HR Evaluation: Measuring HR's Contribution to Business Performance

This report provides a comprehensive overview of HR evaluation, focusing on various methods to measure the HR function's contribution to business performance. It delves into the evolution of HR from an administrative function to a strategic partner, emphasizing the importance of evaluating both efficiency and effectiveness. The report outlines different types of HR measures, including efficiency, effectiveness, and impact, and provides practical examples of how to measure HR activities like recruitment, training, performance systems, and health and safety. It highlights the benefits of evaluation, such as determining future investments, improving processes, and aligning HR with business strategies. Additionally, the report discusses the role of HR business partnering and the use of HR metrics as tools for measuring and improving HR's value. It emphasizes the importance of aligning HR measurement with business goals and building capability within the organization. The report also addresses the skills needed for effective HR measurement and the critical first step of measuring the right things to maximize HR's impact.

Unit 5 Week 6
This week we will be reviewing different ways the HR function
can be evaluated and how this links to the overall performance
of the business.
By the end of the week you will be able to:
 Describe a range of inputs to HR evaluation
 Describe a range of tools for measuring HR
 Outline a number of risk areas and describe the HR role in
relation 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-based
function but, these days, HR in many organisations has moved
away from transactional activities. The opportunity it has to
contribute to organisational performance has changed and so
has the method of measuring its contribution.
Contribution of the HR Function
All HR functions are trying to add value to their organisations
and clear systems and procedures for evaluation must be in
place to measure efficiency and effectiveness.
Evaluation & Human Resources
Patton, (1987) describes evaluation as “a process that critically
examines a program. It involves collecting and analysing

information about a program’s activities, characteristics, and
outcomes. Its purpose is to make judgments about a program,
to improve its effectiveness, and/or to inform programming
decisions”.
This definition provides us with an understanding of the
fundamentals of how we measure and evaluate.
Many HR measures are activity based rather than performance
based. Even when the measures used are performance based,
it is difficult to show that the outcome results from something
that HR has done, rather than something that has occurred
through another function or from changes in the environment
or the competitive situation.
A challenge is that many outputs and outcomes of HR can be
hard to measure as they are intangible and not readily
measured. However, it remains of vital importance that we do
measure the HR contribution.
In the discussion thread below, share some ways in which your
own organisation, or an organisation you are familiar with,
measures its HR contribution.
Measuring HR's contribution
1. Efficiency and effectiveness
Like any key organisational function, it’s important for HR to
demonstrate its ability as a value-adding function. It is
therefore critical that the right evaluation methodologies are
adopted. Selecting appropriate measures and metrics from
which organisational insights can be drawn happens once you
have identified the strategic drivers for your organisation. You
are then better placed to consider how best to undertake
measurement, assessment and evaluation in these key areas to
optimise HR decisions and practices. Of course, it’s worth
noting that measurement is also important because it shows
you are focusing attention in the correct places. The HR
function should do this for its own benefit, not just to justify its
ability to add value.

When measuring HR’s contribution, three different types of
measures are important and these are illustrated below.
 Measures of HR efficiency – to what extent is the HR
function ‘doing things right’? Efficiency measures are
concerned with the extent to which HR processes are
undertaken in a way that minimises the use of resources.
Many organisations engage in HR benchmarking activities,
evaluating HR processes through a comparison with
external standards of good practice or excellence. This
practice is most valuable when it is part of a continuous
process to challenge and improve HR processes.
 Measures of HR effectiveness – to what extent is the
HR function ‘doing the right things’? Effectiveness
measures focus on the extent to which organisational
objectives are achieved and specific problems are solved
through the contribution that the HR function makes to
the organisation. They also typically include measures of
the strategic skills and core competencies in the
workforce.
 Measures of HR impact – to what extent have HR
activities met defined priority needs for the organisation in
its specific and strategic context? Impact measures show
the results of bundles of activities on the achievement of
strategic priorities, through being closely aligned both
‘vertically’ with strategic priorities and ‘horizontally’ with
the work of other parts of the organisational system.

The matrix below further illustrates the differences between
efficiency and effectiveness.
Effective Ineffective
Effici
ent Organisation succeeds
at minimum costs
Organisation controls costs,
but does not succeed
Ineffi
cient Organisation
succeeds, but at high
costs
Organisation fails
Action point
Write down three areas of HR practice where efficiency could
be measured. Identify the measures that may be used to
effectively evaluate them and consider how this may be used to
help improve HR effectiveness.
On the next page, we’ll look at some examples of measures of
efficiency and effectiveness.
2. Examples of measures of efficiency and
effectiveness
 Sales (revenue)
 Net profits
 Costs
 Return on investment
 Market/shareholder value.
3. Examples of HR Practice Measures
The table below shows examples of the type of information that
the HR function will obtain to map future success.

Action point
The recruitment row has been completed but the training and
development, performance systems and health and safety
measures have not. Spend a few minutes noting down some
ideas for those areas then move on to the next page to see
some possible answers.
HR Activity Possible Measure
Recruitment
 Number of recruiting advertising
programmes
 Acceptance per offer ratio
 Number of applicants contacted compared
with those reporting for job interviews
 Time to fill a job
 Cost of filling a job
 Average tenure of employees (divided by
low and high performers)
 Percentage of internally-filled jobs
 Percentage of jobs filled with candidates on
succession plan
 Performance of hired applicants (e.g.
performance of candidates from different
schools, types of experience, etc.)
 Percentage of global units which are
staffed locally
 Ratio of back-up talent (number of
prepared back-ups in place for top‘X’jobs)
 Performance of those hired with different
techniques.
Training and
Developmen
t

Performanc
e Systems
Health and
Safety
4. Possible measures answers
Here’s the completed table with some possible measures. Did
you mention any of these?
HR Activity Possible Measure
Recruitment
 Number of recruiting advertising
programmes
 Acceptance per offer ratio
 Number of applicants contacted compared
with those reporting for job interviews
 Time to fill a job
 Cost of filling a job
 Average tenure of employees (divided by
low and high performers)
 Percentage of internally-filled jobs
 Percentage of jobs filled with candidates on
succession plan
 Performance of hired applicants (e.g.
performance of candidates from different
schools, types of experience, etc.)
 Percentage of global units which are
staffed locally
 Ratio of back-up talent (number of
prepared back-ups in place for top ‘X’ jobs)
 Performance of those hired with different
techniques.

Training and
Developmen
t
 Number of training days and programmes
held per year
 Cost per trainee hour
 Percentage of employees involved in
training
 Number of courses taught by subject
 Percentage of employees with
development plans
 Number of courses taught by subject
 Percentage of payroll spent on training
 Payroll expense per employee
 Comparison: those who did and did not
attend training
 Ratio of advanced to remedial education
 Time for new programme design
 Percentage of new material in programmes
each year
 Efficiency of training registration
 Evaluation of programme
 Percentage of employees applying training
on the job
 Percentage of managers reporting positive
impact of training on employee
performance
Performanc
e Systems
 Acceptance of appraisal processes by
employees
 Effectiveness of appraisal process for
dealing with poor performers
 Percentage of employees receiving
performance appraisal

 Percentage of total salary at risk
 Speed of salary action processing
 Average merit increase granted by
classification
 Ratio of salary to competitor salary
 Extent to which measurement systems are
seen as credible
 Percentage of employees reporting
effective performance conversations with
manager
 Percentage of employees that rate the
performance management system as fair
 Percentage of employees that understand
the link between performance and how
they get paid.
Health and
Safety
 Lost work days due to health
 Cost of injuries
 Incidence of injuries
 Percentage of smokers
 Percentage of employees who are involved
in wellness programmes
 Trends in workforce illness
 Percentage of employees that are aware of
wellness programmes
 Percentage of employees comfortable
using the organisation’s health and safety
programmes.
5. Evaluating measurements
Benefits of evaluation of measurements

It is important to understand the benefits of evaluating
measurements. Can you think of any other benefits to add to
the list below?
 Determine future investments in HR
 Improve HR processes
 Identify alignment of HR with business strategies
 Build intellectual capital within the organisation
 Stop doing what isn’t effective
 Be accountable to stakeholders and ensure employee and
management accountability
 Reflect on and improve the overall climate and health of
the organisation
 Avoid fads – HR seems particularly vulnerable to fads and
evaluation can be a way of determining whether a new
intervention is truly a quality improvement
 Lead the organisation in keeping employees motivated
and productive
 Improve HR’s image within the organisation by showing
how much it contributes to organisational success.
Linking HR with strategic objectives
The CIPD states that HR business partnering is the process by
which HR professionals work closely with business leaders
and/or line managers to achieve shared organisational
objectives. Business partners are senior or key HR
professionals.
HRBPs are usually embedded in the business unit where they
work in partnership with operational managers within that
business unit to influence and steer strategy and strategy
implementation. Research has found that the role of business
partners varies widely between organisations, with factors such
as ‘organisational size, company culture and business
priorities’.
Leading HR with goals and purpose

It is important to remember that there are many measures in
HR and to focus on the overall business objective and mission.
This will be achieved through ongoing review and evaluation of
the various people management and business activities.
Tools for measuring HR
1. Overview
HR metrics are used by businesses to determine the value and
effectiveness of HR strategies which link with measurement,
assessment and evaluation. Understanding what is happening
in the business will provide information about the strengths and
weaknesses within the organisation. Using HR metrics allows
the business to focus on what needs to be improved and
developed.
This session will describe various tools for measuring HR data
and information.
Action point
Before we start, think about the following questions:
 Can you explain why you provide the metric and what it is
for?
 Who would use it?
Typically, HR would measure the following areas:
 Numbers, grades and occupations of employees
 Absenteeism, staff turnover and lateness
 Accident rates
 Age and length of service
 Wages rates and salary levels
 Overtime statistics
 Training and development records
 Records of grievance and discipline

 Performance appraisals and skills audit.
By obtaining this information you will be able to reduce costs
and maximise your employees’ output.
The CIPD (2016) states that a critical first step is to ensure that
HR is measuring the right things. The design and development
of relevant HR metrics requires reflection and discussion in
order to determine what it takes for the organisation to
succeed and to understand how HR can add value.
Three issues underpin effective measurement:
 Aligning measurement with goals
 Taking a business partner perspective
 Adding value by focusing on building capability.
2. The HR function and its measurement
capability
Developing and using HR metrics for maximum impact is
complex. It requires judgement and a range of analytical and
influencing skills to draw out and effectively communicate
insight from data. Some HR practitioners are happiest when
‘working with people’ and less at ease when ‘working with
numbers’. Others find the quantitative aspects of HR work very
meaningful but are less confident with the influencing and
communicating aspects of their role. There may also be a
tendency to ‘look inwards’ at what matters most to
practitioners in the HR function and to provide managers with
information from an HR perspective, rather than considering
how to communicate information about issues in a way that is
relevant to the rest of the organisation.
A range of skills and capabilities is required for the effective
use of measures, assessment and evaluation.

The ability to understand the language of the business – the
ability to communicate effectively with line management
colleagues in their own terms provides the basis for influence
and insight.
Relationship management skills – the ability to look beyond the
HR function and develop positive relationships with all parts of
the business. Understanding the language of the business and
the priorities of different functional areas will help to develop
this capability.
Information-gathering skills to identify key strategic drivers –
sometimes impact areas are explicitly communicated through
organisational strategy documents or discussions but they may
be implicit.
In many organisations, ‘strategy in practice’, expressed through
dialogue and informal channels, is more relevant than ‘strategy
in writing’, expressed through formal documents and policies.