Human Capital Measurement Metrics
Business Executives judge HR strategic role NOT on be the basis of emotions or HR ACTIVITIES but by the IMPACT of their actions on the business, which is always measured in financial terms.
In an increasingly competitive environment dominated by cost-cutting and budget justification, the role of HR is becoming more critical to the overall success of the organization. Currently, the workforce investments range from 20 to 50% of overall operating expense and consequently the Shareholders, CEOs and CFOs all measure results. They are keen to have rigorous, logical, and principles-based framework for seeing the connections between human capital investments and organizational success.
Business decisions are 75% data and 25% emotions. Numbers are the universal language of business and in every aspect of business management, the executives prefer to take decision on measurable and verifiable objective data, rather than gut feelings and subjective instincts. HR's traditional model of using subjective opinions, emotions and gut feelings for workforce decision making is woefully inadequate. A key responsibility of HR leaders is to articulate the logical connections between progressive HR practices and firm performance, and the need to demonstrate those connections with data and ratios.
HR measurement metrics can correlate the data and measure the functional performance of HR and the workforce in terms of input and output. Fortune companies proudly call themselves "metrics fanatics" in every aspect of business management including sales, finance, operations, HR and supply chain management. HR Metrics have therefore become differentiator between top class and traditional HR department. It is a vital tool to respond to emerging organizational change imperatives and boost individual, departmental and organizational performance.