HRM textbook

CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 87
spending on average for tuition reimbursement programs, and what percentage of
employees typically participate in such programs.
6 Explain with examples why
metrics are important for
managing human resources.
Strategy and Strategy-Based Metrics
Benchmarking (comparing one firm s HR metrics with another s) only provides
one way to look at how your company s human resource management system is
performing. 28 It shows how your human resource management system s
performance compares to the competition. It may not show the extent to which
your firm s HR practices are helping your company to achieve its strategic goals.
For example, if our strategy calls for doubling profits by improving customer service,
to what extent are our new selection and training practices helping to improve
customer service?
Managers use strategy-based metrics to answer that question. Strategy-based
metrics are metrics that focus on measuring the activities that contribute to achieving
a company s strategic aims. 29
As an example:
* Let us say the owners of the Paris International Hotel decide to make their
hotel one of the top 10 hotels in France.
* They believe doing so will translate into revenues and profits 50% higher than now.
* They decide that achieving those strategic aims requires improving customer
service. They will measure customer service in terms of measures like guest
returns, and guest compliments of employees.
* What can the hotel s human resource managers do to help achieve this improved
customer service? They can take measurable steps to improve certain targeted
HR practices, such as increase training per year per employee from 10 hours to 25,
boost incentive pay (tied to guest service ratings) from zero now to 10% of total
salaries, and move from no job candidates tested before hiring to 100% testing
prior to hiring.
* So, for the Paris Hotel, the strategic HR metrics would include (among others)
100% employee testing, 80% guest returns, incentive pay as a percent of total
salaries, and sales up 50%. If changes in HR practices such as increased training
and better incentives have their intended effects, then metrics like guest returns
and guest compliments should also rise. And if so, the Paris Hotel should also
achieve its strategic goal of being one of the top 10 hotels in France.
Workforce/Talent Analytics and Data Mining
Employers increasingly use workforce analytics (or talent analytics ) software applications
to analyze their human resources data and to draw conclusions from it. 30
For example, a talent analytics team at Google analyzed data on employee backgrounds,
capabilities, and performance. The team was able to identify the factors
(such as an employee feeling underutilized) likely to lead to the employee leaving. In a
similar project, Google analyzed data on things like employee survey feedback
and performance management scores to identify the attributes of successful Google
managers. Microsoft identified correlations among the schools and companies
employees arrived from and the employee s subsequent performance. This enabled
Microsoft to improve its recruitment and selection practices. 31 Software company
SAS s employee retention program sifts through employee data on things like skills,
tenure, performance, education, and friendships. The program can predict which
high-value employees are more likely to quit in the near future. 32 Alliant Techsystems
created a flight risk model to calculate the probability an employee would leave.
strategy-based metrics
Metrics that specifically focus on measuring
the activities that contribute to achieving a
company s strategic aims.