HR Metrics and Business Performance
The connection between human resource management and the total effectiveness of a company is a constant subject for discussion. This problem is especially critical for HR professionals from large corporations, where all metrics of the productivity matter. Numerous research on this topic prove its controversy and increase interest in finding a way to measure and evaluate the efficiency of HR practice.
First of all, Guest’s article (2011, p. 3) claims that there is not enough research that would demonstrate the real correlation between HR management and organizational performance. There is a serious lack of concepts that would help to find the right metrics. However, the article provides examples of empirical studies that indicated the link between HRM and improved operating results. For example, some studies showed that introducing HR practices resulted in higher commitment and increased sophistication of workers. Some of these practices used models from organizational psychology. Besides, it was observed that employees responded more to the fact of implementation of those practices than to their primary goals, it encouraged them and led to the enhanced performance. Hence, the presence of HR practices and training could have a positive impact on the company.
The analysis of a company’s business processes is the key to the estimation and increase of productivity. As for HR management, it is hard to define the exact tools for measuring progress. Nevertheless, big data can give answers to many questions, depending on the context. Levenson (2013, p. 23) offers several modern strategies useful for collecting data which shows the quality of work: monitoring call center’s work, converting all information concerning the results of work in electronic format, social media platforms, regular online surveys analyzing employee’s feedback, and “pulse” surveys for checking their attitudes.
An HR practitioner might be asking what other aspects of business processes should be assessed in order to make a long-term strategy. One approach was suggested by Coe and Letza (2014, p. 64) who developed a “balanced scorecard” tool that connects four aspects that comprise performance: financial perspective, internal business perspective, innovation, learning perspective, and customer perspective. It can be used to develop a strategy for the whole company or only its department. In addition, Rousseau and Barends (2011, p. 224) offer a framework of an evidence-based HR practice which means actively managing professional decisions and includes using organizational data, professional judgment, and published research.
Armstrong (2006, p. 38) offers the model of human capital measurement and two ways of defining it. One suggests that it is about “finding correlations and, ideally, causation, between different sets of HR data, using statistical techniques.” Another is focused on analyzing the experience of employees. Armstrong (2006, p. 38) explains the necessity of this type of measurement by calling it a “key element of the market worth of a company.” Moreover, he summarizes existing approaches to measurement, such as counting the human capital index, which includes total rewards, the flexibility of the workforce, recruiting excellence, and communication integrity. Others encompass the Sears Roebuck model (the engagement model), the organizational performance model, and the human capital monitor by Mayo focused on counting human asset worth. Finally, he provides the main measurement elements, such as basic workforce data, performance data, perceptual data, and a list of non-financial variables.
To sum up, it is a challenge for an HR professional to evaluate the quality of performance and connect it with the efficiency of a company. Researchers also struggle with finding the best framework to analyze the issue. However, modern tools, which are mostly based on constant monitoring of information and collecting data for the specific business, offer an opportunity to increase performance figures through improving the HRM practice.
Armstrong, M 2006, A handbook of human resource management practice, Kogan Page, London.
Coe, N & Letza, S 2014, ‘Two decades of the balanced scorecard: a review of developments’, Poznan University of Economics Review, vol. 13, no. 1, pp. 63-75.
Guest, D. E 2011, ‘Human resource management and performance: still searching for some answers’, Human Resource Management Journal, vol. 21, no. 1, pp. 3-13.
Levenson, A 2013, ‘The promise of big data for HR’, People & Strategy, vol. 36, no. 4, pp. 22-26.
Rousseau, D & Barends, E 2011, ‘Becoming an evidence-based HR practitioner’, Human Resources Management Journal, vol. 21, no. 3, pp. 221-235.