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Metrics, ROI, and Evidence-Based HR

This workshop is focused on credibility. HR needs more credibility with business leaders, and data is the way to get it. By leveraging metrics, measurement, ROI, and an evidence-based approach, HR leaders can deliver more value and be seen as contributors to the business strategy.

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Metrics, ROI, and Evidence-Based HR

  1. 1. Metrics: Measuring HR's Business Impact
  2. 2. Evaluate: Right or Wrong? If it can’t be measured, don’t do it.
  3. 3. 5 Metrics Lessons
  4. 4. Prioritize These HR Metrics 1. Overtime costs 2. Turnover 3. Unscheduled absence rate 4. Training expense per employee 5. Employee satisfaction 6. Revenue per employee 7. Time to fill 8. Cost per hire 9. Average performance rating 10. Diversity statistics • Retail • Services/consulting company • Manufacturing • Technology firm
  5. 5. Once Upon a Time… • 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 as a business focus area. • Hiring • Assessing • Training • Retaining • Performance
  6. 6. HR Metrics Case Studies • Disney-time to fill, retention, diversity, cost per hire • Virgin Media-improving candidate experience, improving $$$ • Google-faster time to productivity • GE- “Owen” commercial increased traffic 8x • Opower-time to fill, recruiter dashboard • Deloitte-saved 2 million hours a year on talent calibration/ratings • My story… • What’s your success story?
  7. 7. Balanced Scorecards—a bigger picture of HR performance impact.
  8. 8. Balanced Scorecard
  9. 9. Balanced Scorecards: Keys to Success • Building to suit is key. Can’t adopt someone else’s. Value is in the design/creation/implementation. • Take into account broader impact of HR activities.
  10. 10. 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
  11. 11. Sample HR Balanced Scorecard • Objective: Reduce turnover costs. • Description: Develop effective recruiting methods and new hire orientation methods to optimize the retention of new hires. • 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. • 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). Source: SHRM
  12. 12. HR+ROI—two words that never go together.
  13. 13. #1 Reason HR Avoids ROI Calculations
  14. 14. How to Calculate ROI on HR Activities • Explore ROI Process Model Example: • 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.
  15. 15. How to Calculate ROI on HR Activities Example: • Objectives: • Reduce absenteeism costs by 10% • Create benchmark of existing level to measure against
  16. 16. How to Calculate ROI on HR Activities Example • Gather data on absenteeism for a 6 week period prior to the program implementation • Gather same data for 6 week period post implementation
  17. 17. Isolating Impact • Key credibility factor. Methods: • Control groups (contrast with experimental group) • Trend line analysis (historical, training, two alternative future options) • Expert estimation (last resort)
  18. 18. How to Calculate ROI on HR Activities Example • 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.
  19. 19. 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 handout for full ROI Process Map
  20. 20. 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
  21. 21. Activity: Calculating HR ROI • 7 minutes work, 7 minutes discuss • Questions to answer: How do you proceed? What data do you gather? *See ROI framework on page 3 • 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.
  22. 22. Option #1 Example • 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
  23. 23. Developing an Evidence-Based Mindset
  24. 24. The Power of Evidence
  25. 25. Evidence-Based HR • Evidence-Based HR is based on the evidence-based approach to medicine. • 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. It also helps us to be less opinion- focused and more credible.
  26. 26. 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
  27. 27. Evidence-Based HR • Note: You’re a scientist, too! • Where to find data • Management journals • HBR • SHRM Foundation • Deloitte/Bersin • i4cp • CEB • ***Qualitative data
  28. 28. Activity: Evidence-Based HR • 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.
  29. 29. Activity Solutions • 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.
  30. 30. Key Takeaways • Metrics are individual, like hair styles. Don’t try to copy someone else. • Bottom line: blending a healthy appreciation for measurement and metrics, an evidence-based approach, and a broader organizational perspective is key for credibility, impact, and results.
  31. 31. Get My Presentation Notes Click here to download my notes Contact Me About Speaking at Your Event ben@upstarthr.com