Performance Metrics: Beyond the Numbers

by Sharlyn Lauby on March 9, 2010

Peter Drucker once said, “What gets measured, gets managed.”  It’s very true.  Tracking the numbers is essential to running your business.  But it’s also important to not just calculate numbers. You need to have a good understanding of what they mean.

I’ve always enjoyed math and accounting, so I’ve never really shied away from formulas.  But over the years, I’ve learned some very valuable lessons about how to appropriately use the information.  Not just human resources metrics like turnover, cost per hire, etc.  But the need to understand the metrics your CEO is paying attention to.  There are some obvious ones like EBITDA, market share, and profit margin.  And don’t forget to look at industry indicators as well.

For example in the airline industry, on-time performance was (and probably still is) a key performance metric.

My career has primarily been as a human resources generalist, but I did spend a couple of years totally focused on recruitment.  I had always hated recruiting up to that point and when my director gave me the role, I figured it was some sort of punishment.  I was so wrong.  I quickly realized that recruiting was about more than just interviewing people.  There’s a huge strategy component.  And, as a recruiter, I needed to be keenly aware of what was happening in the business in order to be successful in my job.

I remember one day being in a meeting with a senior vice president of airline operations.   We were discussing his future staffing needs and I thought I was dazzling him with my recruitment statistics about time to fill and onboarding completion rate. But, then he asked me a question.  “What was yesterday’s on-time performance?”

I didn’t know the answer.

He proceeded to tell me the number.  Then he explained to me (in a very stern way, I might add) why I needed to know that number.  Because the last thing I ever wanted was to be responsible for a flight not going out on time – because I hadn’t found the right person at the right time to fill the job.

Several weeks later, I was in a team meeting with that same senior vice president.  People were talking about staffing, training, etc. and it was obvious he was getting frustrated.  He asked the group, “What was yesterday’s on-time performance?”  No one responded.  He looked at me directly and I answered the question.  [Oh, I scored some major brownie points that day…]

Just knowing how to calculate a number isn’t enough.  While HR or department metrics are important, you have to understand how they fit into the overall operation.

{ 6 trackbacks }

{ 11 comments }

alejandro March 9, 2010 at 9:52 am

Muy buena publicación. El tema de los números no se debe apartar nunca de los recursos humanos.

Saludos y felicitaciones

AJ Hernandez, SPHR, CPC, CTS March 9, 2010 at 2:24 pm

Excellent advice! Understanding your business at a deeper level and thinking like a CEO are some of the key components towards getting past just looking at HR efficiency metrics or the effectiveness of HR programs. Often, this requires us to think and act differently in order to deliver a greater human capital impact and larger contribution to the business. Of course, there are other components to this recipe, but understanding financials measures and utilizing them to drive value and return.

AJ Hernandez, SPHR, CPC, CTS

hr bartender March 9, 2010 at 4:07 pm

Thanks Alejandro and AJ for the comments. I agree there needs to be a connection between the metrics we generate departmentally and the overall goals of the organization. Otherwise, why do it?

Chris Havrilla March 10, 2010 at 10:59 am

An excellent lesson for all HR and Recruiting professionals!! I am often asked what advice I would give to recruiters and it has always been first and foremost to understand the business. We are tasked to find the people to achieve the team/company goals and objectives. How do you do this if you don’t know what they are and what the people will need to accomplish to achieve? Great post as always, Sharlyn!!

hr bartender March 10, 2010 at 6:07 pm

Thanks for the comment Chris. Understanding the business is so important, it’s amazing sometimes how companies spend so little time on this in orientation or during team meetings.

Lexy Martin March 11, 2010 at 1:29 pm

We published a report in 2007 on the state of metrics and analytics in which we reported the key business metrics by business strategy (growth, profit, or sustainability) and by industry (figure 8). I’m going to be updating that report soon with 2010 survey data. It was interesting that the industries that are the “early adopters” (like financial services) to technologies like analytics back then were reporting business-oriented metrics like revenue per employee or operating income per employee more than other industries that were doing metrics like TTH or process metrics. I’m personally frustrated though that even though they’ve been doing that, their business performance has been abysmal. Do you think there are any metrics (by industry) that transcend economic changes and can always be an indicator for future (good) performance?

hr bartender March 12, 2010 at 11:37 am

Excellent point about the need to monitor economic indicators – in addition to department and industry statistics. Every metric should be evaluated in the context of each organization and their goals. After that, we have to leave it up to the economists. Thanks for the comment Lexy!

Chris Young March 15, 2010 at 12:00 am

Great post Sharlyn! It is easy to get so wrapped up in our own little bubble of metrics and numbers that we forget about how they impact the overall goals of the organization.

I’ve shared your post in my weekly Rainmaker ‘Fab Five’ blog picks of the week (found here: http://www.maximizepossibility.com/employee_retention/2010/03/the-rainmaker-fab-five-blog-picks-of-the-week-1.html) to help my readers rethink the metrics they follow every day.

Be well!

Chris Young

BLOOM March 15, 2010 at 10:15 am

So true. We see this a lot. Recruiters are more concerned about filling spots rather than solving the business problem. It is very frustrating. Perhaps to help the team further understand this the senior executive and HR could take the discussion further. What is required to achieve on-time performance? And what roles in the organization drive that metric? Is it pilots showing up on time because they are sleeping in? Is it the baggage team not having the equipment they need to load planes quickly enough? Is it a lag time in the scheduling system? Is it simply capacity issues? That metric is driven by a system of people working together who make decisions in all of these areas. Until you know the roles that are key for driving that metric, it is impossible to know who to hire for what positions. You would be amazed to know the kind of impact hiring a preventative Implementer (the Kolbe A creative style for being naturally hands-on, concrete, repairer, builder, tangible master) as a baggage handler can have on on-time performance. Likewise a preventative Follow Thru as a scheduler can be a disaster with on-time performance. Knowing the specific types of people to target for required positions to achieve the metrics is the next step.

Jonathan Hilley March 15, 2010 at 7:51 pm

Definitely agree.

Understanding financial statements is more than just knowing how to read numbers. The most important element is understanding the interplay between a person’s job and a company’s financial results. This uncommon knowledge is the Holy Grail for those looking to rise through the ranks and lead an organization.

Keep up the good work Sharlyn.

hr bartender March 16, 2010 at 10:22 am

@Chris – Thanks for the recognition. It’s an honor to be mentioned on your blog.

@BLOOM – You’re right, lots of questions need to be asked. Exactly why HR pros have to learn the different facets of the business.

@Jonathan – Thanks for the comment. Well said.

Comments on this entry are closed.

Previous post:

Next post: