Written by: Matt Lafata
HRchitect has been involved in approximately 2000 HR technology related projects for hundreds of companies of all sizes and industries across the world. We have gained tremendous insight that we love to share with you so that you can benefit from the experience, and the lessons learned from others. With 18 years in business behind us in working with many of today’s leading companies, let us best position your company for a successful future with Human Capital Management Systems!
Successfully executing the ITM concept requires a holistic approach that includes embracing ITM as a philosophy, developing a strategy, applying science & measurement disciplines, breaking down process barriers, selecting and implementing enabling technology, and sustaining the new solution over time.
Three previous posts around this subject have given you an overview of our seven-step process for a successful approach to ITM and covered the first two steps – Philosophy & Strategy. Now we move on to step #3.
Step 3 – Science and Measurement
Fundamental question: What tools and methodologies will enable us to best measure and predict outcomes?
Another critical element that is unfortunately often neglected or totally absent in ITM implementations is the application of the science of individual and organizational psychology to strategy, processes, and technologies. Note that it’s not just about the individual employee – their skills, competencies, performance, etc. – but also how organizational elements like culture, HR program effectiveness, and linkage to business outcomes can impact both individual and organizational performance.
One area where the application of science is extremely important is pre-hire assessment. Providers of scientifically validated assessments have partnered with many customers to demonstrate dramatic overall improvements in traditional HR measures. As an example, Kenexa (a leading provider of assessments) reports that one customer experienced 26% higher performance review scores and 40% fewer counterproductive incidents after an assessment was implemented for a key job category; another customer showed a direct improvement in customer satisfaction of 32% compared to the period before the pre-hire assessment was put in place. A retail customer of SHL (another leader in the assessment space) reports that associates that scored well on the pre-hire assessment sold on average $12 more per hour – a significant impact to the business when multiplied by the sales force of 6,000+ employees.
These examples show that the application of science to ITM processes can make a dramatic difference to workforce performance, and thus substantially improve business outcomes. Science can be applied in more than just the area of pre-hire assessments; it plays a key role in analyzing the impact of changes to process and technology and developing a ‘closed loop’ metrics feedback system, which leads us to the second component of this step – measurement.
It is not possible to overstate the importance of developing a strong foundation of measurement to support ITM. The HR function has historically been a laggard in this area, with a prevailing opinion that HR is “about people” and that “it’s just too hard to measure HR – it’s too soft.” We believe that this attitude is a cop-out, one that has its historical roots in the lack of analytical thinking skills resident in many early HR practitioners. Lack of understanding and expectations by senior business leaders has also been a contributing factor, and the dearth of user-friendly HR reporting and analysis tools has also had a part to play. Whatever the reasons for the lack of HR measurement in the past, it is clear that there is no excuse for this mindset moving forward. As one senior HR leader of an HRchitect client recently put it, “What gets measured gets done. We must continually strive to increase the measurement acumen of the HR function in order to increase the impact of HR program investments on business outcomes.”
In this methodology, the definition of the measurement framework is best accomplished via dialogue with stakeholders throughout the organization. We recommend that project teams conduct a role-based analysis to determine critical metrics. This usually results in a very large pool of potential metrics. Although it is tempting to try to ‘boil the ocean’ and give all roles everything, it is much more realistic to prioritize the metrics list based on the number of roles needing a given metric, impact to the business, ease of delivery, and other criteria. The result will be an initial subset of metrics that satisfy the 80/20 rule, and a plan for delivering extensions in phases over time.
HRchitect finds it useful to categorize metrics according to the following taxonomy, which is based on metrics complexity versus impact:
Figure 1 HCM Metrics Taxonomy
- Information Distribution – these HR metrics are simple, fairly easy to gather, and sent out to stakeholder roles periodically (e.g., standard reports)
- Metrics Delivery (Dashboards) – as we move up the complexity scale a bit, this category includes ratios and graphical depictions of data delivered to a role; more sophisticated capabilities include the option to drill down to the underlying details from summary metrics.
- Contextual Embedded Analytics – another step up in both complexity and impact, this category includes metrics and analysis that is embedded into the supporting technology in order to provide ‘just in time’ information needed by a role to make a decision.
- Correlated Analytics – this category of metric takes data out of the HR silo and links it with enterprise financial and operational information to understand the impact of HR program investments.
- Predictive Modeling – this “Holy Grail” of measurement is to use historical and current data to predict future results – this is the most complex of all measurement categories, but has the potential to deliver the greatest impact, once the organization is able to accumulate longitudinal data for robust trend analysis
To show how this taxonomy plays out in an ITM function, here is an example from Performance Management:
Figure 2 – Performance Management Metrics that Matter
Beginning at the bottom left are metrics commonly delivered via standard reports – useful, easy to gather, but more focused on the efficiency of this ITM process. Metrics in the middle of the chart are more commonly delivered via dashboards or embedded analytics, and move into the realm of effectiveness. Finally, those examples in the top right are related to correlation and prediction; complex to accumulate and analyze, but of great value in determining the impact on the business.
As an ITM project team works to identify the initial metrics subset and extensions, is it likely that the first delivery will have a higher ratio of efficiency metrics, as it will be important to deliver the standard data that roles are expecting. However, we recommend that at least some effectiveness and impact metrics be included (1 or 2 minimum per ITM function) in order to prove the value to HR and the business, and to build momentum for future delivery of the extensions to the measurement framework. In this way, the project team can team science with measurement to define critical organizational metrics for roles and stakeholders within the organization; this will ultimately drive improved linkage to business outcomes in subsequent phases.
We’ll address the next step in successful ITM execution, Process, in the next blog and please let us know how HRchitect can assist you to get maximum benefit that comes from Integrated Talent Management and as it progresses, E2E HCM.
Matt has over 20 years in the HR industry and has been with HRchitect since 2004. He currently serves as President and the firm’s principle HCM analyst. As one of the industry’s leading analysts on HCM Systems Vendors, Matt studies the marketplace and meets with vendors on a regular basis to stay on top of trends in this industry. Matt has moderated numerous HCM shootouts & panel discussions for vendors & HR organizations. He has also been a featured speaker on HCM solutions and workforce trends at various industry & vendor conferences.
As President & CEO, Matt oversees all aspects of HRchitect’s operations including client success, consulting operations, worldwide sales of HRchitect services, marketing, alliances, finance and corporate development. Matt enjoys working with the HRchitect team and the satisfaction he gets from watching our people grow personally and professionally within the organization, and the positive difference our consulting services make in our clients’ organizations.