HR Executives Will Be Looking More At People Measures To Meet Company Goals.

While few companies make significant use of people measures to meet their strategic targets, a majority say that they will increase their use of these tools, according to a report released by The Conference Board.

Eighty-four percent of the 104 human resources executives surveyed for the report predict that their use of human capital measures will rise during the next three years. Only 12 percent say they are 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,” says Stephen Gates, Principal Researcher at The Conference Board and author of the report. “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.”

“Though widespread adoption has been slow, we all see that our best practice customers are beginning to use people metrics to understand and drive business decisions,” says Lisa Hartley, Director HCM Marketing, PeopleSoft, which supported the research. “We’ve had great people data for a long time. It’s just that it hasn’t been presented in a relevant way. That is finally changing. We believe that the use of analytics is nothing less than transformational to making HR relevant to the strategic needs of the business.”

Is HR Up To The Task?

The survey shows that companies are still struggling to mesh people metrics with overall corporate goals. Only 31 percent of survey participants say that HR executives in their companies have a strong understanding of strategic key performance indicators. Even fewer (25 percent) surveyed consider their HR leaders capable of linking people measures to such indicators or (16 percent) believe that HR professionals receive extensive training to connect people measures to strategy.

While 51 percent of survey participants say that the HR professionals in their companies are partially capable of identifying talent critical for implementing strategy, only 22 percent say these executives are fully able to identify strategic talent pools.

Where People Measures Work

Traditionally, HR professionals have employed metrics to study the time and cost of utilizing people. But, when used to evaluate the effectiveness and impact of people investments and HR activities, people measures are 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.

The Conference Board report finds that when popular individual measures are correlated with important perceived benefits, 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 can help boost revenue growth.

Most of the companies surveyed only partially tie their people measures and targets to strategic plans (52 percent) or annual budgets (46 percent). Half of the survey participants report that their people metrics are fully or partially linked to customer data.

How To Make The Case For People Measures

Many surveyed companies are trying to build support for their people metrics efforts, including collaborating with colleagues from finance (54 percent) and strategy (45 percent) and employing business managers as champions for people measures (43 percent).

Before HR professionals can determine if human capital measures have an impact on educating managers or setting strategic goals, they need adequate information technology (IT) to capture data that supports these connections. With only 19 percent of survey participants giving their IT a high rating in terms of gathering HR data, the dilemma many of them are confronting is to make sure they’re selecting the IT capabilities that best support people measures.

Beyond the purely technical obstacles involved in choosing and applying people measures, internal politics can present a significant challenge to the successful use of metrics. Measurement may be considered by some to be a primarily rational exercise, but it has an impact on performance ratings, prestige, power, and resource allocation.

According to Gates, “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. 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 are most commonly delivered to senior management, which is the practice at 78 percent of surveyed companies. In a few companies, business managers, not HR representatives, present information back to business divisions directly, greatly enhancing the credibility of the process with those divisions.

“However, the finding that only 19 percent 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.