How To Effectively Use Organizational Metrics?
Organizational Metrics: As often happens in almost all areas of life, a critical, deep, and reflective look at what we do and what we act on becomes essential for improvement.
The measurement of actions and realities is one of the fundamental elements on which to support this analytical perspective.
This may be the moment in the history of organizational management and Human Resources in which more emphasis and effort are being made to direct management activity based on the information provided by these measurements. The above is likely possible due to the technological development of the Big Data world in Human Resources, Robotization, and the Internet of Things.
Parallel to this rise and the importance of metrics, the pros, and cons regarding their use have also been progressively delimited. From the initial assertions, blunt and with a strong position: “What cannot be measured does not exist. “There was a somewhat more modest version: “What cannot be measured cannot be managed,” attributed to Peter Drucker, and recently various voices, and also common sense, advocate a critical review of metrics and their study to analyze under what conditions and with what profits they provide a competitive advantage for organizations.
This critical review includes the necessary conquest of the tyranny of metrics through continuous experimentation and iterative tuning and a careful examination of metrics’ power when we institutionalize and make them the goal to be achieved.
In this and a second post on organizational metrics, you will learn about the main issues that must be taken into account to make effective use of organizational metrics and thus overcome the tyranny they often exercise over Human Resources management.
Table of Contents
The power of metrics in human resources
I’m not discovering anything new when I say that the metrics we develop and implement have a powerful influence on the actions we decide to take. Thus, just as developing effective metrics is critical to help us focus action and obtain the desired results, poor measurements will likely lead us to mismanagement: paying attention and effort to something that may not be fundamental.
What is an effective metric in HR?
The question that necessarily follows from the above is what is an effective metric? That which allows us to take action is calculated in a standard and consistent manner over time, its calculation is affordable and, therefore, viable, and it is aligned with the business objectives.
In short, it is a question of the metric adequately representing the reality it pursues and successfully guiding the action to generate the desired impact. Undoubtedly, this question is not easy to address, and it is not resolved with a stroke of the pen but rather from an integrated and joint vision of various elements. Let’s see them.
Types of organizational metrics
An initial question that we must consider is that different metrics reflect the organizational reality, paying attention to different aspects that also have a differential effect on organizational results. The classic distinction developed by different authors helps us to discriminate between efficacy, efficiency, and impact metrics.
Organizational efficiency metrics
Efficiency metrics describe how a particular process related to the organization’s talent works. However, it does not go further to offer information about the impact of this process on the organization’s results.
The metrics underlying the concept of effectiveness are intended to account for the degree to which the organization can satisfy a set of requirements. If one looks at the talent attraction process, we would speak here of metrics such as the “number of vacancies covered in a certain period established as an objective” or as the “ratio between the number of valid candidates to start the selection process in function of the number of candidates attracted by the recruitment process.”
Efficiency measures introduce effectiveness in consideration of the resources used to achieve the objectives. Thus, it is understood as the ability to achieve efficiency with an adjusted consumption of resources.
In the above examples, efficiency measures would incorporate this concept of resource utilization through different process cost considerations. Thus, we would speak of ratios such as the following: “incorporation cost (sum of recruitment, selection, and reception costs) based on the number of recruited candidates” or “cost of the recruitment process based on the number of admitted candidates in the selection process.
Organizational efficiency and impact metrics
When, in the metrics, we introduce a new variable that expresses in some way the results of the organization (understood in a broad sense), we point toward the effectiveness and impact metrics.
Continuing with the previous examples, we could convert the previously expressed metrics into impact metrics by introducing, for example, customer satisfaction or sales generated by hired employees.
Thus, we could have the “average number of sales generated by the incorporations produced in a certain period” or, if one wants to differentiate between the different recruiting sources used, the “average number of sales generated by the incorporations produced in a certain period.” Period of time depending on the recruitment source from which the candidate came.
As can be seen, when an organization establishes efficiency metrics, its actions will be oriented precisely toward improving its processes in terms of how well they are done. However, the fact that a process is done well in terms of efficiency does not mean that it positively impacts the organization.
For this reason, the development of impact metrics makes it easier for Human Resources action to be oriented towards generating an impact on the results desired by the organization.