According to the HR scorecard, there is obvious doubt expressed by most management teams on whether HR plays any role in the success of their companies.
Though people are believed to be the greatest valuable resource to many senior executives, whether HR makes it possible has been a question many CEOs are asking.
The HR scorecard attributed the problem to the difficulties of measuring the effect HR roles have on business success and performance.
Research by CUNA Council shows that compensation, absenteeism, turnover and the like are reported and tracked routinely by about 78 percent of organisations. However, the percentage of HR departments that get these reports to members of management teams at all levels is only 19 percent.
Meanwhile, the percentage of firms that use human capital measurement to support the organisation in meeting its target Key Performance Indicators is just 12 percent.
Although it can be difficult to show HR adds value to an organisation, evidence exists that effective HR programs can really help a business to outperform its competitors. To help determine whether your HR programs are effective or not, here are ways you can measure them:
Benchmarking
Benchmarking, according to A. Carter and D. Robinson, is an outward-looking evaluation technique for reviewing one’s own process and practices, assessing how they compare with other organisations, and learning how they can be improved.
Through benchmarking you can determine whether or not a HR program is aligning with the standard trend or not. This standard is the benchmark, and the numbers involved in benchmarking are referred t as metrics.
As stated by A. Carter and D. Robinson, “the process of benchmarking can be an effective way to review both the efficiency of the HR functions itself in meeting its own service delivery standards, and its effectiveness in delivering outcomes or facilitating change across the whole organisation”.
Overall Workforce Productivity
While benchmarking measures a HR program’s success against other organisations, workforce productivity is an internal measuring tool. Results from Saira Hassan’s research on Impact of HRM Practices on Employee’s Performance shows human resource management activities such as career planning, compensation, training, appraisal, and employee engagement can positively impact the performance of an employee.
Therefore, one of the ways to measure the success of your HR programs is comparing overall employee productivity over a period of time to past data. If productivity is lower than past data, it means your HR programs are ineffective. However, if the productivity is higher or there is a significant improvement in productivity, then it proves effetiveness.
Retention and Turnover Rate
Human capital has been defined as “the sum of the knowledge, skills, experience and other workforce attributes that reside in an organisation’s workforce that drive productivity, performance, and the achievement of strategic goals”.
Retaining these assets within your organisation as a result of your HR activities can be used to measure the success of your HR programs. This is because employee retention has become increasingly difficult due to several factors.
Research by Bayt.com on ‘Employee Retention in the MENA Workplace’ poll (February 2013) shows that only 9.2 percent of respondents said employee retention is the same as the previous generation, while 30.6 percent said is higher now.
Meanwhile, 60.2 percent said they thought retention is lower now compared to previous generations. On employee turnover, the research shows that 24.1 percent claimed the turnover rate is not high in their organisation, while 31.2 percent said it is moderately high, with 44 percent claiming it is very high. Therefore, your ability to increase your retention rate and decrease your turnover rate could mean that your HR programs are working fine.
Manager and Employee Satisfaction
The satisfaction of managers and employees with HR services, programs, and results can be used as a tool to measure their success. The HR department can take a random sample survey of both managers and employees to get their feedback. If the feedback is not positive, HR should use it to identify areas that need improvement.
HR Costs Per Employee
The cost per employee for creating, implementing, and administering HR programs, such as recruitment, compensation, benefits, organisation development, staff records, and retention is another way of measuring success and efficiency. For instance, if high HR cost per employee results in positive productivity, recruitment, and retention metrics, it shows that your HR functions effectively.