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HRPA 2018 Conference: Metrics--Measuring HR's Business Impact

What if there was a way to prove the value of the activities that human resources professionals carry out each day? In this presentation, Ben Eubanks walks an audience of HR executives through the strategic business value of metrics, how to create a balanced HR scorecard, how to calculate ROI on HR activities, and what it takes to create an evidence-based mindset.

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HRPA 2018 Conference: Metrics--Measuring HR's Business Impact

  1. 1. Metrics: Measuring HR’s Business Impact Ben Eubanks, SPHR, SHRM-SCP
  2. 2. http://LHRA.IO/ Ben.Eubanks@LHRA.IO (256) 466-3626 More than numbers
  3. 3. http://LHRA.IO/ Ben.Eubanks@LHRA.IO (256) 466-3626 Agenda 1) Metrics as Part of HR Strategy 2) The Balanced Scorecard Process 3) Speaking the #ROI Language 4) An Evidence- Based Approach
  4. 4. Why are metrics so important?
  5. 5. If it can’t be measured, don’t do it.
  6. 6. Think Like a Consultant: Prioritize the Metrics 1. Overtime costs 2. Turnover 3. Unscheduled absence rate 4. Training expenses 5. Employee satisfaction 6. Revenue per employee 7. Time to fill 8. Cost per hire 9. Average performance 10. Diversity statistics
  7. 7. Be Insatiably Curious
  8. 8. Credibility Better to have it and not need it than need it and not have it.
  9. 9. The Essence of HR Strategy • All HR activities should have a connection to organizational strategy and objectives • The more aligned your HR strategy with the business, the better • Example: customer service • Hiring • Assessing • Training • Retaining • Performance
  10. 10. A Story of Failure
  11. 11. Stories of Success • Virgin Media-improving candidate experience, improving $$$ • GE - “Owen” increased traffic 8x • Opower-predicting performance pre-hire • Deloitte-saved 2 million hours a year • Google-faster time to productivity=more $ per employee
  12. 12. What Will Your Story Be?
  13. 13. Balanced Scorecards—a bigger picture of HR performance impact
  14. 14. Balanced Scorecard Essentials • 4 quadrants/perspectives: • Financial (How does our performance affect company performance?) • Customer (How do we impact the customer?) • Business Process (How effective are we?) • Learning/Growth (How do we improve?) • Accountability • Actionable • Results-focused
  15. 15. Sample HR Balanced Scorecard Objective: Reduce turnover costs. 01 Description: Develop effective recruiting methods and new hire orientation methods to optimize the retention of new hires. 02 Actions: •Identify key attributes of successful employees who stay at the company for two or more years. •Utilize technology more effectively for recruiting and screening applications. •Identify selection methods that will contribute to successful hires. •Integrate branding efforts into recruiting. •Revise the orientation program to ensure new hire retention. 03
  16. 16. Sample HR Balanced Scorecard Objective: Reduce turnover costs. 01 Description: Develop effective recruiting and orientation methods to optimize retention. 02
  17. 17. Sample HR Balanced Scorecard Actions: • Identify key attributes of employees who stay at the company for 2+ years. • Identify selection methods that contribute to successful hires. • Integrate branding efforts into recruiting. • Revise the orientation program to ensure new hire social assimilation. 03
  18. 18. Sample HR Balanced Scorecard • Measures: • Cost-per-hire (financial) • Turnover rates and costs (financial) • Time-to-fill (business process) • Customer satisfaction with new hire performance (customer) • New-hire satisfaction with orientation (learning and growth) • Supervisor satisfaction with orientation (learning and growth)
  19. 19. Balanced Scorecards: Keys to Success • Build to fit your business. Don’t try to adopt someone else’s. • Don’t underestimate value of design/creation/implementation. • Be a business professional first and foremost. • Don’t just measure. Act.
  20. 20. HR+ROI—two words that never go together.
  21. 21. #1 Reason HR Avoids ROI Calculations
  22. 22. How to Calculate ROI on HR Activities Mini Case Study Your company has decided that its absenteeism is too costly, and a new absentee reduction program has been scheduled to improve results. You have been tasked with calculating the ROI of the program.
  23. 23. How to Calculate ROI on HR Activities • Objectives: • Reduce absenteeism costs by 10% • Create benchmark of existing level to measure against Develop/Review Program Objectives Develop Evaluation Plans and Establish Baseline Data
  24. 24. How to Calculate ROI on HR Activities Data Collection • Gather data on absenteeism for a 6 week period prior to the program implementation • Gather same data for 6 week period post implementation Collect Data During Program Implementation Collect Data After Program Implementation
  25. 25. Isolating Impact • Key credibility factor! • Methods: • Control groups (contrast with experimental group) • Trend line analysis (historical, training, two alternative futures) • Expert estimation (last resort)
  26. 26. How to Calculate ROI on HR Activities • Absentee reduction program produces savings of $581,000 in reduced turnover, scheduling costs, etc. The program cost $229,000. • For this example, net benefits are $581,000- 229,000=$352,000. • ROI=352,000/$229,000 x100 = 154%. • This means for every $1 invested, $1.54 in monetary benefits are received after costs are covered.
  27. 27. Intangibles • Anything that cannot be documented and translated credibly to financial benefits should be noted in the final findings report as being intangible. • Examples: satisfaction, teamwork, commitment, stress, conflict, etc. *See full ROI Process Map
  28. 28. Report OUT! • Create a short, written report explaining your findings • Include data, calculations, and key recommendations • Remember: ROI is not about evaluating your performance, it’s about process improvement
  29. 29. http://LHRA.IO/ Ben.Eubanks@LHRA.IO (256) 466-3626 • 7 minutes work, 7 minutes discuss • Questions to answer: How do you proceed? What data do you gather? • Option #1: Your CEO has requested a new employee retention program to reduce preventable turnover. Just before approving the budget for the program, she tells you that she wants an ROI study of the program over the next two months to see if it is a valid investment. • Option #2: After yet another employee injury on the job, your boss requests that you develop a new safety training program to reduce workplace injuries. He knows the CEO will be tight on funding the project for more than a few months, so you must perform an ROI study to help justify the investment. Activity: Calculating HR ROI
  30. 30. http://LHRA.IO/ Ben.Eubanks@LHRA.IO (256) 466-3626 • Gather data on existing turnover/retention. • Set target goal for retention rate • Determine how you will calculate retention and impact/cost and what is included (e.g. involuntary turnover excluded) • Collect data on all turnover during your program • Continue collecting after program completion • Isolate effects (trend line, control group) • Convert to monetary value: how many people/how much money did you save with the program? • Calculate ROI (saved vs investment), identify intangible benefits, report out Option #1 Example
  31. 31. Developing an Evidence- Based Mindset Don’t just tell me. Show me.
  32. 32. The Power of Evidence
  33. 33. Evidence-Based HR Example: what if you had to make a change in your strategy, and five different executives had five different opinions. How would you proceed? Aligning HR practices to be evidence- based is a natural way to become more adept at finding and using data to validate big decisions.
  34. 34. Evidence-Based Management: 6 Key Actions 1. Asking: translating a practical issue or problem into an answerable question 2. Acquiring: systematically searching for and retrieving the evidence 3. Appraising: critically judging the trustworthiness and relevance of the evidence 4. Aggregating: weighing and pulling together the evidence 5. Applying: incorporating the evidence into the decision-making process 6. Assessing: evaluating the outcome of the decision taken
  35. 35. Evidence- Based HR • You’re a scientist, too! • Where to find data • Management journals • HBR • SHRM Foundation • Deloitte/Bersin • i4cp • CEB • ***Qualitative data
  36. 36. http://LHRA.IO/ Ben.Eubanks@LHRA.IO (256) 466-3626 • Key question: Is this a proven method of improving results? Research and find out. • 7 minutes research, 7 minutes report out • Option #1: You heard news about some big companies changing performance management and think you want to do the same, moving to a system of more frequent feedback. • Option #2: CEO wants you to buy software that will allow you to put your candidates into “talent pools,” allowing you to recruit from those pools on demand. • Option #3: You heard a speaker talk about employee engagement and now you want to get buy-in for an investment in that area. Activity: Evidence-Based HR
  37. 37. http://LHRA.IO/ Ben.Eubanks@LHRA.IO (256) 466-3626 • Option #1 Feedback • https://www.wsj.com/articles/how-performance-reviews-can-harm- mental-health-1445824925 • https://www.pwc.nl/nl/assets/documents/pwc-performance-survey- 2015.pdf • Option #2 Talent pools • No data found in quick search. Any luck? • Option #3 Employee engagement • www.kevinkruse.com/employee-engagement-research-master-list-of- 29-studies/ 29 research studies pointing to engagement improving revenue, sales, retention, satisfaction, productivity, etc. Activity Solutions
  38. 38. http://LHRA.IO/ Ben.Eubanks@LHRA.IO (256) 466-3626 Key takeaways
  39. 39. http://LHRA.IO/ Ben.Eubanks@LHRA.IO (256) 466-3626 The Virtuous Cycle of Curiosity and Credibility Curiosity Credibility
  40. 40. http://LHRA.IO/ Ben.Eubanks@LHRA.IO (256) 466-3626 THANK YOU Contact me for my slides, notes, & research: Ben.Eubanks@LHRA.IO