The office of finance across most organisations is continually seeking to improve its planning process. More accurate plans delivered in more frequent iterations and the flexibility to adjust budgets as reality reveals itself over time have spurred growth in applications that support planning.
The office of finance is usually first to adopt such solutions but supporting departments and the lines of business can provide valuable insight into corporate performance that can be used to better inform plans. However, the office of finance may be able to drive change outside its domain by pointing to its need for improved planning accuracy and help peer departments build a case for improved analytics.
For example, the office of finance could make the case that improvements in workforce planning can lead to better organisational performance and improve the office of finance’s ability to set performance targets and acquire or release the resources needed to achieve those goals.
However, workforce planning is often a less mature process, often with gaps in information that can lead to bad decisions or well-intended, but ultimately misguided, performance management spanning both HR processes as well as the decision making of employees tasked with filling a variety of roles.
When performance management goes bad it can move an organisation down an undesirable path. In the case of the human resource (HR) department, it is highly likely that a common metric to benchmark performance against is one that measures the time-to-hire.
By the time the process to get a requisition approved is completed, the manager that requested it is often dealing with pent up demand for a resource and needs to get the position filled quickly. If the time-to-hire is kept short, then the HR department is fulfilling their internal clients’ needs. But when thinking about this metric, it’s not related to the success of that new employee, nor is it something that would lead to an organisation meeting strategic goals unless they were in the recruiting industry.
A better measure is one that takes into account the quality of hire. Filling a position only to find some time later that the fit was poor or that there was a lack of adequate training or mentoring to ensure success, can lead to yet another candidate selection process, greatly increasing the true measure of time-to-hire.
Other metrics can mislead an organisation’s decisions too. Turnover can often be calculated organisation-wide, but few organisations may understand how the turnover of strategic employee positions compares to their peers in their industry.
When short-cuts are taken in the analysis of corporate performance, it can be due to a lack of data but more likely it’s a lack of relating the data that exists inside and outside the organisation for better analysis.
The problem of misguided metrics extends beyond HR departments, but they have a great opportunity to provide metrics to improve employee performance across the organisation and help improve the metrics of success used by other departments. For example, there may be a lack of training provided to a procurement manager that may be the cause behind a metric signalling an underperforming supplier.
A packaged analytic application with pre-configured content and metrics, or support from a services provider experienced in HR analytics implementations, can help organisations avoid many of the pitfalls that lead to poor performance management.
The reality is that most HR analytics capabilities were developed in-house and while they may have met the immediate needs of the HR department, it is less likely these solutions meet the needs of other departments and processes that the HR department doesn’t directly oversee, but certainly impacts.
It may have appeared to have been cost-effective to build an HR analytics solution in-house at the time such a project was undertaken, but the hidden costs of bad decision-making are difficult to quantify before an IT project is undertaken. Once these bad decisions reach the office of finance the damage could be significant.
Posted by Brian McDonough