HR Metrics: The Call and Answer of Standardization
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By Micah Fairchild
HR Metrics are Now Officially on SHRM’s Standardization Agenda
It’s hard to look very far within the HR and HCM technology space without seeing evidence that HR analytics, business intelligence, and performance metrics are rapidly evolving into the next big thing. Aside from the countless blogs, analyst opinions, and conference sessions dedicated to the topics, organizations from here to Timbuktu are clamoring to get their hands on the latest, greatest application that will help them finally gain deeper insight into their respective workforces. As you’ve heard us indicate on more than one occasion though, the critical steps for HR analytics deployment are varied, complex, and often organization-specific—issues that don’t necessarily lend themselves all that well to simply going out and buying the first off-the-shelf metrics solution you can find.
Indeed, having in-memory analytics functionalities or custom report-writing capabilities are fairly useless to the company that hasn’t developed its strategic direction; aligned its HR function with organizational objectives; or effectively trained its HR analysts. Be that as it may, these truths about how, when, and why you should utilize HR metrics have done little to slow the zeitgeist of the analytics movement. Perhaps then it should come as no surprise that now the HR and HCM industries as a whole are being faced with backtracking in an effort to standardize the definitions, language, and appropriate uses for specific measures—an endeavor that is being led by none other than the Society for Human Resource Management (SHRM). More specifically, SHRM has convened a panel of approximately 600 HR industry professionals tasked with the objective of drafting guidelines for HR metrics and how those statistics should be reported to stakeholders.
SHRM’s HR Metrics Standards: Helpful or Harmful?
The Human Resource metrics to be covered fall under the 5 broad category topics below.
Human capital spending – including total head count, FTE analysis, training/development spend, total wage/tax/benefits spend, and contingent labor spend;
Depth of leadership – including internal vs. external fill figures, and percentage of positions with a defined successor candidate;
Talent retention ability – including retention statistics for voluntary/involuntary turnover, separated by job type;
Quality of leadership – based on employee surveys; and
Employee engagement – based on organizational climate surveys.
While seemingly straightforward, what’s interesting though about this particular standardization effort (particularly the Human Resources Indices for Investors) though is its emphasis on stakeholder investment—an issue that SHRM believes will benefit both organizations and investors alike by unifying disparate practices into a single set of HR analytics and providing a standard methodology with which to compare companies. As Lee Webster (Director of HR Standards at SHRM) states, "We are not trying to create some new thing, but trying to normalize what we should be creating so investors can compare companies fairly and equitably". Webster goes on to say that, "In the end, it will be important for public companies to have these metrics in place and keep them up to date [because] investors are interested in financial stability”.
As BusinessWeek reports, “SHRM has begun submitting [this] proposed set of metrics to the American National Standards Institute (ANSI)”, but not without a healthy amount of debate and derision both within and outside of the organization. At its core, the major issue revolving around this standardization effort is the proposed external use of the measures; a problem that has created dissention from the HR Policy Association (HRPA) and the American Staffing Association (ASA)—two major players in the HR and HCM industries. For example, the ASA issued a letter to SHRM detailing what it perceives as issues with contingent labor and other staffing strategies that could be affected by this new standardization. “Simply indicating the costs of contingent labor in a vacuum would be misleading”, stated the ASA; and given the fact that organizations’ staffing needs hinge on a number of contextual factors could “be pointless at best and potentially harmful to companies and workers alike”. Likewise, many detractors believe that these standards could wind up being a tiring burden for organizations, especially for those public companies already facing the stringent reporting requirements and guidelines of the Sarbanes-Oxley Act. Not only that, but should ANSI ultimately certify the standard, then it would be considered a consensus standard for one of the largest professional associations in the country—an issue that could well mean that compliance agencies like the Securities and Exchange Commission (SEC) would defer to its measures.
Concluding Thoughts on SHRM’s HR Metrics Standardization Efforts
As Laurie Bassi, chair of this SHRM work group standardization project indicates, efforts are underway to incorporate suggestions and revisions to the standard; and all eyes are focused on making the standards less burdensome and releasing a second review for public comment. Proponents may well argue that other business functions such as Finance institutionalized their metrics decades ago (a move that supporters say has ultimately proved beneficial to both individual companies and the industry as a whole); and that HR’s lack of unified measures has led to issues such as training and development spend being lumped in with general overhead costs; stakeholder data being absent of substantive human capital figures; and an inability industry-wide to accurately gauge how companies invest in their respective workforces. On the other hand, as Knowledge Infusion’s Jason Averbook asks, “If we turn HR into a machine that looks the same in each organization, are we simply back to our non-strategic, transactional roots”?
While arguably each side of this discussion on the standardization of HR metrics has merit-worthy arguments, the fact of the matter that all companies looking at these proposals should realize is that this is not a SHRM issue. Yes, SHRM has been the one that has spearheaded this effort, but the reality is that the most divisive issues in this debate have been advocated for by the HR community at large, as well as a gathering of business leaders and subject matter experts. Especially with regards to the Human Resources Indices for Investors, the insinuation that SHRM is responsible for driving home this agenda is not only patently false , but fails to divine the purpose for which those particular standards are being considered—investors.
The process for the development of these (and the countless other) standards that SHRM is involved with is an open one, and one that allows each member of the HR community to participate. Aside from that though, the attention that is being given to HR analytics is needed; and for the most part is driven by the necessity to leverage organizational data to its fullest—in essence building the business case for why HR as a business function deserves a seat at the C-suite table; and how the function can serve as an appropriate investment indicator. SHRM’s efforts may not be completely on point as of yet, but I for one applaud the efforts taken thus far; if but for no other reason than it keeps HR metrics in the spotlight for a bit longer.
The major issue revolving around this standardization effort is the proposed external use of the measures; a problem that has created dissention from the HR Policy Association (HRPA) and the American Staffing Association (ASA)—two major players in the HR and HCM industries.