Determining what metrics to measure and report will depend on an organization’s strategy and goals. When high-level executives ask the HR team to start measuring the department’s performance, some HR staffers scramble to figure out what they should measure. Measurement just for the sake of providing statistics is never a good idea. As business writer Peter Drucker stated, “What gets measured gets managed,” so implementing an HR reporting system should be carefully planned.
A good approach is to focus on the metrics that affect progress toward business goals. However, assessing what data are meaningful, determining how to measure them and choosing appropriate communication methods can seem daunting.
For help in choosing what HR metrics to focus on, HR professionals may want to consider the following:
- Review business strategy and both long- and short-term goals with C-suite executives to ensure HR is aligned with these objectives. Identify how HR will contribute to achieving those goals, and pinpoint which measurements will provide targeted, relevant information about how those functions affect business objectives and strategies.
- Define each HR metric and its formula. Not all organizations define metrics the same way or use the same formulas. For example, some companies measure the cost for each new hire without including payment for recruiters as a related expense.
- Determine what data must be collected, what collection methods are available and how the data will be gathered. For instance, will all data for cost-per-hire be captured in human resource information systems? Or will some data need to be obtained from another department?
- Decide how often HR metrics information will be collected and reported. Will it be monthly, quarterly or annually?
- Choose what format will be used to report the data and who will receive the report. Will the data be part of a regular operations report or scorecard? Will it be a stand-alone document? Who will receive the report?
- Review what is being measured on a regular basis to ensure that HR is providing relevant information. Have goals changed? Does HR need to be providing different metrics to support business objectives?
An effective HR metrics reporting practice provides measurable value to the organization. For example, if corporate leaders want to open new locations each year for the next few years, measuring the cost for each new hire and the new-hire turnover rate may be important. Cost-per-hire metrics will assist in budgeting. An increase in the new-hire turnover rate may indicate problems with the hiring process or managers at the locations. Understanding this information allows HR professionals to revise hiring processes and retention strategies to support business objectives.
HR metrics can help pinpoint where human capital issues exist and allow HR staff to monitor trends. Information from appropriate HR metrics can be used to assess, plan and improve HR as well as to contribute to achieving business strategies and objectives.