Designing and implementing an HR metrics dashboard

Analysis

Designing and implementing an HR metrics dashboard

Getting buy-in from other business functions and responding to line managers’ needs are two of the most important issues with setting up an effective HR metrics system. A cross-functional steering committee to manage the project is also highly recommended.

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Getting buy-in from other business functions and responding to line managers’ needs are two of the most important issues with setting up an effective HR metrics system. A crossfunctional steering committee to manage the project is also highly recommended.

This point was made by a presenter at an HR Measurement and KPIs seminar conducted by Akolade in Sydney on 14 February 2012.

Scope of HR metrics
 
Stephen Moore, managing director of the consulting firm Optimum Performance, identified four basic topic areas that metrics should cover:
  1. workforce management — measuring, evaluating and continuously improving people performance
  2. workforce planning — structuring, developing and preparing people to meet future business and labour market imperatives
  3. workforce benchmarking — objectively measuring and evaluating workforce performance against established industry standards
  4. HR function effectiveness — objectively measuring and evaluating HR performance and contribution to the business
Establish ownership and accountability

HR is not responsible for everything. Metrics are not a scorecard, but a reflection on the people management skills of all managers. If HR doesn’t make this point very clearly, managers will provide responses like: ‘Okay HR, come back and tell us when you have fixed the problem.’

For this reason, Moore recommended establishing a steering committee to develop and implement metrics. The committee should be driven by its HR representatives, but should also contain representatives from payroll, accounts payable, IT and finance. For example, many line managers will fudge their figures to make themselves or their functions look better than they really are, and accounts payable and finance will be aware of some of their ruses such as using contractors. The technical expertise of IT is essential to advise what is feasible in the way of metrics, and the best ways to do it.

Choose from the metrics menu
 
Moore presented a list of 27 separate subjects that HR metrics could cover, but pointed out that more than half of them cannot usually be obtained via data in the payroll and HR information systems. If those metrics are required, separate resources have to be allocated to collect data.

The decisions to make at this stage are:
  1. What are the most important KPIs for your organisation?
  2. Where can you obtain the information to compile them?
  3. How many KPIs should you have?
A good question to ask stakeholders is:
‘What measurements would you like to receive that would help you to perform your jobs better?’
Start slowly and be patient
 
Moore estimated that a good HR metrics system will take around 18 months to set up properly. He suggested starting with just the five most important metrics, then adding another five after around 6 months, and the rest after at least 12 months. Introducing the lot at once is likely to overwhelm people; and, if there are initial bugs, the credibility of the entire project will be damaged.

It is also recommended to start with a narrow focus, gain some advocates and some small ‘centres of excellence’ that you can highlight to others.

You should also stick to your guns — avoiding making any changes to content for at least the first 6 months. Moore argued that this gives users sufficient time to understand the KPIs and the rationale behind them, which means they will be less likely to ask for changes.

Design them to capture attention
 
Moore recommended that each KPI be presented as a report that is just a single page in length (eg on employee turnover). As much as possible, use the same presentation formats that other organisation reports use — another reason for having representatives from other functions on the steering committee. Similar language and terminology to other in-house reporting systems is also recommended.

Colour-coding in the form of ‘traffic lights’ will help others interpret the report. Red highlights emphasise serious and immediate problems, and these parts of a report should receive the most attention. They should identify what is happening now, and what will happen if remedial action is not taken. Orange highlights indicate issues where Caution is required, and green or unshaded contents are OK or Require No Action at Present. 

A useful statement for gaining attention from those who need to take action is:
‘If you don’t do this,                      ______________ will happen.’
Complimentary graphics are a useful addition to reports, because they will capture the attention of those people who are more responsive to visual cues than figures. Graphs, pie diagrams and charts, either for the current financial year or on a rolling 12-month basis, are the most commonly used graphics.

The choice between using actual numbers (eg dollar cost) or percentages will depend on which one is most likely to attract attention. But it is also recommended to place a dollar value on as many items as you can. For example, when calculating the cost of employee turnover, identify all the relevant direct and indirect costs, and value each one.

Validate the methodology

The definitions used in metrics need to be readily accessible to those who request them. The steering committee should set them and IT will need them to implement the data collection and report production. For example, terms such as ‘planned turnover’ (usually redundancies, retirements and termination of fixed-term contracts) and ‘regrettable turnover’ (usually resignations of highly valued employees) may not be obvious to most managers.

Organisations such as the Australian Human Resources Institute (AHRI), the Australian Bureau of Statistics and some industry associations have standards committees and other relevant resources. Presenting information as an ‘approved standard’ or ‘industry practice’ will help its credibility, and also assist benchmarking if the organisation wants to use it for comparisons.

Role of HR

At a separate panel discussion at the same seminar, the panellists made the following additional comments relevant to HR:
  • HR’s primary role is to identify the issues of concern raised by the metrics, make managers aware of them, recommend solutions and be able to persuade them to implement them.
  • It is important to talk the business language (usually dollars and numbers) as much as you can.
  • Implementing and interpreting metrics is not a natural skill or inclination for many HR practitioners, but it must be learned. Practitioners must be willing to ‘jump in’, and when they can prove the worth of the metrics to management, extra resources will usually follow.
  • Build credibility and trust gradually. Note: numbers will not always be correct, and will be interpreted differently. Take care to manage people’s expectations.
  • If trust is at a low level, take steps to improve it before embarking on a metrics program, otherwise results will probably be ignored. For example, issuing a climate survey may be regarded by employees as a threat (ie ‘this is a set-up, what’s coming next?’).
  • To build common ground with the IT function, it sometimes helps to point out that both HR and IT are regarded as ‘service functions’ that have to respond to others’ problems and complaints.
  • An important HR role is to make others (eg line managers) understand the opportunities that can arise if things are done differently, using the evidence from metrics to persuade them.
  • Find people in the organisation who are doing things really well, and study them to discover why they are succeeding.
The panel discussion also recommended asking the following questions:
  • Where can HR have the greatest impact on organisation performance?
  • How do we measure that?
  • How can we demonstrate any improvements?
  • What are the effects on costs, productivity, service levels, etc?
Summary
 
Developing and implementing HR metrics involves three basic steps (that require roughly equal amounts of attention and resources):
  1. reporting
  2. interpreting
  3. leveraging (ie using the metrics to find a solution)
Some other commentators summarise the steps as: 
  1. information
  2. insight
  3. impact
Further information

 

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