How to Measure the Value of Your HR Department

HR Department
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Human Resources departments are critical in any business but it’s still important to measure the value of this department in terms of leadership, actions, policies and management. A key aspect of Human Resource planning is identifying what metrics they need to collect in order to understand the value the team is supplying to the business as a whole. In this guide, we’ll take you through the various ways to ensure your HR department is working to an optimal level.

The Goal of HR Measures 

When you consider measuring the performance of your HR team, it’s important to think about the set of metrics used as the driving force. HR teams are responsible for a large amount of legal compliance in the business and so it’s vital that the value of the department is continually monitored and assessed to ensure that this compliance is adhered to. By doing this, where there are areas that can be improved, further training and amendments to the processes can be provided. But it’s also important to note that context is key when measuring HR success – there’s no one-size-fits-all approach in business and each company is different, so success will look different to each business. So, it makes sense that there will be different indicators for different HR teams.

Measuring HR Outcomes

HR departments are responsible for the compliance of a wide variety of employment and workplace-related laws, and most HR managers are also responsible for training other personnel to ensure these laws are being upheld in other departments too. The most common laws which impact the decisions that HR teams make involve equal opportunities for employees, discrimination, labour laws and leaves of absence.

To measure the value of your HR department, you need to understand whether HR is delivering the outcomes necessary for your company’s success. This may involve how happy or satisfied your employees are, how engaged they are with their work, what the employee retention rate is, what the absenteeism rate is, or what the impact of training is on the business. Some common metrics for assessing the outcomes include the Employee Satisfaction Index, Average Length of Service and Absenteeism Rate.

There are many ways of measuring outcomes. For example, the Bradford Factor can be a beneficial way of measuring patterns of absence in employees. But what is the Bradford Factor? And how does it work? The interesting feature of absence is that two employees could have the same number of days off sick in the same period of time, yet one of those members of the team could be causing more red flags than the other. That’s where the Bradford Factor comes into play. This formula is easy to understand and calculate, but it’s value in HR should not be underestimated. The calculation works like this – the number of instances an employee has been absent over a set period of time is multiplied by itself and then multiplied by the total number of days. The theory suggests that when the score hits a certain threshold, it’s a sign that the issue needs to be investigated further. HR software can help you set and analyse trigger points for this type of issue, as well as helping you to assess the output of other metrics too.

Auditing HR Compliance

With so many legal requirements related to HR, it’s unsurprising that there is a lot to measure when it comes to the value HR teams are providing. Compliance is important so it’s critical that these metrics are monitored regularly, but it’s also important to remember that you need to monitor them in conjunction with the metrics that are related to the organisation’s strategic priorities. Some of the things you may want to measure include:

  • Are your policies and practices up to date?
  • Are all employees adequately trained on any new policies and practices?
  • Do they fully understand the key policies relevant to the business?
  • Has the employee handbook been updated?
  • Are the equality and diversity obligations being met continuously?

This may include metrics such as salary competitiveness, the percentage of employees who have been trained in the company’s policies, gender pay gaps, the diversity rate and the employee demographics, and the number of diversity initiatives the company has in place.

Conclusion

Compliance is vital for HR departments to adhere to business laws, so it’s a good idea to regularly assess the value of the department and how it’s operating. The main KPIs for compliance and ethics relate to processes, the actions the company is taking to improve compliance and performance in this area, and whether the outcomes are deemed successful. As previously stated, not all metrics will be relevant to all businesses, so only select and monitor the metrics that are closely related to your company’s strategic goals and behaviours. When gathering data, do so in a manner that determines whether there is a cause and effect relationship between your programmes and processes, and the outcomes. Finally, when using metrics, encourage senior members of staff to use them to set performance targets in a manner that holds everyone accountable. By taking some of these ideas into account, HR departments will thrive and be able to help businesses navigate the complex work of regulations and business laws.

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