ASSESSING HR EFFECTIVENESS

Productivity, quality, service, absenteeism, and turnover are all measurable—and they are related to the way activities are performed in an organization. Yet, there is a long-standing myth that one cannot really measure what the HR function does.

That myth has hurt HR departments in some cases, because it suggests that any value added by HR efforts is somehow “mystical” or “magical.” None of that is true;

HR like marketing, legal, or finance must be evaluated based on the value it adds to the organization. Defining and measuring HR effectiveness is not as straightforward as it might be in some more easily quantifiable areas, but it can be done.

Effectiveness for organizations is often defined as the extent to which goals have been met. 

Efficiency is the degree to which operations are done in an economical manner.

Effectiveness=The extent to which goals have been met.

Efficiency=The degree to which operations are done in an economical manner.

Efficiency can also be thought of as cost per unit of output. To be effective, organizations must be able to achieve their goals, but must reach them using limited resources efficiently. For example, providing on-site child care for all employees might help an employer to achieve an effectiveness goal of reducing turnover, but it could be too expensive (reducing efficiency of expenditures) for that employer to implement. Other departments, managers, and employees are the main “customers” for HR services. If those services are lacking, too expensive, or of poor quality, then the organization may have to consider outsourcing some HR activities.

The HR department is an organization within an organization. What it does (or does not do) affects the entire organizational system. To function effectively, HR needs a clear vision of what it does and whom it serves. That perspective should unify the HR staff and provide a basis for making decisions. HR can position itself as a partner in an organization, but only by demonstrating to the rest of the organization that there are real links between what HR activities contribute and organizational results. To demonstrate to the rest of the organization that the HR unit is a partner with a positive influence on the bottom line of the business, HR professionals must be prepared to measure the results of HR activities. Then the HR unit must communicate that information to the rest of the organization.

Measurement is a key to demonstrating the success of the HR activities. Figure shows a general approach to evaluating the efficiency and effectiveness of HR activities.

Overview of the Evaluation Process for HR