Every quarter organizations release their results (financial) and publish them for use by shareholders, analysts and so on. These reports contain lot of financial and operational metrics as well as some HR metrics (people related) . If you observe that most of the Financial data published / metrics are included in alignment with or response to various statutory requirements. For e.g. there is a prescribed method(s) to compute depreciation and method used is declared. There are specific items on the reports like Cash Flow Statement or DSO that are to be reported. In a sense this is what helps compare the organizations apple to apple. So for any organization you can know what is the cash flow, how they turned their inventory in a reporting period (quarter or year), how well they are leveraged or even how many days outstanding they have on the receivables. When it comes to depreciation too there is a choice and companies can chose the best suited for their life cycle and industry and report the same.
But come to people metrics and you are staring at most incomparable metrics across organizations. Few of the organizations do report some numbers like head count, employee turn over or even average age of their employees. But for an investor or analyst is that enough? Is that necessary?
Today it is not longer the financial performance of the organization that can help you decide how things will look five years from now. Financial reporting is historical (past) and we need to understand the future. There are many intangible metrics that let us know how an organization is geared to meet the coming challenges. These are leading indicators. However there is no standard set of metrics.
Take attrition itself. Companies do it very differently and so even comparing two companies across the same industry you will not be sure the method they use to compute the same. Also depending on the choice of what the company chose to exclude (interns or contractors) the number can be very different. Whether the company chose to use the closing head count or the average head count itself matters. While using closing head count shows a deflated number for fast growing one's it is the other way for slowing down situation.
Who are all included or excluded. If the basis remain different this leads to varying head count nos.
There are strong reasons for organizations to adopt standard metrics which can help investors, analysts and other stakeholders to make apple to apple comparison. What they are we shall see in later posts.
But come to people metrics and you are staring at most incomparable metrics across organizations. Few of the organizations do report some numbers like head count, employee turn over or even average age of their employees. But for an investor or analyst is that enough? Is that necessary?
Today it is not longer the financial performance of the organization that can help you decide how things will look five years from now. Financial reporting is historical (past) and we need to understand the future. There are many intangible metrics that let us know how an organization is geared to meet the coming challenges. These are leading indicators. However there is no standard set of metrics.
Take attrition itself. Companies do it very differently and so even comparing two companies across the same industry you will not be sure the method they use to compute the same. Also depending on the choice of what the company chose to exclude (interns or contractors) the number can be very different. Whether the company chose to use the closing head count or the average head count itself matters. While using closing head count shows a deflated number for fast growing one's it is the other way for slowing down situation.
Who are all included or excluded. If the basis remain different this leads to varying head count nos.
There are strong reasons for organizations to adopt standard metrics which can help investors, analysts and other stakeholders to make apple to apple comparison. What they are we shall see in later posts.
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