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Unit 5 Week 6This week we will be reviewing different ways the HR functioncan be evaluated and how this links to the overall performanceof the business.By the end of the week you will be able to:Describe a range of inputs to HR evaluationDescribe a range of tools for measuring HROutline a number of risk areas and describe the HR role inrelation to these risks.Let’s start by looking at how you currently measure HR.How do you measure HR contribution?Historically, the HR function was mainly an admin-basedfunction but, these days, HR in many organisations has movedaway from transactional activities. The opportunity it has tocontribute to organisational performance has changed and sohas the method of measuring its contribution.Contribution ofthe HR FunctionAll HR functions are trying to add value to their organisationsand clear systems and procedures for evaluation must be inplace to measure efficiency and effectiveness.Evaluation & Human ResourcesPatton, (1987) describes evaluation as “a process that criticallyexamines a program. It involves collecting and analysing
information about a program’s activities, characteristics, andoutcomes. Its purpose is to make judgments about a program,to improve its effectiveness, and/or to inform programmingdecisions”.This definition provides us with an understanding of thefundamentals of how we measure and evaluate.Many HR measures are activity based rather than performancebased. Even when the measures used are performance based,it is difficult to show that the outcome results from somethingthat HR has done, rather than something that has occurredthrough another function or from changes in the environmentor the competitive situation.A challenge is that many outputs and outcomes of HR can behard to measure as they are intangible and not readilymeasured. However, it remains of vital importance that we domeasure the HR contribution.In the discussion thread below, share some ways in which yourown organisation, or an organisation you are familiar with,measures its HR contribution.Measuring HR's contribution1. Efficiency and effectivenessLike any key organisational function, it’s important for HR todemonstrate its ability as a value-adding function. It istherefore critical that the right evaluation methodologies areadopted. Selecting appropriate measures and metrics fromwhich organisational insights can be drawn happens once youhave identified the strategic drivers for your organisation. Youare then better placed to consider how best to undertakemeasurement, assessment and evaluation in these key areas tooptimise HR decisions and practices. Of course, it’s worthnoting that measurement is also important because it showsyou are focusing attention in the correct places. The HRfunction should do this for its own benefit, not just to justify itsability to add value.
When measuring HR’s contribution, three different types ofmeasures are important and these are illustrated below.Measures of HRefficiency– to what extent is the HRfunction ‘doing things right’? Efficiency measures areconcerned with the extent to which HR processes areundertaken in a way that minimises the use of resources.Many organisations engage in HR benchmarking activities,evaluating HR processes through a comparison withexternal standards of good practice or excellence. Thispractice is most valuable when it is part of a continuousprocess to challenge and improve HR processes.Measures of HReffectiveness– to what extent is theHR function ‘doing the right things’? Effectivenessmeasures focus on the extent to which organisationalobjectives are achieved and specific problems are solvedthrough the contribution that the HR function makes tothe organisation. They also typically include measures ofthe strategic skills and core competencies in theworkforce.Measures of HRimpact– to what extent have HRactivities met defined priority needs for the organisation inits specific and strategic context? Impact measures showthe results of bundles of activities on the achievement ofstrategic priorities, through being closely aligned both‘vertically’ with strategic priorities and ‘horizontally’ withthe work of other parts of the organisational system.
The matrix below further illustrates the differences betweenefficiency and effectiveness.EffectiveIneffectiveEfficientOrganisation succeedsat minimum costsOrganisation controls costs,but does not succeedInefficientOrganisationsucceeds, but at highcostsOrganisation failsAction pointWrite down three areas of HR practice where efficiency couldbe measured. Identify the measures that may be used toeffectively evaluate them and consider how this may be used tohelp improve HR effectiveness.On the next page, we’ll look at some examples of measures ofefficiency and effectiveness.2. Examples of measures of efficiency andeffectivenessSales (revenue)Net profitsCostsReturn on investmentMarket/shareholder value.3. Examples of HR Practice MeasuresThe table below shows examples of the type of information thatthe HR function will obtain to map future success.
Action pointThe recruitment row has been completed but the training anddevelopment, performance systems and health and safetymeasures have not. Spend a few minutes noting down someideas for those areas then move on to the next page to seesome possible answers.HR ActivityPossible MeasureRecruitmentNumber of recruiting advertisingprogrammesAcceptance per offer ratioNumber of applicants contacted comparedwith those reporting for job interviewsTime to fill a jobCost of filling a jobAverage tenure of employees (divided bylow and high performers)Percentage of internally-filled jobsPercentage of jobs filled with candidates onsuccession planPerformance of hired applicants (e.g.performance of candidates from differentschools, types of experience, etc.)Percentage of global units which arestaffed locallyRatio of back-up talent (number ofprepared back-ups in place for top‘X’jobs)Performance of those hired with differenttechniques.Training andDevelopment
Performance SystemsHealth andSafety4. Possible measures answersHere’s the completed table with some possible measures. Didyou mention any of these?HR ActivityPossible MeasureRecruitmentNumber of recruiting advertisingprogrammesAcceptance per offer ratioNumber of applicants contacted comparedwith those reporting for job interviewsTime to fill a jobCost of filling a jobAverage tenure of employees (divided bylow and high performers)Percentage of internally-filled jobsPercentage of jobs filled with candidates onsuccession planPerformance of hired applicants (e.g.performance of candidates from differentschools, types of experience, etc.)Percentage of global units which arestaffed locallyRatio of back-up talent (number ofprepared back-ups in place for top ‘X’ jobs)Performance of those hired with differenttechniques.
Training andDevelopmentNumber of training days and programmesheld per yearCost per trainee hourPercentage of employees involved intrainingNumber of courses taught by subjectPercentage of employees withdevelopment plansNumber of courses taught by subjectPercentage of payroll spent on trainingPayroll expense per employeeComparison: those who did and did notattend trainingRatio of advanced to remedial educationTime for new programme designPercentage of new material in programmeseach yearEfficiency of training registrationEvaluation of programmePercentage of employees applying trainingon the jobPercentage of managers reporting positiveimpact of training on employeeperformancePerformance SystemsAcceptance of appraisal processes byemployeesEffectiveness of appraisal process fordealing with poor performersPercentage of employees receivingperformance appraisal
Percentage of total salary at riskSpeed of salary action processingAverage merit increase granted byclassificationRatio of salary to competitor salaryExtent to which measurement systems areseen as crediblePercentage of employees reportingeffective performance conversations withmanagerPercentage of employees that rate theperformance management system as fairPercentage of employees that understandthe link between performance and howthey get paid.Health andSafetyLost work days due to healthCost of injuriesIncidence of injuriesPercentage of smokersPercentage of employees who are involvedin wellness programmesTrends in workforce illnessPercentage of employees that are aware ofwellness programmesPercentage of employees comfortableusing the organisation’s health and safetyprogrammes.5. Evaluating measurementsBenefits ofevaluationofmeasurements