Posts tagged ‘HR KPI’

There is no best Talent Management KPI

Imagine your CEO asks you to come up with one KPI he can track to evaluate if your talent management program is successful. Which talent management KPI will you choose?

The example may be hypothetical, but not unrealistic.  I know HR executives who have five or seven KPI’s which they discuss with their CEO once a month. One may be on recruitment and one may be on talent management.  So if you had to choose one for talent management, which one would it be?

When I talk about one KPI, I don’t mean to say that I think the success of a talent management program can or should be measured by one KPI. Instead I think such a program should be measured by 3-5 KPI’s.  No more than that – measuring HR should be simple – but also no fewer than that.  But I have experience HR executives who are forced to pick one.

I do believe that you can find one which is the best for you. That is the good news. The bad news is that unfortunately there is not a single generic KPI you can just copy-and-paste. It simply doesn’t work like that. BUT there is a KPI which is best for you.

Just as an aside, if you are looking for the five best generic talent management KPI’s, you can find them here.

Since I cannot offer you the one best talent management KPI, let me instead offer you the process through which you can find it. It is a fairly generic process and you can therefore use it on all types of programs. But will all generic processes; the value is not in the process design itself but in how you conduct the process and what content you bring to it.

It is a four step process:

  1. Identify what problem the talent management program is trying to solve. This is the purpose of the program. Although all programs are talent management programs, they are trying to achieve different things. Some focus on attracting talent, some on retention of talent and some on development and deployment of talent. There is no right or wrong, but which is more important to you?
  2. Imagine that you have implemented your program successfully and it has achieved its purpose, how do you know? What objective, tangible, measurable things have changed? Is it behavioral, attitude or more financial things which have changed? Which one matters most?
  3. Identify what data you have – or can get – to track the program. Most organizations suffer from bad data, wrong data or simply difficult-to-obtain-data. Ignore all of that data. Find the few data that you really need and focus your effort on that. Don’t sweat the small stuff.
  4. Define the KPI clearly. It must track the ultimate purpose of the program as well as being easy to monitor and understand. Formulating a KPI is not difficult, but you should follow these best practice steps when formulating it. Most organizations use KPI’s extensively but for most they don’t do what they are meant to do – help you make HR better. They use bad KPI’s

If you follow this simple process you are likely to come up with the one KPI which you can show to your CEO. He (she) will thank you for it.

03/04/2013 at 15:20 2 comments

The Top 5 Posts of 2012 from the ‘All About Human Capital’-Blog

It’s been a fantastic and fun year writing blog posts on this blog and in honor of the New Year, I’d like to share the most popular posts to my readers over the past year.

Here are the top 10 posts in terms of views and re-tweets from this blog for 2012, enjoy:

5: The challenge for HR analytics is not data – it is the mindset

The software is good, the people are bright – it is the strategic mindset around data which is the challenge.

4: Why HR KPIs still matter but why they still fail to deliver

KPI’s are criticized but they still matter – you must however follow theses rules of thumb when using them.

3: HR KPIs: The good, the bad and the ugly

KPI’s actually work most of the time. If you measure people and you link it to their pay they will in most cases try to meet these goals. Bad KPI’s therefore do more harm than good.

2: Top 5 Talent Management KPIs

A list of the five most important and strategic Talent Management KPI’s

1: Cognitive dissonance and HR Analytics is a bad cocktail

The most popular post was about psychology and HR Data – how cognitive dissonance will create a bias for a certain decision despite facts and evidence may favor the alternative.

02/01/2013 at 09:07 3 comments

When bad data happen to good HR people!

You are an HR executive and you are sitting in your monthly strategy meeting with the top executives of your organization. You are about to present your monthly workforce data and updates on your KPI’s and strategic initiatives. This is the moment when the people who matters are really listening to you. You have the floor. But you dread this moment, because you know that they know that the data is bad. You hand out the status reports and you begin your presentation. And everybody in the room – including yourself – are thinking the same thing: “this report looks nice, but we don’t trust the data. It just doesn’t look and feel right”. And actually you know that the data isn’t right, but it is the best that you and your analytics department can find. It is not that the data is completely wrong – it is just not right. But you know that if you were to try to make the data right it would require so much work and resources. Resources you don’t have. So you continue with your presentation and hope that nobody asks. They usually don’t.

This is a problem for many in HR (as well as all other functions). You are using workforce data which doesn’t quite feel right but you use it because that is what is available and you or your analytics department have no alternative.

Bad HR analytics data

Bad data is a big problem and it affects every part of an organization, from sales to HR. Many studies have shown that bad data quality cost a lot for organizations. A Gartner survey revealed that in US:

  • 140 companies surveyed lost an average of $8.2M annually due to bad data
  • 30 companies surveyed estimated their losses at $20M
  • 6 companies surveyed estimated their losses to be more than $100M annually

Why does it cost so much? There are three reasons; bad data quality lead to bad decision, bad processes and ultimately bad data can lead to mistrust with your customers.

All organizations have bad data to some degree, but it seems that some have much more than others. There are four reasons behind why bad data happens:

  1. Lack of a coherent data strategy. Having a purely operational approach to your data is probably the biggest reason behind bad data. Data is suppose to support you in your strategic decision making and a lack of a coherent data strategy to support your organization’s strategy means that you approach becomes random and often meaningless.
  2. Assume that analytics software is the answer. HR analytics software is great, but it is simply just another data collection tool, albeit one with more potential than most. To get the most out of HR analytics you must go through a strategic data process and decide what data is of strategic importance to you and how they ideally look like.
  3. Garbage in, garbage out. This one is often overlooked although it should be clear to everyone. Your data is only as good as the component inputs.
  4. Lack of critical data sources. While the quality of the data is critical, what data sources you incorporate is equally important.

So how to avoid bad data? Thomas Redman, writes in his blog that “data creators must create data correctly, the first time, with full understanding of what that means to customers, those who use data they create. Data customers must communicate their data requirements to sources of data, and they must provide feedback when data are wrong. Virtually everyone recognizes they are at once data creators and data customers. There is, of course, a lot more to data quality management. But let’s not make this any more complicated than it needs to be.”

I agree. It is not that difficult, but once you are using bad data in your reporting, ROI’s and updates it is so difficult to change it for primarily psychological and political reasons. So 1) get it right first time and 2) when you observe bad data correct it immediately.

Ultimately, I believe that many executives are sitting with status reports, KPI’s and ROI calculations based upon bad data. And many know this to be true but it takes too much effort to correct it. The bad news is that you have to change it. There is simply no excuse to continue to use bad data. If you don’t have the resources to make them better at least stop using them. The good news is that good data makes a big difference. The quality of the decisions, processes and programs based on good data is worth so much more than it cost to find them – even if it means that you have to change many existing processes and disregard existing data sources. You (and your data) will be so much more trustworthy.

So what to do when bad data happen to good HR people? Fix it.

20/08/2012 at 16:47 13 comments

Why HR KPIs still matter but why they still fail to deliver

How to use KPIs in HR

Key Performance Indicators – or KPIs to everyone these days – continue to be a hotly debated topic in HR. There are those who are simply against them. They see no use of them. This group is divided into two sub-groups; those who simply don’t belive that you can or should attempt to put figures, numbers or monetary value on people. Figures and charts say nothing about people is the argument. To them, it does not matter  how well they are formulated or how they are used – they simply don’t like numbers, metrics and KPIs on people related matters at all.

The second sub-group in this first group is a mix of some HR analytics, some senior HR executives and some top management executives. Their argument against KPIs is that it just doesn’t work in practice. The senior HR executives have used KPIs for so long without success that they now disregard them. The top management has seen HR use KPIs but still feel that HR has not delivered over the years. And some in HR analytics believe that it is analytics and not metrics and/or KPI’s which is the answer.

The second group of people believe KPIs can add significant value.  This group also have two sub-groups; one believe that KPI’s are they answer to all and everything and use them as much as possible. In fact, their departments are almost entirely run by KPIs.

The second sub-group of this second group also believe that KPIs can add significant value but with a caveat namely that they should be used very carefully, only in small doses and if in doubt not at all. I admit that I belong to this group . I believe that in 95% of all organizations, HR KPIs are truly ugly (see definition) – non-strategic, there are too many of them, they are poorly measured and with no real impact and frankly they have not been given the attention they should. So I am left with a strange admission; I belief HR KPIs are a great and effective tool but I have very little evidence to back up this claim as I see as many if not more evidence in practice of the opposite.

I don’t think you can come up with clear definitive rules as to how to make good KPIs. They simply have to be adapted to each organization – what may work in one may not in another. However, I do believe that the best HR KPI’s I have seen follow these rules of thumb:

  • Aligned with the strategy and business plan of the organisation. The targets of the HR KPI should be linked directly to the strategy of the organisation
  • Personally owned. The HR KPI should be owned in two ways; firstly it should be linked to one person who is accountable for its success. This means that it is not falling between roles and people can argue about fault etc. Secondly the HR KPI should be meaningful for that person.
  • Actionable. Every HR KPI should have a project or a set of actions which will lead to meeting the target. It should be within the circle of influence.
  • Well defined. Every KPI should be precisely defined. An exact definition, which data are involved, where the data is collected from and delivered by whom. It should be formulated in a way so an outsider will be able to look at it and find the result.
  • Relevant. It must be relevant in the specific context of this HR department in this particular company.
  • Timely. There must be a specific time when the target should be met.
  • End KPIs (compared to Mean KPIs). Consider a KPI which is about the number of people who had an annual review. This is a classic ‘mean’ goal. It is not an end in itself to hold annual reviews. It is the desired results of the annual review which are interesting. All HR KPI targets should be end-goals not mean-goals.
  • Predictive (i.e. leading indicators).
  • Few.  It is better to meet the target of three or four  KPIs than to meet six of ten. When you have too many KPIs you tend to select the ones you feel are the ones to meet and consciously or unconsciously  not even try to meet the others. This subjective section of KPIs are bad for an organisation. Better select a few and meet them all.
  • Linked to bonus. It should make a difference to the person if he/she meets the HR KPI target or not.

So why are most HR KPIs so bad? I think it is down to three things; 1) Some just copy from other organizations, consultants or books. As I stated above – it simply doesn’t work. 2) Some don’t think strategic. Only strategic KPI’s will ever have the chance of being good. Unfortunately, creating strategic KPIs is more difficult than non-strategic ones. 3) They don’t matter. If there is no consequence of meeting the KPI target they will not have any effect.

My conclusion about HR KPIs is that it is a powerful tool to manage an HR department. However they still fail and do not deliver their promise and consequently are increasingly getting a bad reputation because they are poorly formulated and used. In practice this happens in most places. I believe that bad HR KPIs are a lot worse than not having any at all. Take the time to formulate a few really outstanding ones or don’t use them at all. The problem is that KPI’s do work in as much as people tend to follow them. If they are badly formulated employees will behave equally bad.

25/07/2012 at 11:43 7 comments

Are you measuring performance or results? HR is often measuring the wrong one.

It is impossible these days to open a HR magazine, go to a HR conference or read a HR book without being overwhelmed by terms such as ROI on HR, HR analytics, KPI’s, measurement and Human Capital Management. These buzzwords which are trying to make HR ‘harder’ have really gained acceptance in the HR world today. In many ways, this is a good thing.

The problem with metrics and KPI’s is however, that they actually do work. That is, if you start to measure people in certain ways and you link their pay to meeting those measures they will in most cases try to meet these goals (KPIs) at the cost of other things.

“What you measure is what get’s done” as the old saying goes. It is therefore imperative that you measure the right things.

I was recently inspired by a Ted-talk about measuring performance. The talk was given by Dr. Chris Shambrook who supports organizations with leadership development. He makes the argument that when organizations talk about performance they are usually talking about results. So when you ask a person about how his performance is, what most people think of is results – how well are you doing against the goals set for you. What performance really means is “doing the things you need to do in order to get the things that you want”. He argues that organizations should focus on performance more than results. I totally agree.

I recently wrote about something similar when I advocated that HR also should track effort in the performance management system. Inspired by John Wooden, arguably the best coach in sport’s history, who famously never talked about winning games and wasn’t focused on the points on the board but instead for him it was about sticking to the fundamentals and making an effort to reach your potential. If you do that, he argued, the points will come.

Jon Ingham is a big more cynical when he state that “the easier something in HR is to measure, the more likely it is to be pretty low value”, but I agree with him. It is easier to measure results but HR should be more focused on measuring performance. However just because it is more difficult does not mean impossible. It just means that you should look somewhere else for your best KPI’s.

I freely admit, that I believe  HR can add significant value through good analytics, metrics, ‘true’ evaluation and cleaver KPI’s. However I also believe that they are difficult to get right, and if not done properly you can actually do more damage by using ‘ugly’ KPI’s. If you want to do it, make sure you do it right. In that sense I am not a true ‘Demming’ who believed that “In God we trust, all others must bring data”.

By focusing on performance instead of results you focus on how much potential you have and how you need to develop that. That in return will give you more control over delivering your results. Isn’t that what we are supposed to do?

04/06/2012 at 21:49 2 comments

Top 5 Talent Management KPI’s

I was reading an excellent White Paper by among others Jeff Higgins from Human Capital Management Institute which is called “Top Five Metrics for Workforce Analytics“. The White Paper lists five metrics of which one of them is an index they call ‘Talent Management Index’ – something which alerts me when I read it.

While the report does not go into too much detail, it does outline their suggestions for top 5 metrics for Talent Management.

That got me thinking about my suggestion for top five metrics for Talent Management. I would argue that you really shouldn’t have more than five at the most. KPI’s can overwhelm you and they must be used with care (see here for the pitfalls of using HR KPI’s). My suggestions are;

  1. Talent Retention (this is more positive than its negative cousin ‘Talent Turnover’). This is measured by taking the number of identified talents leaving the company during the year divided by the number of identified talents at the beginning of the year. For me, retention rates are not always very interesting. Many times you do want to get rid of low performers and you should be able to that without messing up your Talent Management KPI’s. But it must be imperative to keep talents – otherwise they shouldn’t be identified as such.
  2. Talent Performance. This is measured by taking the performance score for your identified talents from your Performance Management System. An effective talent program should be able to develop talents in such a way that their performance score improves.
  3. Time to Hire for Critical Roles. This one a bit tricky, because this KPI actually can work against you. The best candidate for a critical role may not be the one which is just available (there may be a 3 month notice period). However, a successful Talent Management program should be able to fill critical roles quicker from within. This should be measured.
  4. Skills gab filling process. This is measured by taking your talents and measure their talent gab at the beginning and at the end of the year. The talent gap will be individual from company to company but be based upon your individual assessment made at the beginning of the year. It may also come from your Succession Planning tool. In any event you must have some way of measuring how well the skills gab is changing.
  5. Talent Engagement Levels. This is measured by taking the engagement survey and identifying the level for your talents.

I have written many times, that I think Talent Management is the most important strategic process for HR to get right. This is simply because the potential pay-off is phenomenal compared to many other HR processes.  Therefore it is too important not to measure and evaluate properly. Let’s get that right.

I will be very interested in hearing about alternatives to these Talent Management KPI’s. Which ones do you used and how do they work for you?

30/04/2012 at 20:21 15 comments

HR KPIs: The good, the bad and the ugly

This week I have had meetings with two HR executives about their HR KPIs (Key Performance Indicators).  They both complained about two things I hear a lot; 1) we have too many and 2) they are not very good. While recognising that they have too many they both found it hard to actually get rid of any. At the same time, while they felt that they were not pushing the business in the right direction, they didn’t know what the difference between a good and a bad HR KPI is.

The problem with KPIs is that they actually work most times. That is, if you start to measure people in certain ways and you link their pay to meeting those measures they will in most cases try to meet these goals (KPIs) at the cost of other things.  This is a problem because there is always a consequence with any KPI and if they are the wrong ones the consequences may be dire.

This can be simply illustrated here:

  • If you are in the recruitment department and your KPI is ‘Time To Fill’, you will be focused on filling a position with a person who may not be right for the job as long as it is done fast. The right person may have a three month notice period whereas another (not fitting the job as well) may only have one month notice period.
  • If your KPI is ‘Performance of the new employee after 6 months’ you will want to spend (a significant) extra time and money on finding the right person who can deliver performance fast, which means that the position may be vacant for many months thus disrupting the workplace in the meantime.
  • If your KPI is ‘Cost Per Hire’, you may use the cheapest channels, the fastest processes with the cheapest personality-tests because this will make you hit your target. The result may be that is the not the right person but it is the cheapest hire. Maybe you need to buy out the right person but this will ruin your KPI

 

The Good HR KPI
The good ones (i.e. the best ones) are the ones which are
  • Aligned with the strategy and business plan of the organisation. The targets of the HR KPI should be linked directly to the strategy of the organisation
  • Personally owned. The HR KPI should be owned in two ways; firstly it should be linked to one person who is accountable for its success. This means that it is not falling between roles and people can argue about fault etc. Secondly the HR KPI should be meaningful for that person.
  • Actionable. Every HR KPI should have a project or a set of actions which will lead to meeting the target. It should be within the circle of influence.
  • Well defined. Every KPI should be precisely defined. An exact definition, which data are involved, where the data is collected from and delivered by whom. It should be formulated in a way so an outsider will be able to look at it and find the result.
  • Relevant. It must be relevant in the specific context of this HR department in this particular company.
  • Timely. There must be a specific time when the target should be met.
  • End KPIs (compared to Mean KPIs). Consider a KPI which is about the number of people who had an annual review. This is a classic ‘mean’ goal. It is not an end in itself to hold annual reviews. It is the desired results of the annual review which are interesting. All HR KPI targets should be end-goals not mean-goals.
  • Predictive (i.e. leading indicators). Meeting the target of the KPI should lead to meeting business goals.
  • Few.  It is better to meet the target of five of five  KPI’s than to meet six of ten. When you have too many KPI’s you tend to select the ones you feel are the ones to meet and consciously or unconsciously  not even try to meet the others. This subjective section of KPI’s are bad for an organisation. Better select a few and meet them all.
  • Linked to bonus. It should make a difference to the person if he/she meets the HR KPI target or not.

The Bad HR KPI
Bad ones are the ones which appear good because they follow the characterises of good KPI but they are not strategic and relevant. So at the end of the year you and the rest of the organisation congratulate yourself on meeting your targets only to discover that you failed to deliver on your strategy.

You may have a really well defined KPI on recruitment, but if your issue is a high turnover of talented employees your KPI may be well defined, actionable, personally owned etc. but it is not relevant nor strategic.

The Ugly HR KPI
The truly ugly ones are the ones which are not strategic, relevant or cannot even be measured. An example could be:

  • Title: Most managers perform annual reviews
  • Description: % of managers who perform annual review
  • Target: Higher than last year

The trouble with this one is that it is a mean-KPI (see above), it is poorly defined and most likely not relevant. This is an ugly HR KPI.

It is not difficult to find HR KPI’s (see for example this library). It is a little more difficult to define them well and have processes in place to meet them . But this is certainly something most can do. But it requires work to make the to be one of The Good ones.

30/03/2012 at 12:46 12 comments


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