01. HR effectiveness and efficiency

Dear Gentle Reader,

An effective Human Resources team is a linchpin in the success of an organization. But how do you determine what being effective means? 

Let’s look at how to measure HR effectiveness to make sure that you’re creating as much positive impact as possible!

What is HR effectiveness?               

Measuring the effectiveness of an HR department's actions and activities for a business is referred to as HR effectiveness. Since HR leaders are involved in influencing significant business decisions, a strong HR team is essential to a company's success.

As an example, a properly planned and implemented recruitment and onboarding strategy can assist in bringing in top personnel, increasing productivity and, consequently, revenue. Similar to this, a dynamic performance management system enables managers and staff to monitor performance and progress, enhance it, and attain corporate objectives.    

Why should you measure HR effectiveness?

Measuring HR effectiveness is important for several reasons.

Ensuring effective use of resources	By measuring HR effectiveness, you’ll get an indication of how effectively you’re using your resources (time and money). Discovering inefficiencies enables you to improve these or eliminate them.
Workforce and budget planning	To understand how effective HR is in your organization, you’ll have to track and analyze various metrics. These metrics will help you plan what your workforce will look like in the future and take steps to plan your strategy and budget accordingly.
Understanding the overall impact of HR	Measuring HR effectiveness will also help you visualize and demonstrate the overall impact your Human Resources department has on the organization.

How to measure HR effectiveness

To measure the effectiveness of your HR function, you need to establish relevant metrics. The metrics you choose will depend on what exactly you want to find out.

For example, you’d track metrics like quality of hire and cost of hire if you want to understand your recruitment process effectiveness. If you want to assess how effective you are in utilizing your HR budget, you might want to look into cost of HR per employee and training effectiveness in terms of ROI.

Enrolling in our HR Metrics & Dashboarding certificate program will teach you how to identify and implement relevant HR metrics to track.

Let’s explore some of the metrics you can use and how to measure them. 

How to calculate your HR-to-Employee Ratio

Regarded as the “well-known general rule,” the HR-to-Employee Ratio suggests 1.5 positions in human resources for every 100 full-time employees is ideal. It’s easy to understand why the ratio is attractive to organizational leaders.

Every business deal with hard numbers and facts to reach their business outcomes and this ratio provides just that. That said, business needs vary by organization and industry. A recent study by SHRM found that companies generally employ 3.4 human resource positions to every 100 employees. Does this mean that the 1.5:100 ratio is invalid? Not necessarily.

With respect to HR effectiveness and the ratio, a large component of what drives effectiveness is not about quantity, but quality. And one organization’s ratio may look vastly different from another even in the same industry. Having the right data-driven information can steer you towards the right solutions and opportunities.

The problem with being reactionary

An HR department does not look the same across organization types and industries. A tech startup with 100 employees, for example, may outsource their HR needs, while a global telecom business employing 10,000 people will deploy HR departments in their regional locations.

So to simply follow an equation positions business leaders in a reactionary position, which can make them susceptible to becoming an example of what not to do. Taking a passive approach can lead to legal ramifications, loss of top talent, and poor organizational performance. Further, a stalled HR department leads to stagnant business growth.

Well-equipped HR teams drive business outcomes. The HR function in the context of effectiveness encompasses many moving parts that require experienced people. When HR effectiveness is partnered with strategic HR business partners, businesses ignite into high-impact organizations, pushing operations into new heights.

Now, granted, not every organization can or needs a massive HR department, which begs the question, how can organizations make strategic HR decisions that drive effectiveness? Well, the answer lies in the power of data.

How to Improve HRs Effectiveness ? 

Effectiveness,

HR professionals are considering it as they try to defend their budget and deliverables. According to John Boudreau and Edward E. Lawler, HR effectiveness refers to the results that HR operations deliver. These activities range widely and include management assistance, strategy contributions, pay planning, and employee onboarding.

Business leaders struggle to balance HR as the workplace environment changes, frequently underutilizing the appropriate HR specialists. The HR-to-Employee Ratio has been regarded as the tried-and-true litmus test for HR staffing since its inception. To fully realize the potential benefits of this ratio—which has increased from 1:100 to 1.5:100 HR professionals to employees, respectively—some nuance is needed.

Conclusion

In conclusion, the practice of HRM needs to be integrated with the overall strategy to ensure effective use of people and provide better returns to the organizations in terms of ROI (Return on Investment) for every dollar or rupee spent on them. Unless the HRM practice is designed in this way, the firms stand to lose from not utilizing people fully. And this does not bode well for the success of the organization.

Thank you for taking time to read my Blog hope it helped to gain some knowledge. 

References 

Obeidat, S.M., 2016. The link between e-HRM use and HRM effectiveness: an empirical study. Personnel review, 45(6), pp.1281-1301.

Chang, E., 2005. Employees’ overall perception of HRM effectiveness. Human relations, 58(4), pp.523-544.

Ruel, H.J., Bondarouk, T.V. and Van der Velde, M., 2007. The contribution of e‐HRM to HRM effectiveness: Results from a quantitative study in a Dutch Ministry. Employee relations, 29(3), pp.280-291.