“Workforce Metrics” is about to revolutionise HR and maximise staff potential. It will soon be coming to a computer near you. Steve Foster reports
Although it is widely acknowledged that much of an organisation’s competitive advantage is stored in it’s people, HR issues frequently fail to command a high priority in the boardroom. Because strategic HR initiatives are often long term and many variables are involved, people related investment is often seen either wasteful or a leap of faith. Yet organisations employing good HR practices will ultimately enjoy enhanced business performance.
Several HR academics, a long-term study by the IWP in Sheffield, and some well documented case studies (Sears Roebuck retail experience), consistently report good linkages between HR practices and improved financial results.
As we learn more about the relationship between HR practices and bottom-line results, developing and sustaining a high performance workforce will become a major strategic priority for organisations. It is likely that as a result there will be an increased focus on identifying and monitoring the people related Key Performance Indicators (KPIs) which drive business performance.
KPIs will support the identification of performance deficiencies, form the basis for the development of new strategies and allow organisations to evaluate the success of HR practices. The ability to manage performance information and deliver it to management desktops in a rapid structured manner will be essential. These developments have major implications for HR technology.
ERP systems don’t deliver
Monitoring HR performance indicators requires sophisticated analytical tools. However, traditional Enterprise Resource Planning (ERP) systems have generally failed to deliver the quality of management information needed to support improved workforce performance. Typically, the output from an ERP system has been reactive, historic and transactional in nature, forcing the user to seek the information they need from generic, pre-defined (often paper-based) reports.
ERP’s value in supporting strategy has therefore been limited. Worse, ERP systems have tended to create functional silos – HR people viewed HR data through the HR system, finance people used the finance system and so on. Not only has it been hard to obtain a pan-organisational view, the complexity and cost of providing end-user access has been prohibitive.
Recent developments in technology are bringing about major changes in the way managers are able to think about strategic issues. Several leading HR software suppliers are introducing a new generation of analytical tools, specifically aimed at tracking core KPIs. “Workforce Metrics” is a generic term for these tools, which can compile, prioritise and present a wide range of people-based KPIs in a timely, meaningful manner.
Workforce Metrics applications depend on powerful data acquisition tools to assimilate information from other ERP and legacy systems, generating a complex data-mart containing HR, financial, customer and production data from across the organisation. Further tools are then used to analyse the data.
At the heart of many Workforce Metrics tools is a balanced business scorecard approach, which identifies the important linkages between customer, financial and other internal perspectives and translates them into appropriate performance indicators. Recognising the indicators which drive performance, then being able to measure them, is a key management tool.
This convergence (rather than the functional silos created by ERP systems), gives insight into the impact of people on the business. For instance, while most HR systems can hold basic absence records, when combined with product costing and production data, the true costs of absence become apparent.
As these tools employ web technology to sift and display information, managers can access real-time analysis through a personalised homepage. The critical KPIs are “pushed” forward to the end user, highlighting only what is important to each user’s specific requirements. For example, marketing managers will wish to see different performance information to finance managers. Key performance metrics are displayed in a “dashboard” format and specific problem areas are highlighted by exception ie, the user will be alerted only when measures fall outside agreed parameters.
Another feature of Workforce Metrics is the ability to link to external benchmarking data, such as compensation surveys, providing the ability to carry out detailed salary modelling and “what-if?” analysis. These features make Workforce Metrics potentially very powerful indeed.
But a word of warning: while Workforce Metrics may indicate where your business is, it will not tell you why, and may give few clues as to how you reach somewhere else. KPI measurement alone will not create a high performance workforce – it is just the instrumentation.
Value of Workforce Metrics
Organisations simply seeking a nice way to present management information, with some pretty flashing lights, are missing the point of Workforce Metrics. Its real value is in bringing about a greater understanding of the people dimension of an organisation, not as a reporting tool.
Introducing Workforce Metrics software will require a tremendous organisational effort to prioritise precisely which HR indicators should be monitored, how they are presented and to whom. Even harder will be interpreting the KPIs in a meaningful way and then using them as the basis for development of strategies that lead to changes in employee and company performance.
Clearly, Workforce Metrics is a milestone in the development of HRMS technology, representing a move away from the traditional systems role of supporting HR administrative processes and towards establishing the people-related data as one component of a business-wide, strategic support tool. With the timely availability of some encouraging academic work and a new generation of data integration and diagnostic tools, organisations at last have the quality of in- formation needed to take a new approach to strategic people management issues.
Steve Foster is a director in KPMG’s workforce group.