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Human Resource - Return On Investment

Human Resource - Return On Investment.

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Human Resource - Return On Investment

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  1. HumanResource - ReturnOn Investment

  2. The ROI measures the financial return on an investment made, or it can be applied to a business measuring the performance of the firm by assessing the net profit compared with the overall net worth of the company. In more recent years, the ROI concept has been adopted by other industries to evaluate projects and programs on a smaller scale. Importance of ROI to HR Using quantifiable metrics improves the credibility of HR as a profession, and allows upper management to identify specific, measurable ways that HR services benefit the organization. It's no longer enough to state that a certain program is believed to be beneficial -- you need to be able to prove the worth of your actions. 

  3. Examples of ROI in HR HR can use ROI metrics to analyze the value of almost any of its services, as long as a dollar cost can be determined. For example, if HR introduces a new health and safety program, its effectiveness can be measured by the associated reduction in costs of work-related injuries. The value of a new employee orientation program can be measured in terms of an ROI by assessing the costs saved by correlated reductions in turnover. Diversity programs, HR information systems, training, development and mentoring initiatives are additional examples of HR programs that can be measured by the ROI calculation.

  4. Return On Investment(ROI)  Benefit/CostRatio BCR ProgramBenefits ProgramCosts ROI (%) Benefit Cost x100 Cost

  5. Challenges in CalculatingROI IdentifyingCosts QuantifyingCosts IdentifyingBenefits Quantifying Benefits

  6. BasicElements ofMeasurement Cost Time Quality Satisfaction (correlated withproductivity) Performance vs.Productivity Effects on business priority (i.e.,revenue) TTP(Time-to-productivity)

  7. Factors Measured by Fortune500 • Companies • Turnovercosts • Employee replacementcosts • Economic value of employeebehaviors (absenteeism, smoking,etc) • Economic benefitsof: • developing a superior selectiontest • various traininglevels • additionalrecruiting • increasing job satisfaction, organizational commitment, or similar jobattitudes • high, medium & low performance on aparticular job

  8. General List of HumanCapital SuccessMetrics Average change in performance-appraisal ratingovertime Climatesurveys Customercomplaints/praise Customersatisfaction/loyalty Employee commitment surveyscores Employee competencygrowth Employee development/advancementopportunities Employee job involvement surveyscores Employee satisfaction withadvancement Employee turnover by performance level andby controllability Extent of cross-functionalteamwork Extent of organizationallearning Extent of understanding of the firm’s competitivestrategy and operationalgoals

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