HR & Employment

How to measure HR effectiveness?

Bryan Brown | 11 August 2021 | 3 years ago

How to measure HR effectiveness?

The Human Resources department is the manager of one of the most critical and most fluctuating assets of every company – people and talent. They are at the core of sourcing, attracting, and developing that talent, as well as making sure that the talent stays put!

But who is developing and tracking the effectiveness of the HR function? And are they achieving this in the most efficient way possible?

We all know that in order for a business to succeed, it can’t be stagnant, and there are a plethora of KPIs in place for that – and, if you’re serious, some big data as well. HR professionals are often overwhelmed with ever-changing business needs and the urgency of getting talent to meet those needs. 2020/2021 was a point in case, stretching HR functions to their limits. HR is a critical pool of talent that they need to be allowed to spend time getting themselves future-ready. The business needs to empower them to achieve success in an agile, dynamic global business environment. Based on the starting point, this will take a lesser or greater HR transformation strategy.

What is the HR of the future?

Human Resources, like your business, will be stagnant if it’s not moving forward. Your HR officers, or your contracted HR service provider, needs to take on new learnings and tools to stay relevant continually.

HR needs to be assessing and redesigning recruitment strategies, succession planning, and performance management at least every second year, questioning: how can we make it more efficient? How can we make it more effective? This is no one solution as different countries and industries will have different needs.

The transformation of HR should position it as an essential business stakeholder with an integral value within strategic discussions.

There are sophisticated HR operations software solutions in the market, from Mecer, for example, which can analyse the effectiveness of an HR delivery model. The enabled data analysis capabilities can very quickly highlight HR services that are less effective or are not fully aligned to business goals. With their data-enabled, HR can cover more information and react faster to changes to their operations.

If a business’ HR department is forced to operate manually, i.e. not enabled, the business needs will always outstrip HR’s ability to respond to those needs.

It is highly prudent for businesses to invest in specialist HR assessment tools, training or workshops on the latest HR trends, and strategic HR partnering.

There are specialist companies that sell self-learning, technical HR tools as well training via simulations that can be set up in-house.

The so-called must-have HR KPIs

Have you seen endless articles on top 10, top 5 or must-have HR KPIs? So have we. Those articles are making sweeping statements. There are indeed some common indicators, but there is definitely no silver bullet that can be shot across the bow of all industries.

Firstly, to most effective indicators would be the ones that you have linked to the HR strategy. As goals and priorities are as diverse as each team, e.g. perhaps talent retention is a current urgent need, or maybe upscale automation is causing change management challenges. This will feed into different indicators that need tracking.

Goals and questions

Indicators are linked to goals, so identify the HR goals and what HR needs to do to help the delivery of the business strategy.

Some of the good questions may remain unanswered as their answers are part of the goals. With the goals and questions listed, you can now attach indicators to drive the discovery of those missing answers, highlight trends and measure HR’s effectiveness.

Here are some examples of what you could measure to ascertain HR effectiveness. Remember, not all of these will apply – identify your goals first and focus on the goals that deliver the greatest strategic reward.

For HR to effectively assist with delivering the business goals, you could consider measuring:

  • Staff satisfaction – an anonymous survey
  • Employee engagement – the Utrecht Work Engagement Scale is the best-researched conceptualisation of engagement. They define engagement as a “positive, fulfilling, work-related state of mind that is characterised by vigour, dedication, and absorption” – Wilmar Schaufeli and colleagues.
  • Employee turnover rate?
  • Absenteeism rate?
  • Training effectiveness?
  • Staff assessment on HR service.
  • Manager’s assessment of induction program effectiveness.
  • Employees assessment of their development opportunities.
  • Will employees recommend the company – anonymous survey.
  • Ascertain employees rating of the performance management process
HR service delivery could be tracked and evaluated, subject to your company’s particular situation, by indicators such as ROI, employee satisfaction with benefits, the success of new hires, the effectiveness of training programs, performance management ratings of new hires and employee net promoter scores (eNPS).

Other indicators that could be applied at different stages of a company’s life could be:

  • Equality and diversity obligations – are they a high priority and being met?
  • Company policy knowledge – what percentage of employees are policy-trained?
  • Salary competitiveness – how does the company compete vs the market?
  • Diversity ratio – does the company meet this ratio?
  • Gender pay gap – is this being addressed, and how slow is the progress?
  • Number of diversity initiatives – how many valuable initiatives are progressing?

Different results requires different methodologies

Legacy processes, policies and behaviours are the number one detractor of talent in today’s Millennial and Gen Xer market. As HR is the first department to make contact with talent, it is vital that they are as cutting edge and forward-thinking as possible.

There are ground-breaking ways to measure HR effectiveness with the help of big data-related technology. Avoid mind-numbing, long and expensive annual staff surveys which are poorly answered. Use short “pulse” surveys that get a quick batch of questions asked of employees without overwhelming them. Your HR department will get much more honesty in replies instead of random answers filled in just to get through the ‘irritating questionnaire’ as soon as possible. The HR team will have a much truer assessment of staff sentiment and can be agile in their response.

Questionnaire terminals can be installed in meeting rooms or pause rooms for the purpose of asking employees simple questions. The answers are equally simple, in the form of selecting between one of four emoticons that best displays how they feel. This can be answered on a daily basis.

Uncomplicated, continuous feedback such as regular pulse surveys or questionnaire terminals enable HR to track changes as well as the effectiveness of initiatives launched in response to employee feedback.

With simple approaches, big data and quick, agile projects, HR can be the critical success factor in a company that wants to attract the stars of the marketplace talent pool.

If you enjoyed this article, you might also enjoy another finance topic: What shapes the HR agenda?

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