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Measuring HR

Tim Palmer
PA Consulting Group Evaluation Centre
3 June 2009

In all but two of the more than 100 HR functions that I have worked with over the past 12 years, there was no rigorous end-to-end measurement regime of HR at the start of the project.  Measurement and governance simply hasn’t been in the traditional DNA of HR functions.  Yet measures play an important part in demonstrating value and in making change work.  At the end of any HR transformation process there should be a measurement regime in place, hopefully with sufficient momentum to be used and maintained over a period of years.  Increasing the visible measurement of HR in this way should have a long-term positive effect. 

I have been surprised recently by client requests to help shape an HR balanced scorecard – surprised because you wouldn’t instinctively think that this would be a priority during a recession.  But on reflection, this is a natural response to organisations analysing all areas of their operation to ensure that they are optimised and are adding value commensurate with their cost base.  With this perspective, it is natural that HR leadership teams should want to demonstrate that they have their own house in order and that they understand where and how they contribute to business success.

So, how should a measurement regime be constructed for HR?  Here’s a short proposal to work from:

Three things to measure

  • The HR function

  • Talent management

  • Leadership effectiveness

What is being measured?

  • Efficiency – financial measures

  • Effectiveness – what is the outcome of the activity

Purpose of the measure

  • Lagging – measure  things that have already happened

  • Leading – indicate things that are likely to happen.

A balanced scorecard for HR can have a blend of each of these types of measure.  This is important because a function that seemingly has a world-class cost might actually be under performing, and one that is delivering great services, might be costing too much. 

Measures are also much more useful when considered over time.  Trending information for consistently measured metrics tells the most complete story, especially if accompanied by explanatory notes, written at the same time.

Obviously measures need to be designed for a specific organisation, however examples within each category are listed below:

HR function performance, efficiency and effectiveness

  • Metrics to measure the cost of the function

  • Total cost of the HR function per employee

  • Number of HR FTE per £1billion revenue

  • Total cost of the HR function as % of Selling, General & Administrative expenditure

  • Metrics to measure the effectiveness of the function

  • Work days missed per FTE due to unplanned absence
  • Percentage of employees with access to employee self services*
  • Customer satisfaction
  • Percentage of Service Level Agreements met
  • Number of HR queries resolved on first contact
  • Number of projects with HR involvement on the project register

Talent management efficiency and effectiveness metrics

  • Metrics to measure the cost of talent management activities

  • Total cost of the process "reward and retain employees" per $1,000 revenue

  • Total cost of the process "reward and retain employees" per employee

  • Leading talent indicators

  • Percentage of senior management/executives with formal succession planning processes in place
  • Percentage of middle management/specialists with formal succession planning processes in place
  • Percentage of CEO and senior leadership time spent on leadership development

  • Metrics to measure the outcome of talent management activities

  • Average time to fill vacancies
  • Retention rate of repatriated employees
  • Retention rate of ‘A’ players
  • Percentage of senior management/executive positions filled by internal promotion (rather than external recruitment)

Leadership effectiveness

  • Metrics to measure the outcome of talent management activities

  • Senior management/executives as a percentage of total employees
  • Revenue and/or profit per senior management / executive position
  • Employee engagement / commitment indices - based on questionnaire responses

Using measurements such as these can help put HR in a more solid position during testing economic times – offering an opportunity to prove the value and effectiveness of the function.

Contact the people and talent team

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