2009 Trend 7: KPI’s – Managing HR means measuring HR
When (turbulent) developments in the external environment lead to the need for change within the company, this must be based on reliable data and analyses. This is to avoid that organization continually reacts to changes at the expense of its chosen direction incorporated in the mission and vision. For HR this means having detailed (quantitative and qualitative) information on workforce performance, leading to the ability to create business scenarios based on a thorough analysis of all the available factors.
As mentioned previously, over the past few years many HR organizations have taken the time to implement backend systems (often to comply with legal obligations) including dashboards and warehouse solutions. As these systems save data in a non-ambiguous manner, they can offer a valuable insight into the performance and the make-up of the workforce. Business’ demand for key performance indicators is being continually better addressed by HR.
Analysis
The next step is processing this data in the context of business scenarios and analyzing the consequences. Beyond this level, the company needs to analyze more complex data to determine its productivity: utilization, contribution, turnover and profit. HR must step up to meet the company’s demand for adequate analysis of key performance indicators. This analysis is crucial to the success of the company strategy and to the achievement of HR’s role as strategic partner.
An example: Last year a client was planning to build a new factory on the other side of the country. They hoped to circumvent the problems posed by the tight labor market and wanted to be located close to certain large clients. The negotiations with the municipality were at an advanced stage, and the selection of a project developer had been initiated. In the meantime, HR took the initiative of conducting a labor market analysis, from which could be concluded that, due to an ageing population, this region would not have enough qualified employees (with the required skill sets and certifications) within five years. Furthermore, moving employees to the region was not an option because of the cost associated with relocation policies. Most likely the new factory would only be able to work at half capacity. This conclusion led to the whole project being cancelled, and an expensive mistake was avoided.
When dealing with key performance indicators, it is important to reflect on the inclusion of data resulting from best-of-breed system landscapes. In order for management information to be reliable, clear definitions are needed. This is increasingly difficult when aggregating information from various systems, due to the fundamental differences in the way data is entered, processed and stored. If data can not be shared, and does not contain exactly the same information, it can not be consolidated. HR must keep this aspect in mind when developing the HR system landscape and any potential extensions.