Transform your people strategy from a cost center to a profit driver with these data-driven approaches that speak the C-suite's language
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You know HR plays a critical role in your organization's success. But in today's data-driven business world, warm and fuzzy feelings about employee engagement and talent development aren't enough. To get buy-in and support from the C-suite, you need to quantify HR's value and speak the language of business: ROI, metrics and analytics.
The good news is, the right HR metrics and workforce analytics can clearly link your people strategy to business outcomes and prove HR's worth as a strategic partner. It's all about tracking the right data and telling a compelling story. Here's how to get started.
Gone are the days when HR could rely on gut instinct and anecdotal evidence. In today's world, data is king. Every other business function—from marketing to supply chain—uses data to improve performance and prove impact. HR must do the same to be seen as an equal strategic player.
As an HR leader, leveraging metrics and analytics helps you:
"The use of analytics positions HR as a fact-based strategic partner as opposed to an emotional and intuitive decision-maker. It elevates HR's role." —Scott Mondore, Managing Partner at Strategic Management Decisions
Not all HR metrics are created equal in the eyes of executives. To grab their attention and prove your value, focus on metrics that directly impact business outcomes. Here are five to get you started:
Revenue per employee (RPE) is exactly what it sounds like—the amount of revenue generated by each individual employee. Tracking RPE over time shows how productive and efficient your workforce is. Improvements in RPE can be tied to HR initiatives like recruiting top talent, effective onboarding, development and productivity-boosting benefits.
How to calculate RPE:
RPE = Total company revenue ÷ Total number of employees
For example, if your company earned $50 million last year and has 500 employees, your RPE would be $100,000 per employee.
Quality of hire measures the value new hires bring to the organization. A bad hire can cost your company big bucks, not just in salary but in lost productivity, disrupted teams and sunk training costs.
Tracking quality of hire shows the business impact of your recruiting and selection process. To measure quality of hire, consider factors such as:
Roll these up into an overall quality of hire score for each new employee, then average the scores. Track this metric over time and look for upward trends that show your hiring process consistently selects the right people.
Losing employees is expensive—really expensive. Some studies estimate losing an employee can cost 1.5-2 times their annual salary. Cost of turnover metrics capture this financial impact.
To calculate cost of turnover for an individual:
Track cost of turnover for your highest-impact or hardest-to-fill roles, not just overall. Then show how retention programs minimize those costs.
Executives understand ROI—the financial return generated per dollar invested. Framing HR programs and initiatives in terms of ROI speaks their language.
Calculating HR ROI isn't an exact science, but it's a powerful way to show impact. Follow these steps:
For example, to calculate the ROI of a leadership training program:
Present your ROI calculations as a "Business Impact Analysis" of major programs to impress the C-suite.
While most HR metrics focus on what happened in the past, predictive analytics forecast the future. Harnessing the power of big data, statistics and modeling, predictive analytics identify patterns and probabilities leaders can use to make proactive decisions.
For example, predictive models can project:
Partnering with data scientists, HR can leverage predictive insights to have more strategic business conversations.
Sold on the power of HR metrics but not sure how to begin? Follow these tips:
Don't measure things just for the sake of measuring. Start with your company's strategic goals and identify the HR metrics that directly support those.
You can't measure everything at once. Focus first on the metrics that will have the biggest business impact and are feasible to track.
Dig into your HRIS, LMS and other HR systems to find relevant data. Partner with Finance and other functions to fill in gaps. If you lack good data, build that into your long-term HR roadmap.
Invest in analytics technology or build a simple spreadsheet to track and visualize your priority metrics. Share it with stakeholders.
Numbers alone won't move leaders to action. Combine metrics with storytelling to show the real human impact. Highlight employee success stories. Share quotes and anecdotes that illustrate