Measuring HR

Is it possible to evaluate an HR department?s programme? Preneet Bindra Sinha tells you how.

Is it possible to evaluate an HR department’s programme? Preneet Bindra Sinha tells you how.

One question that niggles every CEO is, "the investment I make on my human capital is the biggest expense I know the least about…" Business heads often ask themselves questions like "What is the value of my HR function?" So maybe we ought to be addressing a different question altogether — "How can HR create value and deliver results?" And more importantly "Can we measure this value?"

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Traditionally, HR results have been deduced from HR "activities." An ITES company recently honoured its HR department for hiring more than 1000 employees in the previous quarter. An Indian Bank's HR department proudly announced that 90 per cent of their managers attended 40 hours of training in the preceding year. In both these cases, results have been defined in terms of activities. This approach is attractive and widely used, as activities are easy to observe and count.

As an assessment of HR effectiveness, however, this is incomplete. Other professions measure results using accomplishments, not activities. For instance, lawyers assess their performance by the number of cases they won, rather than by the number of counter arguments they presented in the court. Therefore, to measure the "impact" of an HR department, companies must introduce a "deliverable" focus that complements, not replaces, its traditional activity measures. These measures require a lot more focus on correlation, trend analysis and a whole lot of data mining — using outcomes over a longer period of time, rather than just one activity or a set of activities.

The best place to start developing HR metrics is by looking at the avenues available to HR departments to enhance their own effectiveness. These could be classified into four broad areas:

Service delivery: It becomes increasingly important to measure how innovative and effective HR departments are when serving clients. For instance, cost-saving through process consolidation, response time to clients, employee's level of awareness and internalisation of HR programmes objectives.

Effective use of technology: By tracking the percentage of activities that are taken online and administered through self service mechanisms, we can measure the time and cost saving for the HR department, increased accuracy, improved feedback mechanisms, employee satisfaction and productivity.

Quality of business partnering: To enable true business partnering it is important for HR to enhance ways of analysing metrics like attrition rate, recruitment cycle time or employee morale indices. There is a need to look at translating people related issues into business problems backed by quantitative data.

HR capability: New capabilities need to be measured like how well are ideas turned into actions with visible results in terms of benefits or how competent the HR function is at thinking creatively and finding solutions to old problems.

Some key benefits for moving to deliverable-based metrics are:

Better HR processes leading to increased internal customer value and productivity

Swifter processing

Reduced administrative costs

Better leverage of the HR’s contribution to business results.

Employees feel better serviced and also feel a far greater ownership over the company's people processes.

As organisations try to change their fundamental business models, HR will be stretched to continuously keep pace and evolve with the business. For instance, the kind of programmes and outcomes that an HR department requires vary with what stage an organisation is at, as well as, some external market conditions.

To give you an example, a performance management system designed during a downturn, could well be targeted to specifically identify poor performers and hence redundancies, whereas the same programme in an upturn will need to be redesigned to focus more on rewards/ recognition and growth opportunities for an individual. If we continue to measure activities alone, we may miss out on the big picture of how HR contributes to the top or bottom line of a company based on its internal or external considerations.

The author is Manager (People Strategy), Sapient Corporation