CharityVillage® Research: Quantifying the benefits of HR

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Quantifying the benefits of HR
By Kathline Holmes, CHRP, founder of Gailforce Resources
March 8, 2010

Are you a human resources professional struggling with the challenge of proving the value of HR to your organization? Do you have a hard time gaining buy in from the executive team and the line managers? If this is the case, you are not alone. Many HR professionals are struggling with the challenge of shifting the perspective of HR as a cost centre to one of a department that adds value to the organization. Many human resources leaders I have spoken to have expressed concern that HR still being seen as a cost centre. Many line managers I have spoken to do not recognize value in the programs or initiatives that are put forth by HR. Executives have said that HR is often feared by employees and mistrusted by senior management.
You know that the people in your organization are a strong asset and that the human resources function is valuable in facilitating the workforce to achieve the goals of the organization. As HR professionals, we know the positive influence of people performance on the success of the services provided and products produced; however, we have not always been able to articulate the importance of that influence in terms that are relevant to the rest of the organizational leadership team.
Using metrics to demonstrate value of human resources management
Metrics is a tool that assists us to make these links, demonstrating the value of the people within the organization and communicating to the executive team and line managers how HR practices are a key part of an organization’s business strategy and its outcomes. However, many HR professionals are still reluctant to use measures. Some have not directly linked the measures they use to the outcomes of the business. Some say, “I don’t know what to measure," while others say, "What if the results don’t demonstrate that HR is not doing its job?" Still others have said, "I just don’t have time," and the list of reasons go on.
The important thing to remember is that metrics doesn't need to be hard, complicated, or difficult to understand. But it is critical that the metrics be relevant, fairly simple, and easy to understand for everyone throughout the organization. The more complicated and hard to understand, the less likely the metrics will be used and then they do become a waste of our time.
If "not enough time" is your reason for not measuring outcomes, then I encourage you to shift your thinking a little. Metrics, while they do take time to formulate accurately and time to compile and report, do save us extensive time and resources in the long run. If we use our metrics as a guidepost for making sound investments in our people, and can demonstrate the payoff for the investment, we save ourselves much time in the long run and have a better chance of gaining the investment we need for our HR programs and initiatives while building trust with our people and recognition from the executive team.
Shifting the view of your HR department
People are a strategic advantage to your organization, but it takes work to ensure that your HR strategy aligns the efforts of your people with the strategic objectives of the organization, it’s values, culture, and contractual obligations. For the HR professional this may mean shifting perspective. As HR professionals we need to have a sound understanding about the business strategy and the value chain if we are to develop measures that will assess how people performance and desired behaviours will achieve the organizational outcomes established by the executive team and contractual obligations.
Would you like to shift the view of your HR department from cost centre to added value? Do you want to demonstrate what your human resources department is doing to impact the organization, how people performance is impacting the contractual outcomes? By selecting good metrics, tracking results, effectively and clearly communicating results with the rest of the organization, and developing sound corrective action plans, you can do this.
Metrics are a tool you can use to put your department ahead of the game and shift from putting out fires to fire prevention. With good metrics we are able to facilitate the performance of our workforce in the desired direction of the organization and assist the organization leaders to make sound decisions.
Points to consider when using metrics
If you want to select good metrics for your organization here are a few things to keep in mind:

Get to know the organization as a whole - understand the core values of the organization, the strategy of the organization, and the value chain. This will give you a foundation to identify what behaviours are required by your workforce in order to achieve success.

Learn the language of financials - learn the difference between variable costs, fixed costs, actual costs, and opportunity costs. Know how to explain the HR costs in these terms.

Understand types of metrics - learn about ratio metrics, how they work and how they can be manipulated. Know how to ensure your measures are both valid and reliable and understand what happens when they are not. Learn how to align your metrics to the organizational strategy; this is what will have the greatest impact.

Balance your metrics for effectiveness and efficiency - this will help balance cost savings with value. You need to demonstrate both if you are to make and influence sound decisions.

Ensure that your human resources systems and programs are both vertically and horizontally aligned - the horizontal alignment fosters the development of the knowledge, skills, and behaviours needed by your workforce to carry out the objectives of their jobs.. Vertical alignment ensures that your human resources objectives and supporting systems are aligned with the organizational objectives.

Link recognition and rewards to outcomes - this drives performance of the workforce in the direction of your goals and objectives.

Review and revise - as the organization changes and develops, adds, or changes contracts, our metrics need to change. Continually review your metrics to ensure they are driving the organizational and contractual outcomes. Also, test your systems to ensure they are measuring what you need them to. Regularly review metrics and change them as required. Stale metrics can have a negative impact on our ability to make sound decisions and can drive workforce behaviours in the wrong direction.
By using metrics, we can improve and more effectively manage in-house processes, better manage human resources costs, ensure that HR is focussing on what is important to the organization, and better align the efforts of our workforce with the strategy of the organization. By measuring what is relevant to the organization and contractual obligations, we ensure that individual and group performance is aligned with overall organizational needs. When done effectively, we can influence the behaviours of line managers who in turn influence the performance of their work groups.
It takes time and effort to develop good metrics, however the payoff to the organization is a workforce that is differentiated from other workplaces and driven to achieve organizational outcomes.
Gailforce Resources puts people power in sync by assisting businesses with their human resources needs, including training, consulting, coaching, and workplace document writing. Visit their e-learning site at training.gailforceresources.com.