Organizations that do not measure, like the ships at sea prior to longitude, tend to drift without direction.
Until 1760 ships routinely disappeared, ran aground or sank because they could not measure longitude. The cost in life, property and performance was immense. The measurement challenge of our time is human resource performance and the costs of not measuring are as costly, the measurement challenge as daunting, and the benefits of success even greater.
This paragraph, from Ultimate Performance: Measuring People @ Work (www.wiley.com), by Scott Golas, Nicholas C. Burkholder and Jeremy A. Shapiro, may serve as a parable for your organization. You also may find the following passages worth considering.
Excerpts from the Preface
Somewhere in nearly every organization’s annual report, C-executives remark that employees are “the most important asset” in the organization. Until recently, that’s where notice of this incredibly valuable asset stopped. They believed that accurate measurement of the management of this asset was impossible. Now most know it is possible, but find that their organizations are not adequately equipped to measure the performance of the department with the greatest responsibility for that asset: human resources. Making informed decisions regarding critical human capital-related issues like the acquisition, development, and deployment of employees is of paramount importance to the ongoing success of any organization.
Many areas of executive decision-making are indeed supported by sophisticated, time-tested tools and methodologies. Finance and marketing are now considered to be hardcore sciences. The systems in place make use of a wide variety of metrics gathered internally and externally on inputs, processes, and outputs relevant to the business of the organization. The framework underlying these systems is relevant to almost every part of the organization. So why, then, is the one asset base of any organization without which it cannot exist—its employees—allowed to escape this measured scrutiny?
What is needed is an approach that integrates the measurement of human capital assets (and not just the cost of their acquisition) into the decision support models used by finance and operational executives. The finance department is responsible for providing the tools and methodology related to implementing strategies that support the mission and objectives of the organization. So, too, the human resources department should be responsible for the development of tools and methodologies relevant to human capital assets and their place in the organizational mission, objectives, and strategy.
From the Introduction
The story of longitude is analogous to HR metrics. The implications of failing to measure can be disastrous; organizations that do not measure, like the ships at sea prior to longitude, tend to drift without direction. Furthermore, organizations that use the wrong metrics and base their practices on these false results are often in an even worse position—going in the wrong direction under the impression that their policies are indeed correct.
From Chapter 1: HR Outsourcing and Metrics
The most common HR response to elevate their influence in the organization has been to initiate a two-pronged, technology-based program that attempts to remove HR from the bottom of the “pyramid” while building out the infrastructure that allows them to deliver those services at the top.
Step one: Implement systems to enable “self-service” employee and manager transactions to disseminate or outsource the transactional-processing load.
Step two: Implement systems and processes that collect performance and productivity data that, when combined with financial metrics, can be leveraged both in analysis, reporting, and advisory deliverables that mirror their financial counterparts and help to develop and execute strategic decisions.
The current terminology describing HR’s new focus is “Human Capital Management,” which is perceived as being comparable to financial capital management. This is all well and good, and an appropriate reaction to the well-deserved “Personnel” moniker. But as most fads go, outside of self-congratulatory articles, self-promotion and a few “best practice” exceptions, these initiatives have for the most part failed to achieve their main objective—due in large part to HR’s failure to use its own very powerful data in the most effective way. The data alone are not enough; to achieve the status of strategic business advisor, HR must consistently demonstrate that its decisions are empirically based and it continues to demonstrate a persuasive return-on-investment (ROI) business case.