Talent metrics have been a miserable failure! They don’t drive executives to act because they are not forward-looking and they don’t prescribe the needed actions to solve upcoming problems.
Yes, after 20+ years of striving to improve metrics in talent management, most of what we produce are still what I call “so-what metrics.” Even when they are actually reviewed by executives, which is infrequently, their reaction is literally “so what” because they don’t excite, and as a result, they take no action.
One survey revealed that only 12 percent of CEOs trust our human capital metrics. This lack of executive action is problematic. The purpose of metrics is to drive action in the right direction so that executives make better people-management decisions that directly result in improved business results. Most reported talent metrics don’t drive action because they cover tactical talent areas with little business impact (like cost per hire). Also because they are of course 100 percent historical, so they only tell executives what happened last year.
So, you might be surprised to learn that anyone can instantly get CEOs and executives to read and act on your talent metrics if they include these almost always omitted “big five” elements. And those five action driving elements are 1) metrics that only cover strategic talent issues with significant impact on business results, 2) all talent management results are converted to the dollar impact on revenue, 3) metrics are predictive and they make it easy to see the upcoming future because they include a visual trend line, 4) they reveal “the whys” (i.e. the causes of the problem), and 5) they include the recommended prescriptive actions that have proven to solve the upcoming problem.
If you don’t believe the impact that these five factors have, do a side-by-side comparison test (with traditional metrics) and you will realize that executives will always choose the set of metrics that are forward-looking, that show the impact of the problem in dollars, and that offer proven prescriptive solutions.
The “Big 5” Metric Elements That Drive Executives to Act
I have been fortunate during my long career to be both a CEO and a chief talent officer, so I have seen the talent metric problem from both sides. And, I have found that if you expect to drive executive action, you need to add these factors to your metrics. In this section, I explain why these “big-five” components get executive attention, drive action, and ultimately change business results.
- Only report strategic metrics that cover high business impact talent areas — many commonly reported talent metrics (e.g. cost per hire or the number of employees trained) cover areas with little actual business impact. So to avoid reporting tactical HR metrics, talent management leaders need to identify the HR programs that have been proven to have extremely high business impacts. A study by BCG found that recruiting, retention, onboarding, managing talent, employer branding, rewards, and leadership development lead the way in having the highest impact on revenue and profit. In my experience, that means that you should only report metrics to your executives that cover workforce productivity, key employee turnover, new hire time to productivity, employer brand strength’s impact on applications, and leadership development.
- Convert talent metrics into dollars — if you report HR metrics strictly using numbers (e.g. your turnover rate went from 10 to 13 percent), you will get little action because percentages alone make it difficult for executives to understand the business impacts. So, if you want to guarantee that you get everyone’s attention, you must make it a standard practice to convert talent management results into the dollar impact on organizational revenue (or on other corporate strategic goals). If you instead reported that the 3 percent increase in turnover actually cost the firm $2.3 million (6.2 percent of revenue), everyone would instantly take notice. Converting to revenue impacts makes HR metric results comparable to the business impacts of other business functions (i.e. inventory turnover only cost us $1.01 million). HR should finally understand that the language of business is “$”. Work with the CFO’s office to convert your high business impact talent metrics into a language that every executive understands: dollars.
- Report forward-looking predictive metrics with a trend line — Forward-looking predictive metrics have at least twice the value to managers because they provide them with enough warning so that upcoming problems can be mitigated. Include risk analysis in your forward-looking metrics, so that decision-makers can see both the probability of the problem occurring and the likely costs that will result if the upcoming talent problem is not promptly addressed. In addition, reporting a numerical metric that reflects a single point in time may not be enough to drive action. Many executives also need a visual representation in order to recognize a trend and to get them excited. So, add a visual trend line (graph line), so that everyone can instantly see the historical direction, the current direction, and the degree that the metric will shift up or down in the future.
- Executives will not act without knowing the causes of the problem — predicting, quantifying the impact, and showing the future trend will certainly get the attention of most executives. But, unfortunately, many executives will still hesitate before taking action because they want to know why the change in talent results is occurring. Most executives will not go into “solution mode” until they (along with HR) understand the root cause of the change (i.e. why things are happening). For example, knowing that your turnover rate is increasing, by itself, most likely won’t drive executive action … at least, until you reveal that the reason why key employees are quitting is both plausible and likely fixable (e.g. post-exit interviews reveal that departing employees are frustrated with the recent reduction in development opportunities because training budgets and classes have been reduced by 90 percent).
- You will not get the right actions unless you include the recommend prescriptive solutions for fixing the problem — in the above case of reduced training budgets, most executives will intuitively know what to do to resolve the problem. But in more complicated cases like bad managers or low employee engagement, they won’t be spurred to action unless they know that there is a viable targeted solution. You don’t have to be a rocket scientist to realize that there won’t be an improvement in talent management or business results unless managers implement the right solution to the problem that the metrics pointed out. You can increase the likelihood that executives and managers will act if you provide these decision-makers with an array of effective solutions. With each solution option, you should include its probability of success within your firm and its required investment in time and money.
Additional items to spur executive action — in addition to the “big five” elements listed above, there are some additional things you can do to spur executive action and to improve your business results. These actions include:
- Show the cost of a delay — you can increase the likelihood of faster executive action if you include the dollar cost of delaying action and the cost of doing nothing at all. If the costs are projected to increase exponentially with an extended delay, executives are more likely to act immediately.
- Provide comparison numbers — the relative impact of metrics is easier to understand when you provide comparison numbers for each metric. Those comparison numbers might include a comparison to last year’s number, the best/worst in your company, and the best/worst in your industry.
- Prioritize and limit the number of metrics that you report — to avoid “metric overload,” prioritize your highest impact metrics and those that executives use and comment the most on. In most cases, that means reporting 10 or fewer strategic metrics to executives. Obviously, you should periodically rotate your metrics so that the ones revealing the largest impact problem or opportunity appear first on the list. And if you embed your metrics in standard monthly business reports, they are more likely to be noticed than if you put them in a separate monthly HR metric report.
- Include a feedback loop to continually improve — data on successes and failures as a result of using this advanced metric approach must be fed back into the process so that the metric process itself continually learns and improves.
- Get managers to spread the word on the impact of using your metrics — you can accelerate the acceptance and the wider usage of your talent metrics if you get satisfied executives and managers to spread the word. Recommend that they describe their experience and their support on internal social media, on their internal blogs, and during their meetings with their own managers.
- Widely distribute ranked talent metrics — widely distributing metrics that rank the performance of each individual manager will also get everyone’s attention quickly. Distributing metrics widely increases internal competition, and it provides a little embarrassment. These forced ranked reports make it easier for managers to see where they stand relative to others, and they have the added benefit of revealing to everyone which top-ranked individual managers can provide the best advice on how other managers can improve their performance.
- Show a correlation between using talent programs and improved business results — use correlations and other statistical tools to prove how the increased usage of individual talent management programs positively correlate with business success. For example, as training hours go up 6 percent, the performance of the trained employee goes up 11 percent.
The 2016 CEO survey by the Conference Board reveals that human capital is once again at the very top of the list of CEO-identified challenges (for the fourth year in a row). Obviously, we remain at the top of the “challenges list” because what we do is critical for business success but also because CEOs haven’t found that our current talent approach is meeting their expectations. Fortunately, many talent management and recruiting functions have begun a shift to a data-based decision-making approach, which is the right step for dramatically raising the level of our performance. Unfortunately, the new data-based approach is having much of an impact yet. That is probably because our metrics are still designed for reporting and not for decision-making.
Once we finally realize that real-time and predictive talent metrics need to be delivered to the managers who make people-management decisions on their mobile phone, we will begin to make more progress. But once again, progress will be limited until we drive managers to quickly act as a result of our quantified-in-dollars metrics, provide a list of the most effective prescribed actions for managers to take in order to resolve the problem, and take advantage of the opportunity that was pointed out by the metric.
As seen on ERE Media.