Do You Have Ineffective HR Metrics? 25 Reasons Why You Might

May 9, 2011

Recruiting, talent management, and HR professionals in general have been using metrics for many years now. More often than not, the story HR metrics tell is irrelevant or disappointing. Over the past three decades, I’ve compiled a long list of common metrics mistakes that you can use to assess your measurement efforts and improve your efforts to get the attention of your management and senior leadership.

25 Most Damaging Metric Errors

Following are 25 of the most damaging mistakes you can make when using metrics to assess or defend your performance presented in five categories.

If you want your efforts to be as effective as they can be, you cannot make a single one.

Factors That Make a Metric Less Compelling

Not tied to business goals — executives have a narrow agenda, so don’t forget to tie each reported HR metric directly to a business goal or problem (business problem not HR problem).

Not demonstrating revenue impact — no business goal is more “top of mind” with executives than increasing revenue. Although it is admittedly difficult, calculate the dollar business impact on revenue of the area covered by the metric (i.e. revenue decrease as a result of vacant positions). Work with the CFO’s office to ensure that the calculations are credible.

They don’t drive executive action — pretest each metric reported to executives to ensure that they are powerful enough to cause managers and executives to want to take action immediately. Non-compelling metrics get only a “so what” or “that’s interesting” reaction from executives.

Not forward-looking — almost all HR metrics are historical. Unfortunately, executives care more about the future, so focus on metrics that are forward-looking and that alert managers about upcoming problems and opportunities (e.g. key employee turnover will likely increase 8% next quarter).

Not tying rewards to metrics — merely collecting and reporting metrics can have a powerful impact on behavior. However, by failing to reward managers and HR professionals for producing superior metrics results, you are missing a powerful opportunity to further drive behavior and decision-making. Whatever you measure and reward gets done faster and better.

Errors in Selecting Metrics

Developing metrics independently — the CFO’s office is the undisputed king of metrics. So never begin a metric effort without directly involving the CFO to ensure upfront that each metric is useful, credible and relevant. You can avoid many metric selection errors by allowing senior executives to pick the metrics they want to see.

Voting on metrics — it is quite common but a major mistake to select your individual metrics based on a vote by the staff. Because everyone does not have equal knowledge or power, you need to weigh the inputs and the opinions of the individuals who provide advice.

Too many metrics — rather than developing metrics for every whim, limit metrics to one for every major HR goal and major people management problem or opportunity. Only report the handful that directly impact items on executives’ current agenda. That usually means the cost of poor hiring, weak retention, and a lack of leaders, and never cost per hire or training hours per employee. Mixing powerful metrics with low-impact ones can cause the best to be missed.

Focusing on tactical metrics — tactical or transactional metrics help you improve the operational aspects of a specific function or program. In contrast, strategic metrics highlight areas or opportunities that directly impact a major business goal. It’s a mistake not to use the 80/20 rule and spend 80% of your time and resources on the 20% of your metrics that are truly strategic.

Omitting quality measures — a common mistake in HR that does not occur in other business functions is the omission of metrics that cover quality. For example, listing the number of hires without a comparable statistic for the quality of those hires (i.e. on-the-job performance of new hires). Listing the number of training hours provided but failing to note the quality of training (i.e. the change in performance after training) is a common but serious omission.

Not supplementing with “why” metrics — most metrics serve a single purpose in that they tell you “what happened.” In order to fix a problem, you also need to know the causes or “why” something is happening. As a result, for critical strategic metrics you need to gather supplemental data that reveals the causes (i.e. turnover numbers can be supplemented with exit interview data on why people quit).

Metrics are too complicated — don’t provide metrics that are too complicated for the average executive to understand within a minute. If necessary, continually refine your metrics until they are easy to understand.

Follow-the-leader errors — a common error is to “over benchmark” to the point where the metrics that you select are merely a reflection of the metrics that every other firm is using. Unfortunately, because there is little connection between common metrics and effective metrics, copying can result in metrics that do not fit your organization and its problems.

Relying 100% on canned metrics — although many HR software packages, metrics providers, and consultants provide an excellent set of metrics, it is a mistake to rely 100% on them. It may be necessary to supplement them with a few high-value metrics and measures that fit your organizational needs and problems.

Errors in Reporting and Presenting Metrics

Not embedded in financial reports — strategic metrics can have no impact if they are never seen or read. Separate metrics reports are seldom read, so you must fight to have your most important strategic metrics embedded into standard financial reports that all managers receive. For example, having the costs of employee turnover read alongside the cost of inventory turnover can be very powerful.

No indication that action is required — including metrics that require no action with those that do can lead to a lack of focus. Labeling individual metrics with action colors can help executives focus on the metrics that require action. Also report your metrics so that the ones that demand executive attention or action appear first.

No comparison numbers — recording a single number by itself might have little meaning, while including a benchmark comparison number might instantly excite them (e.g. our turnover is 9% but it was 4% last year and the industry average is 2%). Include a “failure, passing, and excellent score” for each metric. Other powerful comparison numbers might include the percentage change and the best and the worst within the firm and industry.

Failing to provide “more information” options — electronic metric reports are far superior to paper reports because you can provide the user with more information options. If an individual manager needs more detailed information, localized information, a formula, or a definition, it can be provided easily using a drop-down menu. This makes metrics easily scannable while at the same time providing any level of detail or depth that the reader requires.

Data or calculations are not judged to be credible — many HR metrics are ignored, discounted, or disregarded by executives because they doubt the accuracy of the metric or the supporting data. This can be caused by an overall lack of credibility but it can be exacerbated if you fail to provide in your background materials the source and reliability statistics for the data. Providing key formulas and definitions can also help minimize confusion.

Reporting metrics that don’t change — routinely reporting metrics that don’t vary much over time, that represent no major change, or that don’t require action actually waste executive time. Either omit them until they show a change or put them last in your report.

Errors Related to Enhanced Decision-making

Not designed for decision-making — the primary purpose of metrics is to improve the quality of people management decision-making. However, when you provide only stand-alone, year-end historical metrics, you are not supporting better decision-making because the actual problem might not have occurred at the very end of the year. By supplementing this static year-end metric with an alert or “heads up” warning system, managers can be made aware of the problem when it is actually occurring.

Not providing action guidance — even when your metrics have the desired effect of causing managers to want to take action, they may still hesitate or even take the wrong action. In order to avoid this problem, you need to provide decision-makers with guidance as to the most and least impactful actions that are available to them.

Errors Related to Data Collection and Metric Calculations

Failing to use sampling techniques — gathering data on every employee or instance is expensive and time-consuming. It is a major error to not use scientific sampling to get almost as accurate results faster and cheaper by using scientific sampling techniques.

Failing to weigh high-priority items — is quite common for HR to consider every occurrence to be of equal importance. However in many cases, some occurrences simply have more of a business impact than others. For example, when calculating turnover, the loss of a top performer or someone in a leadership position has a much greater business impact than the loss of an average employee. As a result, it is a major error not to more heavily weigh the data or opinions from high-impact items (i.e. from top performers, mission-critical positions, revenue-generating positions, regrettable turnover, high-margin business units, etc.).

Outside data is not integrated — almost all HR metrics come from databases owned by HR. Unfortunately, HR metrics would become more powerful if they were supplemented with data and information from other business databases (i.e. performance, productivity, quality control, business plans and forecasts, etc.). In some cases, external data including economic databases (i.e. local growth and population shift statistics) and industry benchmarks could supplement HR metrics with dramatic results.

Final Thoughts

HR professionals commonly ask why the single highest variable cost item in most corporations (i.e. employee-related costs) seems to gain so little senior management attention. Even though we know that the language and currency of business is based on dollars, data, and metrics, HR still garners much less than its deserved share of credibility, respect, and resources. My research and experience indicates that HR’s failure to effectively use metrics is largely to blame. I challenge you to use this checklist to assess your current metrics and see if your process doesn’t fail on more than half of them. If you find that your current metrics have failed miserably, you’ll know what is needed to change the situation.