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A CEO confides to the HR consultant that he is very frustrated with the HR Division of his company. There seems to be a steady stream of recruits being interviewed but the output and quality of work coming out of one of the companys critical departments is declining and there is a steady change in faces in the department
Case Study
The CEO is aware that HR is collecting information on absenteeism and turnover and is conducting exit interviews however nothing is reported back to him. The strategic and operational plan of the company is hinged on the success of the department in question. He is beginning to believe that HR is not supporting the strategic agenda of the company and is talking about changing the leadership in the HR Division
HR should care about Metrics because CEOs and Senior Executives care about the impact of HR on performance and they care about numbers and tangibles.
Metrics that are aligned with business objectives and operational capability are business intelligence tools for HR Metrics track the impact of HR on the business and behaviour of people to improve performance.
Mediocre Measures
A Metric is using a number to enhance a story or argument an Accountability Tool HR was busy. We filled 45 out of 50 vacancies over a 6 month period. HR Programs are working. Company Turnover in the last quarter decreased from 8% to 6%. Absenteeism this month is 10 days versus 15 days last month.
Strategic HR Metrics
A better and more interesting story if the following questions are answered:
How many of the 50 vacancies were key jobs? How long, on average, did it take to fill the jobs? How satisfied were the managers with the recruitment process and results? How many of the new hires reached performance level after 3 months?
HR Doables
Metrics can be internal to HR with an Operational and Task Focus How HR Operates: This is the most common approach used today. Examples: We filled 45 out of 50 vacancies. We conducted 20 exit interviews this year.
HR Deliverables
How HR impacts on the organization Strategic Metrics: Consider impact of HR initiatives across the organization and links Metrics to the Business Strategy Contribution of HR to make the business model a reality. Goes beyond activity-based measurements and focuses on metrics that are in synch with business goals. These metrics are reported to the CEO
HR Deliverables
Example: Strategic Focus: Recruitment of best in marketplace HR filled 45 out of 50 vacancies. After 6 months, 40 of the 45 passed probation and performance ratings ranged from Meets expectations to Outstanding. These metrics show that HR recruitment processes are resulting in quality hires for the company. 80% of managers surveyed were more satisfied with the recruiting process than last year as a result of quality hires and retention of top performers
HR Deliverables
Example: Strategic Focus: Retention of top talent The turnover rate of our top 25% rated employees is below 5%. Employee Survey results show that the performance bonus system put in place to recognize top rated employees as well as flexible scheduling were the key reasons for the drop in turnover. When compared with our industry, we are well above our competitors.
Becoming World-Class HR
Back to our Case Study Using Metrics In the case of our frustrated CEO: HR needs to know what the business plan is and the importance of XY department in achieving overall business targets. Discussions with the CEO and senior executive will clarify the company objectives and allow HR to align HR objectives. HR needs to regularly gather feedback on how satisfied the CEO and senior executive is with HR services including recruitment.
Becoming World-Class HR
Back to our Case Study Using Metrics HR needs to develop recruitment and turnover metrics that indicate the quality of hires and the reasons for turnover. Are the low performers or top performers leaving? What are the reasons for turnover? pay, supervisor, poor fit? Communicating the HR metrics to the CEO will clarify the questions he has, reduce his frustration and concern, and demonstrate the value of HR in achieving the business objective
Organizational/Strategic Metrics
1.
2. Productivity Ratio: What is our output (productivity) for every dollar of people costs spent? 3. People Profit: The number of people dollars spent in order to get one dollar of profit. 4. Employee Pulse/Satisfaction: What are employees saying? People costs include salaries, benefits, training & HR Dept cost
Have we hired more productive people this year than last year? What is new hire time to productivity?
2. Failure rate: What % of the people that we hire are a mistake? What happens to them? Track number of employees who leave voluntarily before probation or do not meet probation
What is the turnover rate of our key/top performers? Compared to our competitors?
Response Time
RT = RD -RR
RT = Response time RD = Date first qualified candidate was referred for an interview (e.g., Sep 22) RR = Date of receipt of job requisition (e.g., Sep 4) RT = 18 days
Time to Fill
TTF = RR - OD
TTF = Time to have an offer accepted RR = Date the requisition is received (e.g., Sep 4) OD = Date the offer is accepted (e.g., Oct 20) Time to Fill = 46
Time to Start
TTS = RR - SD
TTS = Time till the new hire starts RR = Date the requisition is received ( Sep 4) SD = Date the new hire starts work ( Nov 10) TTS = 67
Referral Factor
RF (%) = R/O
RF = Referral Factor, relationship of candidates to openings R = No. of candidates referred for an interview (134) O = Number of Openings (19) RF = 7.4%
Hire Rate
HR (%) = I/A
HR I A R H HR
R/A
H/R
H/A
= Hire rate = Interviews (30) = Applications received (120) = Referrals (10) = Hires (4) = 25% 33% 40% 3%
Quality of Hire
QH = (PR + HP + HS)/N
QH PR HP HS N QH = Quality of the people hired = Average job performance ratings of new hires (e.g., 4 on a 5-point scale, or 80%) = % of new hires promoted within 1 year (e.g., 36%) = % of new hires retained after 1 year (e.g., 70%) = Number of indicators used = 62%