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Are You Measuring the Right Things?

Something is missing from most metrics efforts: the right metrics, not the best ones.

June 27, 2011
Related Topics: HR Metrics, Assessment and Measurement
KEYWORDS measurement / metrics
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At the heart of any successful organization there is the recognition that only through the firm’s talent will it achieve its objectives. With that in mind, the talent management organization’s role is to align its strategy for acquiring, managing and developing talent to the business’ strategic objectives. Business leaders want to assist with this goal. According to Aberdeen Group, the top priority in 2011 for best-in-class companies is aligning their business and talent strategy.

Ask the Right Questions

What does this mean for talent managers? It means something more than having a seat at the table in strategic discussions. It means becoming an indispensable part of any conversation about how to achieve the organization’s goals. People execute business plans, so discussions about organizational strategy and goals must consider how the company will acquire and manage the talent it needs to be successful. This is what aligning business and talent strategy is all about.

There has been a lot of discussion lately among talent management experts, observers, bloggers and practitioners about the best metrics for talent management functions to track and report up to the C-suite. The thinking is that with the right metrics, talent managers can objectively measure their performance and demonstrate their contributions to the business. Having done this, they will have shown the value of being included in more strategic discussions.

Do a quick, unscientific search via Google to see how pervasive this type of thinking is. Type in, “What are the best talent management metrics?” The question will produce more than 1 million hits, and most commentators refer to metrics reflective of a fairly consistent set of categories: efficiency, employee retention, engagement, quality of hire, internal talent development and mobility. Tracking these metrics could indeed help talent managers demonstrate their contribution to an organization’s strategic objectives, but something is missing.

Change that search query slightly to, “How do you choose the right talent management metrics for your company?” This question will produce far fewer results — only about 170,000. This suggests that while many talent managers may be asking the right questions, they may be focused on the wrong answers. Their quest for relevance and inclusion in strategic discussions has led them on a search for the best metrics, but the best metrics may not be the right ones to gauge organizational effectiveness.

Begin With the End in Mind

Focusing on the best metrics can be misguided. It’s like asking for directions without knowing the destination. If talent leaders don’t know what they are trying to achieve — what the organization’s key strategic objectives are — it is pointless to establish metrics or measures to help determine if they are headed in the right direction. Talent leaders need to know their objectives, key business measures that clearly indicate organizational impact, such as increase revenue by 7 percent, for example. Then metrics become milestones — new hire sales productivity, turnover among top producers — that will help them evaluate whether their efforts are on course or not, and whether they are making the progress senior leaders expect or require.

To demonstrate their impact and earn a place in strategic business conversations, talent managers must focus on metrics that align with and contribute to achievement of the firm’s strategic objectives. Identifying these metrics can’t be done in isolation of key talent management activities, however. New hire productivity, employee retention, recruitment costs, revenue per employee and learning investment all might be effective talent management metrics. However, to identify the right metrics to sway senior leaders, the talent manager’s first question must be, “What talent management initiatives or programs will help the organization achieve its strategic goals?” Once those are determined, the right metrics are easily identifiable. They are the ones that evaluate whether or not specific talent management functions achieve company objectives.

For example, let’s say a company recognizes the need to modernize its manufacturing plants to promote gains in quality and efficiency. To help drive success, talent leaders likely will focus on acquiring and training the talent needed to operate in a more complex production environment. Metrics that focus on the impact of technical training programs are more appropriate to demonstrate talent management’s impact in this scenario than metrics such as recruiting costs or revenue per employee.

Consider another scenario playing out in many U.S. companies today. Baby boomers are expected to retire in droves during the coming years. Although their exodus has been slowed by financial concerns, many companies are worried about their ability to maintain a competitive advantage as leadership talent begins to exit, taking years of experience and institutional knowledge with them. Therefore, developing leadership talent has become a strategic goal. Companies have embarked on ambitious initiatives to evaluate the strength and depth of their leadership bench, identify high-potential leadership talent, and establish systemic processes to develop and promote high-potential talent into key positions.

The best metrics for these organizations will help evaluate whether or not they have been successful at invigorating their leadership pipelines. They should be focused on metrics that gauge the size and mobility of their leadership talent pool, things such as internal promotion rates to key positions, depth of talent to succeed the old guard in executive roles and time to competency for leaders making these transitions. Over time, a focus on these metrics will allow talent leaders to demonstrate that: leadership pools have grown; bench strength has increased; and vacated leadership positions are being filled more quickly with talent that can hit the ground running and contribute at a high level. With the talent management organization having demonstrated its impact on a key strategic priority, the C-suite will see it as an effective partner capable of shaping and contributing to the successful execution of the company’s business goals.

Figure 1 provides a simple model to link strategic objectives, talent management goals, initiatives and metrics. Begin with the strategic imperatives that drive the business. From there the question becomes, “Where should talent leaders focus to help the company achieve these goals, and what specific initiatives must we implement?” A discussion of metrics should only happen after that has been addressed. The most useful metrics will help talent leaders answer the question, “How will we know when we have been successful?”

Consider the following hypothetical example to illustrate the linkage process described in Figure 1. A large hotel and resort destination recognizes the need to transform its contact center reservation agents from customer service providers to consultative sales representatives. To transform its talent, the organization embarks on a variety of programs to train and reward the types of behavior that will help drive revenue best in this new sales culture.

One of these programs involves implementing pre-employment assessments to identify candidates who possess the skills, abilities and competencies necessary to be successful in a sales environment. These new-hire characteristics would include drive and goal orientation, resilience and persuasiveness. Given the purpose of this program is to drive revenue, the metrics talent leaders choose to evaluate the value of the assessments could focus on reservation revenue per hour. Imagine if this company gathered data that revealed reservation agents who scored high on the assessment solution generated $150 more per hour than those who scored low. Accounting for the average tenure of contact center representatives, which is about one year, this would equate to a difference of about $200,000 in additional revenue per year for each high scoring agent hired.

In this example, the talent management function would be able to clearly demonstrate, using metrics such as impact on revenue per hour, how this initiative or any other helped to impact one of the organization’s key objectives. Not only does the data prove the value in the assessment investment, the experience — from implementation to reporting — would enable the executive team to see the importance of including talent management in early conversations about strategic objectives and business performance. They would understand it is only through the firm’s talent that it can achieve business goals. As a result, whether strategic business discussions centered on creating solutions to identified challenges, or developing plans to facilitate future growth, they would start to ask questions such as, “Do we have the right people to achieve this?” and “How do we prepare our associates to meet this challenge?”

These are the conversations in which all talent leaders want to be included. This is the center of that seemingly elusive seat at the table. Talent managers don’t get there by focusing on the best metrics to benchmark their functions. They get there by focusing on the metrics that will clearly demonstrate how talent initiatives are critical to achieve the company’s stated objectives.

Jeff Facteau is vice president of professional services, and Nikki Hall is chief human resources officer at SHLPreVisor. They can be reached at editor@talentmgt.com.

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