Investing in people by wayne cascio - Term Paper Example

Investing in People number Publish Human resources (HR) is pivotal to organizational success and is increasingly being considered as a strategic partner of the organizational system (Lockwood, 2006). The quality, availability and productivity of employees determine the productivity levels of an organization and the organization’s ability to meet its outlined goals and objectives. There is an increasing move to quantify HR performance in aiding the achievement of organizational aims and objectives by utilizing Key Performance Indicators (KPIs) (Lockwood, 2006).

In order to quantify the success of the HR program, KPIs are designed to measure how employees add economic value to the organization they work in. Given the varied nature of business operations in the modern economy, it takes repeated iterations in order to develop the right kind of measures that reveal the role of HR planning in adding value to the organization’s processes. This paper will look into employee absenteeism, employee separations and employee hiring effectiveness to determine how KPIs should be applied to measure economic value addition changes to organizational processes.

One of the biggest problems faced by organizations is that of employee absenteeism. When an employee is hired by an organization, the intent is to fulfill some processes in order to create economic value for the organization. In this case, absenteeism is seen as employee absence on days that are not covered by the regular employment program as off days. When an employee does not appear for work, the organization has to bear associated costs such as substitution costs to cover the absent employee’s functions and the loss of economic value since the substitute is nowhere as efficient at the absent employee’s job (Cascio & Boudreau, 2008).

These costs can be measured by utilizing KPIs to relate them to strategic HR planning. KPIs measuring these costs can reveal how much the organization stands to suffer and if it would be feasible to hire two people for the same job. Alternatively, KPI measurement could allow determining how such absenteeism could be reduced. The organization also stands to lose when employees separate from the organization such that they do not return. This phenomenon also known as employee turnover tends to add costs to the organization’s budget.

For example, any employee who leaves needs to be replaced using a complete hiring scheme which requires new investment in the hiring process. In addition, costs may be incurred at employee separation when the employee has to be paid his benefits at leaving. The longer the employee works somewhere, the greater the benefits accrued will be. Hence, when older employees leave an organization, the cost of turnover is greater due to more benefits being paid (Cascio & Boudreau, 2008). Measuring such costs is essential to HR strategic planning as the organization needs to realize what the affordable turnover rate should be.

In certain instances, organizations may be willing to accommodate higher turnover, especially if the employees are not that old or if the organization wants massive rehiring for better skilled workers. On the other hand, some organizations may require retaining their workers in order to avoid large costs. The decision to let go and rehire can only be taken when quantifiable and reliable inputs come in from KPIs. The staffing procedure of an organization can be measured for efficacy using measures that gauge the effectiveness of the employee hired.

Three effective measures for such success measurement are: ratio of employees in a group who are successful by organizational standards; average standard score of an employee group on a measure of job performance; dollar payoff to the organization for using a specific selection scheme. When an organization augments the quality of the hired employees, the overall economic value addition increases due to the factors listed above. A greater ratio of successful employees in an organization leads to greater chances of the employees meeting organizational aims and objectives and creating economic value.

Similarly, higher average standard scores reflect that employees are better attuned to job needs and require fewer inputs to provide better outputs. Lastly, the dollar payoff measurement reveals how much a group of employees adds economic value through its operations. It is obvious that the more efficient the employees, the greater the value addition will be. In conclusion, this paper related HR as a strategic partner to measuring KPIs by looking into how employee absenteeism, employee separation and employee hiring effectiveness can be measured to create greater economic value for the organization.

It was clearly shown that KPI measurement allows HR to align itself to organizational aims and objectives with greater ease and precision so that business success is enhanced. References Cascio, W. F., & Boudreau, J. W. (2008). Investing in People: Financial Impact of Human Resource Initiatives. FT Press. Lockwood, N. R. (2006). Maximizing Human Capital: Demonstrating HR Value with KPIs. SHRM Research Quarterly 3 , 1-10.