HR Vital Signs

Stephanie Marchuk, manager at The Hackett Group, talks with Chief Human Resources Officer and Advisory Principal Harry Osle about key vital signs for measuring the health of a human resources (HR) organization. Harry discusses some of the strategies that world-class HR organizations use to improve efficiency, while also delivering greater effectiveness and providing more strategic value.

Show Notes

Today’s episode of the “Business Excelleration Podcast’ is hosted by Stephanie Marchuk, who works in benchmarking for The Hackett Group. The episode features guest Harry Osle, chief human resources officer and Advisory principal for The Hackett Group, and focuses on measuring and fostering health within an HR organization. What are the best HR metrics, and what is a better strategy to achieve world-class HR?

As the conversation gets underway, Stephanie asks Harry a foundational question: How would you measure the health of an HR organization? To him, the two most important vital signs and key HR metrics to consider are cost per employee and HR ratio to employee. Harry defines what he means by cost, and also clarifies that the HR ratio he has in mind measures full-time equivalents (FTEs) per employee. In recent research, Harry and his colleagues have noticed that world-class companies significantly outperform peer group companies in the area of each vital sign. Remarkably, there is a 33% discrepancy in the category of cost per employee, and a 51% discrepancy in the category of HR ratio per employee.

Harry and Stephanie emphasize, though, that efficiency is not the only important factor to weigh in navigating issues of cost and FTEs. Rather, effectiveness must also be weighed carefully.  Companies were often focused too much on cost reduction and became overly lean when the reality is that they cannot cut their way to world class. The law of diminishing returns offers a reminder that with too many cost cuts, quality also goes down. So, Harry clarifies that companies should focus on investing in their processes and embracing digital transformation, rather than making excessive cuts.

Moving forward, Harry offers more thoughts on these vital signs, explaining the bell curve he’s noticed when studying strong HR ratios, and addressing the most common situations he sees from clients struggling with their HR vital signs. Some clients have worked to make cuts but only found costs to rise due to rework and manual handoffs becoming necessary. For these clients, Harry needs to talk about a better HR strategy, and demonstrate that cutting FTEs is not the way to go; doing so is only applying a bandage, rather than finding and resolving the source of financial bleeding. Other clients represent the opposite situation, having attempted to solve problems by throwing people at them. These companies need a more streamlined and strategic investment process.

Timestamps:

:51 – Stephanie introduces herself and guest Harry Osle.

1:41 – How would Harry measure the health of an HR organization?

4:01 ­– Stephanie asks Harry to share what he’s seen in recent research.

6:12 – The law of diminishing returns clarifies that too many cuts are unhelpful.

8:00 – One of the first things Harry asks clients is where they stand with regard to the two vital signs he has identified.

9:50 – Stephanie asks Harry to explain common problems he sees in client organizations.

12:41 – Sometimes Harry sees the opposite situation – one in which problems are approached by increasing staff.