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Linking the Right Measures to Business Results
Instead of simply benchmarking human resource ef¬ciency and cost mea-
sures against other companies, many companies are taking a broader busi-
ness perspective. They are focusing internally, but in a more strategic way,
and are measuring the company against itself, not against other companies
who may have very different strategies.
The ¬rst requirement is for the business to actually have a clear and
detailed business strategy. Next, the organization must target the job roles
that are most critical to achieving the plan. As we know, as few as 20
percent of the workforce can contribute 80 percent of the value. In the
case of a national restaurant chain with a business strategy that depends on
improvements in customer service, the front-line workers would have to
be considered pivotal to the success of that strategy.
There are many questions to ask: Are there enough of these people on
board? Do they have the right competencies and, if not, how will they be
developed? How will we attract people with the right talents for these
critical roles? Do we have the right human resource systems and practices
in place to engage and retain these people? Are they receiving the right
rewards? And what about the noncritical employees and ˜˜B players™™ we
depend on”are we focused on keeping, re-engaging, and rewarding them
as well?
Another important lens to look through is the growth phase of the

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business. For example, a start-up retail venture would concentrate on se-
lecting and rewarding its top executives, but focus more on middle manag-
ers as it begins to expand nationally and open up new stores. Similarly,
employers of choice stay attuned to the career phases of their employees.
The recruiting pitches, rewards, bene¬ts, and management practices they
use to attract, engage, and retain new hires are different from those used
with more experienced workers. The same goes for women and other
demographically diverse populations of workers.
One de¬nite trend indicating a more proactive approach to talent man-
agement is that more companies seem to be conducting comprehensive
˜˜talent review™™ processes, often beginning with in-depth assessments of
high potential employees. Senior of¬cers and department heads then re-
view the capabilities of speci¬c individuals deep into the organization, not
only to discuss their readiness for promotion, but to assess their strengths
against strategic talent needs. Following these sessions, managers are ex-
pected to create action plans for employees and talent strategies for their
units.
Ultimately, managers and human resource leaders need to be focused
on linking talent-related outcomes to customer measures. For example,
tracking employee retention as a leading indicator of customer retention
and revenues has proved to be particularly compelling. In a recent poll of
HR executives, 50 percent of respondents report that their companies are
increasing their investments in tracking the impact that metrics such as
turnover rates, productivity, and employee morale have on the bottom
line.10
A Conference Board survey also reported that 76 percent of HR exec-
utives say that senior management in their companies will increase their
support for ˜˜people metric projects™™ over the next few years. The same
report also mentioned that Cisco Systems, one of the most progressive
companies when it comes to strategic talent management, has developed
˜˜human capital dashboards™™ to analyze revenue per employee and other
such data.11


Creating an Employer-of-Choice Scorecard
Rather than try to benchmark themselves against other employers, some
companies are creating ways of measuring their own progress toward be-
coming employers of choice. In other words, they are starting to track
year-over-year improvements by creating their own dashboards of talent

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management indicators. One way of doing this is to track measures of the
four things every organization must do with talent: attract, select, engage,
and sustain engagement (see Figure 11-2).
Measures of attraction could include the following:

• Ratio of employment applicants to open positions
• Percentage of applicants considered ˜˜A™™ candidates
• Average days to ¬ll vacancies
• Ratio of acceptances to offers
• Applicant dropout rate
• Number of recruiting sources used
• Percentile rank of total compensation versus talent competitors
• Percentage of new hire referrals who stay at least six months
• Average monthly percentage of open positions

Employers of choice, for example, typically have ratios of employment
applicants to open positions of at least 20 to 1, some as high as 100 to 1.

Figure 11-2.
Four key things we MUST do with talent.


Attract



The Cycle of
Talent
Keep Select
Management
Engaged



Engage


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New-hire referral rates of 30 percent are considered healthy, usually indi-
cating that current employees speak well of the company to their friends
and feel comfortable recommending the organization as a good place to
work.
Measures of selection might include:

• First-year voluntary turnover rate
• First-year involuntary turnover rate
• First-year performance results
• First-year performance evaluation by managers
• First-year absenteeism rate
• First-year employee engagement survey scores
• Percentage of candidates hired using behavioral interviewing
• Percentage of selection decisions based on competency analysis

Engagement surveys have become an important tool for many compa-
nies, which are using them as a primary indicator of how well talent is being
managed. Many see engagement as a much more meaningful measure than
employee satisfaction, because it encompasses satisfaction, plus dimensions
of performance along with commitment, or intent to stay with the organi-
zation. As you would expect, engagement survey scores appear as a key
measure in the next two categories.
Measures of new-hire engagement might include:

• Percentage completing comprehensive orientation process
• Percentage completing ˜˜entrance interview™™
• Percentage coached by buddy or mentor
• First-year employee engagement scores
• Percentage of new hires considered ˜˜outstanding™™ performers
• First-year voluntary turnover rates
• Employee survey results of ¬rst-year employees
• Percentage whose supervisors leave or are reassigned in ¬rst year

Some companies that are especially concerned about quick turnover
among new hires might want to track some of these measures during the
¬rst 30, 90, or 180 days.
Measures of sustained employee engagement could include:

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• Voluntary turnover rate
• Top performer voluntary turnover rate
• Performance/quality results
• Absenteeism rates
• Employee engagement scores
• Training hours per employee
• Ratio of internal to external hires
• Percentage of employees completing individual development plans
• Percentage of re-hires among all hires

There are dozens of similar measures that a company might begin to
track and report. As shown in Figure 11-3, the scorecard becomes more

Figure 11-3.
Employer-of-choice scorecard.

EOC Indicators 2005 2004


Voluntary Turnover Rate 11.9% 13.2%


Employee Referral Rate 21.2% 17.4%


Ratio of Jobs Filled Internally 39.8% 33.5%


New Hire Retention Rate 76.3% 71.8%


13.5% 14.4%
Quit Rate


64.7% 59.7%
Ratio of Acceptances to
Offers


36.6% 27.9%
Percentage of Engaged
Employees


4.0% 5.1%
Absenteeism Rate




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meaningful in the second and subsequent years as improvements and drop-
offs become apparent at a glance. The next logical step would be to begin
showing the relationship between some or all of these measures and busi-
ness results, such as revenue per employee (including outsourced opera-
tions) or customer retention rates.


The Plan Works . . . If You Work the Plan
You may have seen the Dilbert cartoon where Catbert asks Dilbert™s boss
if he has a plan for retaining employees, and the boss responds, ˜˜I whittle
at their con¬dence until they believe no one else would ever hire them.™™
The bad news is that there really are such bosses. The good news is that
you are now armed with 54 engagement practices from which you can
choose to create a better plan for your employees. And the really good
news, as we have seen in the success stories presented earlier in this chapter,
is that if you work the plan, the plan will work.
When I ask audiences what they hope to get from my presentations,
someone often says, ˜˜I was hoping for a magic bullet.™™ The urge to slay
the two-headed monster of employee disengagement and turnover is pri-
mal and hard to resist, but we must. There is only one ˜˜magic bullet,™™ and
that is the steady commitment to a plan that is made up of several well-
targeted practices.
As Jim Collins points out in Good to Great, good companies become
great not through quick changes, but through patient and determined ap-
plication: ˜˜Sustainable transformations follow a predictable pattern of
buildup and breakthrough. Like pushing on a giant, heavy ¬‚ywheel, it takes
a lot of effort to get the thing moving at all, but with persistent pushing
in a consistent direction over a long period of time, the ¬‚ywheel builds
momentum, eventually hitting a point of breakthrough.™™12


Partners in Working the Plan
Becoming an employer of choice is a possible dream for every company,
no matter how big or how small it may be. But if it were easy, every
company would be one. It takes a team effort, with everyone pushing
on the ¬‚ywheel”senior leaders, human resource leaders, managers, and
employees.
Senior leaders make the commitment, enlist the support of the board,

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212

build the culture of trust, competence, and caring, approve the budgets,
and hold all managers accountable for engaging and retaining talent.
Human resource leaders link talent strategies to business objectives, bal-
ance value-creating activities with those that cut costs, create the right sup-
port systems for managing talent, partner with marketing to build an
˜˜employment brand,™™ help the organization understand the true reasons
people stay and leave, recommend the right best practices, support line
managers in the implementation of those practices, and track the right mea-
sures.
Managers bear the greatest responsibility, for they are the main reason
most employees decide to stay or to go. The great managers are the ones
that make their departments ˜˜employers of choice™™ long before the organi-
zation as a whole gains that status. And yet, great managers of people have
not been honored as the heroes they are.
Companies need to select more of the right people to become manag-
ers in the ¬rst place, be more rigorous in the selection process, and take
more care not to promote good technical performers above their level of
competence. Managers must be challenged to be great managers, given the
tools and training they need to become great, and rewarded in meaningful
ways for engaging and retaining valued workers. And managers must be

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