How Do You Measure HR’s Effectiveness?

In HR Talk, we pick one human resources (HR) related topic each week, and gather a few HR experts to share their opinions on it. If you have any questions about the HR industry, send them to us at editor@leaderonomics.com and we will get our panel of experts to answer them.

This week’s topic:

“How do you measure HR’s effectiveness?’

Viknesh Nambiar, Human resources director and Deanna Yap, Deputy general manager, talent organisation and performance, DKSH Malaysia Sdn Bhd

How do we measure the effectiveness of human resources (HR)? It depends highly on the immediate needs and focus of the business. Moreover, the question arises if we can measure HR effectiveness quantitatively with a key performance index (KPI) or if qualitative measurements would be a more appropriate solution.

What we see today is that most people invert effectiveness and efficiency. Peter F. Drucker sums this up nicely: “Efficiency is doing the thing right; effectiveness is doing the right thing.” And doing the right thing at the right time and having people responding in a positive way is a win-win-situation. But realistically, is this something achievable all the time?

At DKSH, we believe in keeping things simple. Every HR employee is given a small reminder bookmark which illustrates the following equation:

Effectiveness (E) = Quality (Q) x Acceptance (A)

Quality is about bringing together the organisation’s desired state, brand and leadership principles as the benchmark of skills or behaviours that one requires to learn or further develop, in order to be successful.

The challenge is about how to stay hungry and elevate each initiative in a sustainable manner as you progress. The business needs to know how to effectively manage its best assets – the people. And that is where HR steps in, as business partners, to provide the best relevant up-to-date data, feedback and consolidation of insights of employees’ performances.

This means being able to manage talent and bringing them to the forefront of the business strategy. HR then acts as an enabler to help execute the business strategy for sustainable, profitable growth with clearly defined roles and responsibilities.

Acceptance is the perceived value of any HR initiatives by our stakeholders. When we implement an initiative, there likely will never be a one-size-fits-all-solution and due consideration has to be given to the objectives of what we want to achieve. It takes many re-visits to make sure that we are on track and that the initiative is meaningful for the organisation. We can only manage what we measure and measurements are all about how initiatives are adopted and accepted in practice, not just as a business case scenario or a presentation slide.

What we also need to keep in mind is that we need to have trust among all HR stakeholders. Trust is not only achieved by being efficient, but also through the critical combination of speed and communication.

The most important thing in communication is to really listen to what isn’t outwardly said. Avenues like employee open forums with HR, management “hot seat” sessions and regular town hall meetings provide our employees with a platform to express what is on their minds and to ask questions.

Equally important is to watch how employees react to the news or to get them involved from an early stage, so that each HR stakeholder has an adequate say. The important thing to remember here is that, there must be a form of follow-up from all engagement activities in a timely manner. Communication plays an important role in cascading these messages in a clear and pragmatic way.

Finally, never underestimate the relevance of development – be it professional or personal. An organisation should always focus on its leadership principles to define which skills and behaviours are required for further development and to be successful.

Claudia Cadena, Director, strategic human capital management, President and group CEO’s office, SapuraKencana

The answer to this question has a variety of perspectives. Effectiveness depends on who measures and what is being measured. I would like to address the question from the perspective of some of HR’s most significant stakeholders:

1. The perspective of employees

If you ask the employees what they think about the HR function, you may encounter a wide range of answers, from “I don’t even know what HR does in this company” to “they really take care of the employees”. What does this tell us about effectiveness?

It highlights the importance of understanding and internalising that HR is first and foremost a support function entrusted with the responsibility of ensuring that some very important transactional/operational matters are managed on an efficient, consistent and competitive manner.

This ranges from paying salaries, reimbursing claims, administering benefits, recruiting needed talent, negotiating with unions, and the list goes on. These activities have a direct impact on employees and their fundamental needs, which differ throughout the various organisational levels.

If the HR function and the HR leaders as the owners of the function don’t recognise the need for HR to be customer-centric, quality-oriented and market-driven, there is a very high probability that internal HR practices will be inconsistent, inefficient, reactive and impractical in many instances.

Employees will consequently feel that they are not appreciated and will be disengaged, and in many cases may be driven to look for other opportunities outside the organisation.

Therefore, HR effectiveness must be measured from the perspective of the employees, and one of the most useful and simple tools to do this is through an internal customer satisfaction survey. This will provide tangible data to identify how HR can improve the way it serves employees.

2. The perspective of line managers

Ask line managers what they think about the HR function. You will be surprised with the answers which range from “they are never around when I need them the most” to “they support me really well.”

Effectiveness at this level takes a different outlook. People management is not HR’s responsibility. It is the supervisors’ and managers’ responsibility.

HR’s responsibility is to develop and equip the supervisors and managers with the right skills, tools and processes so that matters related to performance, career development and progression, recognition, empowerment, and motivation are managed well by the supervisors and managers.

It is important to highlight that tools and processes are enablers and there are no “best in class solutions” that will serve every organisation’s people management purposes. As each organisation is different, the tools and processes to be used need to be customised to its specific reality.

So, how is effectiveness measured in this context? I will advocate that effectiveness at this level comes from consistent education, application and deployment of skills, processes and tools rather than a constant change and introduction of the latest frameworks, solutions and tools.

I believe in an evolutionary outlook instead of a revolutionary one (in most cases). Simply ask supervisors and managers about tools and processes and if they feel well equipped to manage people issues they face.

Ask employees how they feel about the way their bosses manage their performances, their career progressions/developments, and how are they given recognitions. Asking both parties will enable the formation of a comprehensive picture about HR’s effectiveness in developing the supporting infrastructure and deploying/ equipping supervisors/managers with it.

3. The perspective of the CEO and the Board

What can we expect the CEO and board of directors to say about HR? Answers range from “we don’t really involve HR in any strategic effort” all the way to “HR is an integral member of our strategic team”. Why do we have so much divergence here?

In my opinion, it is a matter of capability. Traditionally, HR has been more of an administrative/operational function, which in itself is not wrong or irrelevant.

However, additional requirements have emerged together with the realisation that “people are the most important asset of an organisation” or as my own boss, Tan Sri Shahril Shamsuddin, president and CEO of SapuraKencana says, “people are the multiplier of the value of our assets.”

What does this mean for HR in practical terms? It means that HR now needs to work with business leaders in identifying ways to attract, retain and engage talent. This is critical, especially in industries that are exposed to shortage of talented/experienced staff.

At this level, the HR function is also challenged to demonstrate that it is adding value to the business, that it brings ideas and practical solutions to address tangible business challenges. In order to contribute at this level, HR needs to know and understand the business. Practitioners must learn new skills and enhance their business acumen.

HR must be able to engage with the CEO and the board and be able to credibly put their views and recommendations forward and possess the ability to operationalise and institutionalise these recommendations as they are approved.

HR’s stakeholders are plenty, and their perspective is most critical in ascertaining the function’s effectiveness.