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Combining HR and finance to make productivity metrics more productive

Russell Wong is chief financial officer, ADP Canada.

Nobel Prize winner Paul Krugman, in his critically acclaimed book The Age of Diminished Expectations, wrote, "Productivity isn't everything, but in the long run, it is almost everything. A country's ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker."

This rings particularly true today, as more and more competitive Canadian organizations look to better understand productivity and how it's impacting their work force. In fact, a recent evaluation by the Organisation for Economic Cooperation and Development (OECD) of the G7 countries' levels of productivity shows that Canada is the second-least-productive country. This puts our country at 27 per cent below productivity levels in the United States, and this gap is only widening. The big problem, however, is that most organizations don't have a clear understanding or definition of what constitutes "productivity," and even fewer understand how to measure it.

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A recent survey of senior financial executives conducted by the Canadian Financial Executives Research Foundation (CFERF), sponsored by ADP Canada, showed that nine in 10 of those polled felt that the key performance indicators (KPIs) their companies had put in place to track productivity weren't supporting their business objectives – an alarming statistic at a time when other research has shown that almost half (49 per cent) of Canadian workers say they aren't as productive as they could be at their jobs. In fact, almost one in five of those companies polled as a part of the Understanding Productivity Through the Lens of Finance study said that they aren't using the productivity metrics they're tracking to inform decisions at all.

If improving success depends almost entirely on increasing output per worker, as Krugman asserts, then this disconnect between employers and employees spells trouble for the Canadian work force.

One of the biggest challenges is that often HR departments use metrics such as vacation tracking, payroll management and attendance as indicators of productivity – each valuable insights on their own, but not truly reflective of work force productivity in most organizations. The secret to improving productivity – or at the very least, improving the ability to track and understand it – very likely already lies just down the hall from HR, in the finance department.

It's likely that finance and HR are already working together in some capacity – nearly three-quarters (71 per cent) of those polled by CFERF said finance is involved in HR functions such as payroll. But beyond the transactional, combining the people-focused knowledge of HR with the analytical capabilities of finance can be the special sauce that allows an organization to better determine what defines productivity in their workplace, and how to develop metrics and KPIs to track and improve it.

Finance departments have more experience extracting value from data by developing and analyzing metrics, and are increasingly becoming more involved in the HR functions of an organization largely through culture, staffing and strategic planning. Coupling their level of data-savvy capability with HR's ability to understand the people side of the business can and will ultimately lead to better identification, measurement and insights gleaned from productivity metrics.

The reality is that effectively measuring productivity provides numerous benefits for any organization, regardless of size. Respondents of the CFERF survey said the number one area where they would be interested in applying insights from productivity data is to appropriately upgrade employee training and skills. When correctly leveraged, organizations can identify the key areas where their teams could use extra training and even identify if certain aspects of their existing training models need to be updated.

Other areas where insights gleaned from productivity data could benefit the company include employee engagement, improving work flow design, and expanding or recalibrating the work force. For example, an organization can determine which parts of the business might be over– or under-staffed, and which employees have the capacity to take on more work. This can grant busineses the ability to make informed hiring and staffing decisions to ensure that they are assigning reasonable volumes of work to their employees. That, in turn, should result in higher productivity and less turnover over the long run.

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At the end of the day, there's no one-size-fits-all approach to productivity. In fact, what defines productivity can change from organization to organization. However, what's true for nearly every organization at the outset is the need to clearly identify what productivity metrics matter to them and then to determine how best to measure against those items. By combining HR and finance to identify and quantify the metrics that truly matter, an organization is heading in the right direction to finally glean value productive insights from their productivity data.

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