Q: One of the key elements to successful HRO is the development and maintenance of metrics to manage service performance. But developing and agreeing appropriate metrics seems to be difficult for HR services. Why might this be?

A: Traditional HR metrics (such as turnover, sickness absence and training hours) are not a good means over which to measure service. This does not mean that they should not be reported and used by the organisation as a measure of overall effectiveness, but they do not necessarily provide an appropriate framework within which to measure the HRO.

Development of appropriate metrics can prove difficult as outputs within HR may be less easy to identify than for other transactional services. Not only can they be labour intensive to capture, but perhaps more importantly the role of HR within the organisation may not be clearly defined or understood. HR more often acts a prop to the organisation rather than being seen as having a strong mandate to drive business strategy. And of course there is the 'human touch' which is as difficult to articulate as a service.

Q: So what is an appropriate service measure?

A: There are a number of options - which on the surface, a company might consider. These could include Cost to hire, Employment contract accuracy and timeliness, Enquiries handled satisfactorily at first point of contact and so on. But if none of these seem that important how do you define what will be effective?

Firstly the same service agreement rules apply to HR as for F&A or IT:

• Determine what is important to your organisation
  
  
• Focus on the output and not the process
  
  
• Be 'specific', loose wording can be misinterpreted and lead to dissatisfaction
  
  
• Focus on measures over which the provider has total control. Time to hire may be a valid HR metric, but it will be diluted by line managers and candidates responsiveness which detracts from the providers performance
  
  
• Determine measures that will invoke appropriate behaviours e.g. do you want to use HRO as the catalyst to change your line managers' behaviours?

A: HRO does have further considerations over other services given the perceived, and occasionally real, impact service delivery failure can have. Therefore clients are rightly concerned with how they can determine the quality and accuracy of the services.

Consequences of inappropriate HR interactions can be an increase in informal and formal grievances or in extreme cases industrial action, both of which have been used as service measures by some clients.

Common points to be addressed with HR stakeholders include:

• How do I know you are doing it right?
  
  
• How do I know what advice you are giving?
  
  
• How do I support my managers with fewer staff?
  
  

Plus there may be an expectation of service improvement just through the definition of the metrics. 100% achievement of a metric in not an uncommon demand.

Q: What measurement techniques can be used to address all of these stakeholder interests?

A: These points can be addressed by the use of qualitative measures as well as quantitative. Reputational metrics should also be considered e.g. acknowledgement of job applications; quality of training interventions; timeliness and accuracy of statutory returns. Employees may not always agree with the information provided but that does not mean that the service provider has failed, a very useful measure is the number of cases 'handled professionally' which could hold no matter what the outcome.

In order to satisfy the need to control the face of HR, some clients have expected to be involved in the recruitment of HRO staff, be involved in their induction and viewed the HRO as their virtual team and not a service. Development of trust and robust service delivery will change this view, but in the interim the service measures selected must support the partnership journey which will benefit both HRO provider and client.