ROI. Measurement. Data. Analytics.

Each of these words has the power to strike fear in the hearts of many HR pros, because let’s face it–most of us didn’t get into this profession because we’re awesome at math, right? :-) Seriously though, we can’t deny the power of data and evidence to prove the value HR can provide.

I’ve often said that HR provides plenty of value to the organization in most cases, but HR pros are just really terrible about calculating and proving that value. If that concept resonates with you, then this episode is going to help change all of that.

In this new episode of We’re Only Human with Mary Ila Ward, owner of Horizon Point Consulting, Ben discusses some of the underlying fears that HR has about being measured (hint: measurement isn’t always an indicator of your own personal performance). In addition, we explore three case study examples of how to figure out the ROI of human resources in an easy, step-by-step manner so anyone can grasp the concept.

By the way, if you’re interested in grabbing the slides we mention in the show, feel free to reach out to Mary Ila at miw@horizonpointconsulting.com and she’d be happy to share them with you.

As always, if you’re new or want to revisit some of our previous episodes, be sure to check out the We’re Only Human show archives.

evidence based approach to hr

Last week I had the pleasure of presenting a workshop based on metrics, evidence-based HR, and change management. The session was a lot of fun, because we were able to tie the three topics together in a variety of ways to help reiterate not only why each of them matters, but how each of them can really build value when used in conjunction with one another. HR is often using anecdotal information (if any at all), conjecture, and pure hope to make decisions, but we can do better. Today I want to go a little deeper than my post last week on “keeping up with the Joneses,” focusing more heavily on the evidence-based HR piece.

If you’re not familiar with evidence-based HR, here’s a primer:

Evidence-based human resources is the practice of identifying solutions and approaches that have a strong empirical basis.

In other words, we don’t just use gut instinct, an interesting anecdote, or anyone’s opinion to make our point. We use data and other solid evidence to support our decisions at every possible turn. But where does that evidence come from?

Sources for Evidence-Based Decisions

Here is a list of sources I offered the audience as credible options for finding research materials:

  • Management journals (scholar.google.com)
  • HBR
  • SHRM Foundation
  • Deloitte/Bersin
  • i4cp
  • CEB
  • ATD
  • CIPD

If you just do a quick Google search for one of these organizations and the topic you need to research, you’ll more often than not find something to help make your case. I actually had participants do this during the session, focusing on areas like recognition’s impact on productivity (definite linkage), using talent pools for faster hiring (no data we could find), and other relevant HR activities.

Be careful not to just grab a story of a company that is doing neat things and grabbing headlines, because that’s not enough to warrant good evidence. You want to find information from a study or some other data-backed approach that helps to lend credibility to your eventual decision. If it’s just a neat anecdote, then you’re really not improving the process any more than just making a decision based on gut instinct.

Making an Evidence-Based HR Decision

There are six key steps to making an evidence-based decision in the workplace.

  1. Asking: translating a practical issue or problem into an answerable question
  2. Acquiring: systematically searching for and retrieving the evidence
  3. Appraising: critically judging the trustworthiness and relevance of the evidence
  4. Aggregating: weighing and pulling together the evidence
  5. Applying: incorporating the evidence into the decision-making process
  6. Assessing: evaluating the outcome of the decision taken

Using this approach can help you to not only leverage evidence, but think critically about how valuable the evidence might be relative to other sources of data and information about your problem. Instead of going with the normal approach of “Bob said this worked at his last company,” we can use more credible sources of information to frame and resolve the issue.

Examples of Evidence-Based HR

Seeing this practice in action is the most powerful way to really “get” the value it can offer. I originally was turned off by the idea of having to research everything HR does on a daily basis, but in reality we make relatively few key decisions like those an evidence-based approach to HR would help with. For instance, New York spent more than $75 million on teachers to help increase student performance and teacher satisfaction. The result? No improvement. There is already data available that could have shown that this kind of approach has not yet been proven to deliver strong results (this examination of multiple studies still came away inconclusive, or “cautiously optimistic,” calling for additional research). Despite the lack of evidence, someone went ahead with the program anyway.

Here are a few examples of how it works in practice.

  • Selection Techniques-Your hiring managers are often used to creating high pressure interview situations to “see how candidates will respond.” They also like using tools like application data and GPA to filter out candidates. You find research that demonstrates the validity of their methods is in some cases no better than performing a coin flip to make a hiring decision, helping to sway them into using more structured methods and assessments for hiring decisions.
  • Employee Recognition-One of your managers is resistant to using recognition because “everyone can’t get a trophy” and she doesn’t want to “coddle” her workers. You find some existing research that points to the value of recognition not just in increasing worker satisfaction, but in increasing productivity as well, helping the manager to see the benefit to her and the team by improving her recognition skills and practices.
  • Performance Management-One of the trends in the US is “disposing” of the traditional approach and taking a different avenue for rating and assessing performance. You want to make this move with your company because you feel like your existing process is not adding organizational value. There isn’t much data, if any, available to support the different approach, but there is some data showing that collaborative environments support better teamwork and cultures than those focused on forced ranking and distribution of employees.

Leveraging research can drive immense value across the board, even for organizations outside the private sector. For instance, the Warner Robins Air Logistics Center, which repairs military aircraft for the US Air Force, used new research methods to speed repair processes for C-5 aircraft, allowing reductions in working capital of approximately $50 million (source: Deloitte).

While many of us aren’t working hands-on with aircraft, we still have the company’s largest budget item, its people, under our purview. Isn’t it time we started treating them like the valuable assets they are, managing them to the best of our abilities with the most relevant research and information available?

If you’re from outside the US and unfamiliar with the term, “keeping up with the Joneses” is a term that focuses on everyone’s desire to compare themselves with their peers, even when it’s emotionally unhealthy. Instead of focusing on our own strengths, we look at what others have or can do, and we want that instead. There’s a business version of this, and we’ve all been guilty of it at one point or another. For example:

  • We hear success stories and try to mimic what other companies do. For the last ten years I’ve heard more “we want a culture like Zappos” stories than anything else, even if that request has taken a dip in recent years. The problem is people aren’t willing to put their money on the line to make it happen.
  • We find a cool trend and jump on it, hoping for some mythical results. This always reminds me of the goofy “Google interview questions” like how many manhole covers in a city or how many elephants fit in an refrigerator. The questions didn’t predict success on the job, and Google ultimately moved away from them as a selection tool (thank goodness).
  • We get word about some new “best practice” through the news, and everyone wants to try it out. This is where I put unlimited paid time off. It’s a hot topic, but there isn’t anything to show how it really helps to improve the workplace other than anecdotal evidence here or there.

Getting Serious about Talent Practices

A few years ago, someone presented locally on HR metrics. The speaker prescribed specific metrics to everyone in the room, telling them that they needed to be capturing data because these were the “most important” measures. The problem? Some attendees were from staffing firms, others were in manufacturing, and still others were in professional services organizations. The truth is there is no “right” number of metrics, especially for such a diverse group. I haven’t forgotten that kind of peanut-butter-spread approach to advice on measurement, and that’s one reason I am going to be working to fix that this year with some of my speaking opportunities.

This week I’m delivering a workshop to an audience of HR leaders around two key topics: measurement and change. As I’ve been creating the slides and activities, one of the messages I’m striving to get across is that we need to be more of an evidence-based practice. That term goes back to roots in the healthcare community, as evidence-based medicine. The purpose is finding a course of action that is based not on gut instinct or hopeful results, but on some sound and proven science.

Imagine going to the doctor with an illness and getting five different recommendations for cures. You’d be a bit annoyed and unsure about how to proceed, right? But this is what we see daily in the HR profession. If you bring up a problem for discussion, you’ll get those same five different cure ideas from your peers, often based on a personal experience, a story of a friend, or something similar. Don’t worry, I’ve been guilty of this as well.

But this year I’m really focusing on being more intentional about my recommendations. I’m going to be focusing more on finding and uncovering evidence to support my approach. I’m actually going to be interviewing an author soon for the podcast on science-based principles of selling as a way to explore how to influence others. The two topics are connected, because he went through the same thing within the selling profession, taking advice of numerous “gurus” or basing practices on personal experience instead of an approach proven by science.

Best Practices? Maybe

I’ll leave you with this: by the time something becomes a “best practice,” the companies that used it often have moved to something else. The Google interview questions I mentioned above are just one example. One of the challenges of being an early adopter is that I see all of the newest and “best” talent and learning practices. I hear about what’s hot and what’s not. But the thing that never goes out of style is gathering data, making a decision based on that information, and then collecting feedback on results to adjust your direction or stay the course in the future.

Create your own book of best practices that fit your organization and its people. That’s the only set of practices that really matter.

When I am teaching a class to prepare students for the PHR/SPHR exams, one of the things I repeatedly highlight is the need to tie HR practices back to business objectives. If we only see ourselves and our actions within the “bubble” of HR, then we severely limit the impact and value we can deliver to the business.

One method for bringing the value to the business is by evaluating the financial cost and determining the return or value of a specific program. I know, I know, this involves people, which makes it notoriously difficult to measure. But you don’t have to get crazy about it. There are ways to pull it off.

Measuring Value

I have a friend that works for a company that does satellite mapping. One of the company’s ongoing projects involves supporting large retailers. The satellites take periodic photos of the retailers’ parking lots, and the extent to which the lots are filled with vehicles is used to predict sales for the quarter.

I don’t expect any of us to go to that level to measure the impact of HR programs. :-)

However, the ability to determine a full ROI requires thinking outside the box a bit. We need to be able to take a big picture view so that we can truly evaluate the impacts on the business. In talking with HR leaders at organizations both large and small, the best way to explain this is through a good use case. I read about the example below from Patagonia and knew I needed to share it here.

Patagonia Case Study: On-Site Child Care

on site childcare new mothers

Check out the data below, emphasis mine on the key data point.

Because child care benefits are an important recruitment and retention driver for working parents, one-quarter of organizations (26%) allowed employees to bring their children to work in a child care emergency. Although this benefit has remained consistent since 2013, it decreased significantly from 32% in 2012. On the other hand, there has been an increase over the past year in the percentage of organizations offering a child care referral service, from 9% to 16%, and 2% allowed parents to bring their babies under the age of 1 to work on a regular basis.

The above-mentioned benefits, which help the employee at a minimal cost to the organization, were more commonly offered than costlier benefits such as access to backup child care services (3%), subsidized child care program (4%) and nonsubsidized child care center (3%). The least common child care benefits are becoming even scarcer. The prevalence of subsidized child care centers (2%) decreased from 4% in 2012 and 9% in 1996, and consortium child care centers went from 1% in 2012 to just a fraction of a percent.

Source: 2016 SHRM Benefits Study

The use of company child care centers is dropping. I believe this is due in part to the difficulty of showing an ROI on these programs. In many cases, HR leaders are not trained or equipped to prove the value of certain benefits, like these, and they go on the chopping block any time there are budgetary constraints that affect the offerings companies can deliver.

Bucking the trend, Patagonia is not only providing on-site child care, but it plans to expand the coverage to even more employees in the coming year.

To support our families, Patagonia provides company-paid health care and sick time for all employees; paid maternity and paternity leave; access to on-site child care for employees at our headquarters in Ventura, California, and at our Reno, Nevada, distribution center; and financial support to those who need it, among other benefits. In particular, offering on-site child care, we believe, is the right thing to do for employees, working parents, and the life of the workplace.

However, a reasonable businessperson might ask, “What does it cost?” It’s expensive if you offer high-quality care and subsidize your employees’ tuition—but not as expensive as you’d think.

Source: Fast Company

This is where the conversation gets interesting. In the article, the CEO of Patagonia explains the wide variety of ways the program’s costs are recouped for providing child care support:

  • Tax benefits: 50%
  • Employee retention: 30%
  • Employee engagement: 11%
  • Total recouped cost: 91%

But that just takes hard costs into consideration, not even bothering with any other elements that might be possible to tie in. And it might be undershooting the mark in terms of overall returns.

We’re not alone. JPMorgan Chase Bank, N.A., has estimated returns of 115% for its child-care program; global business consultant KPMG found that its clients earned a return on investment (ROI) of 125%.

There were two statistics from the conversation that I particularly liked, because they help to illustrate the true value of this kind of program.

1. For the past five years, Patagonia has seen 100% of moms return to work after maternity leave.

This is incredibly rare. I don’t have any stats to back it up, but I’d say a sizable portion of the “new mom” segment is still choosing to stay home with the baby instead of going back to work. Companies lose a lot of great talent by not having policies and philosophies that support this critical segment of the population.

2. For the past five years, turnover among Patagonia employees who use its child care program is 25% lower than in its overall workforce.

This was wrapped into the “retention” calculations above, but it’s still a great reminder. When HR pros look at turnover data, it’s often cut by tenure, job, manager, and other similar factors. What about looking at it by benefits, as Patagonia has done? By seeing the impact of this kind of program on the bottom line in terms of employee retention, it becomes an even more valuable asset to the company for recruiting and ongoing engagement.

Statistically only two of you reading this out of every hundred people are actually going to be working at a company with on-site childcare, so that’s a narrow conversation. But I want you to think about how Patagonia is able to tie the value of its program back to various pieces of the business–you can do this with your own leave programs, benefits, perks, etc.

Break out the spreadsheet. Dig into the data. Prove the value.

Does your company have a benefit that is special to the employees? Do you know what impact, if any, it has on the employee population or the bottom line? 

Back in college I wrote a ton of papers for various classes. Without fail, my writing process would look like this.

  • Read some of the research available and form an opinion.
  • Write an essay based on that opinion.
  • Go back and find data to back up my essay’s key points.
  • Get about 95% finished and realize that the paper didn’t turn out like I wanted it to originally.
  • Rewrite the entire thing from scratch (usually with just a day or two left until the deadline)

analysisThis was a painful process, but it usually yielded fairly good results. I think that many of us try to do the same with this big data/analytics concept. We immediately go out and start gathering HR data, hoping to make some incredible discovery that will revolutionize the way we do business. Continue reading

Please. For goodness sake, please stop measuring HR data.

See, I know why you’re doing it. You heard this “big data” thing it was a good idea, and you started gathering information. Then you realized how easy it was, so you started pulling together even more from a variety of sources. You’re hitting up your applicant tracking system, payroll system, and other data feeds to get what you want. I know, it’s hard to stop.

But then you did what many others do–nothing. You took all that information and you sat on it.

Why?

Because you didn’t slow down and start with a plan. You need to know ahead of time (or at least have a general idea) about how the information can help you. If you’re gathering data for the sake of gathering data, then you are wasting time and resources, and you’re probably harming your credibility as well.

On the other hand, if you started with a plan to associate the data with business outcomes to actually prove a point, then carry on. I hope you make better decisions and deliver more value to the business based on what information you’re pulling together.

A quick test

Here’s a quick test to help you figure out what data is valuable and which is not.

  • Learning: what is more valuable in business terms, measuring training completions or measuring changed behaviors based on the training?
  • Payroll: what is more valuable to the organization, calculating how many zip codes employees live in or calculating how many have benefits and how that number trends over time?
  • Employee relations: how about this? Should you measure the number of sexual harassment complaints or how many disagreements you mediate between supervisors and staff?

Here’s the twist. I could easily make the case that any of these could be valuable in specific circumstances. But if you are truly looking at how your training is changing the organization and making people work smarter, then completion information just isn’t enough to do that.

The thing is, many people just gather data without any idea of how to use it. Your needs are different from those of every other organization, so something others might ignore could be incredibly valuable in helping your employer meet its goals and vice versa.

Think about the information you gather and report. Is it truly impacting the business, or is it just a “we’ve always done it” kind of activity? When I think back to the data I reported on at my last job, some of it was valuable, and some of it was a complete waste of time. And it was rarely used for decision-making, which made it doubly painful.

For instance, I had to regularly report on turnover numbers, but we never took the time to review them by team or functional role, which might have given us some insight into what was driving turnover for those specific positions.

We need to be thinking about what we gather and report on more critically. Stop gathering data just for the sake of it. Start with a purpose in mind before you piece together the first bits of information, or “begin with the end in mind,” as Mr. Covey would say.

Hope that helps. Lessons learned from someone who did it the wrong way the first time around. :-)

This summer at SHRM I was looking through the sessions in the app in an attempt to figure out which I wanted to attend, and I saw this one right up front.

SOLD OUT – #707: HR Metrics that Matter: The Process of Developing a Business Scorecard

It made me stop and think, especially in light of some of the conversations I had with others at the event about what sort of content was being offered. For instance, one session at the event was focused on the usual “top ten ways to avoid legal trouble this year,” and it had packed out the entire room and the overflow area as well. I’ve always had trouble with those types of training on the supervisory side of things. Why? Because it makes us focus on the negative aspects of our work, how to avoid getting “in trouble,” and makes us seem more like a nanny in the workplace than a trusted resource for managers/employees and a key business leader.

Policies vs. Actual Contributions

I’ve always had a love/hate relationship (mostly hate) with policies. I think we should take more time to coach and support than regulate and demand. Yes, there are times that come when we must make a rule, be the bad guy, etc. but it shouldn’t come on a daily basis. I recently shared Alison Green’s comments on how managers can have a good relationship with HR. The comments on that blog post when she linked from her site are pretty standard, and yet they still hurt those of us who see ourselves as good and helpful business leaders (instead of merely being the “no, you can’t do that” department).

Going back to the original intent of this post, I was glad to see the metrics session being sold out. Why? Because it’s something that we can do that is not just about being sued, covering our company’s butt, or some other litigation-related idea. Even small companies have the ability to gather and use data in a meaningful way.

In my opinion HR pros who make decisions solely on laws and what the handbook/policies allow aren’t making much of a contribution to the organization. It’s those that take the initiative to find ways that they can contribute in a more meaningful way, offer advice and flexibility that pushes the boundaries, and don’t say, “No” to every request that comes in (even if they are a little bit scary).

A Shift to PositiveHR?

It gives me hope that our philosophy as a profession is changing. SHRM and other organizations will continue to offer these “how not to get sued by your employees” sessions, because there is significant demand for them. But over time, I hope to see us focusing more on the other end of the spectrum. There’s even a group of my friends that started this #PositiveHR movement on Twitter, because they believe that we have the opportunity to do great things if we are truly positive and not self-defeating at every turn.

I do understand that there is a natural maturity curve as well. Smaller organizations or those with inexperienced HR pros will drift toward the legalistic side of things, while organizations with more radical HR pros will seize opportunities to focus on engagement and other positive things we bring to the table. It just seems that many organizations (and HR pros) are reluctant to move beyond the legal side of things. Is it because it offers them more power inside the organization? Is it because they need to feel more intelligent/informed than their peers? I’m not sure…

What are your thoughts? Are we still mired in this world of legal issues or is there a chance we can more into more strategic areas of impact?