Strategy People Performance - Case Study Example

HR Analytics For human resources to succeed and sustain its position in management and business, it has to adopt an approach that is different from and beyond a support function, to a more value-adding function and as a profitable relationship with other management functions. This can be possible when its outcomes and impact is measured, which can further showcase its value; these are achieved through HR measurement and analytics. Human resources analytics allows transformation of human resource initiatives as well as logic into precise and meticulous views, which may be eventually used to assess the effectiveness of HR strategies. Analytics mainly focus on the trend with respect to performance, results, behaviour, growth and development, which further draws management’s attention to specific areas unlike reporting tools that only focus or gather historic data and performance. Contemporary businesses and management lay strong emphasis on measurement of all aspects related to the business and management. Lundgaard (2009) emphasizes the significance of HR analytics in enabling the establishment of HR as a strategic organisational function and credits this to the high competition in business environment which is further pressurizing achievement of greater performance, productivity and profits for business/organisational sustenance. For this, firstly HR initiatives must be made quantifiable through appropriate measures. Lundgaard (2009) suggests a six-domain framework that identifies six key areas for HR: staffing, training/development, appraisal, rewards, organisational governance, and communication. Obtaining HR analytics based on these six core areas makes measuring HR function feasible. Application of this framework to HR initiatives still depends upon the measurability of these areas, for which Hunter et al (2005) have suggested the Balanced Score Card (BSC) system. First proposed by Kaplan and Norton, this framework allows linking strategy to value creating processes. As stated by Kaplan and Norton (1996; p.2), ‘the BSC translates an organisation’s mission and strategy into a comprehensive set of performance measures that provides the framework for a strategic measurement and management system.’ The BSC measures organisational performance across four balanced perspectives: financial, customers, internal business processes, and learning and growth. It helps in capturing the critical value-creation activities of skilled and motivated employees. All activities that an organisation needs to perform in order to achieve its goal can be categorized according to these perspectives, which include categorization of all initiatives by the HR department into these four core areas. The BSC helps in assessing the total business value derived from particular department. To assess the total business value of HR initiatives, they must be made or converted to measurable objectives (Hatry, 2006). For measurement, Lawler and Boudreau (2009) advocate the use of efficiency, effectiveness and impact for measuring HR programmes, where efficiency refers to resources used by HR programmes such as cost-per-hire; effectiveness refers to changes produced by HR programmes such as learning from training; and impact refers to business or strategic value created by the programme such as higher sales from better-trained product developers or sales people (p.61). All three, efficiency, effectiveness and impact are equally important to assess the actual weight of any activity/programme. For instance, measuring the monthly/daily sales without measuring customer satisfaction will be of no use for the business in long run. Similarly, paying out more incentives to staff for over performance without assessing employee satisfaction may or may not yield any improvement in employee satisfaction. Efficiency and effectiveness of HR initiatives can be measured by assigning specific measurable objectives to each initiative. Paladino (2007) emphasized Managing by Objectives (MBO) as an effective tool to enhance organisational efficiency at all levels, and also a result-oriented managerial approach (Scott; 1980). Activities and measures linked to organisational goals form the base for departmental /functional performance. For this, intended outcomes of these objectives need to be translated to measurable outcome indicators. The outcome indicators should be able to identify specific numerical measurement that indicates progress towards an outcome. Integrating Hatry’s (2006) criteria for selecting outcome indicators/criteria for each of these objectives of the four aspects of the BSC can yield an apt and comprehensive measurement system. Based on one of the reasons outlined by Halachmi (2005),’ if they know you intend to measure it, they will get it done,’ MBO is effective in translating organisational goals to individual measurable objectives at each level and function based on the responsibility. Creating objective accountability also helps in setting clear goals. For example, learning and growth are the common goals of few HR initiatives. Activities related to this goal can be assigned to every department where these initiatives are applied with performance indicators in order to ensure this goal is achieved. Activities may include training and skill enhancement to the learning and development team of HR department; identifying and promoting eligible employees to higher roles in every department; motivational activities such as rewards and recognition programmes in every department; development of appropriate communication tools to share organisational information appropriately, to specific team in HR communications; management of attrition in every department; safety and security of workplace to the administrative functions etc of HR department. However, the more important aspect is performance assessment of each of these activities in every department/function. For this, the objectives will have to be assessed on specific outcome indicators such as number of promotions, number of attritions and retentions, process performance and quality etc. For other administrative and logistics-related HR activities, regular surveys need to be conducted and measured against the previously set targets and objectives. Agreeing on specific targets and/or goals is the key to successful implementation of MBO. HR managers can set goals for their teams and also for individuals. This process improves communication within the teams and with individuals; enhances knowledge through information sharing; and also surfaces concerns and hidden issues. Another effective method for measuring the effectiveness of training and developmental activities is Kirkpatrick’s (1994) four-level training evaluation model, which evaluates the training in four levels. At reaction level, learners’ reaction to the learning process is assessed. At learning level, the extent of knowledge and skills are assessed. At behaviour level, their capability to perform the intended job/role is assessed. Finally, results of the training in terms of financial, efficiency, and attitude are assessed. This assessment can also be integrated into the BSC format to assess the training and developmental activities’ financial impact through monetary returns; impact on customers through customer satisfaction, retention, and growth of customer base; impact on processes related to productivity or efficiency enhancement in production, service, and/or supply chain; and learning by measuring the extent of change, innovation, and growth of employees. Lawler, Levenson and Boudreau (2004) credit most of HR initiatives’ lack of measurability and data base to its absence in most of the strategic decision making at business levels. In order for HR to be included in high-level business processes like strategic decision making, HR would require right metrics and analytic models that can enhance value added by HR initiatives. Therefore, use of appropriate metrics to measure HR initiatives is seen as a key requirement for establishing strategic importance of HR. on similar lines, Phoenix, Craver and Desai (2007) assert that people costs, although the largest, are least measured compared to other organisational costs; however, people-related performance numbers such as talent development and employee commitment can be of great value to organisations status and progress because contemporary organisations run with the notion that ‘people’ form the core ingredients of any organisation. Strategic integration of HR contributions happen at senior management levels; rationalized information related to the value-add of HR will help the senior management teams to highlight HR as a core function in organisational success. Through these measures, HR can establish and highlight the impact of HR practices on organisational growth and development. In lieu of this, HR analytics when implemented and accumulated in the right and accurate manner, can yield information that can be used to develop strategies that can be used to further talent and commitment. Phoenix et al state that ‘workforce analytics is a systematic method of tracking, measuring, analyzing, and assessing business performance for the purpose of making more informed strategic decisions, improving financial outcomes and monitoring goals’(2007, p.16). To achieve this, involvement by leadership, HR department, technology, finance, managers and employees becomes imperative in order to accumulate accurate HR analytics as well as produce the right outcome from HR initiatives. Efficiency and effectiveness of HR practices and programmes have a direct impact on the organisational performance, which can be measured through metrics such as employee performance, revenue and profits, employee turnover and recruitment rates, new businesses, growth of the company in terms of number of employees etc. Factors such as process reengineering, organisational restructuring, merger and acquisitions, organisational change etc should be considered while assessing HR analytics and performance. In multinational companies, factors such as region, size, customer base, tenure of employees etc would impact workforce analytics, especially if the HR initiatives are incongruent with local requirements. Appropriate HR analytics provide critical insights, which may be used by organisations to improve their performance in terms of reducing costs by hiring the right candidates, applying appropriate training and developmental activities, appropriate reward management etc. HR information systems provide the core database for retrieving information related to quantity and quality of organisation’s workforce. Information obtained from HR analytics may be applied in HR planning, development and usage of information and technology for HRM programmes, recruitment, selection, and management of employee relations. This information also contains data that can be used to design reward management programmes (De Cieri & Kramar, 2003). Besides these, information from HR analytics may be used to measure employee attrition and the resulting loss for the organisation; employee stability and retention rates; and effectiveness of recruitment and selection procedures (Nankervis, Compton & Morrissey, 2009). Human resource initiatives can be assessed for effectiveness only when they are a part of an integrated strategy; although these initiatives may be measured, but without their integration with overall strategy, they will not be of great value to the organisation (Secord, 2003). For example, when individual leaders come up with specific initiatives to motivate their teams, these initiatives will motivate the teams for a short time; with no credibility on larger platform for the leader as well as the followers, they tend to lose interest in taking the initiatives forward. More often, it becomes necessary for managers to develop appropriate performance evaluation system to measure their staff’s performance; at the same time it is also important to measure the effectiveness of their initiatives. Organisations collect data related to various aspects of HR management, which is further used to assess performance of HR function. To measure efficiency of HR practices, few organisations collect information related to hiring costs, recruitment and selection time, number of training hours for brining new hires on board, HR costs etc. Effectiveness measures are usually obtained from translation of HR practices to measurable objectives such as productivity increase, quality of work, customer satisfaction, number of employee complaints, employee satisfaction indices etc. Employees’ voluntary turnover numbers are considered as significant indicators of effectiveness of HR initiatives. Impact of HR initiatives can be seen in the volume or amount of business growth seen in specific time period; number of internal promotions versus external hiring; indicators from surveys conducted to assess employee motivation etc. Efficiency, effectiveness and impact of HR initiatives depend on certain key factors such as collaboration and coordination between personnel of HR department and other departments. Successful adoption and implementation of HR initiatives partly depends upon the consensus and understanding between departmental heads. These initiatives must have strong financial support; in addition, support from HR sub functions such as training and development, policy and practices, hiring, HR business partners are critical. Involvement and commitment by senior management teams will have an impact on the type of HR initiatives and also in preparing leadership teams to drive these initiatives. In conclusion, HR analytics provides surplus of data related to HR which are used by organisations to enhance value of human capital by measuring the effectiveness, efficiency and impact of HR activities such as recruitment and selection, workforce planning, training and development, employee retention, reward and performance management. HR analytics provide data and facts which can be used by organisations for critical decision making related to human capital management. Further, this information allows organisations to make decisions related to cost reduction, workforce reduction, modifying talent, introduce innovation etc, all of which can add value to organisational strategies. References De Cieri, H and Kramar, R. 2003. Human Resource Management in Australia: Strategy, people, performance. Sydney: McGraw-Hill Australia. Halachmi, A. 2005. Performance measurement is only one way of managing performance. International Journal of Productivity and Performance Management. Vol 54(7). pp.502-516. Hatry, P.H. 2006. What Outcomes should be tracked? In Performance measurement: Getting results. 2nd ed. Washington D.C: Urban Institute Press. (Ch.5; pp:47-58) Hunter, I, Saunders, J, Boroughs, A and Constance, S. 2005. The HR BP and Technology. In HR business partners. England: Gower Publishing Limited. (Ch.7, pp: 67-71). Kaplan, R.S and Norton, D.P. 1996. The balanced scorecard: translating strategy into action. U.S.A: Harvard Business Press. Kirkpatrick, D. L. 1994. Evaluating Training Programs. San Francisco: Berrett-Koehler Publishers, Inc. Lawler, E.E III, Levenson, A and Boudreau, J.W. 2004. HR Metrics and Analytics: Use and Impact. Human Resource Planning. Vol.27 (4); pp:27-35. Lawler, E.E III and Boudreau, J.W. 2009. Achieving excellence in human resources management: An assessment of human resource functions. California: Stanford University Press. Lundgaaard, W. 2009. What gets measured gets done. Australian Human Resources Institute. HR Monthly, April 2009; pp:28-31. Available from, http://www.ahri.com.au/MMSdocuments/comms/hrm_magazine/hrm_2009/hrm_2009_04_what_gets_measured.pdf (Accessed 8 May 2011). Nankervis, A, Compton, R and Morrissey, W. 2009. Effective recruitment and selection practices. 5th ed. Australia: CCH Australia Limited. ISBN: 9781921485770. Phoenix, T, Craver, B and Desai, A.H. 2007. Workforce Analytics: Driving talent management strategies through workforce data. Deloitte consulting LLP. IHRIM. 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