HR metrics: Measure first, manage later

WE hear it loud and clear, if not read it more than 1,953 times from annual reports and mission statements. I’m referring of course to the trite phrase “our people are the most important asset of the organization.”

Now we pose the challenge—prove it. If you can’t, then you’re a stupid liar if not an ignorant (bad word) parrot.

The prevailing wisdom among nincompoops is that the said slogan looks good on paper but difficult to execute with real figures. This violates the oft-repeated aphorism of Peter Drucker who said that “if you cannot measure, you cannot manage.”

This is the way it should be done with human resources (HR). There’s no need for anyone to argue that there’s such a thing as unquantifiable elements in people management.

On the contrary, practically all things or about 95 percent of them can be measured in terms of numbers. Well, at least, I’m referring to those important factors, anyway.

Take the following indicators, which I got from the book Magic Numbers for Human Resource Management (2006) by co-authors Hugh Bucknall and Zheng Wei:

One is the measurement of productivity and efficiency. This includes rates of absenteeism, accident costs, and cost per hire, net profit per employee, and sick leaves, among other others.

Two is the measurement of staffing and learning. This covers turnover rate, employee engagement index, training hours, competency development, etc.

Three is the measurement of talent and reward. This includes internal hire probability, retention rate of key employees, job evaluation, range or distribution of performance appraisal ratings, total compensation expense per employee, and the Black-Scholes method of calculating stock-option values.

Need I say more? Sure there are many others. We only need to ask what’s strategically necessary. Then follow it up with the basic question like—how do organizations measure its workforce and HR performance quantitatively, in the same way it measures its other assets such as real estate, equipment and brands, among others?

That’s why I tend to believe that mathematics is not the strong character of those in the HR profession, which is one reason why it is heavily populated by lawyers and psychologists who are viewed as a loud bunch of water buffaloes lumbering around without a clue while tromping all over their exquisitely arranged versions of the Labor Code.

This was my recurring observation for the entire time I was busily active in corporate HR. I’d be invited in some elegant offices, and all of a sudden I’ll use my icebreaker with the host who was seated in front of their beautifully-worded vision statement, and I’d be asking: “What’s your turnover rate?”

The host—a lawyer usurping the role of an HR manager, would play deaf, would naturally offer me a Nescafe decaf to sidestep the question, and I’d use my tactful courtesy to accept the offer in all graciousness.

Then I’ll be wondering—does he know what I’m talking about?

If yes, does he know how to compute the turnover rate? Or maybe—such figure if revealed to the public would mean violating a tightly guarded corporate secret tantamount to revealing the formula of their product, which to my simple mind is highly unbelievable.

That’s why these days, whenever I meet someone from HR, I don’t want to limit my icebreakers to HR metrics because I don’t want them to feel inadequate anymore, or at least uncover their vaguely under-qualified character. –Reylito A.H. Elbo, Manila Times

Rey Elbo is a business consultant specializing in human resources and total quality management as a fused interest. Feedback may be sent to kairoshq@info.com.ph