There is ample evidence that HR can and does make a difference in organisations. The recession of the last two years caused HR to come of age due to the critical role it fulfilled during this difficult period. However, the challenge for many HR professionals still remains that of providing continuous evidence that demonstrates its added-value contribution to the business in more tangible and quantifiable ways, whatever the economic climate. If HR wants to have a seat at the strategic table, then it must consistently deliver the bottom-line data on human capital management necessary to support an enterprise-level strategic role.

The changing role of HR from an administrative, back-office support role to a strategic one means that the way HR’s value to the business is measured must change from an over-reliance on qualitative, perception-based HR results to measuring quantitative performance. After all, when it comes to the boardroom, it is the numbers that senior management would want to see. As such, HR must have a good grasp and thorough understanding of metrics, measurement, statistics, analysis of numbers and their relationships.

Unfortunately however, very often HR professionals limit themselves in the use of such tools claiming that it is often difficult and imprecise to produce accurate figures around people, hence justifying themselves for not giving metrics their due importance. Wendy Lundgaard, in her article “What gets measured gets done”, in the HR monthly magazine of April 2009, stated that the same argument can be also made by other functions such as marketing and IT and yet this does not stop them from presenting their potentially less-than-perfect measurement of strategies.

Bruno Cassar, Group Head of Human Resources, FIMBank plc commented: “Unfortunately, human capital is still one of the least measured and analysed investments. This is despite the fact that at least 60 to 70 per cent of costs in organisations are people-related. The reason often cited by many HR professionals is that HR cannot be measured or is too difficult to measure as it deals with human beings. And while it is not easy, it is crucial that the bottom-line impact of HR and the effectiveness of its programmes are measured, otherwise senior management is led to believe that HR is not adding value to the business in terms of increased profitability and sales.”

Hence, measuring and evaluating is crucial in HR if it wants to demonstrate its added-value capability to the business. By having a sound HR metrics programme, HR can make business decisions that are based on cold facts, rather than on “gut feeling” and use these figures to back up business cases and request for resources. However, in order for HR to be able to do this, it needs to move away from presenting processing volumes of information that no one besides the unit manager cares about or needs to know about, such as for example the number of training courses conducted during a training period. This is because this kind of data does not demonstrate how HR is being effective in attracting and developing the capability of its workforce, or how the programme or activity supports the overall strategy of the business. For this reason, HR must move away from measuring inputs to measuring outcomes, which would ultimately present a stronger probability in demonstrating in tangible ways, and how HR has really added value to the business. This is because, in doing so HR would be measuring costs, lost productivity and opportunity rather than measuring the level of contribution. Hence, rather than counting for example the number of candidates interviewed (an input), HR should measure the outcomes or the results such as the time to fill that position and/or the cost to fill that position. In this regard, Cassar said: “If HR wants to drive better business performance it must focus on measuring the outcomes and not just the inputs. It is useless to focus solely on the latter, such as the number of training hours carried out, because they will not tell you anything on how HR has impacted on the wider business performance. It is important that metrics such as Employee Opinion Surveys, Performance Appraisal and Employee Turnover are used together with on-going, open and frank communication with the employees so that management identifies those areas which are critical and where improvement is needed.

To conclude, one can argue that HR’s value added can indeed be tangible because it plays a major role in helping businesses making use of their human resources as well as in unlocking the potential of its employees. As Lundgaard states, unless HR is able to measure the effectiveness of its programmes, both the managers and the HR professionals themselves would not be able to distinguish between a fad and a valid programme. Hence, it is critical that HR evaluates and measures ideally in financial terms and makes use of specific, objective language of numbers wherever it is possible.

Ms Camilleri is a researcher

at the Foundation for

Human Resources Development