WHILE FEW companies make significant use of people measures to meet their strategic targets, many will increase their use of these tools over the coming years, a US study has found
WHILE FEW companies make significant use of people measures to meet their strategic targets, many will increase their use of these tools over the coming years, a US study has found.
Taking in 104 HR executives, the study found that 84 per cent of executives predicted their use of human capital measures will rise during the next three years. However only 12 per cent were currently using people measures to a significant degree.“When determining how best to demonstrate achievement, human resource managers must choose from the hundreds of metrics that are currently available to track every aspect of an HR department’s endeavors to recruit, develop, and retain employees,” said Stephen Gates, principal researcher at The Conference Board, which conducted the study.
“What’s imperative for the health of their businesses, however, is that these HR professionals tie these people measures more closely into their efforts to meet their companies’ overall strategic targets.”
The survey found that companies were still struggling to mesh people metrics with overall corporate goals.
Only 31 per cent believed that HR executives had a strong understanding of strategic key performance indicators, while 25 per cent felt their HR leaders were capable of linking people measures to such indicators and just 16 per cent received extensive training to connect people measures to strategy.
While 51 per cent of HR executives said that HR professionals in their companies were partially capable of identifying talent critical for implementing strategy, only 22 per cent said they’re fully able to identify strategic talent pools.
Traditionally, HR professionals have employed metrics to study the time and cost of utilising people, according to the report, Measuring More Than Efficiency: The New Role of Human Capital Metrics.
But, when used to evaluate the effectiveness and impact of people investments and HR activities, people measures were more likely to provoke discussions with managers that lead to action plans, serve as educational tools that help bring implicit ideas about the value of human capital to the surface and improve the HR decision-making process.
When popular individual measures were correlated with important perceived benefits, the study found that certain people measures have been successfully linked to specific strategies.
For example, employee satisfaction and competencies/training metrics were found to match a policy of customer responsiveness. Leadership and competencies/training measures were found to have solid connections to innovation strategies. Remuneration and leadership measures could help boost revenue growth.
Most of the companies only partially tied their people measures and targets to strategic plans (52 per cent) or annual budgets (46 per cent). Half reported that their people metrics were fully or partially linked to customer data.
Many companies were also trying to build support for their people metrics efforts, including collaborating with colleagues from finance (54 per cent) and strategy (45 per cent) and employing business managers as champions for people measures (43 per cent).
Before HR professionals could determine if human capital measures had an impact on educating managers or setting strategic goals, the study found they needed adequate IT to capture data that supports these connections.
With only 19 per cent of HR executives giving their IT a high rating in terms of gathering HR data, the dilemma was to make sure they selected the IT capabilities that best support people measures.
Beyond the purely technical obstacles involved in choosing and applying people measures, internal politics presented a significant challenge to the successful use of metrics. Measurement could be considered by some to be a primarily rational exercise, but it had an impact on performance ratings, prestige, power and resource allocation.
“If people metrics highlight a problem that could be interpreted as critical of a business manager’s performance, then the manager could be tempted to distort or suppress the negative data,”said Gates.
“When they point to a problem with HR’s functional activities, then HR could also be motivated to hide negative data. In both instances, manipulating people data destroys the diagnostic power of the people metrics effort.”
People measure reports were most commonly delivered to senior management, which is the practice at 78 per cent of companies. In a few, business managers, not HR representatives, presented information back to business divisions directly, greatly enhancing the credibility of the process with those divisions.
“However, the finding that only 19 per cent of companies distribute briefings on people measurement to all of their business managers indicates that many companies do not view these reports as decision making tools for managers,” concludes Gates.
