Webinar Series: Understanding Metrics

Today’s topic is one of my most popular presentations because it qualifies as strategic credit; it’s also common knowledge that metrics seem to elude a large number of people – not just HR Professionals. My hope for today’s post is that you’ll walk away with some insight into making HR more strategic and hopefully I can convince you to register for my free, strategic webinar in a couple weeks.

Let’s start by defining the term metrics – it’s a method for measuring something or the results obtained from your measurements. If you’ve attended any of my webinars, I’m sure you know that I’m a data guy. I’ve built my life (and my company) around numbers and won’t make any process changes without implementing a solid method to quantify the results (I blame it on my Internet Marketing and Finance background). I also think that this data obsessed approach has played in my favor when working in the HR space because, in my experience, tracking change is an area where this department is sorely lacking.
In order to be “strategic,” you have to think outside the box a little. Business metrics are fundamentally different than HR metrics because business metrics is focused on the overall business model and drivers of your organization or industry. If you want to make changes that require “pitching” your ideas to upper-level management, you’re going to have to speak in their language by pitching to their pain and goals and converting your data into their data. First, you’re going to need a basic understanding of some key business metrics:

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Balance Sheet

This basically measures assets to liabilities in addition to whatever the owner’s equity is.

Profit and Loss Statement

This is pretty self-explanatory, but you’re basically comparing all your revenue/losses to determine your net income.

Cash Flow Statement

This measures the amount of cash you have going in and out per period.

To really have a firm grasp of how these work, you must first realize that each of these metrics are relative to your individual organization. For example, you’ll need to know your business model, how this affects your executives in terms of what they value, where you are in your business cycle (startup, growth, mature), etc. Once you can make that distinction, you’ll have a better idea of how they measure success. Why is this important? Well, you’ll never be taken seriously as a department if you can’t provide data that makes sense to your executive team. And I can’t tell you how many times I’ve heard an HR Professional’s frustrated tale about not being “heard” when he/she needs something to be changed in order to hire more efficiently. All it takes is a mutual understanding of how to transmit your (HR) data into their (business) data.

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