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Author's profile photo Susan Galer

Human Resource Management: Why are We Afraid to Measure the Value of Employees?

/wp-content/uploads/2015/11/epmmetricsscn_831353.jpgWhile human resources (HR) has shed its traditional administrative process-centric identity, fear of numbers keeps many professionals away from that coveted seat at the boardroom table. Some claim the value of employees isn’t measurable. The trouble is, the only way HR can demonstrate its relevance is by speaking the language of the business, which revolves around metrics. This is the fourth in my series of employee performance management blogs, this time delving into what’s possible with HR measurement.

Steve Hunt, Vice President of Customer Value at SAP/SuccessFactors, said in an ideal world every HR person would understand the field of psychometrics, which is a branch of mathematics that assesses intangible human attributes and capabilities highly valued in the workplace, but not easily measured (think: emotional intelligence, leadership potential, problem-solving ability, commitment.)

“Some HR people seem to act like these are magical concepts that can’t be measured reliably or accurately,” said Hunt. “But there is over 100 years of research showing how to measure these things. The challenge is it takes a specialized set of analytical skills that are often in short supply.”

Psychometrics make the magic measurable

To risk over-simplification, psychometrics focuses on understanding relationships between two variables. Latent or hidden variables include motivation, personality, leadership and employee engagement. Manifest variables are behaviors or outcomes that can be seen and measured like attendance, survey response or customer ratings. HR needs to define the relationships between latent variables critical to the business, and then link these to manifest variables that are measurable.

“The challenge is to measure the magic of people, not to say the magic is unmeasurable,” said Hunt. “Technology provides increasing amounts of data but it requires a more sophisticated way of looking at it. In healthcare, you wouldn’t rely on a patient’s blood pressure measurement alone to determine if they’re healthy. Similarly, for effective performance management, you have to look across multiple data points to infer what’s going on. If you just focus on a single data point, you can misread what’s happening. We need more work that links different HR metrics together so the rating helps predict the future ability to achieve business goals.”

Companies already rely on indirect metrics to some degree during the hiring process, using interview questions to score a candidate’s predicted performance, ultimately measuring their suitability as an employee. Incorporating similar metrics into performance management for existing employees involves defining behaviors associated with position competence to arrive at a measure of someone’s current and potential value.

“For example, you can measure competence if you define specific behaviors that are associated with competence in a particular position,” said Hunt. “It can also include someone’s self-perception of their skills by asking them questions like ‘are you someone comfortable taking on tasks with ill-defined goals?’ But it should not be the only measure used. You also want to look at other things such as willingness to volunteer for different tasks or behavior under pressure. Looking at patterns across different measures provides an accurate read of what’s going on below the surface, even if you can’t actually see it.”

HR professionals at many organizations are already using more holistic performance management approaches with ongoing evaluations throughout the year. Rather than measuring performance at one time with one rating, check-ins at multiple times throughout the year provide a more accurate measure of someone’s true general performance level. The trend towards ongoing performance conversations is in some way the anti-thesis of traditional forced performance rankings, still in use at many companies. “We want performance data to reflect the true measure of the employee. With forced rankings, HR often changes performance scores to distribution models that may not be accurate. The goal has to be to reflect the true performance curve of the organization so you can also improve performance,” said Hunt.

Leslie Apony, Manager of Customer Value and Adoption at SAP/SuccessFactors, also warns against the measurement risk posed when companies remove performance ratings entirely from the compensation process. “What happens is people start using compensation levels as the sole measure of performance. If you are paid more than someone else you are assumed to be more valuable. Many things influence compensation that have nothing to do with performance.  It’s critical to have additional performance metrics in place so people don’t over-interpret pay numbers.”

It may not be easy but it is possible and well worth it to explore more accurate ways of measuring employee performance. HR makes a valuable contribution to the business. The right metrics will prove it.

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