How HR can link workforce metrics to business outcomes
Unfortunately, most of the people metrics HR leaders track as often as their FitBit score don’t grab the attention of the C Suite the way they’d like. And, as a result, the metrics that are reported to CEOs and the executive committee result in no positive action being taken.
So, if your HR metrics don’t directly and unambiguously cover strategic goals like increasing productivity (thereby increasing revenue) and innovation, or contributing factors like quality of talent and turnover of high performers, they simply won’t drive executives to act.
While it might be impossible to capture performance of a division, function, manager or even employee in one single metric, a suite of metrics like these carefully chosen for your context, can help you give your CEOs the value they’re looking for.
1. Productivity index
Why CEOs care
Most organizations are moving towards a project or mission-focused structure so they can deliver on specific objectives or goals (such as a new feature release) in shorter cycles.
This means that setting goals well and achieving them on time is paramount. The productivity index should help you evaluate how productive a certain demographic within your organization (such as a function or a manager’s team).
If goals or projects are being tagged against strategic objectives, you can also track productivity against each strategic objective to see which ones you’re doing well against and which ones you’re lagging behind on.
How to measure it
How you define projects / goals / work allocation might differ between organizations and functions and will require careful consideration. Keep in mind the average duration of your goals while evaluating this metric as well, if the larger goal seems to span beyond 6 months make sure you’re breaking it down into small milestones that can be tracked not only for monitoring progress, but also measuring productivity.
For those following a standard goal and target setting methodology:
(Number of goals met on time in review period / Number of goals set for review period) * 100
For those following a project scope methodology:
1. Identify the scope, final deadline and midway milestones for a particular project
2. Identify # of milestones met on time or the volume of work completed and the amount of time that has passed
3. Extrapolate percentage completion by due date basis current scenario e.g. if things continued at current pace we would achieve 90% completion on due date
2. Engagement level and eNPS
Why CEOs care
While both pulse and engagement surveys capture employee sentiment at a moment in time, they're also valuable for forecasting employee behavior. Engagement is one of the most reliable predictors of attrition or turnover. Given that the cost of losing a great employee can be 2X their salary, it's no surprise CEOs find value in this metric.
How to measure these
While most organizations will include an employee net promoter score or eNPS in their engagement survey, we highly recommend capturing deeper feedback around the employee experience via directed questions around specific engagement drivers. Such as: relationship with reporting manager, opportunities for growth, work environment, nature of work, etc.
Once you’ve arrived at your survey, the most common way to arrive at this score is by generating the mean scores for the series of questions relating to an engagement driver.
3. Attrition or employee turnover
Why CEOs care
The power law or long tail distribution of the quality of performers in an organization shows the importance of ‘hyper’ performers. Depending on your industry and context, the contribution of hyper performers could be anywhere between 2.5x to 10x that of an average performer. Hence to take any good decisions about retaining talent, understanding reasons behind turnover of their top talent is important for the leadership.
How to measure it
(Number of high performers who resigned in a time frame / Total number of high performers at start of time frame) * 100
4. Employee utilization variance
Why CEOs care
For organizations following a project or goal oriented work structure, it is critical to ensure there is optimal utilization of the workforce in delivering output to avoid over-staffing or under-utilization of staff so as to maximise profitability.
Before taking this data point to the leadership, HR could also contribute by proactively speaking with business leaders to identify reasons and solutions for under-utilization, over-staffing and over-utilization (which can lead to burnout).
How to measure it
(Total person hours allocated to active projects or goals by individual in a time frame / Total person hours available in the time frame) * 100
Depending upon how your organization allocates hours / days to projects, the same calculation can be run based on days as well. E.g.: Top talent in marketing was only utilized for 17 days of the month, i.e., under-utilized by 22%
5. Hire quality
Why CEOs care
The faster new hires can achieve average or more than average productivity on the job, the faster the overall productivity will improve and hence profitability will improve.
If you can also prove the quality of your talent search and acquisition efforts via this metric, it’s a win-win for HR. Especially at a time of economic uncertainty like now, any investments made in talent in the last 6 months are critical.
How to measure it
The measurement of this metric depends on how you follow goal setting or project allocation.
For those following a standard goal and target setting methodology:
In an ideal scenario, you would want your new hires to achieve 100% of their allocated goals on time. Hence:
(Number of goals met on time in review period by new hire / Number of goals set for review period for new hire) * 100
For those measuring monetary contribution by a role such as roles in sales, collections or call centers:
(Average monetary contribution of the new hire in a time frame / Average monetary contribution of a top performer in the time frame) * 100
By comparing performance to that of top performers, it might seem like you’re setting an unrealistic target at first but you also show your commitment to bringing in top talent who will make a higher than average contribution to the bottom line. For organizations with more advanced data analytics capabilities, HR could also work with the CFO to estimate the total revenue or profit increase as a result of better performing new hires.
Any people metric is only as strong as the quality of data being recorded in the first place. Tools like Mesh help HR capture all these data points and more in real time, and by important demographics like manager, level, location, etc. so that you can deep dive and generate actionable insights for business managers and leadership alike.
To learn more about how Mesh could help you bring value to your CEO.
