Posted: Tuesday 4 November 2014. Author: Capita HR solutions.
OKAY, so by now we have all heard (sometimes ad infinitum depending on how much HR conversation you like to have) how HR deserves a place at the top table; how it should be a key influencer in business strategy and how HR professionals are only too ready to assume a pivotal role in driving the business forward.
The problem is that for all the bold promises made, the same question will invariably be asked of HR by MDs, chief executives and shareholders - right through to the ordinary punters on the shop floor - show me the money, ie demonstrate to me in terms I understand (and care about) that you make a difference. Our time to hire is lower than last year by 10 percent? Great. What does that mean? Our absence rate is up by one percent. Fine. Is that catastrophic?
Is it acceptable? What is it actually costing me?
No credible business survives if it doesn't make a profit (in the private sector anyhow) and before HR can be trusted to sit at that top table it must actually demonstrate that it can contribute, in the language that most enterprises understand best: money or productivity The problem with HR is that we often don't take that final step. We implement the measuring system, we collate then report back the metrics and that's it. Too often we focus on the trees, not the wood and fail to provide truly meaningful data at the other end of the number crunch.
So what can we do about this? Well we can start by looking at areas that non-HR business folk understand, such as return on investment (RoI). In simplistic terms this effectively means showing that after discounting the money paid out (invested) on whatever measure you are implementing, the net result is either a profit being generated or money being saved.
So rather than celebrate our fancy new absence management software resulting in absence rates going down from 3.4 to 2.3 percent, we take the next step and critically examine the pounds and pence element; translating this into return on investment (RoI). Instead of trumpeting a 1.1 per cent reduction in absence and leaving it there, we should analyse if the saving of £10k from the 1.1 per cent reduction balanced against an investment spend of £50k to achieve this was really worthwhile?
Now RoI is far from the only meaningful statistic HR can use to demonstrate its value. However, it is a very useful first step to illustrate the principle of using metrics constructively. It is also important, however, to add the caveat that we shouldn't get so seduced by using business friendly metrics that we stop examining the bigger picture: Simple RoI is not the be all and end all without proper context.
For example, you might take that first step of reporting the RoI on a new recruitment system, and its effect on cost to hire. If you are really clued in, however, you will stop to consider if your investment in a low-cost hire system is really worth a damn if the people you end up hiring are useless. Then you start joining the dots and tying this into areas such as competency development, effectiveness, output and flexibility to understand and demonstrate if you are truly creating value for money or losing out further down the line in greater cost to train and lower productivity etc. Turnover is another good one. Decent HR might report the RoI back on engagement initiatives linked to turnover. Great HR people will analyse the actual type of turnover and link this to performance management. Is it the high flyers leaving or the dross? Have we succeeded in keeping turnover low but in reality this means keeping people who don't contribute? Widescreen thinking.
So all told it's to be expected that competent HR departments will use some form of metrics. At the very least to illustrate how they are doing against their own HR centric targets. Good HR will use metrics that find a way to speak to non-HR people, in a language they understand and which demonstrates HR value to non HR people. Really great HR however will always continue to see the bigger picture and join the dots as they go.