Low-performing companies put too much emphasis on employee cost metrics

Want to be a high-performing company? Then track your talent. A new study on HR metrics by the Institute for Corporate Productivity (i4cp) shows that higher-performing companies are more apt to measure talent-related metrics than lower performers. Common talent-related metrics include movement within the organization, quality of hires, quality of promotions and the cost of training/development.

Engagement of the workforce is one key component. Ninety-three per cent of higher performers measure employee engagement, compared with 79 per cent of lower performers. In this economy in particular, engaging the workforce is of paramount importance. Ninety-three per cent of higher performers utilize employee engagement surveys, compared with 78 per cent of lower performers. Ninety per cent of high performers report the use of satisfaction surveys for such measures, compared with 68 per cent of lower performers.

The study - commissioned internally by i4cp - also found several other significant traits for high-performing organizations. For example, 71 per cent of higher performers measure compliance or completion of diversity plans (52 per cent in lower-performing companies), and 61 per cent of higher performers, compared with 39 per cent of lower performers, consider employee referral rates.

Conversely, the study showed that 78 per cent of lower-performing organizations measure total labor cost to cost revenue percentage, compared with 55 per cent of high-performing organizations. A higher percentage of lower performers (44 per cent) also measure the employee-to-productivity-output ratio than higher-performing companies (25 per cent).

"What was most striking or interesting is that lower performers were more likely to measure ‘cost' metrics than high-performing organizations," says Mary Ann Downey, i4cp's Talent Pillar director. "While at first glance this may seem counterintuitive, it most likely reflects the attitude that low-performing organizations see their employees as a mere expense and not a source of competitive advantage."

When tracking attrition, HR is more likely to want to know how many workers leave than who is heading out the door.

Overall, 81 per cent of polled companies use turnover and voluntary termination rates in their measurement of attrition, and 74 per cent measure length of service. On the flip side, just 40 per cent measure termination by variables such as job grade, costs or demographics, and just 38 per cent measure the termination rates of both high-potential employees and termination rates by "pivotal job." Study findings showed, however, that higher-performing companies are more likely to analyze who is leaving. In companies with more than 10,000 employees, 72 per cent measure grade, costs and demographics, while 59 per cent track the loss of high-potentials and 55 per cent track by pivotal job.

When it comes to employees moving within the organization, most companies are not adept at tracking those movements. Overall, 34 per cent measure worker movement from job level, classification or rank, while 29 per cent measure by types of move (upward, downward, lateral, short-term, etc.) and 23% track movement by demographic variables.

The HR Metrics Pulse Survey was conducted by i4cp in February 2009.