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Measuring Up
Few HR leaders seem to have the ability to identify and analyze the human capital metrics that would make the most impact on their organization, according to a recent study. But most believe the need for metrics will only grow more important.
HR leaders believe human capital measurement is important -- and will become even more critical in the coming years. But most believe they may not have the tools or skills to meet the increasing demands of HR reporting and analytics, a survey has found. Although the survey focused on HR leaders in Europe, the findings apply in the United States as well, according to Brian Kelly, the president of the North American operation of Infohrm, an Australian consulting firm that specializes in workforce planning and reporting and human-capital analytics. As HR is being called upon to become more strategic, and to identify the levers needed to improve productivity and reduce turnover, HR is moving from measuring efficiency to effectiveness, says Kelly. But, he says, the survey of 60 European HR leaders found that only about one-fourth have successfully made that transition. And, he estimates that less than one-third of U.S. companies "have a comprehensive framework for workforce analytics and planning." Part of the problem is older, transactional-oriented technology that can only look at limited data -- such as diversity and demographics. Modern human-capital analytics, however, requires that a wide array of information be gathered in one place, says Mick Collins, the firm's director of marketing for North America. Such information can include data on applicants and current employees, results of employee engagement surveys and a firm's financial details, he says. But even organizations with the technology to gather such information may not know the best way to analyze it, says Kelly. "HR and the business leaders are not always able to articulate what they want to measure," says Kelly. They'll say, "Now that I have all my data in one place, I don't know what to do with it." The survey of European HR leaders found that most believe human capital measurement will increase in importance in the next five years. And the leaders surveyed identified three areas that show the greatest opportunities for analytics: workforce planning, employee engagement and satisfaction, and training and development. However, the HR leaders were worried that without the right technology and analytics skills, they won't be able to take advantage of those opportunities, the survey found. John Boudreau, professor of management and organization at the University of Southern California's Marshall School of Business, says he agrees with the survey's findings. "Existing measurement systems were never built to offer decision support" for human capital measurement, he says. However, the need for good measurement will grow, he says, as the "competition for and with talent" heats up. HR executives know they must make key human capital decisions to be competitive, but they're saying, "I don't have the confidence to make those decisions well," says Boudreau. "They're saying, 'Our current measurement systems don't seem to be up to snuff.' " Boudreau says HR is lagging in four components of human capital measurement: * Logic: Understanding what information is needed and how to think about it. "This is about understanding the story you need to tell," says Boudreau. * Analytics: Knowing how to use the data, without being fooled by it. For example, it's important that executives don't mistake a correlation for a cause. * Measures: The numbers. Boudreau says "we're awash in numbers," but there's far less understanding of what to do with them. * Process: Persuading decision-makers that the measurement is valuable. This is about getting people to listen to, understand and act on what you want to accomplish, says Boudreau. January 16, 2008 Copyright 2008© LRP Publications |
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© Copyright 2010 LRP Publications. All rights reserved.
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