HR 101: Metrics and KPIs

We want to start sharing some information about how business leaders can leverage their HR function to help drive progress and advance their organizations. While it says start-ups up there, it really works for any business.

The first concept is knowing and understanding how your metrics work and what they mean. Metrics, while great data, are meant to describe what is happening in an organization. It seems there is a dashboard for everything these days, and if you aren't careful, you can be fooled into thinking your dashboards should run your business. Metrics are just the symptoms (both good and bad) of current processes. The most important thing to know about metrics is that they should measure what you value. There is a difference between tracking activity and tracking productivity. Productivity helps know labor costs and workloads, measure efficiency, and also helps an organization forecast any staffing needs they might need currently or in the future as revenue changes. Here is a real-world case study to illustrate what we mean:

ABC Manufacturing (actual client name hidden) tracked productivity in their shipping department by $$ shipped. While this is not bad information, this data never showed them how much their employees worked to ship their total metric and the daily average varied dramatically. Mainly because the cost of a product shipped could vary from one to another. The employees could have actually shipped fewer items one day but it showed as a highly productive day because they shipped more expensive items. In essence, we had no way of knowing if the employees were actually producing as much as they were capable.

To better understand the productivity that is occurring we suggested they start tracking shipping labels so they could see how many items were shipped since the majority of items required the same amount of work to pack and ship. They then measured and supervised the employees for 1 week to get a baseline of how many items could be shipped. Now they had a benchmark to understand if their shipping department was functioning well or lagging. They went from thinking they were ok to now knowing if they were ok or not.

This is what we mean by measuring what you value. If you value customer service, then measure things like complaints resolved, positive feedback, return business, etc. If you value quality, measure errors, time to correct errors, etc. Find what activity is going to help you achieve your strategic goals and then measure and set productivity goals.

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