According to a recent study from the Harvard Business Review surveying 168 business leaders, two-thirds of HR departments are using HR metrics, but less than one-quarter deliver metrics to the CEO that link HR metrics to business results. Why the gap? According to the same study, only 39 percent of leaders agree that HR is able to quantify the business impact of the people strategy.
Linking HR performance metrics to business results can be challenging, but can also result in a competitive advantage for your organization by maximizing the value of your HR spend. To efficiently and effectively link HR metrics to business results, it’s important to keep in mind these three questions:
Let’s look at things your CEO might want to know and see how the framework applies:
What information are CEOs looking for?
Let’s assume your CEO wants to know what was spent last year on recruiting. On its face, the question is about cost. Since HR is not a revenue generating function, this is often the case. However, the quality of talent you are bringing into the organization has a massive impact on revenue, so it’s important to understand the link. Your CEO will be thrilled if a $100 million investment results in $1 billion in revenue. Conversely, your CEO will be agitated if either A) that $100 million investment results in $50 million revenue. Or B) the benefit can’t be quantified. So let’s revisit the question. What is the question that’s being asked here? See below for two ways to answer.
On the left, you’ll find that the question has been answered. You can quickly see how much has been spent on recruiting spread over four quarters. Left without additional context or analysis, your CEO’s reaction will range from mild disinterest to annoyance that costs are rising. On the right, you see a far more developed story. In addition to Cost-to-Hire, we’ve layered in a 90-day turnover metric, an industry benchmark, and several data points on productivity and employee newness. Now you’re ready to speak the language of business. That small increase in recruiting spend has reaped massive benefits for the organization. Your additional layer of analysis didn’t answer the exact question that was asked, but it answered the more important question.
How are you accessing information?
Having access to clean, consistent, well-defined data is a critical first step in building your organization’s people analytics capability. What’s your process for gathering and synthesizing data for complex metrics like regrettable attrition? Loss of high performers, people in hard-to-fill positions, and people with less than one year of tenure can all be classified as regrettable loss. When you’re analyzing and reporting on a metric as subjective as regrettable attrition, though, it’s important to keep in mind a few things:
How are you telling the story?
Just reporting data isn’t enough. To influence strategic direction with people data, you need to present a compelling story and a clear perspective. As an HR leader in 2018, you may be focused on reducing pay inequities between men and women, and how you present this story to your CEO will impact the direction your company takes.
First, consider the likely questions and/or objections your fellow leaders may have, and be familiar with data that supports your POV. Regarding the gender pay gap, many people might raise experience level, performance and job title as explanations for a gender gap in compensation. Be sure you have the information necessary to respond to these.
Next, identify root causes that are contributing the most to the gap. One useful framework is to ask “Why” five times. Take the following fictional situation, where an HR leader delves into an internal pay gap:
In this situation, asking the five Whys has revealed a cultural issue where a common behavior by both men and women has been received differently and caused cultural divide and narrowed potential solutions. In this case, however, the company may wish to train employees on subconscious biases, communicate more transparently about gender issues, or review performance management criteria across the organization to ensure consistency.
Finally, present your findings in a way that is visually compelling, drillable and easy to understand. Here is where people data dashboards can be useful tools. Rather than spending time creating and recreating dozens of PowerPoint slides, consider developing a dashboard within your HRIS, or within a simple Business Intelligence tool like Tableau or Microsoft Power BI, which allow you to rapidly generate high impact visuals, slice and dice data, and quickly respond to your CEO’s questions. Building powerful dashboards requires several steps: requirements gathering, metric identification, front- and back-end development, and operationalization, but the benefits – rapid visualization, analysis, and focus – are well worth the investment.
Linking HR data to business data will help you shape and drive your organization’s strategy. Understanding what your CEO cares about, how to quickly access information, and how to convey a compelling story will allow you get the most out of your people data.
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