The holy grail of HR seems to be the ability to monetize the value of talent-related investments and efforts. And it's been hard to do in a way that's meaningful enough to catch the attention of the C-suite.
Instead, it seems, HR has been preoccupied with costs: cost management, cost reduction, the cost of HR efforts to the organization, etc. But these 'HR metrics' (if you can call them that) often take ages to produce, their accuracy is questionable and, most important, they don't mean much. They typically look at one slice of information, to the exclusion of most everything else, and often as a way of comparing apples to oranges.
Elsewhere, HR metrics don't relate at all to costs. Instead, HR is measured by the amount of 'noise' or 'satisfaction' in the system related to the transactions for which it's most well known. These look like Hiring Manager satisfaction surveys, Candidate Happiness, Employee Engagement results, etc. This is often what HR has been tracking for literally decades.
All this activity is completely detached from - and fails to acknowledge - the new and emerging trends that nearly every global business is facing, such as:
- Intensely competitive talent marketplace
- The use of AI to do the job of some roles
- Complex and challenging global business landscape
- Greater investments in enterprise-wide systems and process improvements
- Embracing of 'smart' technologies and AI to enable the customer experience and the way in which work is done.
- AI and machine learning that can predict certain consumer behaviors.
The irony is: the value of talent to the organization has never been greater than at this moment. So at the time that is most essential to be measuring the value of HR investments, most organizations don't know where to begin. Consider these people-related company demands:
- The need for more - and more rapid - product and service innovations
- The rapidly changing technology landscape
- The emergence and importance of AI as it relates to roles, activities and output
- Companies more often differentiating themselves through their IP, patents, brands, and designs.
Yet only very few use data that can help them recognize their return on this investment as it relates to hiring, talent development and employee retention. There are enormous financial implications to talent management, including improved quality of hire, greater productivity and reduced attrition.
Given the challenges of the global business landscape and the scarcity of critical skills across the world, these are the most important HR metrics to consider measuring, evaluation and continuously improving in the next year:
- Recruitment ROI: Measures the financial return on investment of recruitment strategies, evaluating the effectiveness of recruitment spending – particularly as it relates to the speed, quality and cost effectiveness of hiring
- Quality of Hire: Assesses new employees' retention and performance over time, ensuring hires align with business needs; most valuable when cut by role criticality and key geographies
- Employee Retention Rate: Tracks the percentage of employees who start and stay with the organization over a specific period, indicating a positive work environment; again, most valuable when cut by role criticality, scarcity of skills, key product lines or geographies, etc.
- Time to Fill and Total Vacancy Time: Indicates process efficiency, with faster hires often reflecting streamlined workflows; Total Vacancy Time identifies the total period at which a position is empty - essential for industries such as manufacturing, healthcare, etc.
- Cost per Hire: A core measure of talent acquisition efficiency, calculated by dividing total hiring costs by the number of hires; important when isolated by type of role and availability of talent and compared to like benchmarks or the organization over time (to evaluate improvements)
- Total Organizational Cost of Hiring Shortfalls: A calculation of the cost of unintended consequences such as overuse of contingent labor, overtime, agency spend, etc.
- Employee Engagement Scores: Predicts organizational success and can be crucial for improved performance and reduced turnover rates
- Internal Slating and Succession Planning Effectiveness: Measures the readiness of internal candidates to step into developmental and critical roles, ensuring organizational stability; also indicates the effectiveness of overall talent management efforts such as learning, development, retention, etc.
- People Analytics Insights: Provides data-driven approaches to managing human capital, continuous improvement and the organization's ability to provide insights into the effectiveness of HR practices and predicting future trends
What is the best way to assess HR metrics in an organization? How are you doing it in your company? Contact us if you'd like to discuss this further.