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As you begin to determine what calculations you will make, ask yourself some questions about data collection.

Did you hate math in school? Do you dread the thought of calculating metrics for your management team? This article will help you understand why you need to create metrics, how these metrics increase HR’s value in the eyes of other senior managers and which metrics you should start with.

To begin with, all human resources professionals should have a “how to” book about metrics in their library, such as How to Measure Human Resource Management by Jac Fitz-enz (McGraw-Hill, 2001). When I need to initiate a project or calculate the return on investment for an initiative I’m proposing, it’s a wonderful reference.

Why Bother?

Years ago, I learned about metrics the old-fashioned way (translation: the hard way). I worked for a company where HR had a seat at the table but was expected to be seen and not heard. I would watch as my peers introduced new ideas and projects to wide support and funding. But when I introduced my ideas, to my frustration, they didn’t get the same enthusiastic response.

I spent time figuring out how to refine my approach and realized that, to be successful, employees must do three things:

• Be good at their jobs.
• Have a purpose that positively affects their organization.
• Use their performance to prove that they are good at their jobs. This is how they get what they ask for.

A few weeks later, I went back to the table with an initiative and, crucially, with the numbers to substantiate it. The idea and the resources were approved. I learned a valuable lesson: Metrics (i.e., the numbers) help you “sell” your position.

Who Wants To See The Numbers?

Your senior management team, as well as the human resources team, will be interested in reviewing any metrics reports. The organization will use your numbers not only as a gauge of performance, but also as a catalyst to take action.

For example, let’s say your manufacturing company plans to open a new plant. Your HR metrics will be used to establish when to begin recruiting efforts, how much to spend on recruitment advertising, and when to schedule any initial training efforts—just to name a few uses.

People outside the company also will be interested in your metrics. Using the above example, the plant you are opening might bring a lot of new jobs to the area and, thus, might qualify for local or state workforce grant dollars.

Your numbers also might be used as supporting documentation for “best practices” awards for your company or industry.

In addition, you might find it valuable to share certain metrics with potential job applicants. If, for example, your company has extremely low employee turnover or a high internal promotion ratio, it might be smart to incorporate these metrics into your recruitment marketing strategy.

What Can Metrics Do For Your Organization?

Metrics can be used as an internal gauge of performance.

• They keep the focus on important issues (for example, customer service satisfaction, employee satisfaction, profitability, quality assurance).
• They clarify expectations (for example, tying the management bonus structure to performance).
• They align the HR department with operational departments and reinforce that the HR department understands the company’s business.

How To Get Started

Before you begin publishing any metrics reports, be sure to familiarize yourself with some key operational metrics.

• Revenue.
• Profit margin.
• Market share.
• EBITDA (Earnings before interest, taxes, depreciation and amortization).

You will want to show that a connection exists between your numbers and the operation. This is where some people completely miss the boat. They create the numbers but don’t link them to the operation. That’s like cooking a great meal and not serving it. Metrics must always be tied back to business objectives.

Listed below are a few of the most common HR calculations. You can use these as a starting point.

Practical Example: Cost per hire is a calculation you can use any time you are hiring. Let’s say you are a consulting firm bidding on a big project. Cost per hire can help you estimate the costs associated with adding new positions as part of being awarded the contract for the new project.

Note: Cost to terminate includes severance, unemployment, exit interviews, legal fees, temp replacements, etc.

Have you walked your line managers through this exercise? Be sure to:

• Share your recruiting expenses with your operational managers.
• Divide the total recruiting expenses by the number of people you’ve hired. That’s a rough estimate of cost per hire.
• Have your managers multiply cost per hire by the number of people they’ve hired in their departments during the year.

They will be surprised. Trust me. My operational teams gained a greater understanding of the large investment that the company makes when hiring a new employee. And they became better at weighing the cost of training an employee vs. terminating an employee.

Note: Define what status of employee you will monitor. It might not make sense, for example, to monitor temporary employees. It could skew the statistics for your full-time staff and lead you to false conclusions. Consider conducting a position-specific analysis.

Practical Example: You work in a hotel. You know that it takes an average of three weeks to fill a job requisition. In addition, once hired, housekeepers take two weeks of training to become fully productive.

Operational managers need to realize that best-case scenario for filling a vacancy is five weeks from the time that HR is notified of the vacancy. In this scenario, it’s important for the housekeeping department to let HR know of an opening as soon as possible (and not after the employee has left) to fill the opening sooner.

Last one to consider:

Compiling the Data

As you begin to determine what calculations you will make, ask yourself some questions about data collection.

• Decide who will be responsible for collecting the data. Is it one of your line managers? Talk with that person and get his or her buy-in. Everyone in the chain of data collection must know the whys and what-fors to make this a success.
• Determine what infrastructure is necessary to collect the data (for example, log sheets, computer system, etc.).
• Establish a starting point for the metrics. It can be a daunting task to go back in time to capture historical data.Don’t let that hinder your metrics initiative.
• Choose a frequency for distribution (weekly, monthly, quarterly or annually).

Because this could be a new process for your management team, make your initial reports easy to read. One human resources executive I know puts a red light or a green light next to metrics, so managers can quickly interpret the results. As you get more historical data, another option might be to include a trend summary.

The key in reporting data is to find out what data your managers find most useful. This offers HR an opportunity to demonstrate value.

Lessons Learned

Exercise caution when evaluating what the numbers mean. Here are a couple examples to demonstrate the importance of looking beyond the surface when it comes to metrics.

Which is better—Program A or Program B?
Program A may seem to be better. But, what if I told you that employees hired under Program A stay with the company for two years while those hired under Program B stay for five years? Does this alter your thinking?

Don’t Make It Harder Than It Is

We’ve all heard the term “analysis paralysis.” Keep your metrics simple, easy to read and pertinent to company goals and objectives. If you send out too much data, people will not read it. I’ve created pages of great data only to find that it was more than senior management wanted. Once I trimmed down to a few key statistics, I got better feedback.

Metrics are a necessary part of business. If you start simple and align your numbers with the business goals and objectives, you are sure to get results.

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