Chapter 14: Evaluation of HR Programs and Policies

Scorecard- focuses' managers' and employees' attention on what is important to the organization and allows organizations to make adjustments to achieve their goals.
Cost Control
Traditional organizations see personnel as an expense. The labour component of the production process in service organizations is the single largest expense. This cost represents 85% of the expenses in white-collar organizations. Cost of employees consist of: pay, benefits, absenteeism and turnover. HR practices can reduce labour costs by reducing the workforce while trying to obtain the same volume of work done with fewer employees.
There are three way to reduce labour expenses by reducing the size of the labour force:
  1. technology - increasing the use of technology is the most frequent way to cut labour costs. Process benefits claims, pursue e learning has replaced HR staff, results of about 30% savings.
  2. outsourcing - firms also outsourcing, major activities to manage costs of labour. There are detrimental effects for innovation diminished.
  3. downsizing - restructuring (see chapter 10 notes)
Approaches to Measuring HRM Practices:
1. Activity based measures- the number of employees completing training; the number of employees hired
2. Costing measures- the cost of the training program, the cost per hire
3. Client satisfaction- the manager has a problem solved; the HR department changed the employee's benefits information quickly

The 5 Cs of evaluating HRM include:
  1. Compliance:Ensuring organizational practices comply with the law and that practices are ethical
  2. Client Satisfaction:Includes internal and external clients. These measures have been found to predict financial performance, on a lagged basis. Research has shown that if employee morale drops, managment can expect customer satisfaction levels to drop in about 6 months time.
  3. Culture Management: The development of an appropriate culture will support optimum performance. Attitudes:Perceptions or opinions about organizational characteristics. The most frequently measured attitudes are job satisfaction and committment.
  4. Cost Control:Personnel are viewed as an expense consisting of pay and benefits, the cost of absenteeism and the cost of turnover
  5. Contribution: HRM practices shape the behaviour of employees within an organization, and thus help the organization achieve its goals. We need to view employees as investments and not just as expenses. Sophisticated and integrated HR practices have a positive effect on employee performance.

There are two ways of measuring human resource contribution:
1. Financial Measures - survival of the organization is the first measure but financial ratios are also used such as Return on Equity (ROE) or Return on Investment (ROI).
2. Measures of Managerial Perceptions of Effectiveness - when financial measures are not available or appropriate, managers can be asked to assess their organizations performance relative to the performance of sector competitors.

Advantages of Measuring Client Satisfaction:
1. Measuring client satisfaction reminds the HR department that they are a "service" that must deal witht he expectations of its clients.
2. Surveying clients about their unmet needs increases the credibility of the HR function.
3. Initiating and managing change by surveying stakeholders before, during, and after a change program increasesthe possibility that the HR department will understand the client's perceptions; identify resistance to change, and overcome resistance; and prove that the change program meets its goals.

Methods of Measuring Client Satisfaction:
Informal Feedback: Simply ask people how satisfied they are with the service. This feedback method is limited because:
  • Line managers may be reluctant to provide honest feedback face to face
  • It may be difficult to see patterns in the feedback because there is no method for measuring the frequency of the problem
  • HR professionals have little incentive to report negative feedback to superiors

Critial Incident Method: In the critical incident method, clients are asked to describe a situation in which the HR department provided assistance that was particularly useful, the consequences of this help, and why it was seen as helpful. Similarly, they are asked to describe a situation in which the assistance was not at all useful, and why.

Problems with Measuring Client Satisfaction:
-High expectations of clients
-Conflicting expectations
-Professional affiliations

Surveys: May be conducted confidentially, anonymously and from a large stakeholder group

Critical Incident Method: Clients are asked to describe a situation in which the HR department provided assistance that was particularly useful, the consequences of the help, and why it was helpful - could also be used in the reverse scenario

Cost-Benefit Analysis
Cost-benefit analysisthe relationship between the costs of a program and its benefits
Direct Coststhe hard costs that can be measured by expenditures
Indirect coststhe soft costs whose value can be estimated but not measured easily by financial expenditures

Utility Analysis
Utility Analysisa method of determining the gain or loss that results from different approaches
- calculates the costs and probable oescapes of decisions
- assists HR managers in making choices between programs

Auditing and Benchmarking
Audita measurement method that assesses progress against plan
Benchmarkinga tool that can enhance organizational performance by establishing standards against which processes, products, and performance can be compared and improved

Most of the methods used numbers which can measure the impact of HRM in the lanuage of business, costs, days lost, complaints and so on. My personal thoughts are in the morale of the staff, work being done and customer satisfaction.

Cost Control:
Three ways to reduce labour expenses by reducing the size of the labour force:
1. Technology
2. Outsourcing
3. Downsizing

Cost of Employee Behaviour
1. Absenteesim
2. Turnover- termination, replacement, lost revenues, learning curve, productivity losses
3. Occupational injuries
4. Illnesses

Approaches to Measuring HRM Practices
1. activity-based measures: training, hiring
2. Costing Measures: training programs, hiring
3. Client Satisfaction: solving problems effectively and efficiently

Challenges in Measuring the Impact of HRM
Universality of Best Practices:
-There is no one practice that works in every situation. Some processes that are beneficial for certain companies are detrimental to other companies.
-Companies have differing strategic goals.
Separation of Cause and Effect:
Causes of behaviours cannot be specifically linked to other behaviours, there are many variables involved in determing reasoning behind behaviours.

Successful Measurement
Any measurements used should have the following characteristics:
Alignment-results must offer some value to the strategy or goals of the organization, ie. measuring the impact of performance management system on customer satisfaction.Choose metrics that are meaningful.
Actionable-Chhose only those measures that you can control, ie. employee commitment or turnover which are items that for which action plans can be developed.
Trackability-A good metric must be trackable over time so that improvements , as a result of solutions that were introduced, can be assessed. ie. length of time to hire, employee engagement.
Comparability-Choose measures that can be compared across units and even with best-in-world organizations.
Drill deep-Look at metrics from various sectors of workforce (new hires vs. executives) and different operations within the organization.
Report and communicate a limited number of measures-Information overload can be serious problem. Choose five to ten key measures and report on these in the same way over time. measures should be both historical and predictive. Key metrics almost always include indices of employee engagement, retention rates by occupational group an dunit, absenteeeism by occupation group and unit, productivity measures, and cost-benefit analyses fore the introduction of any new program.

Popular HR Measures
  • Employee retention/turnover
  • Employee engagement/satisfaction
  • Cost per employee
  • Labour costs/capital costs
  • Customer satisfaction/loyalty
  • Revenue per employee
  • Units of output per employee
  • Percentage of employees utilized Interesting article on company culture and how it may influence customers Interesting article on why employees are motivated to leave and ways to prevent turnover I found this interesting! It's outlining what companies can and should do to receive feedback on customer satisfaction!!! Relates well to the class discussion that we posted on.