These days, almost everywhere you turn, someone in the business world is spouting off about metrics. It’s tempting to believe that metrics are nothing more than the next great gimmick for stressed-out executives. Yet, as Nick Burkolder puts it, "Metrics serve as a foundation for running a successful business."
He should know. The founder of Staffing.org and president of consulting firm On Performance Inc. has emerged as an authority on the acquisition, development, utilization and retention of human capital.
He has co-authored On Staffing: Advice and Perspectives from HR Leaders (Wiley, 2003) and The Executive Career Guide for MBAs: Insider Advice on Getting to the Top from Today's Business Leaders (Wiley, 1995).
Workforce Management asked Burkholder to elaborate on the use of metrics for staffing today’s organizations.
Are metrics making any significant impact in the staffing arena?
Burkholder: There has been a continual increase in the interest and use of metrics. Although virtually all organizations recognize the importance of performance metrics, there is still a lack of understanding about what a metric is and what it isn’t. Part of the issue is that all numbers are not metrics and there are different vendors creating noise and [some have created] proprietary metrics, causing some confusion.
So what is and what isn’t a metric? Can you define the concept?
Burkholder: A performance metric should measure an outcome associated with an objective. It should be easy to calculate and easy to understand--like a ratio or a batting average in baseball. A metric should drive the kind of performance that you want. It should measure and encourage positive performance. It should be more than just an activity number.
Which metrics should organizations focus on?
Burkholder: One of the most important metrics isquality of a new hire--not the quality of the applicant or the resumes or the interviewers. Another is measuring how effectively an organization is filling positions when they’re needed--not just general time-to-fill or time-to-start numbers butefficiency [what it costs to recruit, divided by the compensation of the people hired]. Unfortunately, too many organizations lump everyone together. If you compare a Hyundai to a Mercedes there’s a big difference in the cost for each car, but you’re also getting more with the high end vehicle. So, organizations really need to evaluate their efficiency and productivity related to recruiting.
Do you see a lot of organizations using metrics effectively?
Burkholder: More and more, we see organizations using them. There’s not a CEO or CFO in the country who doesn’t embrace metrics. The problem is that some are accustomed to using the wrong ones and they’re not aware that there’s a better way to measure hiring and staffing effectiveness. For example, many are still stuck on employeeturnover. Organizations obsess about turnover. Yet it doesn’t measure the desired outcome or objective.
The reality is that some turnover is acceptable, even desirable. There are horror stories about organizations not getting rid of people they should get rid of because they don’t want to impact their turnover numbers. Turnover is simply an activity indicator and it isn’t a beneficial metric to base decisions on. Another meaningless metric is the vacancy cost associated with an open position. In some cases, there might be advantages to leaving the position open. It might actually save the organization money--at least until a hiring manager finds the right candidate.
Is it important for an organization to strike a balance between negative metrics, such as turnover, and positive metrics, such ashuman capital ROI?
Burkholder: I don’t think positive versus negative metrics is an issue. You only have so much time to track so many metrics--so the key is focusing in on the right ones. Again, it’s important to differentiate between metrics and activity indicators [such as turnover]. The latter might be useful too, but it’s very easy to turn them into bad metrics.
How can organizations put metrics data to practical use?
Burkholder: There are numerous approaches. For example, in the most basic sense, an organization can evaluate a person’s performance and their potential--and then associate these factors with whether they leave the organization. The goal is to determine why the company might be losing its best performers. Johnson & Johnson is one of the best at using the data effectively. It assesses the performance and potential of all managers worldwide on an annual basis. [This is] a different system than standard performance appraisals. J&J then uses the data for more than just internal selection. When people leave, they are able to measure the cost to the organization. This, in turn, lets them know how they can invest in talent to keep them there.
What are some of the most interesting or unusual things that organizations are doing in regard to staffing metrics?
Burkholder: One of the coolest things is when an organization hires someone and creates a development plan. Unfortunately, when someone starts in a new job, the last thing the organization thinks about is professional development. It’s like dating. The person is new and exciting and it’s common to overlook his or her weaknesses. Instead of winding up with the inevitable "Uh-oh, she doesn’t know that," it’s wise to create a professional plan and share organizational metrics with employees. This can help everyone understand what’s needed to boost performance.
What role do employee surveys have in formulating metrics?
Burkholder: Employeesurveys are an effective way to find out what people are thinking. They can also help work groups or departments understand how they compare to organizational goals and objectives. Finally, surveys can serve as a unifying element. But surveys are not always used effectively--especiallyexit surveys. Too often, a lot of great information is missed or not put to good use. Also, organizations do not think through certain issues in a holistic manner. For example, why not ask candidates who interviewed with the organization but turned the job down why they went somewhere else. Also, how did they view the interview process? There’s a lot of great information out there.
How can an organization use the information to improve the hiring process?
Burkholder: Not only can it formulate a more focused staffing strategy, the right information can help them fashion a brand name. However, it’s important to remember that the end goal isn’t simply to be an employer of choice; it’s to be achoice employer to the right people. It’s important to understand what your brand is and be true to your brand at all times. If the operational brand and marketing message do not coincide, people become cynics and the whole thing becomes self-defeating.
Does branding affect existing employees?
Burkholder: There’s a whole lot of power associated with internal branding too. It can be hugely valuable as aretention tool. When employees know what the company stands for and what its objectives are, they can decide whether they are suited to work there or better off going somewhere else.
Is it possible to overuse metrics and focus too much on numbers?
Burkholder: Absolutely. Metrics are not an end in themselves. Some human resources departments wind up with hundreds of metrics and everyone winds up confused. At most, there should be a couple of dozen. It needs to be simple enough that you tabulate a score and move on.
For more on this topic,view a webcast online by featuring Howard Winkler, human resources strategy director for Southern Company.