Management guru Peter Drucker has said the golden words: „You cannot manage what you do not measure”. It is fairly logical to conclude from this statement that what cannot be measured, cannot be improved and without having a comprehensive understanding of how good we are doing, then it is impossible to also determine whether the applied changes in reality actually worked as expected or not. An identical measurement matrix applies also for the HR in order to assess the effectiveness of the provided services, the productivity of the existing processes, and necessity to apply improvement methods. This all is required in order to contribute into the achievement of the organizational goals as a whole and to ensure a smooth as well as competitive operation. Besides the correct implementation of the measurement system, it is as essential to communicate the results to the target groups in an understandable and meaningful manner, hence let´s talk business!
WHAT KIND OF “BUSINESS LANGUAGE” IS SUITABLE FOR OUR ORGANIZATION?
Without any doubt, the leaders of successful organizations have already a while ago realised that sustainable and motivated staff is any organization´s competitive edge factor. However, how can one be sure of it and communicate it to the target groups in a way that they can relate to it as well? The current article concentrates on a variety of measures that allow HR Professionals to measure the function´s productivity as well as its value-adding aspect from the whole organization´s perspective and communicate its contribution on the basis of specific facts. Actually there are several options for measuring the impact of the carried out work as well as applied improvements, but in this article I will be focusing on the following:
• monitoring of costs and efficiency as well as their impact on the organization´s operation via Key Performance Indicators (KPIs);
• evaluation of stakeholders´ satisfaction with the provided services;
• HR Balanced Scorecard;
• evaluation of HR function´s effectiveness and efficiency on the basis of internal as well as external benchmarking.
Whilst keeping all the abovementioned methods in mind, it is essential to measure and assess the aspects that are most relevant from the perspective of achieving the specific organization´s targets. “Business language” is a meaningful presentation of measurements (it is by no means a numb presentation of numbers!) that is clearly understandable and of interest for the stakeholders since it tells the organization’s story, allows to have an adequate understanding of the present and plan better for future. Yes, it can vary from one stakeholder group to another as well as contain a different level of detail, yet it always has the same objective – to evaluate the organization’s operation in general whilst allowing more proactiveness in making the right decisions and choices for future.
KEY PERFORMANCE INDICATORS OR KPIS
KPIs allow an organization or unit to assess the level and efficiency of the services provided as well as evaluate the progress of the activities conducted. As samples, the following aspects of HR can be measured and based on the derived data one can thereafter explain the reasons behind the numbers as well as make proposals for the next action steps:
- average number of candidates applied for vacanices;
- % of vacancies filled within a specific timeframe;
- average cost of recruitment for each vacancy;
- average time resource spent on a recruitment process;
- new Employees´ satisfaction (%) with the recruitment process.
- retention % of new Employees after a specific time period (e.g. probation period);
- Employee satisfaction survey´s index;
- average service period in the organization;
- % of Employees who are willing to recommend the organization as an Employer of choice.
Remuneration and rewards:
- average remuneration level and additional rewards offered to Employees compared to the remuneration level and rewards package offered by other organizations operating in the same sector and/or region.
- % of Employees who feel that they receive regular feedback for their work being carried out efficiently and effectively;
- % of Employees who are satisfied with the performance management process;
- number of absences (these can be also divided into long- and short-term sick leaves);
- cost derived from sick leaves.
Training and development:
- % of Employees who participate in training and development programmes within a specific timeframe;
- average training cost per Employee;
- % of Employees who participate in mentoring and/or coaching programmes;
- ROI (return on investment) of training and development programmes.
EVALUATION OF STAKEHOLDERS´ SATISFACTION WITH THE PROVIDED SERVICES
It is important to gain an adequate understanding of stakeholders´ attitude towards the function: do they see HR as a reliable partner who is actively contributing into the organization´s operation and growth? No doubt, HR unit has a variety of internal as well as external stakeholders whose requirments to the function are at times contradicting each other. That is exactly why it is necessary for the Head of the HR to be aware of how well these expectations are met and where there is still room for improvement.
Stakeholders´ satisfaction can be evaluated:
- via satisfaction surveys and relevant questionnaires (on paper or electronically);
- via focus groups;
- via individual interviews;
- via analyzing the complaints regarding the provided services.
HR BALANCED SCORECARD
HR Balanced Scorecard (Becker, Huselid and Ulrich, 2001) is an HR Manager´s tool that is gaining more and more popularity. It is based on the corporate Balanced Scorecard created by R. Kaplan (Harvard Business School´s Professor) and D. Norton (IT Expert). The corporate Balanced Scorecard has been bitterly criticized for its little attention being paid to the human capital factor which prompted the three academics to establish an HR Balanced Scorecard focusing on the people aspect of the organization.
Professor M. Huselid has explained the principle of the HR Balanced Scorecard as follows: “HR measurement systems must be based on a clear understanding of organizational strategy and the capabilities and behaviors of the workforce required to implement that strategy. Thus, an HR Scorecard is a mechanism for describing and measuring how people and people management systems create value in organizations, as well as communicating key organizational objectives to the workforce”.
As a result of a survey, a simple framework has been created for the HR tool that is based on a corporate Balanced Scorecard and it offers guidelines for establishing an HR Balanced Scorecard for the specific organization („Guide to Measuring HR Effectiveness – Resource D: Developing a Balanced Scorecard“ published on Public Service People Managers’ Association website www.ppma.org.uk ):
• HR function´s impact on the business: results that people Managers as well as HR unit deliver to the business;
• HR function´s service to customers: the service that the HR function provides to its internal customers;
• HR function´s process efficiency: the way the HR function runs its business;
• HR function´s learning and growth: the development of HR function´s capability and improvement of its performance.
INTERNAL AND EXTERNAL BENCHMARKING
Intra-organizational benchmarking allows having an overview of the activities of various units within the organization and as a result of it, specify as well as map out the best practices (e.g. best means of communication). Such method is not only cost-efficient but also ensures confidentiality.
At the same time – external benchmarking allows the HR department to compare its activity (often using as measurements specific KPIs) to other organizations´ HR departments, e.g. to compare the % of absences to another organization operating in the same sector or field of industry. Relevant benchmarking data can be most efficiently collected via partnerships where two or more organizations share among each other information as well as best practices of a specific field of business. However, it is important to remember that any kind of benchmarking must be conducted in a systematic manner that has been thoroughly thought through and planned. One way of conducting it is as follows:
• decide which aspects of the service or activities of the department you want to compare;
• decide who you want to include internally and externally in the benchmarking process;
• specify the results expected from the process;
• determine how you collect data and do it systematically;
• identify options from the existing processes in order to carry out potential changes;
• prepare an application schedule together with the assessment plan;
• implement the changes according to the change management’s best practices;
• monitor and assess the progress derived from the change activity whilst identifying opportunities for constant improvement.
As a result of the recent global recession, organizations´ leaders focus on ensuring the sustainability of the organization and therefore it is important that HR department as a function becomes more transparent as well as proactive whilst effectively combining the business acumen with people aspect. An HR Professional who is competent in “business language” helps to develop the organization’s swift reaction capability whilst at the same time focusing on the longevity of the organization and its human capital as well as communicating the information in a way that is understandable and unique to the organization. Establishing a “business language” is THE means of communication of any powerful, successful, and truly great organizations, thus it is up to us, HR Professionals, to make it happen.