Talent Management Processes

Characteristics of a Good Metric

by Taleo Research

As a speaker and attendee at the recent SHRM conference in Orlando, I detected three major areas of interest and trends in staffing management. One area of concentration among staffing professionals is on background checking, a staffing process step that has taken on even greater significance in light of recent security and economic developments. The second is ongoing discussion around the broad issue of assessment, and the availability and efficacy of assessment and testing tools. The third—the subject of my conference presentation and this article—is the burgeoning focus on metrics.

Metrics is the theme of much of the current HR buzz. It is easy to agree that to be more metrics-driven is a good initiative. Yet amid all the discussion, there is, ironically, a lack of a systematic approach to metrics. Let’s take a step back to explore not the choice of which metrics to track, nor even how to track them and analyze them, but instead, what are the characteristics of a good metric?

What Is A Good Metric?
We use metrics to base decisions on and to focus our actions. To be effective and reliable, the metrics we choose to use need to have five key characteristics.

Each metric must be:

  1. Aligned with business
    In a Corporate Leadership Council survey, 62 percent of respondents cited “to better align HR strategy with corporate strategy” as the number one goal. More than half the respondents in a Towers Perrin study considered “shifting HR’s role to help address critical business issues” as the most significant challenge for HR leadership. Clearly, HR alignment with business goals is a priority to measure and improve upon, but it is also difficult to achieve. First, corporate business targets (direction set by the CEO) and HR strategies need to be synchronized, and then translated into the tactics HR implements.
  2. Actionable & Predictive
    A good metric must provide information that can be acted on. Too often HR measures for the sake of measuring without really thinking, “what do I do if the metric is lower or higher?” A clear plan of action and causality relation is a key element for successful metrics tracking.

    A metric that merely measures finite or completed actions, not ongoing activity, is only of forensic interest. Metrics must be regarded as a trend and trigger appropriate action. The issue with many data points is that they are usually lagging indicators, or in other words, showing what happened in the past. Data that when analyzed can forecast the direction actions should take in the future is what provides the true power and called leading indicators. Presenting leading indicators that can drive aligned action is where strategic HR is going.
  3. Consistent
    A good metric is consistent in what it measures. Comparisons are made of equally weighted criteria. Cost-per-hire, for instance, has been a popular HR metric. Yet a SHRM/EMA Staffing Metrics Study identified more than a dozen components included at widely varying degrees by different companies to calculate cost-per hire. Make sure that the data included in any metric you use is defined at the outset, and remains consistent; otherwise the value of its comparison is useless.
  4. Time trackable (internal benchmark)
    A good metric must be able to be tracked over time. It is not a snapshot of an activity at one moment in time. One example is the number of job applications received per week. That metric can be tracked and graphed to see both the weekly trend as well as a monthly, quarterly or longer interval, and forecast a shortage or not. The frequency of reporting for a metric varies with different metrics. We recommend that the time to fill metric for instance, should be reported weekly. Metrics addressing longer-term evaluations such as hiring manager satisfaction, and new hire performance could be tracked quarterly or annually.
  5. Peer comparisons (external benchmark)
    In addition to analyzing internal performance, good metrics should be able to be compared to external benchmarks amongst a peer group. That peer group may be another business unit within your company, another company similar, for instance, in size or location, or an industry benchmark. A metric viewed only as an internal measure may not reveal the need for improvement until tracked against an external benchmark. Conversely, that metric may show superior performance when viewed in a wider context. A good peer comparison metric allows for additional analysis of benchmark performance. Benchmarking by quartile can be another beneficial indicator of relative performance.

Common Mistakes
The utilization of metrics in your staffing management process requires a commitment and resource allotment, so it is important to do it right. As your staffing department endeavors to become more metrics-driven, beware of errors in the design and use of metrics.

Common mistakes include:

  • Metrics for the sake of metrics (not aligned)
  • Too many metrics (no action)
  • Metrics not driving the intended action
  • Lack of follow up
  • No record of methodology
  • No benchmark
  • Underestimation of the data extraction

The Way to be a Strategic Player
Good metrics are the way to become a strategic player. Gathering, analyzing and presenting pertinent information to upper management is the single strongest means HR has to meet the goal of providing critical input on strategic business issues. With good metrics and the technology to track them, the raw data and information from standard reporting can be analyzed further. Ad-hoc reporting can drill down to produce deeper knowledge on specific initiatives. Statistics can be computed to feed models, make predictions, and drive decisions and actions based on intelligence. Staffing management process and performance optimization based on powerful intelligence drawn from good metrics will deliver proven value and real ROI, and make you become an invaluable strategic player.