1. HUMAN RESOURCES MANAGEMENT
(HRM) METRICS & ANALYTICS
CHARLES COTTER Ph.D candidate, MBA, B.A (Hons), B.A
CITY LODGE HOTEL, FOURWAYS
22-25 AUGUST 2017
www.slideshare.net/CharlesCotter
2. 4-DAY, TRAINING
PROGRAMME OVERVIEW
• Introduction to and the evolution of HRM metrics
• Defining the fundamental concepts
• Applying a strategic mind-set and –approach to HRM
Metrics
• Building a business case for HRM Metrics and Analytics –
benefits and challenges
• Identifying best practice and critical success factors
• Applying the 5-step, HRM Analytics process
• Case studies and Reading Articles
3. • What type of HRM Metrics does your organization currently
utilize?
• Describe the organizational impact, level of maturity and
credibility of these HRM Metrics
• What does your organizational HRM Metrics architecture look
like?
• What is the current degree of HRM practitioner competency
of HRM metrics/analytics?
• Review the benefits of HR Metrics. Is there a business case for
applying HR Metrics?
4. 10-POINT FOUNDATION AND “STARTER-PACK”
FOR STRATEGIC HRM METRICS
#1: Adopt a strategic
mindset
#2:Change
management must
run parallel to HRM
Metrics in “business
unusual”
environment
#3: Streamline and
systematic HRM
metrics process
#4: HRM Metrics is
not a “desktop”
exercise
#5: Adopt a
measurement
culture & build
capacity & skills
for digital literacy
5.
6. 10-POINT FOUNDATION AND “STARTER-PACK”
FOR STRATEGIC HRM METRICS
#6: Re-inject
scientific principles,
processes and tools
& credibility into
HRM Metrics
e.g. 3 E’s
#7: Drill down &
segment HRM
metrics
#8: Apply the 4 C’s
to HRM Metrics
Reporting
#9: Don’t adopt a “Big
Bang” approach –
start small, think big
and scale up
#10: Automation -
utilize a 4-G digital
data analysis solution
7. THE FUTURE OF HRM METRICS &
ANALYTICS?
“HRM will have to migrate from the
fundamentals of people science to the
complexities of data science.”
9. INTRODUCTORY ACTIVITY
• Individual activity:
• Complete the following statement by inserting one word only. As a
HR Manager, in order to effectively apply and utilize HRM analytics, I
need to/to be………………………………………………
• Jot this word down and find other learners who have written down
the same word.
• Write this word down on the flip-chart.
• Each learner will have the opportunity to explain their choice of
word.
10.
11. PH.D. RESEARCH – STRATEGIC HRM/D FACTORS
(COTTER, 2017)
• N = 465 (global)
• Selected deficient factors (on 4-point scale):
#1: Curating modern learning experience: 2.77
#2: HRM/D Architecture: 2.82
#3: Top management support: 2.83
#4: Enhanced skills set of HRM/D practitioners: 2.89
#5: Future-proofing the organization: 2.91
#6: Strategic mindset of HRM/D: 2.97
• HRM/D Capability gap index (differential between compliance and importance):
#1: Enhanced skills set of HRM/D practitioners: -0.44
#2: Curating modern learning experience: -0.42
#3: HRM/D Architecture: -0.38
#4: Strategic mindset of HRM/D: -0.31
#5: Future-proofing the organization: -0.31
12.
13.
14.
15. • 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.
• Differentiation between People and HRM Measures
• Human capital analytics examine the effect of HRM metrics
on organizational performance.
• In more general terms, analytics look for patterns of similarity
between metrics. By using analytics over time, HRM can
become predictive.
DEFINING THE FUNDAMENTAL CONCEPTS
16.
17. STRATEGIC PERSPECTIVE – HRM
METRICS/ANALYTICS
Strategic HRM and correlation to metrics/analytics
The Balanced Business Scorecard
Strategy Mapping
HRM Scorecard:
• Key people measures from the organization’s scorecard
• The second class of measures should be the HR measures
Linking business strategy to personal objectives
26. LEARNING
ACTIVITY 1
• Group discussion:
• Evaluate to what extent
your current HRM
Analytics processes and
practices comply with the
principles of strategic
management i.e. use of
Balanced Scorecard and
HR Scorecard
methodologies and
Strategy Mapping etc.
• Identify gaps and
recommend improvement
strategies.
27.
28. BUILDING A BUSINESS CASE FOR HRM
METRICS/ANALYTICS
• Introduction to the organizational performance
impact of HRM metrics and analytics
• Value of HRM M-E-T-R-I-C-S
• Strategic business partnering
29.
30. ORGANIZATIONAL IMPACT OF HRM
METRICS/ANALYTICS
• According to a HRO Today Institute study (2013), number-crunchers rule the HR roost -
companies that use employee-performance data to improve ongoing talent acquisition
outperform their competition 58% of the time and by margins of up to 200%.
• According to the CIPD, HR analytics enables HR managers and teams to understand more about
the people in their organization, how they’re performing and how they’re creating value for the
organization.
• In turn, this enables HR practitioners and business leaders to make better business decisions.
• It’s also the main way that HR teams can demonstrate the impact that HR policies and
processes are having on the organization.
• Business managers are increasingly interested in how to use HR concepts more effectively, and
so HR analytics is an important way in which HR teams can evaluate and improve people and
business performance.
31. THE VALUE OF M-E-T-R-I-C-S
• Measure the contribution of employees and predict the quality
of performance
• Explore evidence-based relationships between employee
engagement and learning and development
• Tap into new sources of competitive intelligence and stay ahead
of the pack
• Retain and engage your organization’s top talent by utilizing
tools needed to anticipate future success
• Implement process mapping across HR for hiring and inducting
new employees
• Communicate the most relevant and actionable data to top
management
• Strategize optimal measurement methodologies and marshal
resources that create value for customers, investors, executives,
and employees
32. BENEFITS OF HRM METRICS
• Metrics help you ensure that you are meeting your goals and customer
needs
• Metrics help you focus
• Metrics tell you where to spend your money
• Metrics tell you what to stop doing
• Metrics eliminate confusion – “What you measure and reward takes away
all doubt about what is important”
• They help push continuous improvement
33. • 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.
• 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)
• 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.
IMPERATIVE OF HRM METRICS
34.
35. BENEFITS OF HRM METRICS
• Metrics allow you to come across as an expert
• Distributing metrics can change individual behaviour
• Metrics are superior to culture in changing the behaviour of your
managers
• Metrics can help to improve your relationship with the CFO and CIO
• Metrics can build coordination/cooperation
• Metrics can help to build self-confidence
36. BENEFITS OF HRM METRICS
• Using metrics sends the message that you are “new school”
• Metrics tell you what to reward
• Modern ERP and ATS systems make it easier
• Metrics can allow HR to provide evidence of its strategic impact
• Metrics can demonstrate the rand impact of HR programs
• Create a HRM business value chain
37. LEARNING
ACTIVITY 2
• Group discussion:
• By means of a cost-
benefit analysis,
determine if there’s a
viable, feasible and
sustainable business
case for HRM Metrics
and Analytics.
38.
39. CRITICAL SUCCESS FACTORS AND CHALLENGES OF
HRM METRICS AND ANALYTICS
• Best practice principles
• Critical success factors
• Top vendors for HRM analytics
• Constraints and Criticisms
40. 10 BEST PRACTICE PRINCIPLES OF HRM
METRICS/ANALYTICS
• #1: Top performing companies drill down metrics to a deeper level and
communicate to decision-makers more effectively.
• #2: Data becomes part of a “holistic solution” The data is more accessible
and used by more people than with lower-performing companies.
• #3: Given that it’s an integrated solution, it has fewer inconsistencies and
offers greater reliability of data.
• #4: Top performers have a dashboard of Key Performance Indicators KPIs).
• #5: They have a centralized, standardized, cloud-based depository that is
distributable and searchable by standard key words and search strings.
41. 10 BEST PRACTICE PRINCIPLES OF HRM
METRICS/ANALYTICS
• #6: Top performers will have records that include hyperlinks—such as a link
to someone’s LinkedIn profile—for real time updating.
• #7: They have established a dashboard that summarizes the data into
meaningful segments along with overall statistics.
• #8: Metrics are most commonly reported on a monthly basis or quarterly
basis, and then rolled up into a year-end report.
• #9: Top performers had a specific approach to metrics: What separated the
top performers from everyone else was not only what the metrics are, but
how well the data was segmented or drilled down.
• #10: A similar best practice is to deliver metrics that roll up to specific
business units and divisions.
42. CRITICAL SUCCESS FACTORS FOR HRM
METRICS/ANALYTICS
• Showing HR's real value
• Knowing how to interpret the results about the status of
human capital in a meaningful manner.
• If measurement, assessment and evaluation are to play a part
in achieving sustainable organization performance, they
should be impact-oriented, forward-looking and focused on
the entire HR system, not just on individual HR practices.
• The importance of HR capability
• Guarding against point-in-time measurements only
43. HOW DO I MAKE A SUCCESS OF MY HRM
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
44. 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
45. TOP VENDORS FOR HRM
METRICS/ANALYTICS
• The real leaders in analytics are:
Oracle
SAP
• They have the most sophisticated and integrated analytics solutions
• In terms of smaller vendors the frontrunners are:
SumTotal Systems
PeopleFluent
• The real value is in providing actionable information and recommendations.
• Top performers are more likely to ask themselves one vital question: What will the CEO
or CFO do as a result of learning this information?
47. COMMON ERRORS WITH HRM
METRICS/ANALYTICS
• One of the biggest mistakes that are so often reported is TOO MANY
MEASURES - Developing more metrics than it is feasible to maintain
and utilize
• Developing and implementing HR metrics in a vacuum
• The Top 20 Major Faults with Most HR Metric Approaches according
to Sullivan (refer to pages 37-45)
• “HR teams are not very analytical in their thinking yet. That is holding
them back from doing more data-driven decision making.” (Bersin)
• Over-reliance on Spreadsheets
48. Source: The State of Workforce Analytics and
Planning 2014 Survey Report
for workforce metrics and analytics
- With low satisfaction rates
49. Source: Visier WFA Usage Survey, 2012
SURVEY - AREAS TO IMPROVE TO EXPAND
WORKFORCE ANALYTICS CAPABILITIES
51. LEARNING
ACTIVITY 3
• Group discussion:
• By referring to the best
practice principles, critical
success factors and expert
criticism, evaluate your
organization’s current
degree of HRM Analytics
maturity/sophistication.
• Identify gaps and
recommend improvement
strategies.
60. 5-STEP HRM ANALYTICS PROCESS
• Step 1: Identify where HRM can make a strategic impact in
the organization
• Step 2: Develop appropriate metrics around these areas
• Step 3: Obtain data relating to relevant metrics
• Step 4: Draw out insight from the data
• Step 5: Project and take action to communicate metrics and
related insights information to provide a robust basis for
strategic change and improvement
61. THE 5 E’s OF
HRM ANALYTICS
• Exploration
• Examination
• Extraction
• Evaluation
• Extrapolation
62. STEP 1: IDENTIFYING WHERE HRM CAN MAKE A STRATEGIC
IMPACT (EXPLORATION)
• This process step focuses on determining the areas
where HRM can make a strategic impact within the
organizational context.
• It enables HR management team to identify priority
areas for measurement which are aligned with
organizational goals and strategies.
• Identify capability opportunities or problem areas
from a business partner perspective.
• Sources for information collection, retrieval and
analysis.
63. SOURCES FOR INFORMATION COLLECTION,
RETRIEVAL AND ANALYSIS
• Employee and management surveys and interviews
(for employee contentment, communications, rewards
system etc.)
• Performance appraisals (to measure productivity,
attendance)
• HR records (to track communications, turnover,
recruiting efficiency, retention, promotions, and
succession planning)
• Employee files (to research productivity, attendance,
training etc.)
64. STEP 1: EXPLORATION
• A critical first step is to ensure that HRM is measuring the right things.
• The design and development of relevant HR metrics requires reflection and
discussion in order to determine what it takes for the organization to succeed and
to understand how HR can add value.
• Three issues underpin effective measurement (CIPD, 2011):
Aligning measurement with goals
Take a business partner perspective
Adding value by focusing on building capability
• Identify organizational burning issues
• Identify industry, market and macro-environment Disruptors, trends and patterns
65.
66.
67.
68.
69.
70.
71.
72. STEP 2: SELECTING APPROPRIATE
METRICS FROM WHICH
ORGANIZATIONAL INSIGHTS CAN BE
DRAWN (EXAMINATION)
• HRM Measures:
Efficiency (10%) – traditional
Effectiveness (20%) – transactional
Impact (70%) – transformational
• Categories of HRM Metrics:
First Tier (most valued)
Second Tier (lesser valued)
• Commonly used HRM Metrics
• Refer to Annexure A: HRM Scorecard
Template (page 74); Annexure B:
Comprehensive HRM Metrics (pages 75-
114) and Annexure B: HRM
Effectiveness Metrics (pages 115-123)
78. 10
TYPICAL STATISTICS OBTAINED IN COMPILING HRM
METRICS
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
79. 10
TYPICAL 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
80. Present x Productive
Productivity
Q: Are your employees contributing to the success of the organisation.
Are you connecting human capital & business measures.
? Productivity measures on an annual and a quarterly basis
? Compare to national averages
Specific metrics -
Return on Human Capital Investment
Revenue per Full-Time Equivalent (FTE)
Profit per FTE
Critical HR Measures - forTrue Business Impact
81. Critical HR Measures - forTrue Business Impact
Time to fill vacancy x Quality of hire
Recruitment Effectiveness
Q: Are you recruiting new talent of a high calibre. Are they staying.
Are they performing.
? Business-impact shortfalls in capacity
? Consistently increasing organization’s performance through
improved talent
Specific metrics -
Vacancy Rate
FirstYearTurnover Rate
New Hire Performance
Time to Fill
83. Critical HR Measures - forTrue Business Impact
Rate ofTurnover x Retention of critical top talent
Critical Talent Retention
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.
? Overall tenure trends
? Career development
Specific metrics -
Resignation Rate
Resignation Rate ofTop Performers
Promotion Rate and PromotionWaitTime
Engagement Index
Market Compensation Ratio
86. LEARNING
ACTIVITY 4
• Group discussion:
• Apply step 1
(Exploration) and step 2
(Examination) of the
HRM Analytics process
to a defined
organization.
• With step 2, refer to
Annexures A, B and C
for guidelines.
88. STEP 3: DATA
COLLECTION
CRITERIA – 3 E’s
• Data collection is the process
of gathering and measuring
information on targeted variables in an
established systematic fashion, which
then enables one to answer relevant
questions and evaluate outcomes.
Evidentiary
Empirical
Ethical
89. HindSIGHT InSIGHT ForeSIGHT
Gather Data and Report Make sense of data by
Monitoring and
Analysis
Develop Predictive Models
Akshay Raje, Director, Fab.com
90. STEP 3: OBTAIN DATA RELATING TO
RELEVANT METRICS (EXTRACTION)
The top performing
companies were using a
variety of drilled-down
metrics, having the
people to analyze them,
and communicating
them effectively.
This process step focuses
on how HRM can most
effectively communicate
the insights drawn from
metrics to inform action
and hence enable HRM to
deliver maximum strategic
impact.
Effective decision-
making, based on robust
measures and metrics,
therefore, requires HR
professionals to think
carefully about the
relationships that need
to be established to
enable appropriate
information-sharing of
these insights.
91. STEP 3: EXTRACTION – PROCESS STEPS
• #1: There is the initial “harvesting” or gathering of unstructured
data from the web.
• #2: The normalization stage—preparing harvested data for
analysis. Normally, a relational database such as MySQL is used,
but NoSQL can also be used.
• #3: The data is given additional structure with metadata, or
tagging. Analytics can then be presented through a dashboard.
• The process of collecting and updating the data from the myriad of
internet sources has to be automated. Advanced Programming
Interfaces (APIs) can enable different digital platforms to share
dynamic data and feed it into other applications, such as a
company’s own database.
92. STEP 3: EXTRACTION – CHALLENGES
CONFRONTED
• Struggling to use unstructured data
• Difficulty tying talent acquisition data to business results
• Problems with storing, retrieving and integrating data
• There is rarely a systematic approach to integrating disparate systems. Legacy data
systems often don’t talk to each other. There are missing links between ATS and
HRIS systems.
• The data exchange is often clumsy at best, requiring rekeying of data and manual
interventions.
• The successful transfer of data from multiple sources, such as an ATS, a recruiting
site or a social network with an HRIS System is the most problematic part.
• Failure to get the most of ATS
93. Source: The State of Workforce Analytics and
Planning 2014 Survey Report
94. Source: The State of Workforce Analytics and
Planning 2014 Survey Report
95. STEP 4: DRAWING OUT INSIGHTS FROM
DATA (EVALUATION)
• The HRM function and measurement capability
• HR professionals have long been data collectors, amassing and keeping
track of employees’ personal information, salary rates and the annual
number of retirements. But to grasp the potential of HR analytics, HR
managers need to become data interpreters.
• Top performing companies invest in personnel who have analytic and
process-oriented capabilities, those people who can install the necessary
methodological disciplines necessary to use the information effectively.
• Identify root causes and cause-effect linkages and -relationships
• Action planning – interventions and solutions
• Data mining is a process used by companies to turn raw data into useful
information.
96.
97. DATA ANALYSIS
• Data analysis involves critical analysis and interpretation of figures and
numbers, and attempts to find rationale behind the emergence of
main findings.
• In data analysis, the researcher is expected to turn raw numbers into
meaningful data through the application of rational and critical
thinking. The same figure within data set can be interpreted in many
different ways; therefore it is important to apply fair and careful
judgment.
• Three popular quantitative data analysis software, namely: Microsoft
Excel, Microsoft Access and SPSS.
103. LEARNING
ACTIVITY 5
• Group discussion:
• Apply steps 3
(Extraction) and 4
(Evaluation) of
the HRM
Analytics process
to a defined
organization.
104. STEP 5: PROJECT AND TAKE ACTION TO COMMUNICATE METRICS AND RELATED
INSIGHTS INFORMATION TO PROVIDE A ROBUST BASIS FOR STRATEGIC CHANGE AND
IMPROVEMENT (EXTRAPOLATION)
• Projection of data – forecasting (PREDICTIVE ANALYTICS)
• To communicate HRM Analytics, tell a story (NARRATIVE)
• “Data is abundant, but if you don’t give it context, it’s just a
bunch of numbers.”
• Internal benchmarks (to compare their business units to
others in the organization)
• Support comes after results are delivered, not before. “It
really comes back to how credible you are. You get buy-in
when you show up repeatedly with accurate numbers and
you can relate the story to how the company’s performing.”
105. STEP 5: EXTRAPOLATION - REPORTING
• HR analytics reporting
• How the information is communicated to the organization, particularly the
C-suite, is critically important.
• Companies simply produce spreadsheets that offer no easy and timely way
to present what is happening in the business.
• Like any good research report, it is vital to present meaningful information
and identify actionable insight that can be used to make positive change.
• Tactically, the best practice organizations, distribute multiple reports to
multiple levels. Tailored reporting to address the specific needs, and ideally
focuses on very specific business impacts.
• If the metrics being shown convey business impact, quarterly reporting of
5-10 of the most critical, agreed-to KPIs is warranted.
107. Historical metric
“Last year’s corporate turnover rate was 8%.”
Predictive analytic
“As a result of a drop in the regional unemployment rate, there is an 86% chance that the turnover rate
in this job family will dramatically increase from last year’s 8% up to 12% within the next six months,
and up to 16% within 10 months.”
Actionable Predictive Analytic
Adds a cost element - “We project that this 100% increase in turnover will reduce your group’s
productivity over the next 10 months by 17% resulting in a reduced output value of R812,000.”
Also adds a ‘recommended action’ - “we should implement personalized retention plans for the top
performing 20% in this job family; they cost R2,000 each to develop and have a 89% success rate.
ACTIONABLE, PREDICTIVE ANALYTICS —
THE NEXT BIG THING IN TALENT MANAGEMENT
Dr. John Sullivan, Professor, Talent Management Speaker and Advisor
109. LEARNING
ACTIVITY 6
• Group discussion:
• Apply step 5:
Extrapolation and
Reporting of the
HRM Analytics
process to a
defined
organization.
110.
111. CASE STUDY
• CASE STUDY 1: FOUR BEST PRACTICES AT
WORK AT GOOGLE
A retention algorithm
Predictive modeling
Improving diversity
An effective hiring algorithm
112. LEARNING
ACTIVITY 7
• Group discussion:
• By reviewing case
study 1, identify
what best
practice
principles, lessons
and insights can
be drawn.
113. CASE STUDY
• CASE STUDY 2: BIRMINGHAM CITY COUNCIL
The context
Metrics
Acting on the information
Informing decision-making
Sharing knowledge
114. LEARNING
ACTIVITY 8
• Group discussion:
• By reviewing case
study 2, identify
what best
practice
principles, lessons
and insights can
be drawn.
115.
116. READING ARTICLE 1
• The Top 10 Strategic HR and TA Metrics That CEOs Want to
See (Dr. John Sullivan)
• The Top 7 Strategic HR Metrics for Impressing Your CEO:
Revenue per employee
The improvement in the performance of new hires (quality of
hire improvement)
Performance turnover in key jobs
Dollars of revenue lost due to position vacancy days
Track a metric covering the highest impact current “hot” talent
problem at your firm
A contribution to productivity survey to identify which HR
programs helped to increase productivity
The percentage of HR strategic goals that were met
117. READING ARTICLE 1
• Three (3) Additional Strategic Metrics for the
Recruiting Function:
New hire failure rate
Applications per employee
Diversity hires in customer-impact positions
• Final Thoughts
118. LEARNING
ACTIVITY 9
• Group discussion:
• By reviewing
Reading Article 1,
identify what
best practice
principles, lessons
and insights can
be drawn.
119. READING ARTICLE 2
• READING ARTICLE 2: Here’s What HR Must Do to Have the
Business Impact CEOs Want (Dr. John Sullivan)
• The 8 action steps for becoming high impact:
#1: Accept accountability for improving people-management results
#2: Demand a shift to data-based decision-making
#3: Measure and increase workforce productivity
#4: Make managers accountable for great people management
#5: Build a competitive advantage
#6: Expect reporting on continuous improvement
#7: Measure quality and error rates in people management programs
#8: Calculate your ROI
• Final thoughts
120. LEARNING
ACTIVITY 10
• Group discussion:
• By reviewing
Reading Article 2,
identify what
best practice
principles, lessons
and insights can
be drawn.