Q: What Is the No. 1 Metric We Should Be Reporting to Our CEO?
—The Most Important Thing, product manager, software/services, Quebec
Dear Most Important Thing:
Working diligently on staffing, benefits, employee relations and other duties—all while keeping your company out of legal trouble—still isn't enough to get human resources treated as a full-fledged business partner. CEOs watch the bottom line. If you really want recognition and credibility, contribute to profit and improve results on an ongoing basis.
There are a plethora of activity-based metrics from which to choose. Four of the most common reports are headcount, turnover, time-to-fill and cost-to-fill open positions. All of these reports demonstrate HR's work activity. Activity-based reports convince the CEO you are busy, but not that you necessarily add value.
Smart HR professionals go beyond reporting activity—they report on the financial impact of changes they've made. Let's take employee orientations, for example. Which of the following reports do you think the CEO would be most interested in reading?
• Activity-Based Report: 214 orientations done during the month.
• Financial Contribution Report: As a result of our revised sales orientation processes, each orientation participant generated $3,150 in additional profit than was the case prior to the change. Additionally, we have 21 percent less short-term turnover in the first 30 days after orientation than has traditionally been the case. Total additional profit this month was $674,100 (not including the large financial and operational impact related to the turnover reduction).
To transition to financial contribution reporting:
1. Make a list of the processes in which you are involved.
2. Pick one process that could be improved further.
3. Find or develop measures on how the process is currently impacting the bottom line.
4. Design a change that will reduce expenses, increase revenue or produce other value-added impact.
5. Implement the change(s).
6. Measure and report on the change.
The hardest part of financial-contribution reporting is to determine how a process is affecting your organization. You're probably measuring many processes. Find the ones with the greatest impact by asking: "What are we hoping to get out of doing this activity?"
In the orientation example, possible answers include fewer mistakes by new hires, fewer questions asked of supervisors on materials covered in orientation, better comprehension of information presented, less turnover, fewer customer complaints, higher quality scores, or greater sales (if it is a sales personnel orientation). Once you start brainstorming, the answers become readily apparent.
Determine how you will measure pre- and post-change and how those measures convert into additional profit, and you are well on your way to "true business partner" status.
SOURCE: Rick Galbreath, Performance Growth Partners Inc., Bloomington, Illinois
LEARN MORE: Obtaining a solid set of HR metrics from senior leadership gives HR objective data against which to measure delivery.
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The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
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