3 Questions to Answer When Creating Metrics

Anyone who has been in management of HR or recruiting has struggled with the issue of measurement. To be taken seriously in a business world ruled by numbers, we have to get our own numbers right. But, despite all of our hard work gathering data and calculating ratios, it doesn’t seem that HR’s numbers ever have the credibility that measures from finance or operations do. To help rectify this situation, use the following three questions as you develop your metrics. 

Why Measure?

Every decision we make when choosing metrics has a consequence. What we measure says a lot about how we are managing our business. As an example, measuring the number of applicants per posted requisition is a common recruitment measure. However, this metric has no linkage to actual outcomes. It doesn’t tell you if these applicants were qualified or led to a hire. In fact, you could have a large number of applicants per requisition and not have a single qualified applicant. This is a measure of activity only. If you choose to make activity metrics like this a part of your scorecard, you are sending a message to your organization that you don’t really understand what matters and that you are more focused on activity than results. If you want to be taken seriously as a business partner, your metrics should reflect that you understand how business works. Commit to metrics like quality of hire or vacancy rate, as these are outcomes that the leaders within your organization will care about and value. These things are much more difficult to measure, but the effort to do so sends the message that you “get it.”

Who Cares?

The creation of metrics seems like an operational activity that should be squarely rooted in analysis and process improvement. But, like everything else inside an organization, metrics are also political. As I demonstrated above, the metrics you choose says a lot about how you manage your business. And, if our metrics are going to speak for us, we need to consider who we are speaking to. As you build your metrics, ask the following questions:

  • Would the CEO see value in this measure?
  • Would the CFO agree that this metric is valuable to track?
  • Would my internal customers easily understand how this measurement helps us deliver better service to them?

If the answer to any of these questions is no, go back to the drawing board and keep working. If you are unsure, then go find a few business leaders you trust and get their opinions. Keep working until you can answer all three questions with a resounding “yes!”

So What?

This final question might be the most important of the three. How do these metrics affect the action you take in managing your function? It should be obvious for most of your metrics that up is good and down is bad or vice versa. You will have goals set, but what do those goals mean? How much variance is too much variance? At what point do you have to take action?

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Take the “time to hire” metric that most of us measure as an example. If your goal for time to hire is 30 days, would you make changes to your process if your actual result was 31 days (a 3% variance)? What about 36 days (a 20% variance)? What action would you take? As we construct metrics, think through these “what-if” scenarios to have a clear understanding of not only what we are measuring, but also what we will do when the result varies from the target.

Once you’ve run your metrics through these three questions, you are ready to measure and report. However, you are not out of the woods yet. The biggest mistake that most HR and recruiting teams make happens at this point in the process. You must ensure that your data and calculations are perfect. All it takes is one scorecard with one measure where the wrong number was used or the calculation was done incorrectly to kill the credibility of the entire set of numbers. Remember that everyone already thinks you are bad with numbers if you work in HR, so don’t prove them right. Double- and triple-check your numbers. If a result seems a little off, dig in and check your data to ensure that it’s not a mistake. It would be a shame to get this far and destroy all of your hard work with sloppy math.

Having great metrics isn’t the silver bullet to gaining credibility with your organization, but it can be an important step in the right direction if you do it right.

Jason Lauritsen a keynote speaker, author and advisor.  He is an employee engagement and workplace culture expert who will challenge you to think differently. 

A former corporate human resources executive, Jason has dedicated his career to helping leaders build organizations that are good for both people and profits. 

Most recently, he led the research team for Quantum Workplace’s Best Places to Work program where he has studied the employee experience at thousands of companies to understand what the best workplaces in the world do differently than the rest. 

Jason is the co-author of the book, Social Gravity: Harnessing the Natural Laws of Relationships. Connect with Jason at www.JasonLauritsen.com

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5 Comments on “3 Questions to Answer When Creating Metrics

  1. Jason, nice questions, thoughtful advice.

    The CEO. CFO and COO are most interested in the metrics that have a $ sign in front of them. There are two places to find metrics with this relationship.

    1. How do people in any specific position have an impact on the top line or revenue?
    2. How does your staffing process reduce expenses?

    For example, vacancy rate might be carried out to lost production value in dollars per day. That implies you have a $ for that. If you don’t, you increase credibility by getting it. Then reporting how reducing vacancy contributed to more days of production.

    When your metrics document how staffing outcomes drove sales/revenue up and/or expenses down, you have impact on the bottom line. That connection is what makes metrics credible.

    Activity based metrics while interesting and traditionally easier to capture, often lack a connection to the P&L.

    Staffing professional may find an interesting dialogue on their next recruiting assignment with this activity. Go the hiring manager and ask them how the position contributes to revenue. The long tail of that conversation may lead to metrics that matter.

    Joseph Murphy
    Shaker Consulting Group
    Developers of the Virtual Job Tryout®

  2. I would like to expand on Joe’s answer and add a couple points of my own.

    Why measure? As Peter Drucker, a famed business school professor and management guru once said, “You can only manage what you can measure.” I like to say the opposite of this to people when asked why measure. You can’t manage what you can’t measure. That said, just because you can measure something does not mean you should.

    Who cares? Anyone with a big reward based on the business results, that is who cares. In my experience this is typically a P&L owner (CEO and all business unit leaders) or the head of major functional departments (e.g. the head of R&D at one of my high-tech customers because he is responsible for 30% of head count, the largest portion of the company’s labor costs).

    So What? This is where I want to expand on Joe’s answer. Those “who care” understand very well the basic business equation P = R – C or Profits = Revenues – Costs. If your metric does not give insight into the effect of what you are measuring on P, R or C you have not effectively answered the “so what” question (at least not in the minds of those who care). Additionally, if all your metric does is give insight into C then at all times you will be under pressure to minimize C because there will be no credible, reliable way to determine how reductions in C affect R and thus P.

    CorDell Larkin
    http://www.cordellandcompany.com
    http://executivesguide-humancapital.com
    @cordellco

  3. Wouldn’t it be great if we could all decide on what “quality of hire” actually meant? Well, in fact, you can and absolutely should. It’s called a “definition of terms” and is the ONLY way research can be done to support hypotheses through replication.

    To simply say that one thing leads to another and gather metrics to show the connection is a simple excercise in collecting data, writing down numbers, and doing math. It has no scientific credibility whatsoever. Until you DEFINE what YOU think you are measuring – and share it with others – you have zero credibility in any research environment.

    “Hire good people, get good outcomes.” It’s a simple thought with the following definitional needs:

    Hire – FT/PT/Temp/Contractor/Consultant?
    Good – By which valid/reliable measurement tool?
    People – Age, gender, experience level? How many? For how long?
    Outcomes – By which measure(s)? When do we measure?

    Now put a few additional variables on top of this:

    In what environment is this being measured? What is the tenure of the leadership there? Have any co-workers had additional training that may affect an outcome? What is department turnover? Etc., etc., etc.

    What the CEO, CFO, CIO, COO, or the AFL-CIO thinks of what you are doing is irrelevant outside your own small circle. If the collective Human Resources community wants to affect outcomes, start defining and measuring with clarity and replicability. At that point HR themselves begin to establish some measure of credibility.

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