Understanding the metrics that need to be measured and reported is correlated to an organization’s goals and strategy. HR professionals get into a fix regarding which performance metrics they should measure when asked to start measuring the performance of the department by the high-level executives. Measuring metrics just for the sake of completing an assigned task and handover statistics does not meet the objective of doing it. Implementation of the HR reporting system should be carefully planned. It is rightly said that what gets measured gets managed.
The metrics that affect progress towards business goals should therefore be focused on and be measured. Recognizing the data that is important, figuring how to measure it and selecting the correct performance management systems may feel intimidating.
How to choose the right performance metrics?
How do we know what is a good metric? All performance metrics aren’t the same.
When a metric helps you in meeting your end goal it can be characterized as a ‘GOOD’ metric. All good metrics have three distinct characteristics:
- Company growth and objectives are codependent on the good metrics. The important metrics are always working in close proximity of the company’s primary objective. An example of such a good metric is the monthly revenue growth calculator. This might be different for different organizations as this is subjective to what the particular company considers as its objective. For some it might be growth in the number of users of the company’s services and for the others it might be the revenue generated. These performance management systems allow to choose metrics that clearly indicate where you are in relation to your goals.
- Metrics that are already doing well can be made better. Progress is measured using good metrics that leaves room to improve.
- Good performance metrics trigger action. A good metric is an important tool in understanding the questions that an organization needs to ask to improve and understand the areas that need work. Getting an idea of the causes of any discrepancies with the help of these metrics, the organization can work together and sort them out.
You might also be interested to read: High Performance Organizations
As the saying goes, there’s no one-size-fits-all system when choosing which metrics to focus on. All organizations do not define metrics the same way or use the same formulas. There are certain points that the HR team heads need to follow when selecting the metrics. Business strategies and employee performance needs to be constantly monitored in both short and long term goals. The top brass ensure that their co workers are kept in the loop and also that the HR are aligned with the objectives. Remember values change from organization to organization.
Understand business strategy and set objectives that are in tandem with the HR to achieve long-term and short-term goals. Determine the contribution of the human resources to achieve the set goals and set in place the metrics that will help in understanding how these functions will affect the business. As an organization you need to evaluate which data must be collected, what collection methods are available and how the data will be gathered.
HR metrics can help pinpoint where human capital issues exist and allow HR staff to monitor trends. Information from appropriate HR metrics can be used to assess, plan and improve HR as well as to contribute to achieving business strategies and objectives.
Metrics can be classified into two main categories: Leading Indicators and Lagging Indicators.
- Leading indicators are used in measuring the required steps to be taken to achieve your goals. They are basically inputs such as activity per sales rep.
- Lagging indicators are used to measure the final results – which means they let you know if you actually achieved the goals or not. This means they display the output which could be the revenue closed.
Using a vital combination of leading and lagging indicators, you can choose good metrics for your company. If you use only lagging indicators, you won’t be able to make changes quickly enough to grow your company.
It is also important to gauge the supporting metrics or the secondary indicators while focusing on the primary metrics, as they are the ones that display the overall growth of the company. As an organization you need to be confident about acquiring a growth in the amount of clients in a sustainable way which is in the overall interest of the organization. It is therefore easier to use supporting metrics to avoid manipulating or distorting metrics.
One can’t be expected to choose the correct metrics in the first go. It is a constant process and you need to understand it, maybe get it wrong, correct yourself and learn the process and the correct combination of these metrics. Even the best businessmen don’t get it right the first time. They know that their metrics will evolve and hence they need to adapt and evolve their metrics along with their business to measure their objectives in the best way.
In the business and marketing world, goals with parameters need to be set in order to achieve the required results. It can be defined as the specific target an organization needs to reach in order to be profitable. Goals need to align with the objectives that are prerequisite of the company and should be time bound in order to be most effective. Whether your company wishes to increase its sales by a small margin or the customer satisfaction by three fold, it should be a part of your objectives over the course of the next year. One must always ensure that the objectives must be clearly defined in order to set the useful KPIs or Key Point Indicators.
Key Point Indicators (KPIs) may be defined as a type of performance measurement tool that helps in understanding how your department or your overall organization is performing. A good KPI can act as a symbol to help your organization to achieve your objectives by guiding you towards the right path. In order to do its job effectively, a KPI must:
- Be explicit and measurable
- Be broadcasted all over the organization
- Be focused towards the achievement of your goal
- Be in tandem with your concerned business
It is important for any business to have KPIs that help in focusing on strategic and operational improvement, arrive at a rational decision which should lead to focus attention on important matters.
References:
- “How to choose the right metrics and set business goals”- By Team Geckoboard
- “ARE YOU MEASURING THE RIGHT METRICS?” – By Amelia Northrup-Simpson
