Tuesday, January 18, 2011

Measurement: The Human Side of the Equation

Healthcare Industry
Health care has changed dramatically from previous years.  Many health care organizations are faced with challenges to streamline processes and become even more efficient.  Some of the most prevalent items effecting health care over the years include; Health Maintenance Organizations (HMOs), the Balance Budget Act (BBA), government cuts, increase Medicare regulation, the formation of health care systems and alliances, the electronic health record (EHR), shortages in nursing and other key positions, unions and union strategy, increased numbers of uninsured, the aging population, and of course, health care reform.
With the ongoing challenges in health care, it is necessary that health care organizations become increasingly focused on efficient operations, simultaneously providing quality services and service outcomes.  

Our Role
 As human resource professionals, our role should be primarily focused on increasing our strategic partnership in corporate strategy, planning, and business operations.  Finding ways to focus on talent management, succession planning, retention and increase productivity are key essentials in remaining competitive.  HR can assist in helping our organizations to become more efficient through human capital measurement.  The process of measuring human capital in health care seems to be very sensible, since human capital expenditures may average around 65-70% of total operating expenses.


Metrics Usage
An HR metric system is a process of gathering data and measuring the data to demonstrate the value of an organization’s human capital.  If properly utilized, along with other operational metrics, it can enable us to become more efficient by displaying the true facts of operations and ensuing all human capital investments include a return.  The return could be tangible or intangible, but it should require a return.  HR metrics can display a true snapshot of the organization and it’s makeup.  It can show movement within and out of the organization, educational attainment, diversity, skills and training needs, recruitment costs, and employee satisfaction and engagement.  There are a host of things that HR metrics can reveal about an organization.  Metric data can also show possible outcome correlations and causations.   Commonly used metrics can be used for comparison and benchmarking with world-class organizations.  It can help us to become a more leaner and productive organization. 

With the many uses of data, there can be some challenges as well.  Some of the challenges include obtaining the right data, analyzing the data appropriately, and using the information to drive change.  There is a tremendous amount of data available.  Some of the data available may be limited in scope, fragmented, incomplete, or not considered an apple-to-apple comparison.  The sheer volume of data can be overwhelming.  Some leaders find it difficult to connect the dots and this limits their ability to make informed decisions on where to invest their resources.  It also limits their ability to determine possible outcomes or returns.      

The Future of Human Capital Measurement
Towers Watson, an organization built on more than a decade of workforce analytics and human capital metrics, researched heavily into workforce behavior and business outcomes.  They developed an actionable measurement framework based on connections across four critical areas. 

§     Investments in people systems and programs (reward programs,   leadership development, performance management)
§    Employee behavior (engagement, absenteeism, turnover, productivity)
§    Customer behavior (customer loyalty, market share, customer satisfaction)
§    Financial performance (revenue growth, net earnings, share price)

Many organizations are beginning to recognize the potential benefits.  Some have adopted a portion of human capital measurement but have not grasped the total concept by committing to the process completely.  In health care, the process involves many disciplines, which include but not limited to, HR, finance, clinical, quality, strategy and planning.  It involves human, financial, clinical and process measures and can be a tremendous asset in evaluating overall business operations.  The future of human capital measurement will depend on our ability to make the true connection between measurement, outcomes and its effect on the bottom line. 

Important Factors to Consider
Commitment from senior level executives - A common factor as all major initiatives, human capital measurement requires a commitment from senior level officials.  It should be linked to the organization’s strategic objectives. 
Common Systems.  Without common systems in place, collecting data could be manual work.  Having common systems creates efficiency by reducing time and rework.  It can also increase the speed of collecting the data and the overall accuracy of the data. 
Common Definitions - Creating and identifying common definitions are extremely important as well.  There should be a common definition for each metric.  For example, the definition of a manager could have several different meanings, depending on the organization.  Common definitions help us to compare apples to apples.  Using standardized industry definitions allows us to benchmark and compare data with other organizations. 
Effective Communication and Collaboration – Sharing information between inter-disciplines are needed to connect information.  Being transparent and sharing the information with staff and stakeholders can be a highly effective tool when faced with making difficult decisions.  Transparency highlights our strengths and identifies areas of opportunity.  The more information that is shared, the better the opportunities to showcase the organization externally and to continuously improve internally.   
Benchmark Data – Human capital measurement includes internal and external data.  It is important to compare ourselves with similar and sometimes non-similar organizations.  Benchmarking helps us to seek best practices.  The main objective is to optimize performance, outcomes and results.  Adopting practices and learning from others increases the likelihood.   
Census Information - Information from the U.S. Census can provide a snap shot of our current customers and employees.  It can also provide trends on future customers and future employees.  The demographic information can be extremely useful in strategic organizational decisions. 

U.S. Census
On December 21, 2010, the U.S. Census released its first overall results of the 2010 Census.  It was revealed that the U.S. population increased 9.7% over the 2000 Census.  The resident population of the United States on April 1, 2010 was 308,745,538.   Detailed State information is set to be released starting in February 2011.  This information will provide organizations current information for future decisions.

Common HR Measurements in Healthcare
Below is a list of common HR metrics in healthcare.  The list is not all-inclusive. 
Employee satisfaction/engagement
Employee turnover                     
Exit interviews
Vacancy rates              
Training hours and cost                
Agency usage costs
Tuition reimbursement expenses
Total salary costs
Total benefit costs
FTEs per adjusted patient days
Paid hours per adjusted patient days
New hire turnover
Staff competency
Recruitment costs
Cost per hire
Days to fill a position
Turnover costs
Average age by profession

One of the newer HR related metrics include “Boomerang employees.”  This particular metric measures employees who leave the organization for various reasons yet return as a rehire.  These employees can be useful in delivering messages and positive reinforcement to company culture.  “The grass is not always greener on the other side.” 

I strongly believe that the human side of business will become the most important competitive advantage.  Competitors can duplicate most other advantages.  It will be the human component that distinguishes businesses from others.  The core organizational culture, the human side of business, will be more difficult to duplicate, therefore creating the competitive edge.     

~ Joseph Conrod Sr. SPHR

No comments:

Popular Posts