Metrics are defined on About.com: Management as “a set of measurements that quantify results.” The same website defines key performance indicators (KPIs) as “quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organization.”

The HR community has steadily increased the resources devoted to the use of metrics. When asked how they spent their time and budget, CedarCrestone 2007-2008 HR Systems Survey, 10th Annual Edition, survey participants ranked “metrics and analytics/business intelligence” third. In comparison, 2006 survey participants ranked the same category eighth. Data gathered by the American Management Association shows that "clearly defined" performance measures are more common in high performing organizations.

The challenge, however, may be to correctly identify appropriate measures. In a Talent Management Magazine article, Donna Neumann shares advice to those embarking upon this task. Firstly, she recommends that “HR leaders must consider which decisions they are trying to improve; which behaviors they are trying to change; and how the metrics they collect, analyze and report will influence these factors.” Illustrating the difference between efficiency and effectiveness metrics, Neumann compares the value of measuring “number of candidates applying for each position” or number of “job offers accepted,” versus “metrics that track the quality of hiring decisions.”

A KPI – writes S. Manivannan in The Ontario Technologist – “shows how far a metric exceeds or falls short of a predetermined target” and is “biased toward real time data.” Manivannan also advocates beginning with “key processes for the organization” and points to the importance of employee understanding and acceptance of the chosen KPIs. This article also is a good source of information for anyone wanting to learn more about how to use KPIs. S. Manivannan is a C.E.T., Master of Manufacturing Engineering and Certified Lead Auditor with Ford’s Manufacturing Process/Product Support Department.

Once metrics and KPIs are identified, relevant data must be collected and interpreted. PriceWaterhouseCoopers “estimates that a company with 20,000-plus employees is likely to have a minimum of 50 sources of data that relates to people and performance.” They also recommend that the human capital data used be “less than 30 days old.” Perhaps this helps to clarify why CedarCrestone survey respondents are looking for “improvements in analytics and metrics solutions.”

References:

CedarCrestone. “CedarCrestone 2007-2008: HR Systems Survey, 10th Annual Edition.” CedarCrestone [www. cedarcrestone.com]. 2008.

CedarCrestone. “CedarCrestone 2007 Metrics and Analytics Report.” CedarCrestone [www. cedarcrestone.com]. 2007.

Clayton, Peter (host), et al. How to Build a High Performance Organization. American Management Association Presentation, Obtained, 2008.

Manivannan, S. “Making the most of lean with KPI.” The Ontario Technologist, March/April 2008, pp. 20-24.

Neumann, Donna. “The Power of Analytics in Human Capital Management.” Talent Management Magazine, April 2008, pp. 30, 32-34.

PriceWaterhouseCoopers. The people agenda: Optimising Performance at the Front Line. PriceWaterhouseCoopers, 2007.

Reh, F. John. “Key Performance Indicators (KPI).” About.com: Management [http://management.about.com]. Obtained May 5, 2008.

Reh, F. John. “Metrics.” About.com: Management [http://management.about.com]. Obtained May 5, 2008.