HR Professional - Newsletter - hr nl 109

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'Measure everything'. That includes HR standards!

It is more critical than ever in these difficult times to manage people, their performance and their pay properly. Higher standards of professionalism are needed on the part of the HR team. 

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There is no doubt that HR management is more difficult, more onerous and more challenging in organizations today as compared to the position ten years ago - despite continued advances in support systems and electronic communications. The increased sophistication of employees (and the greater awareness that they have of their rights), narrower margins and greater competition for jobs are factors which have precipitated this.

 

The Challenge . . .

 

Perhaps the real challenge confronting the HR executive is to keep the HR function simple and controllable - by good organizational development planning - securing that in every department there are small teams of people working together in a focused and dedicated manner, all motivated and clearly aligned with organizational goals. They must be self-managed in the full sense of that word too.

 

One of the challenges is the management of talent - first envisioning then promoting the concept that there is an optimum level of ‘churn' - staff turnover at sustainable levels which allow for an inflow of fresh talent from the outside, whilst existing employees are able to develop their talents and progress along a career path. At the same time, in this win-win relationship, the organization is able to get a payback for what it has invested in the training and development of the individual.

 

Is this a pipe-dream?

 

It is not - based on current HR thinking.

 

For, one of the most influential factors in management thinking generally in the last decade has been the almost universal acceptance of the principles laid down by the authors of ‘The Balanced Scorecard'.

 

In the preface, they explain with reference to the cockpit of an airliner that literally everything has to be measured - to make sure that all of the risks are managed and that the aircraft reaches its destination on time. They conclude that the same approach can succeed within a business environment - where all variable factors are measured, and controlled - in this way securing that the business becomes the best in its field. It all depends they say on how serious you are about getting there!

 

The same ‘measure everything' principles when applied to HR management may lead us to consider what factors specifically can and should be measured in the HR department. We believe that the check-list may look something like this:

 

Exhibit

 

Key performance areas	Performance criteria	How to be measured:
1. Organizational development	1.1 Productivity across whole organization	SCTO/VATO ratio trend
	1.2 Strategic thinking and assistance to CEO	CEO evaluation of core competencies
	1.3 Budget allocation to HR function	CEO evaluation of core competencies
2. Operational efficiency	2.1 Productivity of department in assisting other departments to recruit and resolve HR issues	SCHR/VATO ratio trend
	2.2 Quality of support in 2.1	Peer Exco review
3. Learning and growth	3.1 Training and development of employees in department (adherence to skills development programme)	Report by programme administrator
	3.2 Support given to subordinates in their roles	A co-ordinated subordinate review
4. Remuneration systems functionality	4.1 Agreed changes implemented	Report by HRE, evaluated by CEO
	4.2 Systems running smoothly	Climate survey; peer Exco review
	4.3 Systems running effectively	Staff turnover; peer Exco review; SCTO/VATO ratio trend
5. Cost control	5.1 Costs within budget	CFO report on variances
	5.2 Costs to budget	CFO report on variances

 

Notes on above:

1. The two ratios - SC_HR/VA_TO and SC_TO/VA_TO - are productivity ratios of staff costs divided by value added. The first measures the contribution of the HR department (HR department staff costs only) to the value added of the total organization; the other the contribution of all employees to the value added of the total organization, which is imputed to the HR department as an indicator of the success of its resourcing strategies. Both ratios should show a declining trend when measured over a ten-year period - indicative of the overall effectiveness of the HR department.

2. The weighting of the first four key performance areas should be equal (as the starting-point). The fifth is a control factor or ‘modifier' (such as safety compliance) - an area of absolute compliance - which will subtract from the performance score if not complied with, but not contribute positively to the performance evaluation.

3. Why are BEE and BAA not on the list? They are - under 4.1. They are important; but so are all of the other things. They should not be given additional weight - for fear of diminishing the importance of the other HR functions (as a proposition to be considered).

Note too that the evaluation in the right-hand column represents a complete ‘360 degree' verification process, which is supported by a number of statistical performance indicators (the productivity ratios and the staff turnover statistics). It is a rigorous and challenging performance review process.

Is it not in fact too much to handle - too elaborate and administratively cumbersome?

It all depends, as the authors of the balanced scorecard would say, just on how serious you are about getting it right!

 

(If you want to read more on this topic, go to Chapter 1.3 in the library. )

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