New Manager

How to measure HR’s contribution

C Mahalingam | Updated on March 10, 2018


Using strategic HRM, not technical terms, is the way forward

As an invited speaker for a Human Resources conference at a leading B-School in Kochi, I chose to speak on “Managing and Measuring HR contribution.” HR function is working hard and meeting many milestones in most companies. However, there is always a disconnect between the perception of HR and the CEO and the leadership team on its contribution. There are reasons for this disconnect.

HR is concerned with best efforts whereas business uses the language of best results. For example, whether it is attrition control or improving employee engagement, HR reports on what they “did” while business measures what HR “delivered.”

HR tracks and reports on initiatives and target KPIs, most of which are efficiency-focused like cost of hiring, lead time to hire, training man-days and so on. However, business is seeking to witness contribution to strategic priorities of the company such as building capability, increasing leadership bench and competitive intelligence on the talent market.

HR is busy with managing marginal performers, which is necessary. Business is worried about retaining top talent and leveraging them for growing the business.

Given this situation, HR has to introspect on how it can redefine its contribution and be an equal business partner, perception-wise.

Bridging the gap

I proposed the following approach for defining and demonstrating their contribution. It is a systematic process of building confidence and delivering value. The approach comprises four key steps:

Build a strong mindshare: With the CEO and the leadership team on their business priorities and what contribution they would like to see from HR. I propose that HR doesn’t need a ‘strategic plan’ of its own, but would rather gain from embracing the strategic plan of the company and business leaders.

Build necessary capabilities in HR: For example, ability to leverage technology including social media, big data that sits within the HRIS is critical. Business leaders are no longer happy with “reporting statistics” but demand “predictive analytics” from the gigabytes of data that HR systems generate. The HR function continues to produce reams of MIS that mean nothing much for the business leaders.

Contribution: HR leaders can define what business deliverables they can impact with HR interventions. Beyond recruiting and inducting people, tracking performance appraisals and monitoring training man-days, HR has to scale its contribution to business-value creating activities. Managing recruitment to retirement constitutes the lifecycle and is purely what may be called as ‘technical HRM.” What business values is a focus on “strategic HRM.” HR has to think hard about enhancing productivity, increase competitiveness,facilitating geographic expansion and create a culture of innovation so the competition shifts from mere execution to innovation.

Measuring HR value creation: HR must build the ability to measure its value creation on higher order contribution. For several decades now, HR has been measuring things that lend themselves for easy measurement. Understandably, strategic HR contribution is difficult to do and even more so when it comes to measuring and reporting to the business. There are ways and tools for constructing an HR scorecard that reflects and measures the strategic HR contribution. In other words, the HR function can determine its maturity by the quality of the HR scorecard it maintains and measures.

By redefining its contribution in strategic HRM terms, HR can assert its value and retain its chair at the strategy table.

(The writer is HR Advisor and Executive Coach. He is also a visiting professor at several IIMs)

Published on October 28, 2014

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