You Can't Be Champion Unless you Keep Score
Measuring the Impact of Great People Programs
John Sullivan



Introduction


If this were the Olympics, it would be obvious to all that you couldn’t become a champion without measuring results. In fact, the definition of a champion is "the one with the best results.” In the general business world the use of numbers and metrics is part of life. CEO's, CFO's and shareholders all measure results using numbers and dollars. Within all major firms all projects, products, and business units are evaluated on the basis of numerical results. However, in direct contrast, we within HR resist using metrics, almost like developing them was the equivalent of a root canal. After over three decades of studying the dramatic differences between the two approaches, I have concluded that there are three primary reasons why HR professionals resist the use of metrics:


1. They protect the "human resources" of their firm. The inherent "human" nature of HR people forces them to resist anything that might in anyway reduce an individual to "just a number"

2. Most enter the field of HR without a business degree and as a result they are uncomfortable with business ratios and measures. Their lack of understanding with regards to common business ratios and sometimes business in general leave them uncomfortable with metrics

3. They are so unsure of the results of their HR programs that they are afraid they'll get and "F" on the scorecard, if we begin to measure (“A” students love being graded)








Our fear of reducing "humans" to numbers

Most people enjoy working in HR because they enjoy working with people and helping others with people problems. This is especially true in the "softer side" of HR including such functions and activities as organizational development, coaching, mentoring, training, and leadership development. Our concerns for "dehumanizing" people started in the 1950s with the fear about the possible introduction of universal IDs and even forcing everyone to have a social security number. Historically many argued that universal ID’s and the application of numbers to individuals in general, created a situation whereby the unique aspects of our individual characters would be minimized. In reality, in most cases, the opposite turned out to be true and those who continue to cling to this excuse are behind the times. The world has changed. Credit card companies, insurance companies, political parties, and even your local grocery store have realized that delivering “individualized” service requires that you have data to help you distinguish wants, needs and behaviors unique to each person. . In a global fast changing world, numbers and data have become "king", They have become the “key” measure of business success and the determinant of whether you will get future funding.


You can't tell if you're actually helping people and improving their lives without metrics


Although most utilize metrics primarily to build their business case, strong "people" advocates need them too. As a strong people advocate you care about people and improving the quality of their work/life balance. But how can you know what their actual needs are without the use of metrics that identify what is needed? Metrics derived from surveys and focus groups help you understand worker needs and their frustrations.


The value of metrics doesn't stop at determining employee needs. Once you identify their needs and implement your "people programs" to meet them you aren’t finished. It is also essential that you continue to use measurement systems to ensure that the programs are actually meeting the goals you established. And since people programs are so underfunded, it's also important that you get it right the first time, because there won’t be funds to try something else.


So even if you are a die-hard people advocate, I hope you can now see the value added by using metrics. The metrics don't really dehumanize and they can help you improve your efficiency and responsiveness. Remember in the end, if you don't agree with the metrics, you are still free to "react emotionally" if you so choose. The metrics just give you another option, they allow you, if you choose, to become a fact based decision maker.









Dooming "people programs" to a life of underfunding

Funding Issues have become one of the key drivers behind the use of metrics. In a world of extremely tight resources, the primary consideration for the funding of projects and programs is the quantifiable return on investment, ROI for short. It's not my fault, and yes it wasn’t always that way, but it is now and it will likely remain that way for the foreseeable future.


Technology forces managers to shift to “fact based” decisions

It's time to realize that failing to attempt to quantify the business impact of people program results essentially dooms people programs to a life of underfunding and under appreciation. Why? Because the world has changed. It started first with the proliferation of computers, databases and ERP software most decisions are now “fact based”. Almost everything in business has been reduced to numbers. For example product decisions that used to be made by "humans" have now frequently been turned into a metrics driven operation at successful firms like Wal-Mart, GM and Best Buy. The "human protectors" in HR don't want to admit that, in some cases, the limited knowledge, time or experience that people have makes their decisions inferior to those decisions that can be made with the help of technology that uses metrics and sophisticated forecasting techniques. We might wish that it wasn't true but in fact it is true in more cases then we care to admit.


Globalization and mergers also force managers to shift to “fact based” decisions

In addition to technology, the globalization and consolidation of companies (through mergers) means that firms are now much larger and their workforces are spread over huge geographic areas. Once you lose the face-to-face contact that is possible in smaller firms, you are forced into the realization that you can’t assess performance “remotely” without metrics and quantifiable goals. Global competition means you must make fast decisions and in most cases…. fast “fact based” decisions are superior to fast “gut” decisions. Great fact based decisions are decisions made by experienced “humans” using the data provided by measurement and metrics!


Bringing up the rear -- Supply chain, JIT inventory, CRM and Six Sigma are forcing HR to change


If you follow leading business publications you more than likely have noticed stories heralding the dramatic shift in business operations that has occurred during the last decade. Over the past ten-years many so-called "overhead" functions were called that because they made no direct impact on profitability. They were treated as second-class citizens because of that lack of impact. Functions like purchasing, shipping and warehousing were even lower on the funding totem pole that HR. But something dramatic happened to the world of overhead functions during the late 80's and early 90's. They got tired of poor treatment because they were not "profit centers". What happened was a transformation almost unheard of the world of business. Each of these functions began generating a demonstrateable profit through the use of measures and metrics. To this day, supply chain, just in time inventory, lean manufacturing, CRM and similar programs are business heroes. What is their secret to successes? First it was their courage to admit that numbers and metrics could drive decisions and second it was the adoption of comprehensive management systems (driven by metrics) to improve service, quality and productivity. Where was HR during the transformation of these other “overhead” functions? The answer is, unfortunately, following well behind the pack.


Improving people productivity has huge economic consequences

What makes the “overhead” transformation even more startling is they became corporate heroes even though they only spend a single digit percentage of the total corporate budget. In direct contrast however, companies spend, on average, nearly 60 % of all variable costs on their people. It doesn't take a vivid imagination to realize that if we move past our "dehumanization problem" and begin to improve the productivity of 60%of the budget, the overall economic result to a large company would be easily recognizable. The “human capital index” study, completed by the Watson Wyatt consulting organization, demonstrated that the potential impact of people programs on a firms overall market value could be as high as forty-seven percent. The road is clear and the time is right. HR must now seize this unprecedented opportunity to adopt metrics and to become the next "corporate hero.”






THE BENEFITS OF METRICS - WHY DO YOU NEED TO USE THEM?


Metrics are the fastest and the cheapest way to change behavior in business. They work as motivators because they excite and occasionally embarrass performance driven individuals. Although metrics might seem intimidating at first, once you grow accustomed to them you will not be able to live without them.


One of the major mistakes managers make when implementing any HR program is assuming that "having one" is sufficient. Nothing could be further from the truth. Merely “having one” doesn't mean that the program is meeting it's goals, or that it is performing at it's maximum potential. Common reasons to utilize metrics include.

· Meeting your goals -- Rather than guessing or assuming you're doing good work, metrics help you determine precisely whether you are meeting each of your goals. Quantifying your goals also helps you more accurately assess your success

· Driving improvement -- In a fast changing world even historically strong performing programs must continually improve. Metrics are an excellent mechanism for assessing your strengths and weaknesses. Used effectively, they can help you determine where to refine your efforts over time. Metrics also help you to determine how you should redistribute your resources (time and budget) from areas of low return to areas of higher return (ROI)

· Obtain funding --Any decision that must be approved by the CFO will be made primarily based on numbers and dollars. If you expect to convince management to fund or continue to support your people programs you will need to provide (at the very least) an ROI and a payback period. In addition, it’s important to realize that the wide use of metrics demonstrates to top management that you are "results oriented". Metrics also force you to shift your language away from terms like "happy, running well or satisfied" and more towards terms used by CFO's including margins, productivity and decreased cost of service

· Early warning a.k.a “smoke detectors” -- Effectiveness metrics can provide you and your managers with early warning signs (or alerts) of potential failures or any decline in the performance of your key programs. Providing managers with an adequate "heads up” can minimize damage or in some cases, even prevent people problems.

· Understanding critical success factors – In a fast changing world, running successful programs isn't enough. If you expect to improve them you'll need to understand the critical success factors that make them work. Metrics and analytics can help you understand why things work and what conditions and elements are necessary for success

· Shift to "fact based" decisions -- HR has a long history of making decisions based on thinking and feeling. Since CFO’s certainly don't "feel", if you want to increase funding it is important to shift decision-making from "I think" to "I know". The one single factor that differentiates great HR departments from mediocre ones is fact or data based decision-making

· Metrics change behavior -- If you distribute "ranked" results throughout the organization you will find that metrics, on their own, can drive change. Whether it stirs managers competitive juices, or just causes a degree of "embarrassment," the fact is that distributed metrics will change behavior almost immediately

· Eliminate confusion -- Metrics send a clear message about “what's important” and what isn't. It gives managers and programs focus by telling them what to do "more of” and “less of", based on what you measure. If you add rewards to the mix, you can further strengthen the focus and the speed of change

· Builds coordination/ cooperation -- Most metrics are internal to a project or department. However, if you develop metrics that assess performance across and between departmental lines you can encourage the breaking down of silos. If you add rewards to those cross departmental metrics, you can further transform "dis-similar" HR or business units into an integrated process


As you can see, metrics can have a variety of positive uses and impacts. If you're going to be a champion, you can use metric comparisons to give yourself legitimate bragging rights. They also ensure that you are meeting your customer’s needs and eventually they will lead to giving your firm a distinct competitive advantage over others in your industry.






The consequences of not using metrics

Failing to utilize metrics can have a number of negative consequences. In addition to the obvious (you will lose a lot of budget battles) you can be some other consequences. For example, it's difficult to attract and retain top talent when you don't keep score because top performers love to keep score. They want to win and you can tell to winning without metrics.


There are also some personal consequences as an individual if you fail to use metrics. First your personal pride will suffer because you won’t know precisely whether you actually met your personal, professional or departmental goals. Is also true in highly competitive world of HR that failing to use metrics will negatively impact your opportunities for pay increases, bonuses, promotion and yes, even your job security. It turns out that merely working hard in HR is no longer sufficient, there are negative consequences if you can’t "prove" you're doing great job




HOW TO BEGIN – STEPS IN DEVELOPING METRICS


The following section outlines the 8 basic steps in developing HR metrics. Consider it a metrics "toolkit" and from it you can select the best metrics for your organization. Whatever individual metrics you select be sure that you first check with the HRIS or the CIO's office to ensure that the data needed for each is easily available for each of them. Next, "run them by" your CFO's office to ensure that they mesh with other existing financial and performance metrics.


Once you're convinced of the need to utilize metrics the next steps include:

1. Select a metric for each program goal

2. Choosing between soft and hard metrics

3. Understanding the different categories of business impact

4. Selecting simple…but attention getting metrics

5. Understanding the characteristics of great measures

6. Selecting from “standard” HR metrics

7. Selecting from advanced HR metrics

8. Building the business case for increased HR funding



1) Select a metric for each program goal

Before you begin to determine which metrics to use it’s important to recognize this basic rule. “Select at least one metric for each of your program goals and what ever else you do, keep it simple”.


Although metrics can make a significant contribution toward improving your performance it is equally important not to overdo them. It's best to start simple and then to expand them into other areas when it's necessary. There is no standardized rule of thumb because every company has different goals and values as to what is important. The best approach is to build metrics that fit your needs and culture. Start with a few and then expand only if you see added value.



2) Choosing from soft and Hard metrics

CFO's break metrics into two different degrees of believability. Those that relate to items not counted in the budget are known as soft metrics and those that relate to items that are included in the budget are known as hard metrics. In case of doubt, realize that CFO’s are biased in favor of hard metrics.


Perhaps some examples will illustrate the difference…


Soft results metrics - Be careful of these because they get little credibility in the financial community

· No impact measures - I think my training program works, managers like me, no one complains, we are all working really hard etc.

· HR time savings - Shifting HR work so that employees and managers (on paid time) do the same work on their own time. Although it saves on your budget, there are no net savings to the firm. In a similar light, shifting employee costs to consultants, outsource vendors, contractors or temps may result in headcount savings but real costs may actually go up

· Time and Cost Savings from HR process re-engineering. – Streamlined processes and less paperwork, for example, are considered soft-metrics because HR generally offers no proof that HR headcount will be reduced or that it will add value with the extra time and money it saves. If employee or manager time is saved (fewer calls, reports or approvals required) it is still a soft metric unless you can first prove the time saving actually occurs and second that the “saved” time is actually shifted to more on the job productivity

· Employee satisfaction and less stress – Although it may seem valuable on the surface many CFO’s wonder if the higher satisfaction or the reduced stress are a result of lower standards and less “pressure” to perform


Hard results metrics ("Clint Eastwood" like metrics)

· Increased on the job performance – Demonstrating that individual performance increases as a result of a new program. For example, our new recruiting program produces hires with 25% higher on the job performance during their first year (compared to those hired under the old hiring system) and an industry low 1% termination rate in the first year

· Return on investment – Showing that invested dollars bring a high rate of return. For example, our new incentive program spends $1000 more per salesperson per month but the sales revenue increases by an average of S100,000 for every salesperson under the new incentive program. It returns $100 for every 1 dollar invested (the firm average ROI is 2 to 1 and the next best in the firm is 8 to 1).

· Program impact – Where a single program has an immediate demonstrated impact. For example, revenue increased 17 percent within two months of the sales team completing the new xyz sales training program. Other sales non-trained teams had no increase in revenue

· Correlation with performance – When the productivity or performance increases proportionately as program usage increases. For example, productivity increases by 10 percent in departments that increase training expenditures by 1 percent (and vice versa)

· Revenue per People Cost Dollar. Measures the margin performance of the organization as it relates to spending on people programs. For example, our revenue per dollar spent on employee costs went up 32% after our performance management system identified and released the bottom 5% of our employees in a business unit

· Decreased costs – Where actual labor costs are reduced. For example, our new scheduling system in the factory resulted in a 10% decrease in people costs per unit of output within a week after implementation



3) Understanding the five different categories of business impact

When you attempt to measure the results of any particular business or HR program there are generally 5 different categories of business impacts that you can measure. A single HR program may have a measure in each of the 5 areas. These five distinct business impact categories include:


1. Quality - (Error rate, quality of the features, usability, did it work?)

2. Quantity or volume - (Capability, capacity, the number completed)

3. Time (On time, response time, time to complete)

4. Money (Cost, revenue)

5. Satisfaction - (Degree to which the user liked the process or result)


The most overused metric category is cost. Often the costs of HR programs are miniscule compared to their relative impact. Tracking costs without also looking at quality is a common error. In contrast, the most underused metric category is quality. All too frequently HR omits this crucial category of measure. For example, recruiters quite often measure the cost-per-hire by recruiting source, but seldom measure the quality of the hire as expressed by performance on the job. Cutting costs makes no sense if the new hires have decreased on the job performance.


4) Selecting some simple…but attention getting metrics

Metrics don't have to be complicated or extensive in order to have a dramatic impact. Here are some examples of simple but dramatic metrics just to demonstrate how simple metrics may provide all the “power” you need to get your manager’s attention:


· Retention rate of top performers - How are those bulls doing without Michael Jordan? (4 losing seasons after 3 championships)

· Customer satisfaction to turnover rate correlation - The turnover rate at our retail stores that scored in the bottom 10% of employee satisfaction is 148%. In contrast the turnover rate at our retail stores that scored in the TOP 10% on employee satisfaction = 49%. There is a nearly 100% difference in turnover rates (A manager estimated that was worth $45 million each year)

· HR program impact on market value - Watson Wyatt, a well-known consulting organization, found that great people practices can increase shareholder (stock) value by as much as 47%, while inferior ones can decrease shareholder value by as much as 33%.

· Management practices and their impact on Employee Productivity - McKinsey, a well-known consulting organization that focuses on strategy, found that American manufacturing firms operating in Britain are 90% more productive than British firms (operating in their own country). The 90% difference in productivity resulted from failure on the part of British managers to identify and attract hi-potential employees, set clear goals, use metrics and incentives, and failure to use lean manufacturing and other productivity tools

· Performance management – Weak performance management systems that managed (or failed to manage) the performance or two employees caused a billion dollar loss in stock value to a major healthcare chain


Other simple measures

· We beat yesterday… everyday for 176 days

· Your HR program is mentioned in the annual report

· The program is so effective, line managers are willing to fund it

· We stopped doing it… and no one complained (a negative metrics)



5) UNDERSTANDING THE CHARACTERISTICS OF GREAT MEASURES

If you only use a few metrics it’s critical that they be of the highest quality. Great metrics meet most of the following characteristics:


1. The CFO's office approves them in advance (I call this the CFO "BS filter")

2. They are simple, credible and easy to understand

3. When possible, they use existing data or information

4. They measure quality whenever looking at cost or quantity

5. They are combined with no more than 9 other metrics to assess any particular program

6. They enable comparison against a pre-determined standard (last year, best in the industry, the average, etc.).

7. Instead of "counting" everyone or every item it uses sampling (one out of every 10) to reduce costs

8. They are not easily manipulatable or “gameable”

9. They measure outputs or results, not process or effort

10. Every crucial metric has a reward closely tied to it

11. For every major program goal, there is at least one measure

12. The ranked results metrics are distributed to all concerned (to build competitive pressure because all can see how they did, compared to others)

13. Some metrics extend between functions in order to encourage cooperation & team behavior. They measure the performance of an activity from beginning to end, across functions, and at major milestones along the way.

14. Some of the metrics are forward-looking to get managers of "heads up" about upcoming problems. They are designed in such a way that they enable forecasting.

15. Are continuously refined and improved as time and experience yield proof of their effectiveness and impact


SELECTING SOME "STANDARD" HR FUNCTIONAL METRICS

Standard HR metrics are "single issue" measures that are traditionally used within HR to improve effectiveness and efficiency. Some recommended metrics to select from are listed below.


Sample retention metrics

· Turnover rate of top performers & key positions compared to our competitors

· Separation rate of bottom performers & bad managers

· % Of employee's rated as "needs improvement" that have improved or left

· % Of voluntary turnover that go to direct competitors

· The cost of losing a key employee to a competitor

· The cost of retaining poor performers

· Percentage of voluntary turnover that participated in regular or post exit interviews


Sample employee relation’s metrics

· % Of employees that feel challenged, growing and recognized by their manager

· % Of agreement between a manager and their employees self rating on performance

· Post-Exit interview scores are positive (the reasons top performers left the firm are beyond our control, they would highly recommend it to their friends and a majority would like to return someday)

· % Of managers rated as weak in pulse surveys and 360 degree assessments

· The number and dollar cost of grievances, lawsuits and employee relations complaints


Sample compensation metrics

· Ratio - Revenue per dollar of compensation and benefits paid out

· % Of employees over-all pay that is at risk (tied to performance and stock price)

· % Of all managers bonus that is tied to great people management

· % Of new hires that rate our total comp approach as one of the top 5 reasons for accepting their job

· % Of employees that cite a weak compensation approach as one of the top 5 reasons for leaving/

· % Of managers that cite comp/ benefits as a roadblock to hiring, time to market, retention, innovation & productivity

· Benefits costs as a percentage of payroll


Sample development/ training metrics

· % Of EE's citing they are on the leading edge of knowledge

· Percentage of training available on-line

· Speed of best practice learning & copying between business units

· % Of new hires that give training excellence as one of the top 5 reasons for accepting their job

· % Of employees that cite a lack of training one of the top 5 reasons for leaving or as an inhibitor to their productivity

· % Of managers that cite T&D as a roadblock to Time to Market, hiring, retention, innovation and productivity


Sample HR customer satisfaction metrics

· Manager and employee satisfaction with the speed of HR services

· Manager and employee satisfaction with the quality of HR services

· Applicant and new hire satisfaction with the hiring process


Sample HRIS metrics

· % Of all HR services available on-line (self service)

· % Of HR services that are paperless

· % Of HR services that are available worldwide

· Manager /employee satisfaction with service

· Response time to service calls/ questions

· Cost per hour of service




7) Selecting from advanced metrics

Once you master standard metrics like cost and quality of hire, trainee satisfaction and ROI you might want to consider some more advanced metrics. Some types or categories of advanced metrics include:


· An HR Dashboard - Similar to a car's dashboard it provides managers with a wide range of "program efficiency" metrics in order to ensure that operations are within standards

· An index - Very much like the Dow Jones or the Standard & Poor's index. An HR index is a single number that reflects the overall performance of the function. Such an index might include at least one metric from each of the major categories (quantity, quality, time and customer satisfaction). An index gives the manager a simple, quick but accurate “snapshot” of what's happening. An index also makes comparisons between distinct departments easier

· Alerts/ Smoke detectors - Alerts are "leading indicators" which warn managers of upcoming problems. While most metrics tell the manager about what happened "last year," alerts provide valuable information to allow the manager to prevent problems prior to their occurrence

· Analytics - Analytics are metrics that analyze trends to help you understand "why" things are happening and what the future pattern is likely to be.

· Heuristics -heuristics is the search for patterns in data in order to identify similar or related events. Once you identify a problem they help (generally using software) you find similar ones (heuristics are used in anti-virus programs to find "new variations")

· A balanced scorecard - A series of metrics that attempts to strike a balance between hard financial measures and soft HR measures (be forewarned, most CFO's are not “balanced")


Each of these advanced metrics have both benefits and problems. If you want to have a great people management function you must move beyond the standard measures, especially in the areas of forecasting and alerts. Some examples of indexes and dashboards are found in the next section.


Some sample advanced metrics


An example of a recruiting index


Weight* Performance factor

25% - Performance of hires

20% - % of hires from referrals

15% - Time to fill key positions

15% - Time from referral to manager to interview

15% - Manager satisfaction with employment

10% - Diversity hiring ratios in exempt jobs


*The weight shows the relative importance of the item in the over-all index score. Many indexes are “normalized” so that the targeted over-all number is easy to remember (Ex. 100)


An example of an overall HR department index

20% - Revenue per dollar spent on people costs

15% - Turnover rate of the top 10% (top performers)

15% - Performance of recent hires

15% - % of key employees pay that is at risk (based on performance)

10% - % of employees that feel they are challenged and growing in their current job

10% -Turnover rate of poor managers

5% - Manager satisfaction with HR services

5% - Time to fill key jobs

5% - Diversity ratios of the workforce


An example of a recruiting dashboard

A dashboard has no weighted items. Each factor is treated individually. All are checked on a regular basis (Weekly or monthly)

· Performance of hires (6-12 month after they are hired)

· Time to fill in key positions

· Time to minimum productivity (after hire)

· Number of vacancies (in key positions)

· % Of bad hires (new hires that are released after 6-12 months)

· Turnover of new hires (new hires that quit within the first 6 months)

· Time to refer resumes to managers, time to interview and interview to offer time

· Give away take away ratio (the number of employees we "take away from" and "lose to" a competitor)

· % Of diversity hires

· % Of hires from referrals

· % Of hires from the web

· A list of the top reasons why candidates excepted a job

· Cost per source (per qualified applicant)

· Cost per hire

· Satisfaction with the hiring process (applicants and managers)




8) BUILDING THE BUSINESS CASE FOR INCREASED HR FUNDING

As stated earlier, the predominate use for metrics is to build the business case for increased program funding. However, metrics by themselves do not comprise a business case, they are just the first step in a much more involved process. The remaining steps in the business case building process focus on making sure that your business case addresses each of the eleven most common decision factors used to evaluate program spending.


The Top Decision Factors For Approving HR Projects

If you look at numerous projects that are approved or rejected by senior executives you soon learn that there are certain standard "decision factors" that are used to determine whether a project should be funded or not. These 11 decision factors include:


1. A low initial investment (upfront money)

2. The project has a high return on investment (ROI or cost / benefit ratio)

3. Similar projects implemented elsewhere have a high success rate or a low risk of failure

4. The project starts right away without a long delay

5. There is a short payback period (the time required to payback the initial expense)

6. The project has a complete set of accurate results metrics and a method for collecting metric information

7. No new headcount is required

8. The project has negative consequences for failure built in (individual accountability)

9. The program gives us a competitive advantage over other firms

10. The program can demonstrate that it increases worker productivity (revenue per dollar spent on people costs)

11. A project team is credible and has a high success rate on previous projects


“Testing” to provide “dead bang” proof of business impact

Implementing new HR programs and then measuring the results represents the traditional way that most HR professionals determine whether a new program is successful. However, simply noting that productivity or output increased following the introduction of a new program does not automatically convince most executives, because most understand that performance can be influenced by numerous factors that occur simultaneously. Without accounting for all of the factors that could have impacted productivity, the increase in performance cannot be directly tied to the introduction of the HR program.


For example, a new training program might seem to produce a productivity improvement, but if a new incentive program was simultaneously implemented, it would be hard to determine which one created the impact, or what percentage of the impact belonged to each. One way to provide what I call "dead bang proof" that a program works is to run a test; similar to the way a new drug gets tested prior to approval. If HR people began to think and act like scientists, they would have more credible proof regarding the effectiveness of new programs. Some of the “testing” approaches I recommend include:


· Utilize A Split Sample - Rather than implementing the program throughout the entire company, instead implement it in some teams or locations and not in others. If there is a significant difference in performance between the two "samples" you are home free

· Correlation - Demonstrate that there is a direct connection or correlation between the increased usage of a particular service and business results. If you can show that when usage increases dramatically, that productivity also improves you are on the right track

· Put It In And Take It Out - If you implement a program and it works, most HR people are satisfied. But if you really want to know if the program really works remove it to see if the productivity returns to the initial level

· Run a pilot - Running a small pilot and then demonstrating that it immediately impacts the business provides you with some direct evidence. Pilots also puts less “upfront” money “at risk” (as compared to a company wide rollout) in the event of a failure. Pilots also give you time to revise and improve your program before you implement it company wide (thus reducing the risk of a highly visible company wide failure)

· The top competitor has it - Occasionally managers are fanatical about becoming more like an admired competitor. Occasionally, if you can demonstrate that the new program produced results at the benchmark firm that your senior leaders "want to be like", you can et away with using the benchmark firms data to justify your own program


Business case steps – Do your pre-work

When the time comes to actually present your case for increased funding to senior management it is important to realize that the chances of receiving funding increase dramatically if you do your “pre-work”. The steps that I recommend you undertake before you present your business case to senior management include:


1. Identify burning or crucial issues facing the business -- Make every attempt to show how your "program" contributes to solving one or more of the firms major problems

2. Identify supporters/ blockers - Identify the individuals in senior management that have supported or blocked similar programs in order to determine who is likely to be "the enemy" and who is likely to support you

3. Identify past decision criteria -- Examine past funding decisions to determine what criteria that senior executives use when they approve or reject projects. Quite often there is a discernible pattern that changes very little over time

4. Prove that you are an expert - Senior executives feel more comfortable supporting programs when it is clear that the leader is a true "expert" in the subject area. You can often demonstrate your expertise through extensive benchmarking and your ability to answer "any question" without hesitation

5. Forecast trends and patterns - We don't live in an unchanging world so projects that don't forecast changes in the economic and business environment are unlikely to be funded. You might also include information about the accuracy of your previous forecasts in your proposal

6. Demonstrate your success rate - Everyone supports a consistent winner so it is important that you demonstrate your track record in successfully completing projects. Compare your success rate to the average success rate at the firm

7. Demonstrate that the solution fits our culture – It is important to demonstrate that you understand our processes, technology and culture and that any solution you propose will mesh with each of them

8. Prove how often these types of solutions work - Never assume that good people working hard automatically produce results. It is important to demonstrate to the decision makers that this "type or project" has a high success rate? First calculate the likelihood of success and then highlight the possible risks and how you calculated them

9. List the critical success/ failure factors - It's not enough just to know that the program works, it is also important that you know "why" it works. Highlight the critical success factors of the project to demonstrate that you know what is essential for the project to succeed

10. Demonstrate we have the talent and skills -- Great ideas only work with great people. Demonstrate that our firm or your team has the necessary skill, technology and talent to "pull it off". If we don't have the talent, demonstrate that we know how to recruit it

11. Show the expected results -- Quantify the expected financial results (revenue, income, profit, ROI, margins, customer value and payback period) and show your understanding of these financial measures

12. List the program metrics -- Outline your program monitoring and measurement systems to show that project success will be closely watched and that “problems” won’t get out of hand

13. Calculate its impact on our products and services -- Although many HR programs are independent, if you can demonstrate how your HR program will positively impact our products, product development and customers

14. Provide best/ worst-case scenarios - Prove that you strategically planned ahead by demonstrating each of the possible best and worst-case scenarios and your plan for each scenario

15. List common problems -- Demonstrate that you are aware of the problems that normally occur during the implementation of these types of programs. Show that you are not naive and that you know how others have handled each potential problem

16. Show personal benefit to top managers -- Show how each key decision maker will either directly benefit or at least not suffer as a result of the new HR program. Personalize the results and impacts for powerful decision makers

17. Show how you will learn and continually improve -- Provide information about the systems you have developed to ensure that the program continually improves over time. No project plan is perfect, just demonstrate that you will “learn fast” from your errors and you will be fine


CONCLUSION


Throughout this chapter I have attempted to demonstrate the importance of using metrics. I of course realize that there is a great deal of resistance within the HR community to utilizing metrics. I also understand the traditional reasons for that resistance. However, it is equally important that HR professionals understand that the world of business has recently lost its tolerance for decisions made without facts and for programs that don't produce measurable results. As technology spreads to every part of the business, that reliance on numbers will begin to increase at an even faster rate.


In a similar vein, as firms become more “global”, HR will be forced to rely even more heavily on metrics. In the "old days" you could personally connect with and assess your subordinates on a face-to-face basis. Now however, with so many employees working remotely, at home, on flexible schedules or around the globe the only option available for assessing their performance on a regular basis will be the use of pre-defined performance metrics. In addition, as companies increase the use of outside contractors and vendors, the need for effective metrics will again increase because you can't trust or "control" a vendor the same as you can an employee. No matter which way you slice it, metrics are becoming mandatory.


Looking at it from another perspective, consider the sports analogy as a way of understanding where we are headed: It would not be possible to win an Olympic gold medal without continually measuring your results and comparing them to the very best in the world. World class athletes measure performance almost daily because they are striving to push their performance beyond all others. Metrics can provide you with the opportunity to be a superior performer by letting you know unambiguously where you are and how far you have to go. Your future path is clear, you can't become a champion… without measuring your results.


ABOUT THE AUTHOR


Dr. John Sullivan is a well-known HR “guru,” international speaker, author and advisor to Fortune 500 and Global 1000 firms. Training magazine has called him a “visionary” and named him as one of its top thought leaders. FastCompany magazine called him “the Michael Jordan of hiring!” Industry guru Gerry Crispin called him “the Tom Peters of HR” because of his energetic presentation style. Tom Peters called his e-HR work “brilliant.”