A distribution-center manager can sit down at the end of a quarter and look at a scorecard to see how well the location has done. A few metrics on cost, productivity, and quality pretty much show necessary information. We should be able to have the same for HR.
How do you create an HR scorecard? You use the same method a distribution manager does. You get on to Google and search to see what others have done. Like the distribution manager, the HR manager will quickly find many HR scorecards. Unfortunately, none of them are much good.
To be fair to HR scorecards, they are, like the Curate’s famous egg, good in parts. In particular, you can get reasonably good scorecards for the parts of HR that are most operational. For example, in talent acquisition metrics on time to fill, cost per hire, and quality of hire can give a pretty good picture of how well that function is doing. None of these metrics are quite as simple as they seem, but then again neither are the metrics used to assess a distribution center.
The important question to ask is: How much of HR can be translated to a useful scorecard? Or rather, how much of what the CEO most wants HR to accomplish is like that?
There are differences between measures of efficiency, effectiveness, and impact. And in HR there simply are very few good, objective metrics of effectiveness and impact — which is what leaders of an organization care about most.
One could make a pretty good argument — and some investors do make this argument — that the best measure of HR effectiveness is profits. Profits, to a large measure, depend on attracting, retaining, and motivating talent. We can’t tease out whether profits derive from good hiring or good leadership training or a good compensation system. It’s all those things, and they interact in complex ways that ultimately lead to a successful company.
So rather than continuing to hope that a tidy and meaningful HR scorecard can be invented if we just put our minds to it, it’s better to face up to the messy reality. What HR can do is make a logical argument for what initiatives are most important to the business and then provide a mix of quantitative and qualitative evidence to illustrate how well those initiatives are going.
We need to accept that we will never be entirely happy with HR measures because the outputs we most care about, such as “an innovative culture”, are inherently vague. If we step back from the goal of seeking a simple, objective measure of a culture’s innovativeness, and instead seek a mix of evidence that gives us insights, then we are on the right path to the best possible HR scorecard.