Does IT Improve Business Performance?

A new McKinsey study shows a clear connection between good business management and good IT management

Courtesy of Optimize Which came first, the IT chicken or the business egg? When McKinsey Consulting studied 100 manufacturing companies in France, Germany, the United Kingdom, and the United States, it found that IT investments have little hope of making an impact on a company’s bottom line unless they are accompanied by first-rate management practices.
McKinsey rated companies in three key areas: lean manufacturing, which cuts waste in the production process; performance management, which sets clear goals and rewards the employees who reach them; and talent management, which attracts and develops high-caliber people. According to the firm, those companies that had the highest marks in these three areas became more productive, with or without higher spending on IT. With excellent IT, however, the payoff is even greater; that is, the whole is greater than the sum of its parts.

Contributing Web editor Howard Baldwin talked to McKinsey consultants John Dowdy, a director, and Stephen Dorgan, an associate principal, both of whom work in McKinsey’s London office, about the insights gained from this survey.

Q: So what’s the lesson to be learned from this?

Dorgan: For me, the big takeaway is that you have to have the right management practices in place before you invest in IT, rather than investing in IT and then hoping to improve management practice and behaviors.

Dowdy: When we started, we looked at the three aspects of management: production, operations, and talent. I was expecting to find that some companies would be good at one thing and others would be good at something else. I was thinking that a company might be successful because it has great people or a good shop-floor layout. But there were numerous complementary indications; that is, if you are good at operations, you are also good at hanging on to great people. It turns out there’s this thing called great management, and just as someone might be good at one of those three areas, there’s a similar positive relationship between good management and effective use of IT.

People who just improve management practices get a benefit, and people who invest in IT without good management get a negative result. So on your path to improved productivity, you’re better off putting management practices first. People who improve management practices and invest in IT get the most benefit at all.

Q: Are there certain combinations of the three aspects you looked at plus IT that work better than others?

Dorgan: There is no one silver bullet. People who are good at one dimension tend to be good at all dimensions. That was a surprise to us, because we expected to find different mental models on how to be great. Companies are usually famous for doing one thing well but not others.

Q: No one’s perfect, of course. So if you want to improve a facet of your company, do you focus on your strengths?

Dowdy: Actually, no. The most effective thing to do if you want to improve overall productivity is to invest in the weakest of those three dimensions, aside from IT. A company that’s good at getting people and that has good operational performance should invest in IT. But if you’re weak on the shop floor, don’t invest in IT. If you’re a CIO, you should assess the relative strength in each of these areas. If there’s an area that’s lagging, make an incremental investment to bring it forward.

Q: But don’t invest in IT first?

Dowdy: No, invest at the pace at which the company can improve. Invest in chunks that the company can digest. If IT tries to make a great leap forward, it can leave the company behind; the departments can’t absorb the potential benefits. In other words, you can’t look at IT as a panacea. You have to improve across all levels of performance. If you get too far ahead at any one, you don’t derive benefits.

Q: But how do you keep your fingers on the pace of improvement? How can you tell how good you are at finance, or manufacturing, or human resources?

Dorgan: By benchmarking yourself against your competitors. Very few companies do that. It’s not rocket science to get a feel for strengths and weaknesses.

Dowdy: You don’t need an outsider to tell you these things. If you’ve seen 100 operations, it’s easier to tell how you’re doing. If all you’ve ever seen is one plant, it’s hard to assess. Most experienced business executives have seen a lot of different companies in their sector and can figure out where the weak link is.

But you have to have the will to improve. If you’re not consciously seeking to improve your performance, it’s easy to convince yourself that everything’s OK. You have to have the will to give yourself a rough assessment. Some of the very best companies are the ones that are most critical of their own performance. This is all related—the people who are always searching for the areas to improve perform better. Great managers create the impetus for change, in good times and bad.

Source: Biz Intelligence Pipeline

iSixSigma Magazine: Leadership Programs That Include Six Sigma Are Six Times More Effective, Survey Shows; 60% of Six Sigma Professionals Are Promoted

SEATTLE--(BUSINESS WIRE)--Aug. 25, 2005--A new survey completed by more than 1300 business professionals from around the world whose companies are using Six Sigma shows that corporate leadership programs that involved Six Sigma training were six times more likely to be called "highly successful" than those without. In the survey, to be released in the September/October issue of iSixSigma Magazine (www.isixsigma-magazine.com), the longer companies have been using Six Sigma, the more likely they are to require related experience among their managers.

"The results were even more dramatic than we anticipated," commented Michael Cyger, CEO and publisher of iSixSigma Magazine and iSixSigma.com. "About 85% of people who said their leadership programs were highly successful indicated that Six Sigma was a key component of that training. Only 15% of highly successful programs did not include Six Sigma.
"In sharp contrast," he continued, "only 3% of the highly unsuccessful programs involved Six Sigma."

The link between Six Sigma experience and leadership development was obvious in other parts of the survey. "About 60% of the respondents said that people in their companies who have completed a Six Sigma 'tour of duty' are moved into new leadership positions," said Cyger. "That's compared to only 14% who returned to their original jobs."
Cyger said these patterns aren't too surprising once you consider the kind of skills that Six Sigma training builds.

"We all want to work for leaders who make good decisions based on data not emotions, who share responsibility, who know how to generate results," Cyger said. "We want leaders who are enthusiastic and passionate about what they're doing. Those are exactly the skills and qualities that make Six Sigma professionals most successful and that Six Sigma helps build in future leaders."

In fact, noted Cyger, previous research by iSixSigma Magazine showed that Black Belts (staff who receive extensive Six Sigma training and lead projects) generate almost $200,000 of hard financial benefit per project. He added, "If you're looking for people to promote into leadership positions, what better track record could someone have?"

Source: Business Wire

Operational improvements promise efficiency in health care, but how?

John W. Huppertz

Analytical work done by health care executives have ferreted out excessive costs within their operations, using the tools and techniques familiar to practitioners of six sigma programs designed to improve quality and efficiency.

Once identified, specific problems can be tackled through quality-improvement teams and other techniques borrowed from industry. However, in health care, operating efficiency often proves elusive because patient care does not always follow predictable paths, and processes must be adjusted to meet unanticipated events, facts that entrenched players sometimes use to resist changes in operational procedures.

At the recent annual meeting of the American College of Healthcare Executives, it was clear that progressive health care organizations recognize this resistance, and a consensus has developed around the best methods for promoting change.

The ideal structure is to team a senior executive of the firm (usually the chief operating officer or chief financial officer) with an experienced clinical operator and a senior medical leader (i.e., the medical director, chief of medicine, or chief of surgery) who has the respect of the doctors in the community.

A team structured in this fashion not only has access to all the information, but also can clear away roadblocks to progress.

Having identified costly inefficiencies through the kind of rigorous benchmarking analysis done in manufacturing, transportation and logistics, teams determine a course of action.

Executives who have gone through this process report that when moving from analysis to action, it becomes clear that every service or procedure for a patient seems to affect another procedure, and rarely are they coordinated. To patients, this often means hurry up and wait.

For example, in one hospital the staffers who transport patients were told to pick up a patient at 10 and bring him down for a CT-scan. Transporters showed up at the patient's room at 10, moved him from bed to gurney, took him down to radiology, and his scan started at 10:20.

The problem was that his appointment was for 10. An expensive high-tech piece of equipment and a trained operator sat idle because of a low-tech miscommunication.

Furthermore, that 20-minute delay caused delays in taking X-rays of patients in the emergency room, which caused overcrowding, long waiting times and diversion of patients to other hospitals' emergency rooms.

The solution? A coordinated, simplified scheduling system that shows everyone where every patient needs to be at all times. The team plans to borrow an idea from the airport business: an arrival and departure board at the nursing station.

If you think this was just an aberration-- simply a hospital with a screwed-up system and incompetent support people--think again. These things happen all the time, but they are too often overlooked as health care workers and managers devote their time to taking care of patients.

And don't conclude that the workers ignored or failed to see problems right in front of them. Identifying the linkages between a patient's tardiness for a CT-scan and a long wait in Emergency takes a lot of research, analysis and observation.

Improving operational effectiveness demands coordination across departments, disciplines and specialties. As the example above illustrates, one small problem creates another, which creates another.

The interconnected nature of patient care elements means that identifying the problem through benchmarking is only a start. Once a problem is found, the team must not only find and fix the problem but the root cause as well.

Health care workers at all levels need to understand what goes on outside their own specific area of responsibility, which requires them to think differently. Health care managers are using examples from other industries to help communicate this message.

For example, FedEx tells its people to "think of packages like people." The operations improvement team in one multi-specialty group practice concluded, "We've been treating our patients like packages," shipping them from one specialty to another, from lab to radiology to physical therapy, without considering the effect on the patient--whether it is convenient for her to make four appointments going out six weeks.

Many health care organizations profess to provide "patient-centered care," yet they have difficulty getting their employees to understand exactly what this means and how it affects their jobs. Simple things matter, like "don't cause the patient to miss lunch because you scheduled her into the lab to get blood drawn at 11:30."

Health care managers are beginning to pay serious attention to finding and fixing inefficiencies in their operations. Solutions require people to think organizationally, beyond their own day-to-day responsibilities. Silos have to come down, which will be management's biggest challenge.

JOHN W. HUPPERTZ is an associate professor and co-chair of the MBA in Health Services Administration program at the Graduate College of Union Unversity. He can be reached at huppertj@union.edu.

Source: The Business Review

Aim For Excellence With Six Sigma

By Sohini Bagchi
Bangalore, Aug 22, 2005

With quality management and cost benefits becoming the mantra in today's IT-circle, a growing number of Indian companies are gradually discovering that Six Sigma is a powerful catalyst that can successfully combine higher quality and substantial cost savings to achieve breakthrough results.

Speaking to CXOtoday on the benefits of this approach to Indian enterprises, V. Ramamurathy, Black Belt in Six Sigma and management consultant remarked, "Indian enterprises often feel the increasing strain of the rapidly shrinking global village. As a company's survival and profitability depends on its change management strategy, enterprises across sectors are realizing the growing advantages of deploying Six Sigma across different departments to chop off cost and improve performance."

"Simply defined Six Sigma is a defect reduction methodology that transforms organizations by forcing them to focus on the quality of the customer experience. The term sigma refers to deviations from an ideal level of operation, where each level of sigma, starting from one, allows for fewer defects," explained Ramamurathy.

Despite its origin in manufacturing, at Motorola in the 1980s, and later on spread to nuts-and-bolts powerhouses like General Electric and Honeywell International, CIOs across verticals are adopting Six Sigma for its fact-based, quantifiable insistence on continuous improvement and its ability to doggedly root out and improve defects in processes.

According to noted Six Sigma guru, P. Kapila, who has more than 15 years of experience in this area, "When applied to IT enterprise, Six Sigma aims to measure and improve both internal processes, such as network speed and reliability, and line-of-business processes in which IT has a role, such as how well an online ordering system is working."

In India, IT majors such as Satyam, Wipro and Infosys are pushing Six Sigma practices across all levels, and training hundreds of its staff members.

"Six Sigma brings many changes in the work culture wherever it has been deployed, creating an open and transparent culture where ideas are invited from everyone. There is lack of hierarchy, and the focus is on a learning environment. It leads to quality thinking at every level and in every operation in a software development organization," said Kapila.

Satyam has embarked on a major drive to implement Six Sigma, and has already achieved the 4.8 level in more than 300 projects. The company is implementing an action plan to equip all of its associates with analytical skills through Six Sigma training and aims to bring in significant cost savings through productivity improvements in its processes.

C. R. Nagaraj, senior vice president quality, Satyam, feels that in order to optimize processes, the company used Six Sigma, and this practice saves a lot in costs. The company has also made substantial investments in Six Sigma for its BPO arm- Nipuna, in order to save cost through defect and cycle-time reduction.

Another landmark is the recent launch of Microsoft's Accelerator, a framework developed for Six Sigma. The product customized for Six Sigma practitioners, combines Microsoft's enterprise product management (EPM) and business process management (BPM) solutions thereby helping enterprises to effectively manage Six Sigma projects, easily measure their financial impact, optimally utilise and track manpower resources.

"Any company's existing project management and portfolio management programmes should complement Six Sigma's quality and customer goals-and indeed, many PM vendors have begun including Six Sigma tools in their software offerings," pitched in Rama Bhagi, manager (SQA), Wipro Technologies. He feels the methodology helps improve operational efficiency, customer satisfaction, and business parameters.

Some of the other Indian companies such as, TACO and Zeta Pharma have just begun to implement the Six Sigma approach as part of their work culture. As far as CRM, ERP and other customer initiatives are concerned, Sun Microsystems is one company that has made significant improvements from its customer relationship management system by applying Six Sigma principles.

"We have already made huge performance and process advances in our CRM system," said Junaid Mohiuddin, program manager and Black Belt for worldwide CRM in Sun's global sales operations. "When disciplined Sigma is applied to ERP rollouts or infrastructure improvements, you increase your chances of success by many factors," added Mohiuddin.

"Six Sigma provides CIOs with an objective, measurable way to justify technology investments. Further, it serves as a judgment-free common language between IT and other project stakeholders within the company," tips off Ramamurathy, who feels that CIOs have a good reason to implement this process as it brings quality on the corporate radar in a big way.

Though the concept is still at a testing stage in India, with poor penetration in the government, financial and service sectors, Kapila feels that many of the country's largest enterprises are gearing up to look trim and vigorous these days and perhaps adoption of Six Sigma is the answer.

Source: CXO Today

The Next Generation of Hiring Metrics

The next generation of hiring metrics: new tools and approaches are helping HR achieve a deeper understanding of the value of an organization's hiring practices
Charlotte Garvey

No longer satisfied with basic metrics that show how many job openings are being filled or how long it takes to fill them, HR professionals are analyzing hiring data in greater depth to better determine the value of their hiring practices and to better align them with business priorities.

It's a business evolution reflected in a recent metrics retooling by Saratoga Institute, a PricewaterhouseCoopers LLP (PwC) wholly owned subsidiary that pioneered the use of human capital metrics in the 1980s.

Following PwC's March 2003 acquisition of Saratoga Institute, the firm convened an advisory group of clients, PwC consultants and academics to take a fresh look at hiring metrics, says Jim Hatch, managing partner of Saratoga. "The metrics were getting a bit stale, and they were more or less created for a different time," says Hatch.

The result: Saratoga retained seven existing metrics and added 50 new ones from a proposed list of about 100. With the new metrics, "we look at the entire life cycle of the employee, from hiring, training and retention all the way to termination," Hatch says. (For a peek at some of the new metrics, see "New and Old Metrics from Saratoga" on page 72.)

One result of this metrics re-examination has been to use a matrix-based approach to more closely examine the sources of successful hires. This approach allows employers to get a multifaceted view of recruiting practices, one that more completely examines the quality of new hires and of the hiring process.

For example, Hatch says some employers previously gathered data on where hires came from--such as through advertising, referrals, college recruitment programs or lateral moves--but did not determine the return on investment from those various sources. Saratoga's new metrics enable employers to look at the sources of new hires and then fill in a matrix of factors--such as turnover, pay increases and performance ratings--after the employees are on board. "You look at a scorecard like that and you can get an idea where you are getting your return on investment," Hatch says.

The data can drive companies to develop more cost-effective recruiting practices, either by lowering costs or improving the quality and retention of new hires. Achieving such boosted hiring efficiency will become increasingly important for any employer facing a skills gap in the future. (For more information about a possible coming labor shortage, see the cover story in the March 2005 issue of HR Magazine.)

There is, however, no one-size-fits-all approach that employers can adopt to achieve greater hiring efficiency. The matrix of metrics that will best suit your company depends on a variety of factors, including your business goals. Here's a look at how some companies have figured out which metrics work best for them.

Wachovia Stresses Recruiter Success

Wachovia Corp., a consumer banking and financial services company based in Charlotte, N.C., has shifted its use of hiring metrics in recent years to emphasize success in the recruiting process. The company has grown rapidly of late through a steady stream of acquisitions and now employs about 95,000 people.

Unlike some firms, Wachovia developed its metrics in-house. "We came to the conclusion that we know our business better than anyone, and we know what is important to the company and the clients," says Sarah George, senior vice president of recruiting. Creating metrics internally "gave us the freedom to change them without incurring additional expense," she says.

Over the past four years, the system has evolved, undergoing several modifications.

The first generation of the system emphasized numbers, such as offers and acceptances. "In the beginning, we were looking at how many candidates we were pushing through the pipeline," says George. In the second generation, "we stepped back to ask, 'What is the strategy of the company and how do we align with that?'"

Finding the answer to that question mandated a closer look at the company's success in increasing workforce diversity, something Wachovia's leadership had identified as an important corporate goal. In fact, CEO Ken Thompson leads the company's Corporate Diversity Council, which was established in the late 1990s to evaluate the company's efforts and develop action plans when needed.

"We recognize that we need to mirror our customer base," says George. "This is key for us in being able to identify with our customers to meet their financial needs."

As a result, George says, the company started evaluating recruiters on whether they were presenting a diverse slate of successful candidates.

Further, the company developed an incentive plan for recruiters that follows the direction of Wachovia's overall business strategy and that builds in compensation incentives for recruiters to hit their personal targets, tracking a sales model that the organization was implementing.

Recruiters' initial response was not universally positive; some expressed frustration because they had no control over the actual hiring process, George notes. "We had some good conversations," she says, and eventually "the recruiters got to a good place on this."

The current scorecard, given to individual recruiters monthly, includes the following metrics, all of which are connected to incentive compensation:

* Number of hires.

* Time to fill.

* Percentage of diverse candidates.

* Percentage of diverse hires.

* Interview-to-offer ratio.

* Offer-to-acceptance rate.

The scorecard also includes metrics that are not yet connected to incentive compensation: hiring manager satisfaction; new hire satisfaction; and a series of efficiency measures, including number of internal hires and number of external hires by source (such as employee referral, Internet, advertising, agency, college recruiting, career fair, etc.).

George and her team now are considering ways to make the hiring metrics process more fluid and responsive to changing circumstances. For example, Wachovia recently merged with SouthTrust, resulting in the displacement of 12,500 former SouthTrust employees, many of whom would be good candidates for placement at Wachovia.

As a result, the company has been considering building incentives into the recruiters' scorecard to prompt them to address this displaced talent pool quickly. Those measurements can be dropped from the scorecard once they are no longer relevant, George notes.

Similarly, Wachovia is looking at moving away from a one-size-fits-all card for recruiters. The aim is to recognize that recruiters are aligned with the bank's various lines of business, which may have very different priorities.

George says Wachovia has convened a team to look at whether it makes more sense to vary the weighting of metrics depending on the business priorities of each line of business. She notes that speed of filling a vacancy may not be the top priority in all of the bank's lines of business--such as those requiring candidates with specialized knowledge in the investment arena, who may take longer to find.

In the end, George says, not all recruiters love the scorecard process. But she views it as an overall success. "It's made our recruiters smart about the business of recruiting," and it's "a conversation starter" in assessing the performance of individual recruiters.

However, it's not "the cure-all for everybody," she adds, and it could eventually be phased out if it no longer fits Wachovia's needs and culture. "I feel we're still on a journey" in using metrics effectively, George says.

GlaxoSmithKline Seeks 'Next Level'

The use of hiring metrics also "is still evolving" at GlaxoSmithKline (GSK), says Mark Janusz, director of recruitment for the company's U.S. pharmaceutical operations, headquartered in Philadelphia.

"We're really in the infancy stage in a lot of metrics," Janusz says. The company formed in January 2001 as the result of a merger between pharmaceutical giants GlaxoWellcome and SmithKline Beecham. U.S. operations employ about 13,000 workers; the company employs more than 100,000 people worldwide.

Vacancies include sales positions and technical jobs that require candidates with advanced degrees. While there are plenty of sales candidates, Janusz notes it has been getting tougher to find qualified candidates to fill technical jobs in areas such as research and development.

Janusz says the company began using Peopleclick software for recruitment tracking in mid-2001, and since then has been revising the process, "trying to take it a step further" to use recruiting sources more effectively. "It's all good data," he says, but the next step really is "driving down to the next level."

The HR department produces two types of metrics scorecards that gather data on hiring. One is a business scorecard, which takes "a more macro look" at numbers that interest GSK's lines of business. This scorecard's measurements include the number of jobs being filled by division within the pharmaceutical business, such as figures on diversity and gender.

The scorecard has been modified to reflect the needs of business leaders, which includes heads of pharmaceutical divisions, marketing research, finance and HR.

"We have really pushed the businesses to see what they wanted back from the report," says Janusz. Initially, "we started measuring everything," such as the number of job openings in every area and how long it took to fill each one. But the feedback from the lines of business was that "they were more interested on a very macro level," not in individual vacancies.

HR also puts out a recruitment effectiveness scorecard, which Janusz describes as using "a funnel approach" to data analysis. The report card first looks at the number of job applicants and whether they were recommended for an interview, as well as whether they were actually interviewed or hired. Then, "we cut that data by diversity and source," he notes. "We look at how we are leveraging those sources so we source more effectively."

Janusz says his goal is getting to a deeper level in terms of analyzing the data. "It's easy to measure how many jobs each recruiter is filling, but the question is, are they filling it with the right person?" he says. He and his team now are developing additional tools to assess whether the company is hiring better people. "We haven't mastered that" yet, he says.

In addition to assessing quality of hires, one of GSK's stated business objectives is developing a diverse workforce, so HR is looking at "where are we finding more diversity so we can leverage those sources as well."

Sometimes the data gathered prompts a reassessment of how recruiting and hiring is done. For example, Janusz was surprised recently by data about the huge volume of sales position resumes coming to GSK through the Internet--more than 150,000 in 2004. Of those candidates, about 350 ultimately were hired by the company.

The data prompted Janusz to ponder whether this is the best use of HR's resources. The sheer volume of resumes has him wondering, "Are we spending too much time sifting through resumes of unqualified people? Have we built our own monster?" (For another example of surprising results from analyzing hiring data, see "Top Prospects Are Not Always Best," left.)

Business Partners Key at Avaya

At Avaya, the use of hiring metrics is driven by an HR business partner model, says Rupert Bader, director of workforce planning. Avaya, headquartered in Basking Ridge, N.J., is a business communications provider of software and services, including voice-over-Internet-protocol, and employs more than 15,000 people worldwide.

Avaya HR managers work closely with business partners in the company. As a result, human capital metrics were agreed upon by both HR and the business partners before they were implemented, says Bader, who manages a small team of human resource consultants and data analysts who provide workforce information and analytics.

His group has been reporting on hiring metrics as part of an integrated human capital metrics scorecard for 18 months. The flow of information is frequent, Bader notes, with reports for business leaders and HR business partners provided twice a month. Relevant metrics also are woven into a human capital review that is provided annually to Avaya's board of directors.

"We look at many metrics showing the strength and productivity of Avaya's workforce," says Bader, "including gross margin per employee, high-performer retention, pay for performance and many others."

To choose hiring metrics to be used, "we started with the head count plans developed by business leaders as part of their financial planning process," he notes. "From those, we estimated the affordable hires," using expected attrition rates, rates of internal transfer and promotions. Bader and his team compare these measures with the job requisitions prepared by hiring managers "to ensure that our recruitment process is always closely in line with our financial plans."

Avaya's business leaders budget how much they will spend on compensation and how many employees they will have each quarter, Bader explains. "We want to make sure they don't start hiring so many people that they exceed these budgets unless there is a good business reason," such as unplanned demand for a product that drives a sudden need for more salespeople than originally projected, he notes. Bader says his group also tries to get business leaders to take a realistic look at historic attrition rates to assess what impact they will have on staffing needs going forward.

Avaya also assesses time-to-fill rates against three benchmarks developed by Saratoga and others: a global benchmark and rates for similar-size companies and high-tech companies.

"Time-to-fill [rates] allowed us to look at both recruiter efficiency as well as the time frame in which hiring managers involved us in the recruitment process," says Bader.

He describes "time to fill" as "a 'Goldilocks' metric" because it needs to be "just right." If time to fill is below an industry benchmark, it can mean hiring managers are not taking the time to interview enough candidates to ensure that they are hiring the best. Conversely, a high time-to-fill rate indicates a drop in recruiter and hiring manager productivity, which is not desirable either.

Bader's group provides its HR business partners with color-coded data "to make clear which metrics are out of acceptable limits," using a red, yellow and green system in which green signals data within an acceptable range. Business leaders also get a narrative "so they can quickly make sense of the numbers."

The data can be used by business leaders to prompt changes in their human capital practices, Bader says.

The information generated through hiring metrics has driven Avaya to develop "a richer staffing planning process," he notes. The process takes into consideration current head count, attrition expectations, and college recruiting and internal transfer goals for the year ahead. "Without a clear connection between hiring plans and the business plans, this improvement in the staffing process would not have been possible."

Data generated also has enhanced HR's ability to assess and improve the requisition load per recruiter and bring time-to-fill levels into line with benchmarks, says Bader. As a result, "the quality of our hires has steadily improved over time."

In addition to giving recruiters and hiring managers more time to evaluate and make quality hires, it also has given them more time to be proactive in identifying top performers outside the company who may not be currently looking, and then work to bring them on at Avaya, he notes.

Online Resources

To view a collection of articles and resources on calculating the return of investment on staffing initiatives, visit the online version of this article at www.shrm.org/hrmagazine/05April.

RELATED ARTICLE: New and Old Metrics From Saratoga

Saratoga Institute's latest set of hiring metrics includes the following:

* Ratios of total hires relative to total head count.

* Percentages of hires coming from various sources, including advertising, agency hiring, referrals from current employees and college recruiting.

* Average relocation package.

* Requisitions per recruiter.

* HR recruiter costs per requisition.

* Average sign-on bonus.

* Time to start, meaning the number of calendar days from requisition approval to the employee's first day at work.

Time to start "is a measure of your onboarding process," says Saratoga's Jim Hatch. That rate of efficiency can say a lot about the agility of your organization overall, he adds.

The staffing/hiring metrics already frequently in use include the following:

* Time to fill, meaning how long it takes from requisition to acceptance by a candidate.

* Cost per hire, which factors in a number of internal and external costs that go into the recruitment and hiring process.

* Number of job openings, sometimes sliced up by functional responsibility or educational requirements.

RELATED ARTICLE: Top Prospects Are Not Always Best

Analyzing a group of hiring metrics can lead to some pretty surprising conclusions regarding hiring efficiency. For example, when Saratoga Institute recently helped a large financial institution assess its hiring data, the firm discovered that it was better off refocusing its hiring efforts away from graduates of prestigious MBA programs.

While applicants from these top schools tended to receive slightly higher job performance appraisals than peers from less prestigious programs, they also tended to leave the company more quickly, generating extraordinary turnover costs, says Jim Hatch of Saratoga.

In response, he says, the company decided to revamp its hiring strategy.

Instead of focusing on snaring the best and brightest, the company now plans to target graduates from schools that may not have the cachet of Harvard and the Wharton School of Business but that produce qualified candidates who will stay longer and contribute to the firm, resulting in lower recruitment and hiring costs.

CHARLOTTE GARVEY IS A FREELANCE WRITER BASED IN THE WASHINGTON, D.C., AREA WHO REPORTS ON BUSINESS AND ENVIRONMENTAL ISSUES.

COPYRIGHT 2005 Society for Human Resource Management
COPYRIGHT 2005 Gale Group

Source: Society for Human Resource Management (Membership required)