Metrics Drive Outcomes
A great company needs a great management team that understand the only way to improve a process is to define who you are, decide where you want to be and then constantly measures the progress in closing the gap. Good metrics should be clearly defined, measurable and actionable so that you can successfully drive behavior. Well-designed metrics will drive behavior to optimize output from your processes.
Your process is like a machine.
One way to look at how companies work is to imagine the processes as a machine that has outputs and levers that you can pull to affect its behavior. Most companies are all too familiar with the standard financial ratios. However, to be truly successful you have to go beyond these measures and focus on other key areas such as customer satisfaction and employee engagement and satisfaction. So where do you start? Start with your goals and vision. If you have a robust system in place then congratulations, this article may not be helpful. But if you’re struggling to figure out what to measure and how to measure, then read on. Today I’m going to focus on metrics specific to people management and human resources. (For more on HR metrics that are worthy of tracking, check out Datis Blog).
Start with your overall goals
Examine your mission, vision, and core values to determine what outcomes your organization believes are important. What measurements do you have in place to reach your key goal of success? In the beginning it’s important not to overwhelm yourself and bite off more than you can chew. I recommend finding about 10 key success measures and setting targets on a regular cadence. The targets should be both stretch in nature and achievable. A regular review is mandatory on a monthly, quarterly and annual basis to ensure accountability and consistent execution. What gets recorded, tracked and measured is typically achieved. So be clear about the things you choose and make sure they support your vision in the short and long term. According to Bert Markgraf, “A good performance metric gives hard data and yields results that measure clearly defined quantities within a range that allows for improvement.” (Source)
Which Metrics are commonly used to Measure Employee Performance?
The lifeblood of every business is its employees. It is not enough to build a great product in a cool company to keep employees happy. This is why deeply understanding your employees, deepening their engagement and remaining committed to their growth and development are especially important. There are hundreds of metrics in use by HR today, ranging from the most basic (employee turnover) to highly complex scorecards and workforce analytics. Done well, these metrics are used to drive onboarding, development and exit decisions. The most common metrics that can be tracked are listed below. Here are two great reasons why you need to pay close attention to your employees’ performance and engagement: Each year the average company loses 20-50% of its employee base (Bain & Company) and replacing a lost employee costs 150% of that person’s annual salary (Columbia University). Yikes!
What data are you tracking and how are you using it? The most common metrics that can be tracked are listed below.
- Overtime worked (work/life balance)
- 360 Review Results
- Performance review data over time
- Recruitment costs
- Training hours
- Employee survey results
- Head count ratios
- Level of trust
- Employees commitment
Not all organizations can or will track all of the above. Much depends on the lifecycle stage that the organization is in. Mature companies are likely to have highly developed metrics that provide a host of decision making data. Early stage start up are likely to have less robust systems in place tracking a subset to the above. For more details of what to measure and how to calculate metrics, read this article and this report.
What it takes
Developing a metrics plan will require an investment of time and resources. If your organization is new to outcomes measurement, it will take from 18 months to 3 years to develop a comprehensive system. There are a number of additional resources, other than time that are also needed:
- People on staff who are engaged and understand the mission willing to roll up their sleeves to make it happen. Check out these tips for many of the great ways to get to know your employees better. The Harvard Business Review article (HBR article) on engaging employees offers some practical approaches to increasing your engagement with your people.
- Outside resources to help guide the process to ensure you’re following industry best practices and benchmarking against other companies in your industry.
- A solid communication strategy to keep all stakeholders informed and engaged. A predictable outcome to taking on this type of project is employee anxiety over job security. This is why you need someone with strong empathy to help communicate the overall mission and project goals and ensure you don’t lose top talent as a result. The underlying message to your employees needs to ensure that the data will be used to help employees understand performance deficits and construct ways to help them improve their performance. A recent surveyby US staffing agency, Accountemps found that one third of HR managers cited communication issues as the main cause of staff morale issues. (Source)
- A planning team which directly works with key stakeholders and the management team, determine the timeline and allocate the proper resources, delegate authority to the lead person.
The overall process can feel daunting and overwhelming so a number of additional key resources such as project management and coordination and technology skills to achieve or build the supporting tools to achieve your measurement goals will also be needed.
Dos and Don’ts
- Tie metrics to planning and outcomes
- Make sure everyone in the organization understands what is being measured and why
- Apply metrics to everyone including the C-suite
- Start small with a handful of metrics
- Link metrics to performance rewards
- Be prepared for some bumps in the road along the way
- Embed it into the culture and keep evolving the processes over time
- Limit who participates, make everyone contribute to the process to engender a sense of ownership
- Treat metrics as a one and done event
- Use metrics as a compensation decision tool; tie the metrics to other quantitative and qualitative factors
Why you need to take action today.
Employees are your most valuable asset. According to Gallup, these nine areas are positively impacted by improving your employee’s engagement in your company (Source):
- 37% lower absenteeism
- 25% lower turnover (in high-turnover organizations)
- 65% lower turnover (in low-turnover organizations)
- 28% less shrinkage
- 48% fewer safety incidents
- 41% fewer patient safety incidents
- 41% fewer quality incidents (defects)
- 10% higher customer metrics
- 21% higher productivity
- 22% higher profitability
There is no single one-size fits all approach to using metrics to improve your employees’ performance and engagement. Like every great relationship, it takes time and effort and a genuine degree of caring. The more management makes effort to connect, motivate and invest in their workforce, the more eager they will be to invest more of themselves to help the company achieve its goals. If you start to think of your employees in the same light that you think about your customers, and measuring their contributions in a consistent and predictable manner, the greater your bottom line will increase. Just some food for thought as you set your planning cycle in motion.
CEO, MACH4 Ventures
Gina Lepore is the CEO and founder of MACH4 Ventures offering coaching, team building and execution consulting for individuals and organizations. She is a board certified coach and experienced executive with multiple decades of practical business experience. Services include: Executive Coaching, Training and Building Team Trust and Collaboration and Business Oversight Services.