Human Resources – Create a system to measure performance

Question:

I manage a small human resources (HR) department. We’ve recently identified a vision and a mission for our department. We’ve also identified a number of process improvements we’d like to pursue. A major initiative has to do with documenting what we are doing and measuring our work. Can you offer some suggestions for getting started?

Answer:

It was Admiral Grace Hopper who observed, “One accurate measurement is worth more than a thousand expert opinions.” Admiral Hopper was correct, and her words are especially relevant for today’s measurement-oriented world. So, at the outset, let me applaud you for your efforts to enhance your practices by making measurement a priority. This will serve you and your colleagues well as you attempt to improve your processes. After all, without measurement you will have a hard time identifying what, if any, gains have been made along the way.

Over the past 10 years, Kaplan and Norton’s “Balanced Scorecard” has been one of the catalysts for organizations to study their measurement practices and see if they are measuring well and/or if they are measuring the right things. The “Balanced Scorecard” is a conceptual framework for undertaking measurement. Well implemented, it can promote a variety of effective internal and external communications. It can provide for increased accountability for results. In essence, it is a comprehensive performance measurement system that provides intelligence to leaders and decision makers. Ideological underpinnings include:

•    Compensation, rewards, and recognition should be linked to performance measurement.

•    Performance measurement should be a positive, not a punitive system.

•    Results and progress attached to the measurement program should be openly shared with employees, customers, and stakeholders.

A “Balanced Scorecard” approach compels the organization to measure more than the financial. It suggests that by measuring more fully, a more accurate representation of performance within the organization is possible. Indeed, a model of organizational performance can be documented and fine-tuned that involves these performance areas or factors:

•    Learning and growth –

Do we have the right people on-board, making full use of their gifts and talents?

•    Processes – Are our people doing the right things using the right tools?

•    Customer – How excited are our customers with the goods, products, or services we offer and our process for offering them?

•    Financial – What does our bottom line look like? How do our realized financials compare with our forecasted financials?

Obviously, this change toward a more robust view of organizational performance reflects an evolution in thinking. Today’s future-oriented are cognizant of emerging trends such as fast-paced technology advances; resources of all kinds becoming increasingly scarce; greater demands for higher efficiency in the organization’s operations; and an explosion of outcomes/results–oriented management.

Ultimately, what are today’s organizations looking for? My sense is that your organization, like many, is striving to: (1) Operate with greater vitality, balance, and effectiveness; (2) Provide sensational service to its customers, as well as its employees; and (3) Add value … offer a compelling value proposition to the marketplace.

Why pursue a comprehensive performance measurement system, though? Can’t we just do a better job of what we are already doing without having to start measuring everything? Won’t that be a lot of work? Maybe. Maybe not, though. By getting serious about measurement, among other things, you are likely to derive the following:

•    Explicit, documented measurable outcomes that are clearly understood.

•    A replicable process for assessing, managing, and improving.

•    A forward-looking strategic partnership involving all organizational levels.

•    Employee alignment with organizational objectives.

•    Consistency and predictability.

So, where should you begin? Begin by referencing and documenting the context in which you are operating. You probably have done this to some extent already when you crafted the vision and mission statements. What’s going on in our organization? What are some things the organization is pursuing? What is upper management emphasizing in its communications?

Specific areas to probe include the organization’s vision, mission and core values; strategic plan; budget process; and performance measurement plan.

In crafting your performance measures, you will want to include a mix of leading and lagging indicators. Leading indicators are measures that lead to or drive the end results.  Lagging indicators are representation of consequences of actions taken. Keep in mind that lagging indicators are easier to develop than leading indicators. But, don’t let that dissuade you.

Another thing to keep in mind is that you want your performance measures to be relevant.  At ODC, we use a simple critical thinking approach to help our clients. It involves answering these kinds of questions: What do we want to know? What could we measure? What data might we gather? What criteria might we apply?

Let me briefly show you how these questions might be helpful to you in your attempts to develop some performance measures for your HR area:

•    What do we want to know? Are employees leaving the company at an unacceptable rate?

•    What could we measure? Employee turnover.

•    What data might we gather? Records of employment for all employees over the period of the past five years.

•    What criteria might we apply? Twelve percent is the acceptable target.

 

Obviously, you do not lack things to measure in the HR area. There are a host of possibilities, including the following partial list: training investment per employee; average years of service; number of cross-trained employees; absenteeism; turnover rate; employee suggestions; employee satisfaction; participation in stock ownership plans; lost time accidents; and value added per employee.

 My counsel to you is to focus on the most important things your work area does. What are the key performance indicators (KPIs) you want to focus on? What are the things “that most matter?”

In summary, measurement provides the basis for the organization to assess how well it is progressing towards its predetermined objectives, help it identify areas of strength and weakness, and decide on next steps, with the ultimate goal of improving performance. I encourage you to continue your measurement journey.

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