Can You Measure Talent?
John E. Jones said: "What gets measured gets done, what gets measured and fed back gets done well, and what gets rewarded gets repeated."
A recent report from the UK-based Chartered Institute of Personnel and Development suggests the majority of organizations fail to measure or gather information about their human capital, thereby denying stakeholders and potential investors the ability to assess the impact of current and future performance.
This observation calls into attention what is needed and what is available for a company to measure human capital. A standard framework must be set to assess human capital under specific organizational objectives. These measures enable the organization to review its success at each activity (lead), output / human capital, and business impact (lag).
So, what should we measure when it comes to human capital, and why do need to measure it?
The "why" is the easy part: to measure performance against set objectives and ensure the organization as a whole is moving in the right direction, as desired by the stakeholders. Organizations that measure human capital use this data as a key analytical tool in running the business or defining the strategic objectives of the company. The use of this data in decision making brings real efficiency, and eventually performance enhancement.
Thus remains the question of "what" to measure. In simple terms, Key Performance Indicators (KPIs) should be compared to Key Result Areas (KRAs). Sounds simple enough, but how does one measure a KPI and what factors should be measured by Human Resources?
KPIs are quantifiable measurements, agreed to in advance, that can be mapped against time and an analytical report can be generated. The indicators, as I would like to call them, are listed below pertaining to various areas in HR:
- Applicant Response Rate (ARR): Quantity of applicants that apply to an internal or external job post.
- ARR: Number of applications received in "specified period" / No of job postings in "specified period"
- Qualified Applicants Ratio (QAR): Percentage of applicants meeting the required qualifications from all recruitment boards.
- QAR: Total number of qualified applicants divided by total number of applicants.
- Offer Acceptance Rate (OAR): Total offers accepted divided by total offers issued.
- Compa Ratio: Average of employee actual pay divided by the range mid-point.
- Compa Conformity: Percentage of people whose pay is within the salary scale.
- Human Value Added (HVA) or Profit Per Employee (PPE): Net Profit divided by number of full time employees.
- Absenteeism Rate: Hours of Absence divided by Number of Working Hours (for all employees) and multiplied by 100.
- Return on Human Capital: Net Profit divided by Total Pay & Benefits
- Vacant Position Cost: HVA or PPE divided by average working days, multiplied by the number of days the position remained vacant.
KPIs must always have a clear unit of measure that is simple and can easily be linked to a strategic objective or Result Area. But be careful— this does not provide measure in financial terms. What KPIs provide are indicators in areas of individual performance. The results can ultimately be used to drive efficiency.