There is no doubt that people are what makes a business function properly. Consequently, your HR team is essential for your company to be successful. However, it’s not always easy to monitor the effectiveness of your HR, so here’s how you can do it.
Understand the Context
First of all, you need to understand the context of your own business. Every company has a different situation, so there is no one way of measuring the effectiveness of HR that will work for absolutely every company.
You will need to keep in mind the size of your business and the number of employees working at your company. Moreover, you will also need to remember about your industry and whether you offer products or services.
Another reason why there is no one way to measure HR is that different companies struggle with different aspects of their business. While you may be concerned with retaining your employees, another organization will want to automize some of their regular processes.
Sort Out Your Priorities
Once you know what kind of business you own and what you are currently struggling with, you need to sort out your priorities. Rather than skipping right to the indicators of how well your HR is holding up, you need to first identify your HR goals.
Stop asking how you can measure the effectiveness of your HR and start asking what you perceive as good or bad performance. You need to be asking the right questions to move on to the next stage of identifying your performance indicators.
Some General Tips
To assist you in determining your context, priorities, and goals, there are some common practices you can follow and some general tips that will be helpful before, during, and after the process:
- Measure HR Outcomes: Think of what determines your business’s success. Look inside your organization and think of whether or not your employees are satisfied with their job and working conditions. Think of how much they are engaged in your business and how well your training actually worked out for them. You might also want to look at your churn and absenteeism rates.
- Analyze HR Service Delivery: While looking at your company as a whole is great, assessing your HR team more closely is even better. Think of how well it delivers HR service and whether this corresponds with the values of your brand. Ask your employees how they would rate their performance and whether they would recommend your company to others.
- Going Even More In-Depth: Think of other aspects of your HR department that it could be improved. What is your recruiting process? How effective is the training you provide? How much do the HR processes cost and are those expenses justified? Are your policies and practices up-to-date and do your employees understand them? Are we meeting our diversity and equality requirements?
Three Metrics to Measure HR Effectiveness
Before we get to the three most important metrics for measuring HR effectiveness, here are some additional ones that you can still and that we haven’t touched upon yet:
- The average time taken to fill vacancies
- Employee Net Promoter Score (eNPS)
- Return on investment (ROI)
- Employee productivity rate
- The average length of service
- The failure rate of new hires
- The performance of new hires
- Salary competitiveness
- Gender pay gap
- Cost-per-hire
- Attrition rate
And now for the three most important metrics:
- Staff Turnover: Staff turnover can be useful to an extent. For instance, it can bring in new faces, new talent, and new ideas. But if it increases, you might start losing valuable specialists, company knowledge, and so on. In addition to that, a high staff turnover rate prevents your company from growing. In other words, this is perhaps the most important indicator of your HR’s effectiveness. Work out the percentage of people who left during each year of your business working. Then, look at which of those people were valuable for your organization and which weren’t as much.
- Engagement: Another key indicator of your HR team’s performance is the engagement rate of your employees. This has been covered a little earlier in the article, but it is worth going more in-depth with this subject. You will not only have to assess it yourself but also ask your employees what they think. A survey works best in this situation, but you need to ensure that it consists of all the necessary questions to really make it work. Don’t forget about confidentiality. After you gather and analyze the information you have, you will need to invest in the various aspects of your business to make your workers more engaged.
- Leaving Feedback: It’s hard to see your employees leave but such losses can result in very valuable feedback from those leaving your organization. After all, people who are leaving are more likely to say the truth than anyone else currently working in your company because they have nothing to lose. The best way to collect such feedback is to implement an exit interview program. Ask about the reasons why they are leaving and where they are going. In addition to that, ask about what they enjoyed while working for your company and what they found challenging.
Benefit from New Technologies
While it is important to use traditional methods of measuring the performance and effectiveness of your HR team, there are many new technologies that allow you to get way more accurate results.
Instead of compiling long employee surveys once in a while, it is easier and more efficient to ask short, precise questions regularly. This allows companies to react quickly to this feedback and improve various aspects of their business.
Discover interesting technologies and experiment until you find something that will fit your company the best. Look at what others are using and start with those. It may take some time to find the best fit but it will be worth it in the end.
Final Thoughts
In conclusion, monitoring and evaluating the effectiveness of your HR will be possible once you understand the context, determine your goals, and use new technologies. Follow the tips in this article to better understand how well your HR team is working.
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