Ask any divisional/functional business leader about how they measure the effectiveness of their business and the answer will likely be uniform – how effectively it assists in the achievement of the business strategy. HR is no different! Combine this with the ever-increasing pressure on Australian businesses to be constantly doing more with less (and with labour and associated costs often in the highest expense categories) the requirement for HR to talk to the Board and shareholders in real commercial & tangible terms is more paramount today than ever before.
HR is not an exact science and HR professionals operate in an environment where so many internal and external factors create ambiguity. As such, it is critical to link the evaluation of HRM to a variety of criterion that most closely drive the strategy of an organisation. As with the development of organisation strategy, HR must work with all key stakeholders from across the organisation and define and subsequently link the HR strategy to the key business drivers from across the organisation.
In practice, this implies that there is no ‘one-size fits all’ set of metrics to assess and define HR effectiveness.
This ‘business drivers’ approach to assessing (and measuring) the effectiveness of HRM enables a multi-faceted performance indicator approach, and by working with your key internal stakeholders to define real & measurable metrics, HR can report more clearly and with higher impact about its effectiveness. In practice, this implies that there is no ‘one-size fits all’ set of metrics to assess and define HR effectiveness.
As an example, deliberatepractice has worked closely with an organisation whose parent company was highly conservative and demanded minimal deviation from the forecasted returns. As such, and given their industry, safety became a key business risk and ultimately a strategic imperative. Using the business drivers approach, HR’s effectiveness was clearly demonstrated by their ability to impact and reduce the key safety metrics via their activities. Similarly, another sales driven organisation with a much greater appetite for risk had headcount growth in line with the workforce plan as one of their key business drivers. This in turn provided HR with the strategic imperative to develop a set of measurements that were quite specifically focused on their ability to deliver the right people to the business at the right time.
Whilst it is easy to obtain a generic set of measurements that can assist in communicating HR’s performance, utilising a key business drivers approach to define effectiveness will see HR’s ability to underpin and deliver the business strategy more greatly enhanced.