ties what people and skills an organization needs to what those people will cost, HR becomes critical to ensuring business plans that can not only be implemented, but also implemented on budget.

HR leaders need to know the answers to all of these questions, and be able to relate performance, roles and compensation to understand how it properly rewards and creates incentive for employees. At the same time, managing the overall cost of the workforce to deliver results for the best price requires bringing workforce costs into your workforce strategy and planning.Summary

Indeed, the ability to generalize without losing that logical con-nection of parts to the whole is a bit of an art. Organizations can move from information to insight by connecting multiple data points, helping HR make fact-based decisions with confidence. By moving away from individual metrics to comprehensive workforce analytics, you can help business leaders understand the contributing factors that are impacting their organization. With the right facts, you can take the right action to implement effective employee programs. The result? A more engaged and productive workforce. S&P

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Dave Weisbeck leads the overall solutions success and strategy at Visier. Prior to joining Visier, Dave was the Senior Vice President and General Manager responsible for Business Intelligence, Enterprise Information Management and Data Warehousing at SAP.Email info@visier.com

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HR Strategy and Planning Excellence Essentials presented by HR.com | 02.201413