Future Trends of HR Metrics
This article was co-written by Jay Jamrog and Mary Ann Downey.
We've been asked a lot lately about the future of HR metrics. In order to answer that question, it's essential to first see how far HR analytics and metrics have come. And, although the past isn't necessarily a good predictor of the future, it's a good place to start.
Over the past 25 years, much has been written by practitioners, consultants, academics and gurus calling for the HR profession to step up and install better ways to measure not only the efficiency but also the effectiveness of the various HR functions. Even more important is a call for the measures that will show the impact that HR is having on the organization as a whole. The theory is that this would lead to more enlightened strategies for managing human capital and give HR the long-lost respect that the profession deserves.
So, how far have we come in 25 years? Unfortunately, the answer is mixed. While a few organizations are making good progress, the vast majority are not. The results of i4cp's 2009 survey on the topic showed that while almost three-quarters of the respondents said that they had HR measurements in place, most were measuring only the efficiency of various HR functions and programs. Less than a quarter were attempting to develop effectiveness metrics, and very few were measuring the impact on the organization (unless you believe that engagement and satisfaction surveys are providing a reliable gauge for measuring the impact that HR is having on the organization).
No board or CEO would ever accept this paucity of data from any other department. If marketing were measuring efficiency only, they would be reporting something like, "Last year, marketing placed more ads in more magazines at less cost." This wouldn't be greeted favorably by decision-makers. They would demand that marketing give them data on the effectiveness and impact of the campaign: "Did it boost sales? Did it increase marketing share?"
So, what can HR do? We know from studying those companies that are making progress in measuring the efficiency, effectiveness and impact of HR that building a thriving human capital management metrics process takes four ingredients: good people information, a culture that makes decisions based on data, effective tools and dedicated resources. But we also know that most organizations aren't willing to devote much time and effort to this process. As a result, absent a major breakthrough, we believe that for most organizations, the measurement of human capital management will look only incrementally better 10 years from now.
But organizations willing to devote the resources to sustain the effort over the next 10 years will see real progress. Over time, continued collection of historical data on efficiency, effectiveness and impact - along with external data - will help them to build better predictive models. These models will help them gain a deeper understanding of how people add value to their processes, leading to even better predictive modeling and, subsequently, better decision-making. These cutting-edge organizations will eventually have predictive models that will help determine which roles, skills, knowledge and behaviors increase productivity, drive profitability and give the organization a competitive advantage. Through better employee planning and development, employee engagement should increase with new transparency and empowerment. There will be a virtuous cycle, because the talented and driven will want to join these companies, making them the new employers of choice and role models of the organizational world. They will represent real-world versions of a modern managerial ideal: the organization that is so excellent in so many areas that it consistently outperforms most of its competitors for extended periods of time.
Is your organization in the forefront, or are you being left behind?
We've been asked a lot lately about the future of HR metrics. In order to answer that question, it's essential to first see how far HR analytics and metrics have come. And, although the past isn't necessarily a good predictor of the future, it's a good place to start.
Over the past 25 years, much has been written by practitioners, consultants, academics and gurus calling for the HR profession to step up and install better ways to measure not only the efficiency but also the effectiveness of the various HR functions. Even more important is a call for the measures that will show the impact that HR is having on the organization as a whole. The theory is that this would lead to more enlightened strategies for managing human capital and give HR the long-lost respect that the profession deserves.
So, how far have we come in 25 years? Unfortunately, the answer is mixed. While a few organizations are making good progress, the vast majority are not. The results of i4cp's 2009 survey on the topic showed that while almost three-quarters of the respondents said that they had HR measurements in place, most were measuring only the efficiency of various HR functions and programs. Less than a quarter were attempting to develop effectiveness metrics, and very few were measuring the impact on the organization (unless you believe that engagement and satisfaction surveys are providing a reliable gauge for measuring the impact that HR is having on the organization).
No board or CEO would ever accept this paucity of data from any other department. If marketing were measuring efficiency only, they would be reporting something like, "Last year, marketing placed more ads in more magazines at less cost." This wouldn't be greeted favorably by decision-makers. They would demand that marketing give them data on the effectiveness and impact of the campaign: "Did it boost sales? Did it increase marketing share?"
So, what can HR do? We know from studying those companies that are making progress in measuring the efficiency, effectiveness and impact of HR that building a thriving human capital management metrics process takes four ingredients: good people information, a culture that makes decisions based on data, effective tools and dedicated resources. But we also know that most organizations aren't willing to devote much time and effort to this process. As a result, absent a major breakthrough, we believe that for most organizations, the measurement of human capital management will look only incrementally better 10 years from now.
But organizations willing to devote the resources to sustain the effort over the next 10 years will see real progress. Over time, continued collection of historical data on efficiency, effectiveness and impact - along with external data - will help them to build better predictive models. These models will help them gain a deeper understanding of how people add value to their processes, leading to even better predictive modeling and, subsequently, better decision-making. These cutting-edge organizations will eventually have predictive models that will help determine which roles, skills, knowledge and behaviors increase productivity, drive profitability and give the organization a competitive advantage. Through better employee planning and development, employee engagement should increase with new transparency and empowerment. There will be a virtuous cycle, because the talented and driven will want to join these companies, making them the new employers of choice and role models of the organizational world. They will represent real-world versions of a modern managerial ideal: the organization that is so excellent in so many areas that it consistently outperforms most of its competitors for extended periods of time.
Is your organization in the forefront, or are you being left behind?
Jay is a futurist and has devoted the past 25 years to identifying and analyzing the major issues and trends affecting the management of people in organizations.