Recognise This! – What you measure and how you report the results is critical to proving the HR value proposition.
In a recent article in TLNT, Lance Haun did an exceptional job highlighting recent research showing HR reports the most important measures for gauging HR’s value to the organisation are retention and employee satisfaction.
Regardless of my opinion on why employee satisfaction is a useless measure (and how it is completely different from employee engagement), I drew three clear lessons from Lance’s assessment of the research:
1. Measure what matters to your CEO and CFO
“I think as you get further down the list, you start to see more things that the CEO and CFO care about: costs, open reqs, revenue, and productivity. And at the very least, you have to connect those retention and employee satisfaction numbers with the higher concerns for your colleagues in the C-suite.”
Retention is an important measure, but only if you report clearly why it’s important. Replacing employees lost to voluntary turnover can cost anywhere from 50-150% of that person’s annual salary. Show your senior team how increasing retention adds millions to the bottom line, and you will quickly show the value of your contributions.
Similarly, Towers Watson research has shown a 15% increase in employee engagement (not satisfaction) correlates to a 2% increase in operating margin. Prove an increase in employee engagement and then make that improvement real in terms your executive team cares about.
Don’t forget to point out that Gallup proved engaged employees lead to greater financial success, but employees do not become engaged simply because they work for a financially successful organisation.
2. You can’t prove strategic value without measurement and reporting
“Maybe the more alarming for some of you will be the 26 per cent of organisations that don’t use metrics at all to evaluate HR’s value to the company. One in four (1 in 4) not using metrics is a tough number to swallow for a function that strives to be more relevant and visible among the organisation’s top leaders.”
Lance rightly points out that HR cannot “claim their seat at the table” if you cannot prove your value in being there. Metrics that matter to those already at the table is a critical first step.
3. Be sure to measure the right things
“Make no mistake about it though: measuring (and focussing on) the wrong things can be as costly as doing nothing at all.”
Our own research at Globoforce, conducted with SHRM and reported in our 2011 Employee Recognition Tracker Survey showed the majority (69%) of respondents (HR managers and leaders) said employee engagement was the most important HR challenge they would face in the coming years, and yet the primary method used to track employee engagement levels was employee exit interviews (71%).
I still can’t get over the irony of using exit interviews to track employee engagement levels. What do you measure to prove the value of HR in your organisation?
Derek Irvine is senior vice president of global strategy at HR software provider, Globoforce.
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One Response
HR Metrics
I fully agree that finding and plotting measures of HR success is important, and I also agree that ’employee satisfaction’ can often be an incomplete and even misleading tool.
One of the first measures I would want to see, whether as a CEO, Chairman or NED, would be the thoroughness and take-up of a regular, formal appraisal system, how many appraisers have been trained to use it, and how it is used in practice. I see many companies only paying lip-service to appraisals; for example, with not all managers finding time to appraise their staff properly and regularly (highlighting not only past successes in meeting agreed targets and areas for improvement, but also setting future targets and clarifying future training and development needs. And note? A ‘training need’ to my mind is to help an employee to do their *current* job even better; a development need might most often be to prepare that employee for a future role. A helpful distinction?)
The cost of failing to appraise properly comes in so many ways. Not just from unattended performance issues down the track, but lack of employee engagement, fulfillment and enjoyment more generally.