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When HR measures are carefully aligned with powerful, logical frameworks, human capital
measurement systems not only track the effectiveness of talent policies and practices, they
actually teach the logical connections, because organization leaders use the measurement
systems to make decisions. This is precisely what occurs in other business disciplines. For
example, the power of a consistent, rigorous logic, combined with measures, is what makes
financial tools such as economic value added (EVA) and net present value (NPV) so useful.
They elegantly combine both numbers and logic, and help business leaders become better at
making decisions about financial resources.
Business leaders and employees routinely are expected to understand the logic that explains how
decisions about money and customers connect to organization success. Even those outside the
finance profession understand principles of cash flow and return on investment. Even those
outside the marketing profession understand principles of market segmentation and product life
cycle. In the same way, human capital measurement systems can enhance how well users
understand the logic that connects organization success to decisions about their own talent, and
the talent of those whom they lead or work with.
The greatest opportunity is in improving those decisions that are made outside of the HR
function. Just as with decisions about financial and customer resources, talent decisions reside
with executives, managers, supervisors, and employees who are making decisions that impact
talent, including their own talent, as well as those they are responsible for or interact with. Even
in core HR processes, such as succession planning, performance management, staffing, and
leadership development, improvements in effectiveness rely much more on improving the
competency and engagement of non-HR leaders than on anything that HR typically controls
directly.
Why use the term science? Because the most successful professions rely on decision systems that
follow scientific principles and that have a strong capacity to incorporate new scientific
knowledge quickly into practical applications. Disciplines such as finance, marketing, and
operations provide leaders with frameworks that show how those resources affect strategic
success, and the frameworks themselves reflect findings from universities, research centers, and
scholarly journals. Their decision models and their measurement systems are compatible with the
scholarly science that supports them. Yet, with talent and human resources, the frameworks used
by leaders in organizations often bear distressingly little similarity to the scholarly research in
human resources and human behavior at work. For examples, see the work of Sara Rynes and
colleagues.1
For measures to support a true decision science, they must do more than just incorporate facts
and numbers. More specifically, a decision science for talent draws upon and informs scientific
study related to people in organizations. There is a vast array of research about human behavior
at work, labor markets, and how organizations can better compete with and for talent and how it
is organized. Disciplines such as psychology, economics, sociology, organization theory, game
theory, and even operations management and human physiology all contain potent research
frameworks and findings based on the scientific method. A scientific approach reveals how
decisions and decision-based measures can bring the insights of these fields to bear on the
practical issues confronting organization leaders and employees. You will learn how to use these
research findings as you master the HR measurement techniques described in this book.
Boudreau and Ramstad noted five important elements in a mature decision science: a logical
decision framework; management systems integration; shared mental models; a focus on
optimization; and data, measurement, and analysis. In this book, we focus on two of these:
logical decision frameworks and the data, analysis, and measures supporting them. So, let's
define what we mean by a decision framework and how measures integrate with it.
Decision Frameworks
A decision framework provides the logical connections between decisions about a resource (for
example, financial capital, customers, or talent) and the strategic success of the organization.
This is true in HR, as we show in subsequent chapters that describe such connections in various
domains of HR. It is also true in other more familiar decision sciences such as finance and
marketing. It is instructive to compare HR to these other disciplines. Figure 1-1 shows how a
decision framework for talent and HR, which Boudreau and Ramstad called "talentship," has a
parallel structure to decision frameworks for finance and marketing.
Figure 1-1 Finance, Marketing, and Talentship Decision Frameworks.
Finance is a decision science for the resource of money, marketing is the decision science for the
resource of customers, and talentship is the decision science for the resource of talent. In all three
decision sciences, the elements combine to show how one factor interacts with others to produce
value.
Figure 1-2 shows how, over time, the HR profession has become more elegant and sophisticated,
yet the trend line doesn't seem to be leading to the desired result. Victory is typically declared
when business leaders are induced or held accountable for HR measures. HR organizations often
point proudly to the fact that bonuses for top leaders depend in part on the results of an HR
"scorecard." For example, incentive systems might make bonuses for business-unit managers
contingent on reducing turnover, raising average engagement scores, or placing their employees
into the required distribution of 70 percent in the middle, 10 percent at the bottom, and 20
percent in the top.
Figure 1-2 Hitting the "Wall" in HR Measurement.
Yet, having business-leader incentives based on HR measures is not the same as creating
organization change. To have impact, HR measures must create a true strategic difference in the
organization. Many organizations are frustrated because they seem to be doing all the
measurement things "right," but there is a large gap between the expectations for the
measurement systems and their true effects. HR measurement systems have much to learn from
measurement systems in more mature professions such as finance and marketing. In these
professions, measures are only one part of the system for creating organizational change through
better decisions.
Correcting these limitations requires keeping in mind the basic principle expressed at the
beginning of this chapter: Human capital metrics are valuable to the extent that they improve
decisions about talent and how it is organized. That means that we must embed HR measures
within a complete framework for creating organizational change through enhanced decisions. We
describe that framework next.
One evening while strolling, a man encountered an inebriated person diligently searching
the sidewalk below a street lamp.
"Did you lose something?" he asked.
"My car keys. I've been looking for them for an hour," the person replied.
The man quickly scanned the area, spotting nothing. "Are you sure you lost them here?"
"No, I lost them in that dark alley over there."
"If you lost your keys in the dark alley, why don't you search over there?"
"Because this is where the light is."
In many ways, talent and organization measurement systems are like the person looking for his
or her keys where the light is, not where they are most likely to be found. Advancements in
information technology often provide technical capabilities that far surpass the ability of the
decision science and processes to use them properly. So, it is not uncommon to find
organizations that have invested significant resources constructing elegant search and
presentation technology around measures of efficiency, or measures that largely emanate from
the accounting system.
The paradox is that genuine insights probably exist in areas where there are not standard
accounting measures. The significant growth in HR outsourcing, where efficiency is often the
primary value proposition and IT technology is the primary tool, has exacerbated these
issues.4 Even imperfect measures aimed at the right areas may be more illuminating than very
elegant measures aimed in the wrong places.
Returning to our story about the person looking for his or her keys under the street lamp, it's been
said that "Even a weak penlight in the alley where the keys are is better than a very bright
streetlight where the keys are not."
Figure 1-3 shows that HR measurement systems are only as valuable as the decisions they
improve and the organizational effectiveness to which they contribute. That is, such systems are
valuable to the extent that they are a force for strategic change. Let's examine how the four
components of the LAMP framework define a more complete measurement system. We present
the elements in the following order: logic, measures, analytics, and finally, process.
For example, recall Figure 1-1, which shows how finance organizes its measures of return on
equity to reflect the logic that equity is used to purchase assets, which are used to generate sales,
which, in turn, produce profits. The logically derived measures include leverage (assets divided
by equity), asset productivity (sales divided by assets), and margin (profits divided by sales).
You can directly calculate return on equity simply by dividing profits by equity, but that would
obscure the logical connection points that are vital to make decisions about equity, assets, and
sales effectively. The power of the framework is to embed the measures within a logic that
enhances decisions.
In the field of human resources, there are many logical frameworks, including salary structures,
workforce-planning models, and even labor contracts. All are useful, but they are not sufficient
to connect decisions about investments in HR programs to strategic outcomes. In contrast, some
authors have proposed a "service-value-profit" framework for the customer-facing process. This
framework calls attention to the connections between HR and management practices, which, in
turn, affect employee attitudes, engagement, and turnover; which, in turn, affect the experiences
of customers. This, in turn, affects customer-buying behavior, which, in turn, affects sales,
which, in turn, affects profits. Perhaps the most well-known application of this framework was at
Sears, which showed quantitative relationships among these factors and used them to change the
behavior of store managers.5
Precision alone is not a panacea. There are many ways to make HR measures more reliable and
precise. An exclusive focus on measurement quality can produce a brighter light shining where
the keys are not! Measures require investment, which should be directed where it has the greatest
return, not just where improvement is most feasible. Organizations routinely pay greater
attention to some elements of their materials inventory more than others. Indeed, a well-known
principle is the "80-20 rule" that suggests that 80 percent of the important variation in inventory
costs or quality is often driven by 20 percent of the inventory items. Thus, although
organizations indeed track 100 percent of their inventory items, they measure the vital 20 percent
with greater precision, more frequently, and with greater accountability for key decision makers.
Why not approach HR measurement in the same way? Employee turnover is not equally
important everywhere. Where turnover costs are very high, or where turnover represents a
significant risk to the revenues or critical resources of the organization (such as when departing
employees take clients with them or when they possess unique knowledge that cannot be re-
created easily), it makes sense to track turnover very closely and with greater precision.
However, this does not mean simply reporting turnover rates more frequently. It means that the
turnover measurements in these situations should focus precisely on what matters. If turnover is
a risk due to the loss of key capabilities, turnover rates should be stratified to distinguish those
with such skills from others. If turnover is a risk due to losses of clients with departing
employees, turnover rates should not focus on skill differences, but instead should be stratified
according to the risks of client loss.
Lacking a common logic about how turnover affects business or strategic success, well-meaning
managers draw conclusions that might be misguided or dangerous. This is why every chapter of
this book describes measures, as well as the logic that helps explain how the measures work
together. For example, Chapter 4, "The High Cost of Employee Separations," deals with
turnover.
Analytics: Finding Answers in the Data
Even a very rigorous logic with good measures can flounder if the analysis is incorrect. For
example, some theories suggest that employees with positive attitudes convey those attitudes to
customers who, in turn, have more positive experiences and purchase more. Suppose an
organization has data showing that customer attitudes and purchases are higher in locations with
better employee attitudes? Does that mean that improving employee attitudes
will improve customer attitudes? Many organizations have invested significant resources in
programs to improve frontline-employee attitudes based precisely on this sort of evidence of
association (correlation).
The problem is that this conclusion may be wrong, and such investments misguided. A
correlation between employee and customer attitudes does not prove that one causes the other,
nor does it prove that improving one will improve the other. Such a correlation also happens
when customer attitudes actually cause employee attitudes. This can happen because stores with
more loyal and committed customers are more pleasant places to work. The correlation can also
result from a third, unmeasured factor. Perhaps stores in certain locations attract customers who
buy more merchandise or services and are more enthusiastic. Employees in those locations like
working with such customers, and are more satisfied. Store location turns out to cause both store
performance and employee satisfaction. The point is that a high correlation between employee
attitudes and customer purchases could be due to any or all of these effects. Sound analytics can
reveal which way the causal arrow actually is pointing.
Analytics is about drawing the right conclusions from data. It includes statistics and research
design, and then goes beyond them to include skill in identifying and articulating key issues,
gathering and using appropriate data within and outside the HR function, setting the appropriate
balance between statistical rigor and practical relevance, and building analytical competencies
throughout the organization. Analytics transforms HR logic and measures into rigorous, relevant
insights.
Analytics often connect the logical framework to the "science" related to talent and organization,
which is an important element of a mature decision science. Frequently, the most appropriate and
advanced analytics are found in scientific studies that are published in professional journals. In
this book, we draw upon that scientific knowledge to build the analytical frameworks in each
chapter.
Advanced analytics are often the domain of specialists in statistics, psychology, economics, and
other disciplines. In fact, HR organizations often draw upon experts in these fields, and upon
internal analytical groups in areas such as marketing and consumer research, to help augment
their own analytical capability. Although this can be very useful, it is our strong belief that
familiarity with analytical principles is increasingly essential for all HR professionals and for
those who aspire to use HR data well.
The initial step in effective measurement is to get managers to accept that HR analysis is possible
and informative. The way to make that happen is not necessarily to present the most
sophisticated analysis. The best approach may be to present relatively simple measures and
analyses that match the mental models that managers already use. Calculating turnover costs can
reveal millions of dollars that can be saved with turnover reductions, as discussed in Chapter 4.
Several leaders outside of HR have told us that a turnover-cost analysis was their first realization
that talent and organization decisions had tangible effects on the economic and accounting
processes they were familiar with.
Of course, measuring only the cost of turnover is insufficient for good decision making. For
example, overzealous attempts to cut turnover costs can compromise candidate quality in ways
that far outweigh the cost savings. Managers can reduce the number of candidates who must be
interviewed by lowering their selection standards. The lower the standards, the more candidates
will "pass" the interview, and the fewer interviews that must be conducted to fill a certain
number of vacancies. Of course, lowering standards can create problems that far outweigh the
cost savings from doing fewer interviews! Still, the process element of the LAMP framework
reminds us that often best way to start a change process may be first to assess turnover costs, to
create initial awareness that the same analytical logic used for financial, technological, and
marketing investments can apply to human resources. Then the door is open to more
sophisticated analyses beyond the costs.
Education is also a core element of any change process. The return-on-investment (ROI) formula
from finance is actually a potent tool for educating leaders in the key components of financial
decisions. In the same way, we believe that HR measurements increasingly will be used to
educate constituents and will become embedded within the organization's learning and
knowledge frameworks.
In the chapters that follow, we suggest where the HR measures we describe can be connected to
existing organizational frameworks and systems that offer the greatest opportunity for using
measures to get attention and enhance decisions. For example, the accounting and finance
systems in organizations currently pay a great deal of attention to escalating health-care costs.
The cost measures discussed in Chapter 5, "Employee Health, Wellness, and Welfare," can offer
additional insights and more precision to such discussions. Moreover, starting by embedding
these basic ideas and measures into the existing health-care-cost discussion, HR leaders can gain
credibility to be able to extend the discussion to include additional logical connections between
employee health and other organizational outcomes, such as learning, performance, and profits.
What began as a budget exercise becomes a more nuanced discussion about the optimal
investments in employee health, and how those investments pay off.
You will see the LAMP framework emerge in many of the chapters in this book, to help you
organize not only the measures, but also your approach to making those measures matter. Our
next section illustrates how some alternative measurement frameworks can help us understand
the benefits and limitations of several of today's most popular approaches to HR measurement.
Causal chain Models link employee Useful logic linking Is this the best path
attitudes to service employee variables to from talent to
behavior to customer financial outcomes. profits?
responses to profit.
Valuable for organizing How do our HR
and analyzing diverse practices work
data elements. together?
Source: John W. Boudreau and Peter M. Ramstad, "Strategic HRM Measurement in the 21st
Century: From Justifying HR to Strategic Talent Leadership." In HRM in the 21st Century,
Marshall Goldsmith, Robert P. Gandossy, & Marc S. Efron (eds.), 7990. New York: John
Wiley, 2003.
HRM Operations...Measuring Efficiency
The first row of Table 1-1 describes measures focused on "efficiency" (see also Figure 1-1).
These measures are usually expressed in terms of "input-output" ratios, such as the time to fill
vacancies, turnover rates, turnover costs, and compensation budgets compared to total
expenses.7 These approaches are compelling because they connect HR processes to accounting
outcomes (dollars), and because they can show that HR operations achieve visible cost
reductions, particularly when compared to other organizations. They are frequently a significant
motivator for HR outsourcing. Many applications of Six Sigma to HR tend to focus on such
measures to detect opportunities to improve costs or speed. One of the major limitations of these
types of measures, however, is that they are not really HR measures at allinstead, they are
efficiency ratios that can be used to monitor overhead costs in nearly any staff function. As a
result, efficiency-focused systems can omit the value of talent. Fixa ting on cost reduction alone
can lead to the rejection of more expensive decision options that are the better value. Efficiency-
based measures alone, no matter how "financially" compelling, cannot reflect the value of talent.
Finally, they focus almost exclusively on the HR function, and not on the decisions made
elsewhere within the organization.
These limitations can be seen by an analogy to advertising. It is quite likely that studies would
show an association between financial performance and the presence of television-advertising
activity, perhaps even that advertising activity rises before financial outcomes rise. This would
suggest that among organizations that compete where advertising matters, advertising decisions
relate to financial outcomes. Would it also mean that every organization should advertise on
television? Obviously not.
Thus, these approaches shed some valuable light on the important question of whether HR
activities relate to financial outcomes, and they have made important contributions to HRM
research. However, even their strongest advocates agree that they do not measure the
connections that explain why HRM practices might associate with financial outcomes, and they
do not reflect other key elements of strategic success. They leave unanswered whether and how
groups of employees significantly affect key processes and outcomes.
HR Scorecards
The third row of Table 1-1 describes HR "scorecards" or "dashboards," inspired by Kaplan and
Norton,11who proposed adding measures of "customer" (such as customer satisfaction, market
share, and so on), "internal processes" (such as cycle time, quality, and cost), and "learning and
growth" (systems, organization procedures, and people that contribute to competitive advantage)
to traditional financial measures. HR scorecards include measures aligned and arranged into each
of the four perspectives. Such approaches tie HR measures to a compelling business concept and,
in principle, can articulate links between HR measures and strategic or financial outcomes.
Today's scorecards or "dashboards," built on data warehouses, allow users to "drill down" using
a potentially huge array of variables customized to unique personal preferences. For example,
HR training costs conceivably can be broken down by location, course, and diversity category,
and then linked to attitudes, performance, and turnover. Although impressive, in the hands of the
unsophisticated, such approaches risk creating information overload, or even worse, a false
certainty about the connection between talent and strategic success. As Walker and MacDonald
observed in describing the GTE/Verizon scorecard, "The measures taken in isolation can be
misleading." They describe one GTE/Verizon call center where, "when HR reviewed the call
center results from the HR Scorecard...the HR metrics showed a very low cost per hire, a very
quick cycle time to fill jobs, and an average employee separation rate ... the staffing metrics
showed a high efficiency and cost control." However, the call center accomplished this by
"changing talent pools and reducing the investments in selection methods [that] kept costs low
while bringing in applicants who were ready to start quickly but were harder to train and keep ...a
bad tradeoff." GTE/Verizon was fortunate to have HR analysts who discovered this flaw in logic,
but the example shows that even the best scorecards and drill-down technology alone do not
necessarily provide the logical framework users need to make the best talent decisions.
HR scorecards are also often limited by relegating HR to measuring only the "learning and
growth" category, or by applying the four categories only to the HR function, calculating HR-
function "financials" (for example, HR program budgets), "customers" (for example, HR client-
satisfaction surveys), "operational efficiency" (for example, the yield rates of recruitment
sources), and "learning and growth" (for example, the qualifications of HR professionals). Both
lead to measurement systems with weak (if any) links to organizational outcomes.
Conclusion
HR measures must improve important decisions about talent and how it is organized. This
chapter has shown how this simple premise leads to a very different approach to HR
measurement than is typically followed today, and how it produces several decision-science-
based frameworks to help guide HR measurement activities toward greater strategic impact. We
have introduced not only the general principle that decision-based measurement is vital to
strategic impact, but also the LAMP framework, as a useful logical system for understanding
how measurements drive decisions, organization effectiveness, and strategic success. LAMP also
provides a diagnostic framework that can be used to examine existing measurement systems for
their potential to create these results. We return to the LAMP framework frequently in this book.
We also return frequently to the ideas of measuring efficiency, effectiveness, and impact, the
three anchor points of the talentship decision framework of Boudreau and Ramstad. Throughout
the book, you will see the power and effectiveness of measures in each of these areas, but also
the importance of avoiding becoming fixated on any one of them. Like the well-developed
disciplines of finance and marketing, it is important to focus on synergy between the different
elements of the measurement and decision frameworks, not fixate exclusively on any single
component of them.
We show how to think of your HR measurement systems as teaching rather than telling. We also
describe the opportunities you will have to take discussions that might normally be driven
exclusively by accounting logic and HR cost-cutting, and elevate them with more complete
frameworks that are better grounded in the science behind human behavior at work. The
challenge will be to embed those frameworks in the key decision processes that already exist in
organizations.
The Evolution of HR Analytics: Are We There Yet?
Most large global organisations now utilise sophisticated HR Information Systems, such as
Workday or SuccessFactors. As a result, the HR profession is now in the exciting position of
being able to leverage data to inform strategic workforce decisions in a way that has not
previously been possible. HR Analytics capabilities are still under-developed in most
organisations, and there is a fair way to go before the full and powerful potential of HR analytics
is harnessed.
With many of the compliance and process aspects of HR now located in low-cost shared services
centres, HR Generalists, Business Partners and specialists are now in a position to draw on data
insights and add more value. Importantly, HR analytics also enables the allocation of HR time to
talent issues that have the highest impact, rather than spending time on projects and activities that
deliver less value.
Were now seeing companies work through the initial challenges involved in figuring out how to
best use the systems and data that enable HR analytics. There is a very real risk of information
overload, and also of poor presentation of data, vis-a-vis actually connecting talent metrics to the
stakeholders business priorities or decisions.
Research conducted by the Harvard Business Review indicates that to enable faster and more
effective decision-making, your analytics must be:
1. Relevant: HR analysts need to apply data to the business issue (a top-down approach), rather
than using an unnecessary amount of resources for bottom-up data mining.
2. Valid: The quality of data is important, along with the way business leaders are educated
about the credibility of talent metrics.
3. Compelling: Of the hundreds of HR leaders I speak with each year, one of the most common
goals of analytics is to tell a better story through the data. HR cant just present raw numbers
and expect the recipient to identify the correct message. Analysts need to understand the
audience, create a plot of related storylines, and deliver conclusions that tie together the
principal facts.
4. Transformative: Ultimately, actionable analytics should change a leaders behaviour. As a
result of talent data, a leader must be able to change his or her thinking and make better,
faster decisions. 1
What Are Some of the More Advanced Data-Driven HR Insights Being Made?
We recently spoke with Gina Wood, Senior Advisor Business Analytics, at Deloitte, and she
shared the following data-driven HR insights that she is seeing from the more advanced
implementations:
Other insights include: which learning and development programmes have been most successful?
Do successful team managers have certain common competencies and attributes (success
profiling)? How do you give someone a pay rise or a promotion in a way that maximises
happiness? What is the optimal mix of compensation for certain role types cash? Shares?
Bonuses or more flexible working arrangements? Which HR programmes and investment yields
the greatest productivity?
Were seeing HR analytics becoming more prevalent in informing remuneration, benefits, Short-
Term Incentives, Long-Term Incentives and recognition programmes. It is also a crucial tool in
strategic workforce planning, and its fascinating to see HR Analytics challenge traditional
paradigms, such as whether or not qualifications and grades are a predictor of success.
To read more about performance metrics, check out this comprehensive list with performance
metrics, including Net Promoter Score, management by objectives, number of errors, 360-
degree feedback, forced ranking, etc.
8. Engagement rating
An engaged workforce is a productive workforce. Engagement might be the most important
soft HR outcome. People who like their job and who are proud of their company are generally
more engaged, even if the work environment is stressful and pressure is high. Engaged
employees perform better and are more likely to perceive stress as an exciting challenge, not as a
burden. Additionally, team engagement is an important metric for a team managers success.
As you can see there are a lot of different examples of HR metrics. While some metrics are
easier to implement than others, all of them provide insights into the workforce and HR.
Combining these insights will prove vital for making substantiated decisions with proven impact.
Before you start to work with HR metrics, its important to make sure you understand how
metrics can work for you. What are HR metrics?
Human Resource metrics are measurements that help you to track key areas in HR data. The
most important areas are listed below. In this list of HR metrics we included the key HR metrics
examples associated with those areas.
1. Organizational performance
o Turnover percentages
o % of regretted loss
o Statistics on why personnel is leaving
o Absence percentages and behavior
o Recruitment (time to fill, number of applicants, recruitment cost)
2. HR operations
o HR efficiency (e.g. time to resolving HR self-service tickets)
o HR effectiveness (e.g. perception of HR service quality)
3. Process optimization
Process optimization helps to analyze how we do what we do in Human Resource
Management. The HR metrics and analytics in this area focus on changes of HR
efficiency and effectiveness over time. These HR metrics and analytics are then used to
re-engineer and reinvent what is happening in HR. This helps to optimize the Human
Resource delivery process.
The latter is next level for a lot of organizations as this area is barely prevalent in most
organizations. It therefore represents the highest level of HR metrics and analytics.
11 Key HR metrics
1. Absence rate
Unscheduled absence rate (Absence days/FTE) is a key HR to measure absenteeism. It tracks the
percentage of workers who are absent in a given period. This metric also provides a benchmark
over time: absence levels can differ from month to month, but over longer periods of time you
want the rates to be relatively low and stable. Growing absence rates indicate a worsening work
climate and increased stress levels. An absence rate of about 1 to 2% is normal (because
everybody gets sick a few days a year).
3. Overtime expense
People dont mind working overtime every now and again. However, when overtime goes
through the roof, you can expect your absence rates to follow. Excessive overtime, especially for
longer periods of time (e.g. audit season for accountancy firms), also drives turnover.
Consistently high levels of overtime can be fixed relatively easy by hiring additional employees.
When testing for effectiveness, it is better to set training goals and check whether employees
have reached those goals when the training is over. Companies can also track baseline
productivity and look into the impact of training over a longer period of time. Effective training
is expected to help the employee become better in his/her job and thus raises his/her average
performance level. In other words: after effective training, you would expect the Employee
Productivity Index to increase.
7. Training efficiency
Training effectiveness is important. However, measuring the efficiency of training will help you
make the most of your money.
Training efficiency = training expenses per employee / training effectiveness.
Employee satisfaction with development On one hand, training helps people to become better
at their jobs. On the other hand, training is used to reward and connect people with their
organization. This is why employee satisfaction coupled with available development
opportunities is crucial. In addition, people will only learn when they enjoy what they do. When
employees are unhappy with the companys new and amazing Learning Management Solution,
they wont use the system and thus wont learn.
8. Employee happiness
Employee happiness (also measured as employee satisfaction) is more often recognized as a
valuable HR metric. Happy employees are productive employees, they are committed to the
organization and dont mind working overtime when necessary. Employee happiness is related to
commitment to the organization, and commitment to the job. Low employee happiness in certain
parts of the organization can be an indicator of conflict or work stress.
Of course, retention rates will differ between people with different jobs. However, when similar
teams in similar geographical locations show very different retention rates it indicates that there
is something rotten in the state of Denmark.
Metrics offer many possibilities. If you havent done it already, take a look at our previous blog
on 14 HR Metrics. The metrics we listed enable you to track key HR areas, measure efficiency
and track effectiveness. In the near future, we will post a blog about recruitment metrics. If you
are interested in connecting these metrics through analytics, you should look into connecting
business performance with engagement.
To read about performance metrics, check out this blog with 21 performance metrics, including
the 9-grid, number of errors, Net Promoter Score, forced ranking, revenue per employee, etc.
With the flood of data available to businesses regarding their supply chain these days, companies
are turning to analytics solutions to extract meaning from the huge volumes of data to help
improve decision making
Companies that are attempting to optimize their S&OP efforts need capabilities to analyze
historical data, forecast what might happen in the future. The promise of doing it right and
becoming a data driven organization is great. Huge ROIs can be enjoyed as evidenced by
companies that have optimized their supply chain, lowered operating costs, increased revenues,
or improved their customer service and product mix.
Looking at all the analytic options can be a daunting task. However, luckily these analytic
options can be categorized at a high level into three distinct types. No one type of analytic is
better than another, and in fact, they co-exist with, and complement each other. In order for a
business have a holistic view of the market and how a company competes efficiently within that
market requires a robust analytic environment which includes:
1. Descriptive Analytics, which use data aggregation and data mining to provide insight
into the past and answer: What has happened?
2. Predictive Analytics, which use statistical models and forecasts techniques to understand
the future and answer: What could happen?
3. Prescriptive Analytics, which use optimization and simulation algorithms to advice on
possible outcomes and answer: What should we do?
Descriptive analysis or statistics does exactly what the name implies they Describe, or
summarize raw data and make it something that is interpretable by humans. They are analytics
that describe the past. The past refers to any point of time that an event has occurred, whether it
is one minute ago, or one year ago. Descriptive analytics are useful because they allow us to
learn from past behaviors, and understand how they might influence future outcomes.
The vast majority of the statistics we use fall into this category. (Think basic arithmetic like
sums, averages, percent changes). Usually, the underlying data is a count, or aggregate of a
filtered column of data to which basic math is applied. For all practical purposes, there are an
infinite number of these statistics. Descriptive statistics are useful to show things like, total stock
in inventory, average dollars spent per customer and Year over year change in sales. Common
examples of descriptive analytics are reports that provide historical insights regarding the
companys production, financials, operations, sales, finance, inventory and customers.
Use Descriptive Analytics when you need to understand at an aggregate level what is going on in
your company, and when you want to summarize and describe different aspects of your business.
Predictive analytics has its roots in the ability to Predict what might happen. These analytics
are about understanding the future. Predictive analytics provides companies with actionable
insights based on data. Predictive analytics provide estimates about the likelihood of a future
outcome. It is important to remember that no statistical algorithm can predict the future with
100% certainty. Companies use these statistics to forecast what might happen in the future. This
is because the foundation of predictive analytics is based on probabilities.
These statistics try to take the data that you have, and fill in the missing data with best guesses.
They combine historical data found in ERP, CRM, HR and POS systems to identify patterns in
the data and apply statistical models and algorithms to capture relationships between various data
sets. Companies use Predictive statistics and analytics anytime they want to look into the future.
Predictive analytics can be used throughout the organization, from forecasting customer behavior
and purchasing patterns to identifying trends in sales activities. They also help forecast demand
for inputs from the supply chain, operations and inventory.
One common application most people are familiar with is the use of predictive analytics to
produce a credit score. These scores are used by financial services to determine the probability of
customers making future credit payments on time. Typical business uses include, understanding
how sales might close at the end of the year, predicting what items customers will purchase
together, or forecasting inventory levels based upon a myriad of variables.
Use Predictive Analytics any time you need to know something about the future, or fill in the
information that you do not have.
The relatively new field of prescriptive analytics allows users to prescribe a number of
different possible actions to and guide them towards a solution. In a nut-shell, these analytics are
all about providing advice. Prescriptive analytics attempt to quantify the effect of future
decisions in order to advise on possible outcomes before the decisions are actually made. At their
best, prescriptive analytics predicts not only what will happen, but also why it will happen
providing recommendations regarding actions that will take advantage of the predictions.
These analytics go beyond descriptive and predictive analytics by recommending one or more
possible courses of action. Essentially they predict multiple futures and allow companies to
assess a number of possible outcomes based upon their actions. Prescriptive analytics use a
combination of techniques and tools such as business rules, algorithms, machine learning and
computational modelling procedures. These techniques are applied against input from many
different data sets including historical and transactional data, real-time data feeds, and big data.
Prescriptive analytics are relatively complex to administer, and most companies are not yet using
them in their daily course of business. When implemented correctly, they can have a large
impact on how businesses make decisions, and on the companys bottom line. Larger companies
are successfully using prescriptive analytics to optimize production, scheduling and inventory
in the supply chain to make sure that are delivering the right products at the right time and
optimizing the customer experience.
Use Prescriptive Analytics anytime you need to provide users with advice on what action to take.
The business person is usually trained to do "analytical thinking"; analyzing the past to predict
the future, in order to produce "reliability". The training of a designer is to create something that
is not replicable from the past, and while his creation has to answer a design brief, it is mostly
something he loves, infused with his own aesthetics. The logic used by each of them is very
different.
Designers complain usually that they feel, when working in business, they are designing in
"hostile" territory. For example, one way to encourage designers, is to make their task
challenging and to ask more of them; in terms of finding solutions to multiple complicated
problems. They thrive and enjoy all complicated challenging work, when they
have generous amounts of freedom. They do understand (and often require), well
defined constraints and boundaries. what they don't appreciate, or even comprehend to some
extent, are the obligations and imposed necessities to align with old systems and regulations.
These restrictions would be the surest way to stifle their creativity and hinder the process of
innovation. The favored approach of designers when creating something new, is to dismantle the
reasons this product has to exist at all, then they attempt to rebuild it from scratch, if only in their
mind. This approach is not considered by business people to be an optimal use of time nor
resources; when something is not broken why fix it, goes the saying...
This is where Design Thinking, combining the best of analytical thinking with intuitive
thinking into a hybrid, can be the solution and produces both creativity and longevity.
Creative intuitive thinking is messy, iterative, circular, all over the place. Analytical business
thinking is linear; from A to B, it could zigzag to E and D, but not by too much... Every time the
thinking leaves the straight lines, there is the worry of loosing time and "turning in circles". The
creative thinking lives in the circles, whenever it takes straight lines the designer starts to worry
about his/her level of creativity...
Until I enrolled in the MBA program and got to work with professionals from a variety of sectors
and industries, I had not experienced in depth, the vast differences in these two ways of thinking.
As architects we are taught and trained to exercise both approaches, but I have not had until then
the opportunity to study from close distance, the need for lateral thinking.
I got very interested by the topic and read all I could find about it. Afterward I started observing
closely, the different attitudes to problem solving, whether they were generated by intuitive
each others beautifully, and magic would happen, but also unfortunately they oftentimes
prohibited creativity, by generating misunderstandings and divergence.
For instance every time right brain thinking creatives were asked to find a solution to a problem,
they would favor taking the untrodden route and come up with new novel ways of seeing things,
with loads of different ideas about ways to proceed. Left brain thinking people would get puzzled
at this approach and not even understand, what they considered, a senseless "waste" of time.
They could not empathize (even when trying hard enough) with the intrinsic desire, that spurred
intuitive thinkers to do things in novel ways, different than what had been done before.
In my opinion these differences are rooted in what each "category" considers their "mission" or
added value to be, on a given project, and on a larger scale, within an organization. Redefining
this "mission" while aligning it with Design Thinking, should go a long way in bridging these
two separate approaches.
I just read about Zappos' decision to adopt "Holocracy" , to the tune of great financial and human
costs. While Holocracy (seems to) adopts on purpose a "not yet transparent" approach, it appears,
from the articles written about it, to follow to a certain degree, the same thought movement these
3 TED talks examine.
In my opinion, it is about letting go of the "silos" mentality, encouraging curiosity and exchanges
between different disciplines, and learning about how each person's role affects the rest of the
organization. It is also about enhancing the need to be closer to reality on the ground, making
sure decision processes are more fluid and inclusive, and people can move with ease between
roles.
This is pretty much how small creative agencies had mostly operated for a long time. The
challenge seems to be in finding ways to scale this system, while accompanying growth, without
creating too many layers of management.
Design Thinking is much easier to apply to business thinking, when managers and decision
makers are not too far removed from the reality on the ground.
The domain of human resources management has evolved over the last two decades and the
foraying in of technology has reshaped the domain considerably. Lets focus on one element of
the human resources, namely, human resource information systems (HRIS).
Human resource information systems (HRIS), are, well-defined software programs that allow
HR professionals to store and organize vast amount of data pertaining to employee information.
There are different types of HRIS that every organization makes use of in order to carry out their
daily tasks of managing employees. So what are these different types of HRIS? Heres a look:
I. Operational HRIS
Operational HRIS is of immense help to the manager. It provides the manager with all the
required data to support routine and repetitive human resource decisions. Many operational level
human resource systems collect and report human resource data. These systems usually include
information about the organizations employees and position and also about governmental
regulations. Two major sub-divisions under operational HRIS comprise the following:
Employee information systems is a major part of operational HRIS. Organizations need to keep a
track of an employees records and details pertaining to all kinds of personal and professional
details including name, address, sex, minority status, citizenship, education, past professional
experiences and much more.
The concept of position control systems is introduced in an organization in order to identify each
position within the organization; the job title within which the position is classified; and the
employee currently assigned to the position. Referring to the position control systems, a HR
manager can identify the details about and unfilled position.
grievance matters. Careful documentation of employee performance and of how the performance
hearing. Performance management systems can lead to a number of decisions beyond merely the
decisions to retain, promote, transfer or terminate an employee.
Tactical human resource information systems provide managers with support for decisions that
emphasize the allocation of resources. Within the domain of HR, these include recruitment
decisions, job analysis, and design decisions, training and development and also employee
compensation plans. Tactical HRIS also has a few subparts that are explained below:
workers and affirmative action guidelines. Inputs also comprise information from external
sources to the firm, such as labour unions, competitors and government agencies.
In order to direct the recruiting function, the organization needs to develop a proper recruiting
plan. The plan is designed in order to address gaps such as vacant positions to be filled and skills
required for the employees for these positions. If this plan is to be executed, a proper recruiting
information system is pretty much required, so that everything is executed with proper ease.
This particular information systems may support a variety of tactical HR decisions, especially
when it comes to compensation and benefits systems. Compensation and benefits plan an
important role in the overall productivity of the organization.
Another major aspect where HRIS is extensively implemented is the domain of employee
training and development. The training must be directed at those individuals who are not only
interested but also capable of benefiting from it.
Strategic HRIS focuses on supporting labour negotiations, workforce planning, and certain
specialized human resources software. The main purpose of this is to have an overall good idea
about labour resources and workforce planning. Major types of strategic HRIS comprise the
following:
1. Information Systems Supporting Workforce Planning
Organization that are involved in long-term strategic planning, such as those planning to expand
into new market areas, construct factories or offices in new locations, or add new products, will
need information about the quantity and quality of the available workforce to achieve their goals.
Information systems that support workforce planning serve this purpose.
There has been a great deal of software that has been designed for the proper functioning of the
human resources. Software that is specifically designed for the human resource management
function can be divided into two basic categories: comprehensive human resource information
systems software and limited-function packages that support one or a few human resource
activities.
The computerization of HRIS has resulted in an integrated database of human resource files.,
employee files, position, skills inventory files, affirmative action files, job analysis and design
files, occupational health and safety files, and many other human resource files are constructed in
a coordinated manner using database management systems software so that application programs
can produce reports from any or all of the files.
HRIS was introduced so that the overall human resources domain is able to function in a much
easier and simpler way. Today, also most all organizations across the globe has started
implementing HRIS and are benefiting from its use to a great extent.