Most HR measurements miss the boat!
Many HR departments say they are a “business partner,” but few can provide any real evidence that they are having a strategic business impact. After years of studying CEO expectations of HR I’ve compiled a list of the kind of questions CEO’s might want answered about how their “human resources” give them a measurable competitive advantage over their competitors.
These questions are based on the “captain of the ship ” approach , where HR assumes responsibility for all corporate “people” performance even though HR does not have direct control over all aspects of it.
A – Does having great employees really make a difference in our industry?
- Does HR have evidence that having “the best” employees is a Critical Success Factor (CSF) in our industry because the most profitable firms have a high proportion of “quality” employees and the less successful firms have lower proportion of “quality” employees?
- Has HR identified the jobs/ functional areas where having great people is essential for Corporate Success, a CSF?
- Does adding more or higher quality HR resources make a difference?
- Is the Return on Investment in Human Resources higher than the ROI on Capital or for plant and equipment?
- Do the best firms in our industry have great HR departments and do the mediocre ones have mediocre HR?
- Does improving the HR department impact a firms competitive position?
B – Are the people we have the most productive in the industry?
- What is our productivity (output) per dollar of people costs spent? (People Costs include: sal, benefits, training, & HR Dept. costs.) Can HR show the trend (over several years and project future years) and compare it to our chief competitors.
- What is our “People Profit” (the number of dollars of “people” costs we must incur in order to generate a dollar of profit)?
- What is the trend and how does it compare to our chief competitors?
- What is our “Revenue per employee”? Is it higher than our competitors?
C – Do we have the right number of people in our organization?
- Does HR have a metric / system for ensuring we are not over-staffed?
- Do we compare our head count per unit of production / sales to that of our direct competitors to ensure we don’t have head count “fat”?
- Are we under-staffed in areas, where if we added people in key areas, we would increase our profitability?
D – Are we over paying our employees for the output they produce?
- Can HR show the impact of pay increases? What is the % increase in employee performance as the result of every 1% increase in pay.
- Does paying top dollar matter? Do the employees paid in the top quartile of the salary range produce proportionally more output than those paid in the middle quartile?
- Demonstrate that we have tied a higher proportion of our total compensation to productivity and company performance than our competitors. How much differently do we treat (pay) our top contributors from our average contributors?
- Who are we over/ under paying? Demonstrate we have an effective system for identifying and forecasting whether we are under or over paying our employees.
- Is there evidence that our benefits programs really attract or keep people?
E – Do we improve the people we have? (Make them more skilled and productive)
- Is Training a Critical Success Factor? Is there a correlation in our industry between the % of all people costs spent on training/ OD and firm profitability?
- Does Training make a difference in performance? What is the percent increase in performance as a result of every $1,000 spent on training?
F – Do we attract and HIRE the very best people we can afford?
- Did we hire better people this year (more productive per dollar spent in salary) than last?
- Demonstrate that we are hiring people with competencies and skills that give us a competitive advantage over our competitors.
- When we compete head to head with our competitors for top tier talent, show we get a higher percentage than our competitors.
- Show that you have made our firm the Employer of Choice in our industry.
G – Do we retain our key / most productive people at a higher rate than our best competitors?
- Show that our voluntary turnover rate is lower than our competitors for:
- Key executives
- Top performers
- Individuals with “key” competencies and
- All individuals in hard to hire positions
H – Do we “fix” our “problem employees” rapidly or get rid of them if they are too expensive to”fix”?
- What percentage of “poor” performers become “very good” performers within a year, as a result of our employee relations efforts?
- Show we get rid of our poor performers that can’t be “fixed” at a rate faster than our competitors.
- Is there evidence HR identifies and effectively “fixes” “bad” managers?
I – Is there evidence HR is a major contributor (among overhead functions) to our corporate success/ profitability?
- Do we survey our managers and ask them to force rank all overhead functions on how they contributed to departmental and divisional profitability? Does HR rank toward the top?
- Does HR provide evidence it contributes to increasing our shared vision and the strengthening of our corporate culture?
- In our employee pulse survey do employees rate HR as a contributor or a barrier to productivity?
- Does HR give managers multi-options and do it’s programs allow managers to “adjust” corporate policies to fit “local” needs?
J – Do we forecast and prevent people problems better than the best in the industry?
- Have HR’s “smoke detectors” and forecasts given top management sufficient warning of possible “people problems”?
- Has it allowed us to effectively mitigate their impact upon the business?
K – Is our HR department efficient and does it continually improve?
- Is there evidence that HR continually improves it’s programs? Drops it’s ineffective ones?
- Is there evidence that putting more HR resources in an area dramatically impacts that areas productivity and profitability?
- What percent of all corporate spending goes to HR? How does it compare to last year and our best competitors.
- Are our costs per unit of HR service below those of our best competitors given an equal quality of service?
- Do key depts. and products get the most Human Resources help?
L – Are our employees “satisfied”?
- Do employees report they are more satisfied this year with the way they are treated? (compared to last year?).
- Does HR have evidence of the impact of employee satisfaction on our employees productivity and retention?
M – Do we rapidly redeploy our people resources from areas of low return in the corporation to areas of high return?
- What % of our work force moves internally each year between business units?
- What % of our work force have we had to “layoff this year?
- Is there evidence that we get the most from our talent?
N – Is our over-all HR strategy aligned with our business strategy
- What is our over-all HR strategy?
- Is there evidence it adequately shifts as our business needs change?
- Has HR done a competitive analysis (over-all and by function) to see where we need to shift our efforts in order to beat our competitors in every HR category?
O – Is there evidence that HR has significantly added to our shareholders value?
- Has our stock options program added to or diluted our share’s value?
- Demonstrate what HR has done to increase our over-all corporate capabilities, competencies and capacity to beat our competitors. (Since, on average, over 60% of all corporate dollars are spent on people costs).