Measuring and Improving HR Effectiveness in Contemporary Organizations

1. Week 12Chapter 18 Contemporary Issues of HRM

2. Learning objectives • Understand the reasons why many companies are trying to measure HR • Explain the approaches to evaluating the effectiveness of HR practices • Discuss the issues related to measuring and evaluating the HR function • Discuss how outsourcing HR activities may improve service delivery efficiency and effectiveness • Relate how process re-engineering is used to review and redesign HR practices • Consider future directions for the HR function

3. Key definitions • HR metrics: measurements for human performance that enable effective decisions to be made regarding the HR function and value creation in organisations • Corporate governance: how decisions are made about the deployment of an organisation’s resources and the resolution of conflicts among its stakeholders • Corporate social responsibility or corporate sustainability:the continuing, voluntary commitment by companies to establish and maintain a systematic approach to the management of environmental, social, economic and governance issues • Triple bottom line: the combination of economic, social and environmental performance indicators for an organisation

4. Sustainability report • A company report presenting information on the economic, environmental and social dimensions of its activities, products and services • Synonymous with social report, citizenship report, triple bottom line report, corporate social responsibility report

5. Measuring corporate sustainability • Negative screening: • companies are assessed as non-‘socially responsible investments’ (SRIs) for a variety of reasons, including their environmental records, their products or their company policies • Positive screening: • companies are judged SRIs based on factors such as a good environmental or social record • Best-of-sector approach: • making investments by selecting the ‘least-worst’ performer in that industry

6. Categories of HR activities • Transactional activities: • day-to-day transactions such as pay administration, maintaining human resource information systems and employee services • Traditional activities: • include performance management, learning, recruiting, selection, compensation and industrial relations • Transformational activities: • include knowledge management, management development, cultural change, and strategic redirection and renewal

7. Figure 18.1 Categories of HR activities

8. Adding value to the firm using the HR function Increase efforts in traditional and transformational HR activities by: • developing a strategy for the HR function • assessing the current effectiveness of the HR function • redesigning, reengineering or outsourcing HR processes to improve efficiency and effectiveness

9. Strategic management of the HRM function HR professionals need to adopt a system of metrics, or measurements, for human performance that will enable effective decisions to be made regarding the function and value creation in organisations

10. Effective measurement of the HR function provides benefits • Marketing the HR function • Accountability • Objective not subjective/intuitive measures • Elevating the HR function to an equal footing with other functions • Enables evaluating the HR function’s contribution to strategy implementation • A valid and systematic justification for resource allocation

11. Approaches for evaluating HR effectiveness • Audit approach: • involves a review of customer satisfaction or key indicators (e.g. turnover rate, average days to fill a position) related to an HR activity (e.g. staffing) • Analytic approach: • involves determining the impact of, or the financial costs and benefits of, a program or practice continued

12. Approaches for evaluating HR effectiveness • Types of cost–benefit analyses: • human resource accounting • utility analysis • Analytic tools include: • HR activity index • balanced scorecard • causal chain analysis (employee–customer–profit chain)

13. Human capital management • A management approach that aims to capture all the efforts related to people in an organisation. While human capital management includes HRM, it is intended to serve as more than a new label for the HR function • Focuses on measuring the effectiveness of HR activities, with an emphasis on enhancing the fit between those activities and organisational strategic goals

14. Figure 18.2 Improving HR effectiveness

15. Figure 18.3 Old and new structures for the HR organisation

16. Improving HR effectiveness through process redesign • Re-engineering: • review and redesign of work processes to make them more efficient and improve the quality of the end product or service • Involves four steps: • identify the process to be re-engineered • understand the process • redesign the process • implement the new process

17. Figure 18.4 The re-engineering process

18. Improving HR effectiveness through new technologies • New technologies are current applications of knowledge, procedures and equipment that have not been used previously • Technology requires companies to have appropriately skilled and motivated people and streamlined work processes • There is evidence that new technology is related to improvements in productivity • Improvements in productivity have been credited largely to downsizing, restructuring and re-engineering • In some cases, technology has replaced human capital

19. Summary • The roles required of the HR function have changed as people have become recognised as a true source of competitive advantage • Strategic management of the HR function will determine whether HR will transform itself into a true strategic partner or simply disappear • The HR function must deliver transactional, traditional and transformational services and activities to the firm, and it must be both efficient and effective continued

20. Summary • Restructuring, re-engineering and outsourcing may be appropriate in some circumstances, but require careful planning, attention to detail in implementation and ongoing evaluation • Multiple performance outcomes for the HR function should be considered, including financial terms and social terms • New technology has allowed companies to find more effective, not simply more efficient, ways of operating to improve productivity