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HR Evaluation
HR Evaluation
HHDNP Opatha
For a good evaluation, it is important to assess how well and how far employees of the
organisation have been utilised in achieving the organisational goals. A model of HRM was
presented in the first Chapter. In order to achieve the organisational goals, it is possible to
theorise that objectives, strategic goals and generic purpose of HRM need to be achieved
respectively through successful performance of specific HRM functions. Ideally each of the
HRM functions needs to be performed successfully and then objectives of HRM will be
achieved. Achievement of the objectives of HRM will lead to achievement of the strategic
goals of HRM that will lead to achievement of the generic purpose of HRM. If the generic
purpose of HRM, i.e. to generate and retain an appropriate and contented human force,
which gives the maximum individual contribution to organisational success and progress of
success is accomplished, the organisational goals can be achieved.
Ivancevich (1992, p. 772) writes: “There is an old motto in HRM that, if you can’t measure it, forget
it. The premise of this saying is that, if you can’t show what contribution you are making, there is little hope
that anyone will pay attention to your requests. Therefore, measurement in terms of evaluation is a high
priority need in any HRM unit. For that matter, showing a contribution in any unit in an enterprise should
be a top priority.” Thus, evaluating the success of the HRM function is a work that requires a
high priority by the HR Department of the organisation. With the increasing emphasis
placed on strategic contribution, competitiveness, and cost control, there has been a greater
need to justify the existence of human resource practices, activities, and programmes (Greer,
2001).
Dimensions of Evaluation
There are three aspects or dimensions of evaluation of HRM. First dimension focuses on
evaluating the quality and the quantity of each HRM function. Ideally each HRM
function is to be performed systematically and formally. Under this dimension, central
question is whether each function has been performed in the appropriate way. Second
dimension is attainment of the HRM objectives and strategic goals. This dimension focuses
on evaluating the degree to which the HRM objectives and strategic goals have been
achieved. Third dimension is evaluation of the department for human resources in the
organisation. It focuses on how well and how far the HR Department of the
organisation has performed. For evaluation, there must be a period that may be one year
or six months or four months. Doing an evaluation is important for at least one time per
year.
What are the criteria for evaluation under each dimension? Basically evaluation criteria are of
two types, i.e. subjective criteria and objective criteria. Managers’ opinion of HR Department
success is a subjective criterion. Average time taken to fill job vacancies is an objective
criterion. Exhibit 21-11 presents some useful criteria for evaluating the efficiency and
effectiveness of HRM by function. As per the Figure it is possible to have objective criteria
and subjective criteria as well for each function of HRM. Exhibit 21-12 presents some useful
criteria for evaluating the efficiency and effectiveness of HRM by objectives and strategic
goals of HRM. By using several objective and subjective criteria it is possible to evaluate the
degree of achievement of the objectives and strategic objectives of HRM. Some useful
criteria for evaluating the efficiency and effectiveness of the HR Department are given in
Exhibit 21-13. Evaluation done under the three dimensions will be more comprehensive
though it is more rigorous and time-consuming. As benefits of evaluation exceed costs of
evaluation, a sufficient amount of evaluation of HRM needs to be done.
Exhibit 21-11 Criteria for Evaluation of Efficiency and Effectiveness of HRM
Functions
Function Objective Criteria Subjective Criteria
Job Design Number of complaints about Employee satisfaction about
job design behavioural elements of job
design
A note from Professor Dr.HHDNP Opatha
evaluated formally
Number of training
programmes implemented per
year
Career Management Number of career Rating of quality of career
management programmes management perceived by
developed and implemented employees
Pay Management Percentage of jobs evaluated Top and Departmental
as per point method Managers’ satisfaction about
pay management
Complaints about wrong
calculations of pays Employees’ satisfaction about
pay management
Number of delays in paying
Number of incentive
programmes implemented
Percentage of workforce
whose merit pay is tied to
performance
Percentage of difference in
incentive payments between a
poor employee and an
excellent employee
Employee Movement Percentage of jobs filled from Top and Departmental
A note from Professor Dr.HHDNP Opatha
Cost of accidents
Discipline Management Number of rule violations Managers’ rating of quality of
management of employee
Percentage of employees who discipline
have not violated a single rule
of discipline Employees’/trade unions’
rating of quality of
Number of disciplinary cases management of employee
settled discipline
Motivate employees and Percentage of employees who Average survey score of job
enhance job satisfaction are enthusiastic to work motivation and satisfaction
A note from Professor Dr.HHDNP Opatha
Control the cost of employees Average rewards cost per Managerial perception of
employee controlling the employee cost
Number of hours of
development programmes for
employees
Increase quality of work life Number of innovations Average survey score of
quality of work life (the
Number of suggestions made summated rating received on
a 10-item, 5-point Likert
Percentage of employees scale)
making suggestions
Ensure legal compliance Number of suits against the Average survey score of legal
organisation compliance (the summated
rating received on a 10-item,
Number of violations of 5-point Likert scale)
labour law requirements
Perception of the legality of
Cost of litigation per the HRM practices
employee
HR Department cost per employee The CEO’s rating of the roles played by the
HR Department
HR Scorecard
Does HRM contribute to achievement of strategic goals of the organisation? HR scorecard
is an evaluative technique that attempts to get a more quantitative answer for the question. It
is a framework that links HRM with strategic objectives and shows the causal link between
HRM and strategic objectives in a quantitative way. Management ultimately judges the HR
function based on whether it creates value for the organisation, where “value creation”
means contributing in a measurable way to achieving the organisation’s strategic goals
(Dessler, 2005). Hence HR scorecard is an evaluative approach showing how HRM creates
value for the organisation.
The HR Scorecard derives from works of Robert Kaplan and David P. Norton on balanced
scorecard perspective. Greer (2001, p. 307) writes: “Kaplan and Norton explain that satisfaction is
a prerequisite for improvements in productivity, quality, responsiveness, and customer service. They note that
the relationship with customer service is straightforward, as satisfied employees tend to have more satisfied
customers. They also endorse annual surveys of employee satisfaction or monthly rolling surveys of samples of
the workforce. Similarly, they endorse the measurement of employee retention for its importance in preserving
the organization’s investments in intellectual capital.” This explanation presents two major criteria
for HRM evaluation, i.e. job satisfaction and employee retention. Dessler (2005, p. 87)
defines: “The HR Scorecard is a concise measurement system. It shows the quantitative standards, or
“metrics” the firm uses to measure HR activities, and to measure the employee behaviours resulting from these
activities, and to measure the strategically relevant organizational outcomes of those employee behaviours. In so
doing, it highlights, in a concise but comprehensive way, the causal link between the HR activities, and the
emergent employee behaviours, and the resulting firmwide strategic outcomes and performance.” Dessler’s
definition stresses that the HR Scorecard is a concise measurement system highlighting the
causal link between the HR activities, and the emergent employee behaviours, and the
resulting firmwide strategic outcomes and performance. Also he has used a term called HRM
metrics. According to him, metrics are statistics used to measure the activities and results
A note from Professor Dr.HHDNP Opatha
involved in a field and HRM metrics are a set of quantitative performance measures HR
managers use to assess their operations.
Functional HRM metrics are defined as statistics used to measure the degree of
successful performance of functions of HRM. They focus on measuring the degree of
systematic usage of each of the HRM functions. They attempt to measure intensity of
each HRM function being applied in the organisation. Measures called criteria which
are given in Exhibit 21-11 are examples of functional HRM metrics.
Number of accidents 11
Percentage of employees who have not violated a 57%
single rule of discipline
Table 21-4 Values of the Metrics (Years 2005, 2006 and 2007)
Types of Metrics Specific Metric 2005 2006 2007
Strategic Percentage of customer excellent 70% 80% 90%
rating
Percentage increase of the annual 30% 38% 45%
profit
Strategic HRM Competency Inventory Index 3.4 3.9 4.2
Job Satisfaction Index 3.6 3.9 4.5
Job Involvement Index 3.7 4.4 4.7
Organisational Commitment Index 3.6 4.0 4.5
Organisational Citizenship Index 2.7 2.9 3.5
Rate of Tardiness 40% 30% 18%
Rate of Absenteeism 30% 28% 24%
Rate of Employee Turnover 27% 23% 18%
% Increase of Sales Value per 20% 32% 45%
A note from Professor Dr.HHDNP Opatha
Employee
% Increase of Profits per Employee 20% 40% 50%
Number of New Customers per 30 45 50
Employee
Overall Employee Performance 67% 75% 85%
Evaluation Score
Functional HRM Overall Intensity Index of HRM 3.8 4.4 4.8
Practices
Number of complaints about job 10 06 02
design
Number of jobs covered by job 50% 70% 100%
description and job specification as a
percentage
Number of job vacancies not 50% 20% 10%
forecasted
Ratio of qualified recruits to 0.40 .60 .70
unqualified recruits
Percentage of employees selected 40% 70% 100%
based on validated selection methods
Complaints about laps of the 10 07 03
employment appointments
Percentage of employees inducted 50% 80% 100%
formally
Percentage of employees whose 70% 90% 100%
performance is evaluated formally
Number of accidents 07 04 02
Percentage of employees who have 68% 75% 90%
not violated a single rule of
discipline
As per the Table it is possible to see that there are considerable changes (positive)
with regard to each metric. It indicates that the hotel took a very serious effort to
A note from Professor Dr.HHDNP Opatha
improve its HRM resulting positive results under the functional HRM metrics and the
strategic HRM metrics. Then how to determine the linkages? Correlation analysis will
show the relationships. For example, take competency index (a strategic HRM metric)
and number of hours of training received by employees per year (a functional HRM
metric). Correlation coefficient will be .98 showing that both variables are very highly
significant and positively related. Then, consider competency index (a strategic HRM
metric) and percentage of customer excellent rating (a strategic metric). Correlation
coefficient will be .99 indicating a very high significant positive relationship. In the
same way a meaningful statistical analysis can be done to show linkages between
functional HRM metrics and strategic HRM metrics and linkages between strategic
HRM metrics and strategic metrics. Thus it is possible to ascertain how HRM
contributes to business strategic needs quantitatively.