Metrics have become a requirement for any human resources department to show its value to the organization, but in order for metrics to be effective, they need to be the right metrics and aligned with business objectives, according to two experts who recently led a BLR audio conference.

Ronald Adler, president and CEO of HR consulting firm Laurdan Associates, Inc., says that in measuring HR results, HR professionals should use the language of the organization. For example, if the organization uses costs per mile as a measurement, HR should do the same when it measures, he said.

Deborah Saks, president of 1 Source Consulting, says that metrics are important to HR's new leadership role, which includes business professional, leader, general manager, and HR expert/visionary.

In the role of business professional, HR must approach business problems as an executive would, moving from a business partner to a business peer, she said. This role includes critical thinking, root-cause analysis, and fact-based decision making as keys to measuring return on investment. This requires HR to be able to dissect balance sheets and annual reports.

In the role of leader, HR must ensure that its competencies are comparable to peer-level executives, according to Saks.

In the role of general manager, HR must run its department like a business, Saks said. She said that HR needs to run the best ship in the house, too. HR must be efficient (internal measurements like employee turnover and healthcare costs per employee), effective (return on investment), and measure its impact (how it contributes to overall business results). HR must align its strategy with the business strategy, she said.

In addition to those roles, HR needs to have expertise and vision in the areas that are important to the executive team, Saks said.

Saks said HR should concentrate on developing a core set of metrics that are important to the organization and use metrics as a smoke detector to alert the organization of problems.

Adler said that metrics should concentrate on the following:

HR activities:

• Hiring and staffing
  
• Identifying top performers and linking compensation to performance
  
• Succession planning
  
• Training and skills development
  
• Retention
  
• Risk exposure of employment decisions

Outcomes:

• Improved organizational competitiveness
  
• Increased productivity
  
• Improved employee satisfaction
  
• Reduction of risk associated with employment decisions
  
• Improved ROI

Strategic Planning:

• Identification of problems and opportunities
  
• Development of organizational goals and objectives
  
• Development of ways to achieve goals and objectives
  
• Development of an assessment and monitoring system to measure performance.

He stressed that when deciding what to measure, HR should place emphasis on measuring results instead of activities.