I’m sure you have heard the saying, “What gets measured gets done [or managed].” This quote has been the subject of thousands of articles by academics and management consultants for decades. The quote is often attributed to the late Peter Drucker, one of the most notable business thinkers of the last decade. While Drucker denies saying it, he was in support of measuring, though only as part of the successful business equation. In his book “Management: Tasks, Responsibilities, Practices,” Drucker notes, “…not everything can be measured, especially some of the most important things in business: Your first role … is the personal one … It is the relationship with people, the development of mutual confidence, the identification of people, the creation of a community. This is something only you can do … It cannot be measured or easily defined. But it is not only a key function. It is one only you can perform.” I like how, in one sentence, Drucker recognizes the importance of the people side of HR as well as the measurement side.
Many other scholars over the years have weighed in on the negative aspects of “over measuring” work outcomes, including:
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Too much focus on measurable results can lead to biased, distorted, and even counterproductive behavior. Much has been written about the “cobra effect” that occurred in India under British Colonial Rule. Britain’s measurement and reward of the number of deadly cobras killed resulted in gamers breeding cobras to meet the measure (and get paid). In the business world, we often see distortions with sales reps who have already met their quota one month, pushing orders into the next month and helping themselves while hurting customers. Leader rewards sometimes put short-term measures ahead of long-term organizational health.
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As Drucker wrote, not everything that is important can be measured. This includes things like culture, teamwork, values, work ethic, etc. In fact, many times, the unmeasured is just as important as the measured.
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Approximated measures can be misleading. Measuring “culture” from survey results or turnover metrics may or may not be accurate. Good financials don’t equate to a healthy company by themselves.
So then, back to my title, is an HR Scorecard a good idea? One word: ABSOLUTELY! Yes, a singular focus on metrics isn’t healthy, but there are many good reasons for an HR scorecard.
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Measurements serve to focus our efforts. A thoughtful HR Scorecard will paint a journey toward optimum performance and hopefully help us prioritize our activities toward the goal. It also helps us benchmark against ourselves and other companies. How many times do I hear professionals complaining about too many priorities? When there are literally too many priorities, there isn’t usually a clear goal.
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With a scorecard, management has a clearer picture of staged progress, enabling it to be more proactive and targeted in ensuring eventual success. All projects are not equal.
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Human nature can lead to greater motivation when we see the quantified results of our work. We instinctively keep score, whether it’s encouraged or not.
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It is easier to instill a sense of accountability across the organization when results can be measured precisely against goals. If everything is a priority, then nothing is, as they say.
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Lastly, and perhaps most importantly for the HR Leader, an HR Scorecard ties HR Activities to the overall business strategy, thus promoting the value of HR. It shows that HR is concerned with objectively moving the organization forward, in addition to the softer side of HR. For every HR professional I meet who believes they aren’t taken seriously by senior leadership, I always ask, let me see your scorecard. Almost always, there isn’t one.
So then, what measures should be included on an HR scorecard? We discussed this issue in my May HR Peer Group meeting. One best practice from that discussion came from a retail employer with many locations. They produce a monthly HR scorecard that includes, among other things, the top five and bottom five locations in terms of retention. These groups are paired together for learning. What a powerful way to drive improvement. Another firm measures and reports turnover by supervisors. Another produces a monthly trend report for all people managers. I love how these firms are putting HR metrics in front of all leaders, thus raising the relevance of HR!
While every scorecard needs to be customized to the important business drivers of each organization, generally, you should have the following sections (a few measures provided).
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HR Budget and Efficiency Metrics: measures like HR Expenses as a percentage of revenue (HR value), HR Costs per employee (HR expenditure), Revenue per employee (productivity measure), and number of employees per HR staff FTE.
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Employee Satisfaction Metrics. Staff turnover, employee NPS (or other survey metric), internal promotion rate.
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Learning and Growth metrics: employee development plan rate, skill acquisition rate, goal achievement rate, training participation rate, and training hours per employee.
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Staffing metrics. Cost per hire, time to hire, quality of hires.
There are hundreds of metrics you could include on your scorecard. The key is keeping the number small and relevant to your organization. This is another initiative you should collaborate with your CFO to set up, and therefore, another credibility-enhancing exercise for you. When other leaders see that you are interested in driving the business forward from the talent side, as opposed to just policing behavior, you will find many doors begin to open for you and your department.
Try it, and as always, if we can help, please reach out!
Written by Chief Solutions Officer Doug Blizzard, MBA, SPHR, SHRM-SCP.
