Human Resource

Evaluation
Shreeya Chourasia & Hasitha Rupakula
INDEX

Human Resource Evaluation: Definition and Overview

HRM and Firm Performance

Rationale for HR Evaluation

Measures of HRM Performance

Approaches to HR Evaluation

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HR Evaluation: Definition and Overview

Human Resource evaluation refers to determining the value of HR

for achieving organisational growth.

Bratton defines HRM evaluation as the procedures and process that

measure, evaluate and communicate the value added of human
resource management practice to the organisation.

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Benefits of HR Evaluation

▪ The promotion of change by identifying strengths and

weaknesses;
▪ An assessment of the performance of HR function;
▪ A demonstration of bottom-line contribution of HR
function;
▪ A demonstration of the functions of role in the
achievement of organisational goals.

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Questions to Ask before HR Evaluation

What should be evaluated-

▪ Overall HR effectiveness or only the effectiveness of HR function?
▪ HR activities & practices, or the impact of HR policies on the org?
▪ HR practices, HR department or HR professionals?
What should be the level of analysis in HRM evaluation within the
organisation structure?
What criteria should be used to assess the effectiveness of the HR
function/department?

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Overview of HR Evaluation

Scope

HR Evaluation Focus

Strategic Linkage

Level of Analysis

Evaluation Criteria
Linkage between HRM & Firm Performance

HR HR Organizational Other
HR Practices
Climate Outcome Effectiveness Factors

● Training ● Proactive ● Employee ● High ● Environmental

● Performance ● Authenticity Competency productivity ● Technology
appraisal ● Openness ● Teamwork ● More profit ● Resource
● Communication ● Risk Taking ● Commitment ● Cost availability
● Rewards, etc ● Job reduction
satisfaction

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Linkage between HRM & Firm Performance

HR/Performance Organisational
Measures Performance Measure
Individual: Other Factors: Operating
HRM Practices,
Absenteeism, turnover, Economy , performance: Labour
Programmes, productivity,
Commitment. Technology,
Policies, System Group: Dynamics, product/service quality
Industry
processes Financial performance:
performance Profit, market share,
ROI

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 Difficult to demonstrate a Accuracy of measurement of
causal link variables

Measurement
Problems
Influence of Disconnect between
extraneous variables what is measure and
making it difficult to what is important
isolate impact of HR
practices on firm
performance

Firm performance measures

are quantitative and financial. 9
HR practices are intangible
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Trends Creating Needs for HR Evaluation

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Measures of
HRM
Performance
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How and on what basis?

▪ Performance of HRM functions is measured on the

basis of “value it creates” to the firm

▪ HRM functions creates value through HR activities

▪ Key factor of organizational success is the

effectiveness of firm’s human resources
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Evolving role of
HRM and its
Measurement
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Dimensions of HRM Traditional HRM Progressive HRM Truly Advanced HRM
Function

HRM mission To provide requested To shape the success of To lead creation,

HR services business preservation and
utilization of human and
intellectual capital

HRM Role Viewed as Servants Viewed as Partner Viewed as primary

source of competitive
advantage

HR Professionals Inexpensive employees Contributed partly in Well respected in the

kept away from decision decision making firm , included entirely

Criteria for HR Measures based on Measures emphasize Measure’s emphasize

EValuation administrative HR’s impact on business ability of HR to grow,
services,e.g. Speed of strategy and HR’s retain and access
response to customers contribution intellectual capital
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HR Measures

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HR Measures Examples

Efficiency Cost per hire, time to fill, etc

Employee Turnover Percentage of employees leaving the firm

Staffing ratios Ratio of HR staff per 100 employees

Expenditure of resources Cost of HR function

Level of activity/effort Benchmarks, number of people hired and trained

Employee Attitude Satisfaction survey scores

HR Planning(staffing, training) Extent to which organization must hire ,cost per hire ,
number of resumes received, annual cost of hiring
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Three Clusters of HR Measures:

▪ Internal Operational Measures - traditional, focus on

efficiency, quality and speed

▪ Internal Strategic Measures - assess effectiveness of HR

practices in building organizational capabilities

▪ External Strategic Measures - focus on effectiveness of

HR practices in obtaining satisfaction of key external
stakeholders 17
General Approaches to HR Evaluation:

▪ Goal of HR measurement approaches is to enhance

organizational success

▪ Key objective of any approach to HR measurement is to

demonstrate relationship between HRM and
organizational outcomes and to use this understanding
to improve the quality of HR decisions
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 Steps in Design and Development of HR
Measures
Step 1 Step 2 Step 3

Determine the critical Understand how HR Design the appropriate

success factors of the can add value to the HR measures to be
firm which includes critical success aligned with the
the business trends, factors, where HR framework, develop
critical creates sustainable HR measures that
stakeholders ,factors competitive advantage reinforce and
in current and future for the firm - accomplish the
business environment organizational intended contribution
that will determine capabilities of HR
firms success or
Approaches to HR Evaluation:
Stakeholder/Audit Utility/Analytical Business
Approach Approach Consulting
Approach

Focus To determine the Cost benefit analysis, HR function as a

satisfaction of key and determining strategic business
users with HR financial utility of HR
services services

Criteria for HR Employee Asset method- value Quantitative

Effectiveness satisfaction survey , of employees measures: decrease
Absenteeism rate, Expense model- turnover
Avg no of days to economic effects Qualitative
hire an employee Economic measures:
profitability- Changes in
employee employee 20
contribution satisfaction index
Cost benefit ratio
 Contemporary Approaches to HR Evaluation:
Balanced Benchmarking
Scorecard
Compares selected
Diagnostic tool that performance indicators
ensures that from different
companies utilize the
right processes and
04 organizations, typically in
people to improve the
the same industry or with
performance of both comparable
customers and organizations
business

01 03
HR Scorecard Business Excellence
Model(BEM)
Measures the
contribution of HR to Assists organizations in
the financial success of achieving excellence
the firm .
02 through continuous
improvements in the
management and 21
deployment of processes
Balanced Scorecard - Measure of Employee Success:

Balanced scorecard approach assumes that all stakeholders

are interrelated.
Employee success is tracked using these three measures:
Productivity - Output/Input
People - turnover, absenteeism, satisfaction
Process - linking employee perception of leadership to a
manager’s salary increase

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HR Scorecard Approach - Creating a Strategically
Result-oriented HR system:
Steps in Using the HR Scorecard Example of an FMCG firm

Define business strategy To be a global leader

Outline the value chain of the company Develop new and unique products, which
require certain employment behaviours

Identify strategic organizational outcomes Development of new products

Identify required workforce competencies Creativity and proactivity, working to find

and behaviour novel solutions

Identify relevant HR systems and practices Training to enhance workforce creativity

Design HR Scorecard measurement Has morale gone up or down as a result of

HR practice?
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Periodically evaluate measurement system Does HR practice have impact?
 Benchmarking & Purpose of Benchmarking HR
Practices:
1

Self - Audit
2

To learn from others

3

Helps provide focus and set

4 priorities for HR manager

Tool to create motivation to

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change

To assess improvements in
HR competencies over time

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Business Excellence Model:

BEM is anchored in the idea of quality management

European Foundation for Quality Management(EFQM)

states that BEM applies equally across a wide range of
industries

BEM uses seven criteria to evaluate performance:

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BEM Criteria to evaluate performance:

Result orientation

Customer focus

Leadership and constancy of purpose

Management by processes and involvement

People development and involvement

Partnership development

Public responsibility

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THANK
YOU!
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