Survey: More Firms to Ponder HR Metrics

February 25, 2004 ( - In an effort to get a feel for how well they take advantage of their people resources, many companies will be shelling out big bucks over the next three years to measure the relationship between their HR practices and their bottom line.

A survey of US and European human resource managers sponsored by business technology company PeopleSoft found predictions that employers will be paying special attention to employee turnover, diversity, and the extent of employees’ overall engagement in furthering the company’s goals. The data was contained in a Conference Bureau report released Wednesday.

While 40% of survey participants consider senior management support to already have been high for human capital measures during the past three years, three quarters (76%) predict a further stepping up of top-level backing during the next 36 month.

“The major reason that management lends increasing support to people metrics projects is that they help lower costs and improve the return on people investments while helping align these investments with business strategy,” said Stephen Gates, author of the report and principal researcher at The Conference Board. “Human resources leaders need to determine how to link people measures to business processes. They should involve line managers at all stages of the human capital metrics process, seek advice and input from finance and strategy colleagues, and eventually embed people metrics in managers’ bonus plans.”

Human resource directors are still the primary sponsors of people metrics in most organizations, although 36% of surveyed companies report that business unit leaders are also involved.

Other study findings:

  • managers become less involved in the selection and execution of people measures as the size of a company grows
  • utilizing metrics in bonus plans is growing, but is still a minority practice with only 39% of surveyed companies rewarding managers based on people measures
  • cost reduction and revenue growth are more commonly linked to people metrics than intermediate performance drivers such as process and product innovation and globalization. .

Manager Tips

The study sugges the following tips for managers:

  • involve HR professionals in the development of overall business strategy
  • enlist leaders from outside the HR department to help develop and back human capital metrics
  • collaborate with business managers to ensure that people measures link to the strategic goals of business units
  • focus more attention on the links between people measures and major performance drivers (customer satisfaction, innovation, etc.)
  • include human capital metrics in bonus plans
  • audit metrics internally and externally
  • develop ad hoc analytical reports that detail how people investments can deliver business results.