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HR to the Rescue!

How to Use Human Resource Metrics to Create a Competitive Advantage

In light of the looming labor shortage, organizations must maximize the contributions of their human capital. Ultimate Performance: Measuring Human Resources at Work, a new book from Wiley, explains how.

America is on the cusp of a serious labor shortage. Between now and the year 2012 the U.S. Bureau of Labor Statistics estimates that nearly 35 million Baby Boomers will retire, leaving businesses with one of the tightest labor markets in American history. Faced with this huge lack of talented and skilled workers, organizations must find better ways to maximize the contributions of their human capital in order to remain competitive. If you're a human resource executive, the heat is on you-and job one is properly measuring workforce performance.

Ultimate Performance: Measuring Human Resources at Work (Wiley, 2007, ISBN-13: 978-0-4717412-1-3, ISBN-10: 0471741213)-a new handbook by Nicholas C. Burkholder, Scott Golas, and Jeremy Shapiro-offers corporate human resource managers a new blueprint for expanding the contributions of their workforce to the bottom line. By employing new ways of measuring employee potential and performance, CEOs and other C-level executives can finally gauge accurately how to manage people for maximum productivity, performance, and results.

Most organizations have traditionally viewed their workforce as a "cost of doing business," rather than as a strategic resource. Too often employees have been considered more of a burden than a corporate asset. Ultimate Performance proposes to change that mindset.

Conventional human resource management strategies have generally advocated processes like goal setting and individual performance review to motivate employees to work harder and contribute more. But standard performance appraisal criteria are often difficult to measure and may have little actual affect on the company's profitability. It's no wonder that human resource management is seen as a "soft" science in many management schools and boardrooms.

At the same time, other organizational units such as marketing, strategic planning, production, and finance routinely use proven tools and metrics to track their progress and improve their operations. The authors suggest a more structured approach to human resource management that relies on forging closer links between operations and staff executives.

"What is needed," the authors explain, "is an approach that integrates the measurement of human capital assets (and not just the cost of their acquisition) into the decision support models used by finance and operational executives."

Rather than seeing the traditional "personnel department" as a cost center, they view the human resources function as a full partner in managing the strategic direction and performance of the organization as a whole. In Ultimate Performance: Measuring Human Resources at Work the authors provide the framework, tools, and techniques for implementing a new system of human metrics within any organization.

As the authors point out, "The new economic paradigm continues to recognize people as a company's key competitive advantage; human resources managers are required to deliver services that are more than efficient and effective, but also support their organization's strategy and objectives."

In addition to chapters on how to develop meaningful measurements of workforce costs and contributions, along with selecting more typical metrics for job performance, the authors include case studies from organizations such as Intel Corporation and PacifiCare Health Systems. Also included are lively discussions about the value and need for metrics in such diverse arenas as Major League Baseball, government bureaucracy, crime reports, and the "No Child Left Behind" Act.

Ultimate Performance is filled with practical advice, tips, strategies, and plans. Among the advice the book renders is this set of tips for measuring human capital:

1. Keep Track of Data: It is important to have the necessary data available. For example, it is impossible to calculate cost ratio and efficiency without first knowing your organization's external and internal recruiting expenses.

2. Measure Consistently: Be careful not to overdo it; calculating quality, time, satisfaction, and efficiency more than once a month can distort the results.

3. Monitor Activity Indicators Weekly: Indicators, such as Acceptance-to-Start Ratio, should be monitored every week. Trends that these results yield, both positive and negative, should be examined closely.

4. Make Adjustments: Be sure to correct the negative trends, while exploiting the positive ones.

5. Don't Be Afraid to Experiment, Even If It May-or Does-Produce Negative Results: No performance curves go straight up. Look for mistakes. Things are never as bad, or good, as they seem.

The book also provides a framework for selecting and implementing performance metrics that can enable managers to make strategic decisions that will hit the bottom line with impact.

Experienced human resources professionals will also likely find Ultimate Performance to be a tool they can use to solidify their position within the organization. As the authors point out, the human resources department is ... "the only function within a company that is reasonably positioned to improve the way people work. HR owns and manages all of the data about workers and work: their jobs, expertise, organizations, backgrounds, skills, requirements, and compensation structure. HR as a discipline-not the department-has a matchless understanding of the factors that govern worker productivity: competencies, management processes, relationships, rewards, collaboration, learning, job structures, partnership models, and more."

In today's demanding, fast-paced, rapidly evolving global economy, an organization's workforce is the most important competitive advantage it possesses. Armed with the measurement systems outlined in this important book, C-level executives, including chief human resource officers, will finally be empowered to pinpoint and build upon the strengths, weaknesses, and opportunities of their human capital.

"The ability to maximize the performance of your human assets relies on the ability to measure their attributes, exploit the strengths, and examine the weaknesses," the authors conclude. "In the perilous sea of business, is your organization navigating with longitude or is it merely drifting? Without the proper measurement tools, your organization is risking its own existence, competing with organizations that measure, correctly and on time. Measurement arms organizations with a competitive advantage and it is imperative to take it."

About the Authors:

Nicholas C. Burkholder
Relentless in the pursuit of "what can be," Nick Burkholder is actively engaged in the development and application of performance frameworks that enable individuals and organizations to achieve optimum results. Nick Burkholder is the president of OnPerformance and founder and a trustee of Staffing.org.

Experienced in virtually every aspect of workforce selection and management, Nick completed consulting engagements in nine countries and worked for organizations including the Johnson & Johnson Worldwide Family of Companies, CIGNA Corporation, The Vanguard Group of Investment Companies, and the U.S. Army.

Nick's previous books include On Staffing: Advice and Perspectives from HR Leaders (Wiley) and Outsourcing: The Definitive View, Applications and Implications (Wiley).

Scott Golas
Scott Golas is a managing consultant for PA Consulting based in Chicago. In this role, he works to develop and implement human capital solutions that support and accelerate companies' business strategies and aligns the resources required to drive implementation. Scott earned an MS in organizational development from Loyola University of Chicago and a BS in manufacturing engineering and technology from Purdue University. Before joining Aon, Scott was managing director at Talent divine/MarchFirst, a Chicago B2E company, and was the HRM (Human Resources Management) consulting practice leader for PricewaterhouseCoopers' West Region.

Jeremy Shapiro
Jeremy Shapiro is a vice president at Bernard Hodes Group, where he co-manages the Hodes iQ e-recruiting product suite. Jeremy has coached hundreds of companies through challenging recruiting technology implementations over the past decade. He holds an MS in Information Systems from NYU's Stern School of Business.