The problem is that this raw data is rarely converted into useful management output - and when it is, shortcomings in the core data collation processes become apparent. High quality analytical insight - the kind that positions HR as a provider of key strategic data to senior management - requires both depth and breadth of information. While organizations should begin their analytical initiatives by leveraging the information that's easiest to access, their long-term plans should take into account the value they might derive from a more comprehensive approach.

Cost of turnover - where depth of metrics really counts
One area where HR can provide significant analytical value is in helping managers understand the true cost of employee attrition. In a white paper published in November 2001**, Webster Buchanan Research pointed out that HR departments typically view attrition from a very limited cost perspective, measuring direct recruitment costs like agency fees but rarely looking at the fuller picture. We suggested that turnover analysis should examine:

• Total cost of the recruitment process, comprising direct external expenditure (advertising charges, agency fees etc) and internal costs (e.g. HR and management resource allocated to recruitment). Ultimately, it could include opportunity cost from the diversion of resources to the recruitment effort, although this falls outside standard financial measurement practice
• Training costs, including cost of formal training services, plus the management and peer-level resource required for "on the job" education
• Productivity costs. The loss of an employee and introduction of a replacement invariably leads to a short-term deterioration in productivity
• Loss of employee knowledge and experience.
• Loss of customer/supplier/partner value capacity. The departure of employees may have a detrimental effect on key business relationships
• Loss of team impetus. The loss of a key team member should be seen in the context of their positive impact on group activities
• Impact across the business. For example, the departure of a senior manager in product design may slow a development project and delay product release, impacting sales and marketing strategy and delaying revenue generation

Having established the full extent of the costs involved, RBS was able to define a break-even point for a typical employee, representing the moment in time when they start to add net value to the organization rather than being a net cost. From a financial perspective, its research demonstrated that this point typically arises after around one year's salary has been spent.

This breakdown provides a meaningful context for line managers to weigh up the implications of attrition in their department, reflecting the true cost of losing employees at different stages in their first year of employment. Over time, if it were broken down into job types (e.g. for senior managers or call center employees) it would provide even more detailed insight at a local level. As such, it's a practical example of how HR metrics can be presented in a way that's meaningful for departmental managers.

Putting motivation in context -where breadth of metrics matters
RBS is also at the forefront of HR strategy in the way that it analyzes employee 'engagement' and sets it in the context of critical HR issues. The company built its engagement model on the back of extensive research into other organizations' experiences, and subsequently validated it through a questionnaire sent to some 6000 of its 115,000 worldwide staff. The model incorporates eight major research categories, such as work/life balance, total rewards and leadership. Each of these is then broken into sub-components - for example, there are a dozen questions on the quality of leadership.

This survey is one of many data sources designed to establish perceptions about the bank, including information drawn from joiners and leavers, and more unusually, from external individuals who were offered jobs but turned them down. Pulled into a central datawarehouse, this information is then mapped onto other HR-related data and used to address key business issues, demonstrating the power of multi-dimensional analysis.

For example, the bank recently analyzed employee turnover in its call centers, where attrition rates across industry are traditionally high. It found that in some centers, turnover rates were slightly higher than expected - despite the fact that the broad feedback from employee surveys was good. That finding prompted it to carry out further drill-down analysis, which threw forward issues specific to individual business units. Using this data, HR was able to provide each business unit with an action plan to tackle the issues raised.

In another example, the bank mapped its employee engagement model against productivity, and uncovered evidence to support managers' intuitive belief that higher engagement leads to higher productivity. It also discovered that engagement increased by a staggering 20 percentage points if employees took four or more options from the bank's flexible benefits scheme. As Greig Aitken, head of HR Strategy and Planning, remarks: "If we reduced our turnover by a fraction of that 20 percent, we'd be saving tens of millions of pounds."

This kind of analysis provides key strategic information which the HR department can pass onto the board and line managers. As the HR profession looks to build a role for itself beyond its core administrative roots, these kinds of initiatives provide practical, real-life examples of how value can truly be generated. ** see "Human Capital Management: A pragmatic approach to delivering strategic value", by Webster Buchanan Research, November 2001" http://www.websterb.com/Tpage/PSFTHCM1/psfthcm1.cfm