From the Collective

A Narrative in Numbers: How CHROs Can Embrace Their Inner ‘CHFO’ to Quantify HR Value

Maria Colacurcio

To elevate their seat at the executive table and get top billing in board meetings, HR leaders should harness hard metrics to tell a compelling people story. 

The CHRO’s role has evolved rapidly over the past five years as they’ve tackled a rapid succession of complex and costly people problems. From reacting to an overnight shift to remote work during a global pandemic to addressing heightened calls for diversity and equity, navigating a pendulum swing back to the office and layoffs related to a cooling economy, and grappling with the emergence of generative AI — CHROs have been at the forefront of it all. Furthermore, the proliferation of pay transparency laws across the U.S. and the globe has intensified the scrutiny on salaries and fairness. 

All of these developments have two things in common — they directly influence employees’ perception of their workplace, and they directly impact the bottom line. That’s why this sea change in the world of HR has been accompanied by a rising tide for CHROs who have an opportunity to position themselves as the financial stewards of the largest item on the P&L list: employees.

During a panel discussion titled “Total Rewards and the Dawn of the CHFO: How to Use Hard Data to Harness the ROI of Workplace Equity” at the WorldatWork Total Rewards ‘23 conference last month, I shared my thoughts on how CHROs can leverage this opportunity to elevate their seat at the executive table — by harnessing data analytics to tell a compelling business story about their function. CHROs can look to their CFO colleagues as models for applying analytical rigor to their role, in a sense evolving themselves into a “Chief Human Financial Officer”. 

5 metrics for the “Chief Human Financial Officer”  

Metrics are the difference maker in propelling HR leaders from being listed in the appendix of board decks to being placed at the top of the agenda for board meetings. People are often the greatest asset and greatest expense for a company, so modern CHROs must excel at analyzing time and cost for employees in the same way that Chief Financial Officers analyze time and cost for products. 

Below are five key metrics that CHROs should leverage to connect the dots from their people data and talent challenges to the business:

  1. Representation — What is the distribution of identity groups at each level and department in the company?: Gathering demographic data, such as the gender ratio or race/ethnicity breakdown within various teams and levels, serves as a fundamental starting point to understanding your workforce's composition. This data enables you to present metrics to the board of directors for justifying the expense of initiatives such as a breastmilk delivery service. Armed with this data, you can articulate the return on investment in terms of attracting potential job candidates and retaining talent. 
Representation metrics example: What is the gender breakdown of women to men in your Engineering team? What is the race/ethnicity breakdown on the team?

  1. Promotion — At what rates do specific groups move up in the company?: Inequitable promotion gaps are a major contributor to pay gaps because they cause specific groups to miss out on the career advancements that lead to higher pay. This makes promotion rates an crucial yardstick that not only informs your DEI programs, but can also flag high impact areas for moving the needle on your pay gaps. For example, by identifying discrepancies between the promotion timelines for men and women in Engineering, you can then analyze resource allocation and funding distribution to ensure equitable support in those areas.
Promotion metrics example: What is the average time to promotion in engineering for women compared to men? Is there a statistically significant difference that indicates a promotion gap?

  1. Attrition — At what rates do specific groups leave the company?: Attrition rates are just as important to analyze as promotion rates. Culture issues and lack of inclusion, belonging, and support can create a “leaky bucket” in which women and people of color leave at higher rates than their white male counterparts. So even if you’re putting effort and resources into equitable hiring and promotions, if you aren’t retaining equitably, you can still end up with representation gaps and pay gaps. You can drill down to determine why groups are leaving at higher rates and pinpoint areas of high impact on which to focus investments.
Attrition metrics example: Is there a retention gap between men and women overall across Engineering (i.e. are women more likely to exit than men)?

  1. Pay equity / pay gap — Have you achieved equal pay for equal work? What is your unadjusted pay gap?:  To tell the full story of your pay gap, you should analyze both pay equity and your unadjusted pay gap. Pay equity shows whether you are paying employees in equal, similar, and comparable roles equally after accounting for neutral, job-related factors (such as tenure or experience), without bias in regards to their gender, race, ethnicity, or other protected category of identity. It’s equally important to know your unadjusted pay gap, as it has roots in systemic opportunity inequities such as promotion gaps, retention gaps, and underrepresentation in higher-paying management and leadership roles. Knowing these figures — and having an action plan for making progress on them — is increasingly important as new regulations, shareholder proposals, and voluntary disclosures by peers put pressure on companies to disclose their pay equity and unadjusted pay gap figures. 
Pay gap metrics example: What is the unadjusted gender pay gap across your engineering team — how much does the average woman earn compared to the average man on that team?

  1. Benchmarking — Where does your representation stand in comparison to internal benchmarks, as well as to competitors and your industry and/or geography at large? To understand the “health” of equity at your company, you need comparison points. It’s crucial to understand how representation for specific groups and departments/levels stands in comparison to your internal benchmarks, as well as to external benchmarks for your industry or geography. 
Pay gap metrics example: How are women represented compared to all others in Engineering? What is the estimated forecast to meet internal benchmark goals for women in Engineering at the Manager level?

Paint a story with the numbers

If your people are at the heart of your business performance, HR analytics are your organization’s “heart monitor.” When you dig into your people data, what’s the underlying narrative about the overall health of your company? A strong way to build a story is to connect your data to a recent event such as an employee survey, a recent merit cycle or pay equity audit, or some other people-related incident. Then use visual representations of specific data points to drive that story home, whether it’s in an update to your board, a presentation to your employees at an all hands meeting, a DEI infographic on your careers and culture webpage, or a public disclosure in an ESG report.

While you may tailor the level of information to make it digestible for each of your audiences, be sure to keep your overall story consistent for the sake of credibility. Boards, investors, employees, job candidates, and consumers all have their own stake in the outcomes of issues such as pay equity, pay transparency, salary benchmarking, diversity goals, DE&I programs, and benefits packages — and they each have their own priorities. Harness analytics to drive the conversation you want to have, instead of simply reacting to stakeholder’s assumptions and questions. Be clear on how you define terms; for example, what do you mean if you say you “pay for performance"?

Proactive, data-based transparency is a powerful approach that allows you to set the narrative around your people and pay programs. This is increasingly important in the pay transparency era, as salaries go public and employees especially start pushing to understand whether you pay and promote fairly. No company is perfect when it comes to pay gaps and opportunity inequities, but if you can use data to clearly show where the company stands, what you’re targeting, and when you forecast achieving those goals, your progress and commitment becomes the story, rather than where you are falling short. 

Redefining Total Rewards in the era of pay transparency

Because Total Rewards leaders are entrenched in their organization’s people data, the opportunity for CHROs to evolve into CHFOs also creates an opportunity for Total Rewards to strengthen their position as a strategic partner. Total Rewards leaders who level up the right analytics will help their HR leaders to tell a stronger story in their conversations with stakeholders. This matters more than ever as pay transparency expands and employees learn their salaries in relation to their peers. To get ahead of employee questions and concerns — Total Rewards teams must rethink their compensation programs with a new lens of “pay explainability.” 

In turn, CHROs should look to empower their Total Rewards teams with the latest analytical tools and technologies, such as pay equity software, that can allow them to truly own their data and monitor outcomes on a more regular basis. Old school methods — such as handing off an annual pay equity analysis to external auditors — don’t allow your teams to truly ‘get their hands dirty’ in their data and understand the root causes that are driving issues. Additionally, the results of a static pay equity analysis become out-of-date quickly as your organization continues to hire and lose employees. The right software can allow Total Rewards teams to have efficient, up-to-date analyses at their fingertips — which they can then level up to you. 

For advice on building a communications strategy for the pay transparency era, get the Workplace Equity Communications Playbook. 

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