Metrics: Measuring HR's Business Impact€¦ · Prioritize the Metrics 1. Overtime costs 2. Turnover 3. ... • Example: customer service ... Sample HR Balanced Scorecard

Metrics: Measuring HR’s Business ImpactBen Eubanks, SPHR, SHRM-SCP

http://LHRA.IO/ [email protected] (256) 466-3

More than numbers


Agenda

1) Metrics as Part of HR Strategy

2) The Balanced Scorecard Process

3) Speaking the #ROI Language

4) An Evidence-Based Approach

Metrics: Measuring HR's Business Impact

If it can’t be measured, don’t

do it.

Think Like a Consultant: Prioritize the Metrics

1. Overtime costs

2. Turnover

3. Unscheduled absence rate

4. Training expenses

5. Employee satisfaction

6. Revenue per employee

7. Time to fill

8. Cost per hire

9. Average performance

10. Diversity statistics

Be Insatiably Curious

CredibilityBetter to have it and not need it

than need it and not have it.

The Essence of HR Strategy• All HR activities should have a

connection to organizational strategy and objectives

• The more aligned your HR strategy with the business, the better

• Example: customer service• Hiring• Assessing• Training• Retaining• Performance

A Story of Failure

Stories of Success• Virgin Media-improving candidate

experience, improving $$$

• GE - “Owen” increased traffic 8x

• Opower-predicting performance pre-hire

• Deloitte-saved 2 million hours a year

• Google-faster time to productivity=more $ per employee

What Will Your Story Be?

Balanced Scorecards—a bigger picture of HR performance impact

Balanced Scorecard Essentials• 4 quadrants/perspectives:

• Financial (How does our performance affect company performance?)

• Customer (How do we impact the customer?)

• Business Process (How effective are we?)• Learning/Growth (How do we improve?)

• Accountability• Actionable• Results-focused

Sample HR Balanced Scorecard

Objective: Reduce turnover costs.

01Description: Develop effective recruiting methods and new hire orientation methods to optimize the retention of new hires.

02Actions:•Identify key attributes of successful employees who stay at the company for two or more years.

•Utilize technology more effectively for recruiting and screening applications.

•Identify selection methods that will contribute to successful hires.

•Integrate branding efforts into recruiting.•Revise the orientation program to ensure new hire retention.

03


Objective: Reduce turnover costs.

01Description: Develop effective recruiting and orientation methods to optimize retention.

02


Actions:• Identify key attributes of employees who stay at the company

for 2+ years.• Identify selection methods that contribute to successful hires.• Integrate branding efforts into recruiting.• Revise the orientation program to ensure new hire social

assimilation.

03


• Measures:• Cost-per-hire (financial)• Turnover rates and costs

(financial)• Time-to-fill (business process)• Customer satisfaction with new

hire performance (customer)• New-hire satisfaction with

orientation (learning and growth)• Supervisor satisfaction with

orientation (learning and growth)

Balanced Scorecards: Keys to Success

• Build to fit your business. Don’t try to adopt someone else’s.

• Don’t underestimate value of design/creation/implementation.

• Be a business professional first and foremost.

• Don’t just measure. Act.

HR+ROI—two words that never go together.

#1 Reason HR Avoids ROI

Calculations

How to Calculate ROI on HR ActivitiesMini Case Study

Your company has decided that its absenteeism is too costly, and a new absentee reduction program has been scheduled to improve results. You have been tasked with calculating the ROI of the program.

How to Calculate ROI on HR Activities• Objectives:

• Reduce absenteeism costs by 10%

• Create benchmark of existing level to measure against

Develop/Review Program

Objectives

Develop Evaluation Plans

and Establish Baseline Data

How to Calculate ROI on HR ActivitiesData Collection• Gather data on

absenteeism for a 6 week period prior to the program implementation

• Gather same data for 6 week period post implementation

Collect Data During Program Implementation

Collect Data After Program

Implementation

Isolating Impact

• Key credibility factor!• Methods:

• Control groups (contrast with experimental group)

• Trend line analysis (historical, training, two alternative futures)

• Expert estimation (last resort)

How to Calculate ROI on HR Activities

• Absentee reduction program produces savings of $581,000 in reduced turnover, scheduling costs, etc. The program cost $229,000.

• For this example, net benefits are $581,000-229,000=$352,000.

• ROI=352,000/$229,000 x100 = 154%. • This means for every $1 invested, $1.54 in

monetary benefits are received after costs are covered.

Intangibles

• Anything that cannot be documented and translated credibly to financial benefits should be noted in the final findings report as being intangible.

• Examples: satisfaction, teamwork, commitment, stress, conflict, etc.

*See full ROI Process Map

Report OUT!

• Create a short, written report explaining your findings

• Include data, calculations, and key recommendations

• Remember: ROI is not about evaluating your performance, it’s about process improvement


• 7 minutes work, 7 minutes discuss• Questions to answer: How do you proceed? What data do you

gather? • Option #1: Your CEO has requested a new employee retention

program to reduce preventable turnover. Just before approving the budget for the program, she tells you that she wants an ROI study of the program over the next two months to see if it is a valid investment.

• Option #2: After yet another employee injury on the job, your boss requests that you develop a new safety training program to reduce workplace injuries. He knows the CEO will be tight on funding the project for more than a few months, so you must perform an ROI study to help justify the investment.

Activity: Calculating HR ROI


• Gather data on existing turnover/retention. • Set target goal for retention rate• Determine how you will calculate retention and impact/cost and

what is included (e.g. involuntary turnover excluded)• Collect data on all turnover during your program• Continue collecting after program completion• Isolate effects (trend line, control group)• Convert to monetary value: how many people/how much money did

you save with the program?• Calculate ROI (saved vs investment), identify intangible benefits,

report out

Option #1 Example

Developing an Evidence-Based Mindset

Don’t just tell me. Show me.

The Power of Evidence

Evidence-Based HR

Example: what if you had to make a change in your strategy, and five different executives had five different opinions. How would you proceed?

Aligning HR practices to be evidence-based is a natural way to become more adept at finding and using data to validate big decisions.

Evidence-Based Management: 6 Key Actions

1. Asking: translating a practical issue or problem into an answerable question

2. Acquiring: systematically searching for and retrieving the evidence

3. Appraising: critically judging the trustworthiness and relevance of the evidence

4. Aggregating: weighing and pulling together the evidence 5. Applying: incorporating the evidence into the decision-making

process 6. Assessing: evaluating the outcome of the decision taken

Evidence-Based HR

• You’re a scientist, too!• Where to find data

• Management journals• HBR• SHRM Foundation• Deloitte/Bersin• i4cp• CEB• ***Qualitative data


• Key question: Is this a proven method of improving results? Research and find out.

• 7 minutes research, 7 minutes report out• Option #1: You heard news about some big companies changing

performance management and think you want to do the same, moving to a system of more frequent feedback.

• Option #2: CEO wants you to buy software that will allow you to put your candidates into “talent pools,” allowing you to recruit from those pools on demand.

• Option #3: You heard a speaker talk about employee engagement and now you want to get buy-in for an investment in that area.

Activity: Evidence-Based HR


• Option #1 Feedback• https://www.wsj.com/articles/how-performance-reviews-can-harm-

mental-health-1445824925• https://www.pwc.nl/nl/assets/documents/pwc-performance-survey-

2015.pdf• Option #2 Talent pools

• No data found in quick search. Any luck? • Option #3 Employee engagement

• www.kevinkruse.com/employee-engagement-research-master-list-of-29-studies/ 29 research studies pointing to engagement improving revenue, sales, retention, satisfaction, productivity, etc.

Activity Solutions

https://www.wsj.com/articles/how-performance-reviews-can-harm-mental-health-1445824925

https://www.pwc.nl/nl/assets/documents/pwc-performance-survey-2015.pdf

http://www.kevinkruse.com/employee-engagement-research-master-list-of-29-studies/


Key takeaways


The Virtuous Cycle of Curiosity and

Credibility

Curiosity Credibility


THANK YOUContact me for my slides, notes, &

research: Ben.Eubanks@LHR

Documents

Metrics: Measuring HR's Business Impact€¦ · Prioritize the Metrics 1. Overtime costs 2. Turnover 3. ... • Example: customer service ... Sample HR Balanced Scorecard