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Made to measure


<b>It can be hard to measure the effectiveness of human resources policies. But Stefan Stern discovers three successful examples</b>

You cannot manage what you cannot measure is one of the oldest clichs in management and one of the most robust. Measurement has a growing cult following. But as with other cults, there are some misguided disciples along with the serious ones. So how rigorous and how sensible has measurement been in the past?

Theres certainly no shortage of research on the subject, says Chris Dyson, a director at Hay Management Consulting. But there are too many HR people out there who are really just working on a wing and a prayer, he believes. They base their work on assertion and belief, when in fact there is good research out there if you know where to look. Alternatively, they may realise they need proof that a certain approach is going to work, but they are not prepared to put in the hard-nosed measures they need.

Timing can also be important. Measurement only makes sense if you are capturing useful information at the right time, says Steve Newhall, managing director of global HR consultancy firm DDI. Theres a difference between lead indicators and lag indicators, he explains. Staff turnover, for example, is really a lag indicator people have already decided to leave, and they have gone. But employee attitudes today might help you catch what is going on in your business before its too late. And too many firms still fail to agree at the start of a new initiative or project how they will know how well they have done, he adds. Tough conversations have to take place at the outset.

There is no doubt that measurement, sensibly applied, can help pin down some of the more abstract or intangible aspects of working life that otherwise remain obscure. While output or sales targets are black and white, culture and morale are not. If you are going through a change

programme you have to keep track of the cultural factors, says Katarina Brown, a senior consultant with PIMS Associates. Its the sustainability of the changes you need to think about. How are attitudes changing?

The passion for measurement does have its critics. One line of thought is that decision-makers should not need to be convinced of the value of good people to an organisation. Another is that death by targeting occurs when too much arbitrary measurement of the wrong things is taking place. Public sector organisations are currently being commanded by Whitehall to measure all manner of activities, sometimes provoking perverse behaviour as efforts are made to massage certain figures into a more acceptable shape. Should emergency operations be halted just to get long-term waits down? Should schools exclude less able pupils simply to climb higher up the league tables? If it remains true that what gets measured gets managed, it can also be the case that what gets measured gets manipulated. Nor should we forget Goodharts Law, which states that any indicator you select as being crucial for future decision-making is bound to let you down precisely because people will alter their behaviour in order to second-guess that measurement.

But for now the carping can wait. What follows are three very different examples of effective measurement in practice. They should contain useful lessons for any HR professional. See how they measure up.

Company: Evotec OAI

Key player: HR director, Martyn Melvin

Measuring: engagement of employees

How: email survey and via secure website

There is little point protesting that you care about your people when over 25% of them are leaving every year. And if you are in a knowledge business, such a staff turnover rate could be fatal. This was the situation facing Martyn Melvin, HR director at pharmaceutical research firm Evotec OAI, only a year ago. The company, formed in December 2000 by the merger of the German Evotec and the UKs Oxford Asymmetry International, had been growing fast, at a rate of 30% a year, and needed more people. But as well as recruiting, the company was being forced to replace a lot of staff. Something had to change.

Conventional approaches were tried to get a grip on turnover. Exit interviews were conducted and some changes made to the way the firm communicated with the staff. But the problems hadnt gone away.

Exit interviews tell you something about the people who are leaving, Melvin says, but what about the people who are still there? It was time to get serious about understanding the staff, and that meant measuring employee engagement far more rigorously. Melvin brought in consultants from Penna to help in this task.

Focus groups were organised and then an all-staff email survey was devised, accessible on a secure website and data-processed in the US. Melvin wanted to explore three factors in particular: what sort of job satisfaction did people have, how likely were people to stay, and would they recommend the firm to other friends and colleagues?

The vast majority of our people are scientists, Melvin points out. We have a lot of graduate recruits, and you would expect a certain number to move on, but we had to get on top of the situation.

Confidentiality was vital. And the response rate 88% was impressive. The great thing for me is that the data is live, Melvin says. I can study the answers, compare departments with each other, and now we have a baseline to work from. It was also important to make the questionnaire relatively simple. It was just a 20-minute task to fill in the answers at a desktop PC. As well as questions requiring a specific answer and value judgment agreeing or disagreeing with a statement with answers ranging from a five (strongly agree) to a zero (strongly disagree) there were open questions as well. Qualitative data on what is it like to work here? was captured. There was also space left blank for staff to make their own observations.

The data took two months to digest, and then came the difficult task of presenting the firms leadership with the evidence and causes of peoples dissatisfaction. A certain amount of heart-searching and budgeting went on, Melvin says. But you cant ignore data like this.

Changes both large and small have been put into place. Benefits packages have been altered, training, development and career support revitalised, induction has been extended to last over a whole year, weaker departments can look to stronger performing ones for a benchmark and there is even a new canteen. And all this based on a simple but robust piece of measurement. Evotec OAI has identified its current score for employee engagement, and can now track it regularly as the firm moves ahead.

Six months on from the first survey staff turnover has almost halved. We were worried that this exercise of comparing teams performance and attitudes might prove divisive, Melvin says. But it has had the opposite effect. We will be measuring our engagement score again this year.

You may think you know what your people are thinking but these figures make it real, he adds. You can track the responses on a graph. This is what they are telling you. Its not simply about making people happy. Its about making the business perform better.

Company: UBS

Key player: Randal Tajer, managing director, global HR

Measuring: competency

How: strengths and weaknesses inventory

Randal Tajer of UBS has a message for his HR colleagues. The traditional measures and processes that HR professionals have used are simply not adequate. We have asked how many training days a year people get, or how many HR staff there are per employee, and these sound like fundamental metrics, but these figures are not really appropriate in terms of meeting the challenges we face.

Tajers responsibilities cover half of the investment banks 70,000 strong workforce. When you are talking about a salary and bonus bill of between 2 billion and 3 billion a year, you can see why accurate measurement is a priority. And Tajer is not afraid to be radical. He describes his work as an attempt to define a new structure for categorising the human capital assets of the institution.

Tajers style of HR is all about measuring competencies and performance. Job descriptions start with specific roles, the part someone has to play in meeting the business plan. We articulate the competency profile of the role, and assess people against these competencies, Tajer explains. We find out where the gaps are, where people stand against these competencies, and come up with specific actions to deal with them.

Tajer distinguishes between tech-nical and behavioural competencies. In investment banking, technical knowledge might involve, for example, pricing a stock option. Behavioural questions concern dealing with customers. But under both headings Tajer uses a scale of one to four to identify what level of competence a colleague displays. One is a relative novice, two a basic practitioner, three an expert who can handle over 90% of the situations they face, and four a master, who is actually advancing the field in a

given discipline.

The gap analysis, which provides a kind of strengths inventory, puts more power into managers hands. They know what development work they need to do. Instead of dragging everybody through a programme of training, only relevant and necessary development takes place.

What we are doing is providing HR metrics that are aligned with the businesss metrics, says Tajer. It leads on to discussions about organisational development and structure. Do the high performing teams have a certain profile in terms of competencies?

This is about providing a fact-base for decision-making about human capital, Tajer adds. In my experience, when you have a discussion based on peoples opinions, the highest ranking opinion wins. But this is objective, verifiable information. Senior managers take good decisions based on good information. HR too often has taken decisions based on bad data.

Tajer uses IT to help chart and categorise the competency profiles the business needs. Outstanding performers help set global benchmarks. This also provides a transparent framework for employees, liberating them from the potential tyranny of any given line manager. It also helps Tajer identify what really matters about peoples performance.It could be that three of these competencies account for 85% of the difference in performance, he says.

Some people might say that this all sounds a little over-engineered, Tajer admits. But this approach has really helped particularly in terms of recruiting over the past two to three years. It has focused our developmental work, and made us smarter about possible alterna-tives and the changing roles in the organisation.

Company: AMP

Key player: Judy Greevy, head of diversity

Measuring: diversity

How: attitude survey

Human beings are hard to quantify in cash or numerical terms. So should we pity the poor diversity manager trying to make a case in human terms for more investment in training and development? Perhaps not. There is a strong business case to be made for the importance of diversity right across a business, says Judy Greevy of AMP, the financial services group. But you do have to show some meaningful measurement. If you cant provide it people will say, Why are we bothering with this? she says.

AMP introduced a new raft of flexible working arrangements in its home market of Australia in 1999. An attempt was made to calculate a return on investment (ROI) figure for the new initiative. Astonishingly, it came out at 400%. Even though Australias maternity benefits at the time were practically non-existent so any employer offering better alternatives to women returners was bound to attract some positive attention AMPs experience showed that so-called soft measures can produce some very real results.

Diversity can be problematic as far as measurement is concerned, because of the natural sensitivities involved. Some HR managers will want to measure in this area simply for legal reasons, as an insurance in case of employment tribunals and equality cases. Some employees may feel there is a chance they will be discriminated against if they speak up on the issue. Colleagues with certain disabilities that in no way affect their ability to do a job may not want to discuss their personal details.

So here is another aspect of HR metrics that may be misunderstood: how you get your data is just as important as the data you are trying to collect. Greevy explains how to go about the task. There are, if you like, hard and soft numbers to measure, she says. Of course you look at the make-up of the workforce, ethnic minorities, disability and so on. But you also need attitude surveys, how people feel about the organisation: does it foster equality, is there real flexibility, can you stand up and be different and not do harm to your prospects? Charting those responses over time gives you a qualitative measure of what people think, she says.

By working closely with marketing, diversity initiatives can make your brand as an employer and as a business more appealing in your market. Customers, it can be shown, like to buy from businesses that look and sound like them. But this too needs to be measured and proven with evidence. When you start asking for budget you dont want to be seen as soft and fluffy, Greevy says. Benchmark yourself against leading organisations such as those in Business in the Community, the Employers Forum on Disability or Age, and Race for Opportunity.

Although its a tough time at the moment for many like AMP in financial services, it may also be a good time to get diversity talked about right at the heart of the organisation. Sometimes diversity has been marginalised as an issue, Greevy admits. But when everybody is fighting for market share, unveiling your convincing numbers on the case for diversity might be just what people want to hear.