Human resource (HR) management is one of the most crucial factors in improving a firm’s performance. Business founders can be professionals in their industries, but beginners in managing employees. So, the presence of HR is necessary. An experienced HR manager can not only resolve organizational behavior conflicts, but also bring in numerous talented employees. A successful HR department can develop an efficient recruiting process and enhance the overall productivity of a company. Recent reports show that 83% of HR leaders are influential in shaping company decisions. Nowadays, more and more business owners realize the importance of HR departments in creating an effective organization.
Although most company directors are aware of the benefits of HR, they do not know how to measure its effectiveness. Moreover, they do not know how to improve HR effectiveness after evaluating it. What are the key performance indicators (KPIs) in this measurement? What are the strategies for enhancing HR performance? This article will introduce key indicators and techniques in measuring and developing HR effectiveness.
3 Key Indicators of HR Effectiveness
1. Employee Retention
As job-hopping becomes more and more common among millennials, HR plays an essential role in maintaining current talent. According to the CEB Corporate Leadership Council’s 2016 research reports, only 5% of organizations feel they are effective at maintaining a high employee retention rate. Employee retention rate refers to the number of staff members who stay at a company during a specific time period. It is one of the most frequently used measurements in HR effectiveness because it illustrates the hiring efficiency of HR (in other words, the department is finding employees who are the right fit for the company). It also indicates a pleasant working environment—the more agreeable the working environment, the fewer employees likely to leave their jobs. Besides, the employee retention rate is easy to calculate and can be regularly analyzed. As a result, employee retention becomes the most common KPI in evaluating HR effectiveness.
2. Employee Satisfaction
Employee satisfaction is another key indicator of HR effectiveness. How do employees feel about the company atmosphere? Are all the organizational conflicts adequately resolved? Do all the departments communicate effectively? These are critical questions that influence employee satisfaction. And if employees are satisfied, they will be more productive. HR is responsible for solving these internal issues so the company is harmonious and efficient. Compared to employee retention rate, employee satisfaction is harder to measure due to its subjectivity. A frequently used method to measure employee satisfaction is an anonymous survey. Anonymity allows employees to express their true feelings so the survey can deliver the most accurate responses.
3. Company Culture
Creating a strong company culture is the core responsibility of HR. Each company has its own unique company culture, such as equality, innovation and so on. A strong company culture creates a sense of belonging for employees, giving them a feeling of “identity” or “home.” However, company culture is the most difficult among the three indicators to measure because its data is hard to collect and evaluate. To measure company culture, we can use common values such as transparency, diversity, and equality to see if a company follows its values in daily practices, such as promotion. High performance in employee retention and satisfaction are also indicators of strong company culture.
Although the process of measuring can be costly and time-consuming, it is worth the investment to evaluate HR. The effectiveness of HR directly relates to a company’s performance. In other words, whether the company has efficient communications, suitable recruiting processes, and productive employees is dependent on HR effectiveness. Therefore, evaluating HR effectiveness is a critical step to improve a company’s overall strategic development.
How to Improve HR Effectiveness
After measuring HR effectiveness, a company should reflect on deficiencies and try to implement new strategies to improve HR performance. Here are some useful tips for improving HR effectiveness.
- Improve organizational communication
- Develop an effective training program
- Provide more regular feedback to employees
- Build a company cultural vision
- Use available technology
- Take advantage of data
Improving HR effectiveness is mostly dependent on a company’s specific situation. For example, improving organizational communication is dependent on the size and structure of the company; developing an effective training program requires the exact number of new employees and their specialties; building a cultural vision is based on the company’s mission and overarching goals. Want to learn more about HR effectiveness evaluation and improvement? Click here to contact a CoreAxis specialist to measure your HR effectiveness and customize your strategies to improve!
The information contained in this article is for informational purposes only. No information (or possible omissions) contained in this article shall be considered legal advice and no attorney-client relationship is established.
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We all know that HR is vital to a company. How do we know if a company’s HR department is effective? What are some KPIs used in the measuring process? Learn more about HR effectiveness in our latest blog post! https://coreaxis.com/hr-effectiveness/
Improving HR performance can be more difficult than you think. What are the key steps to boost HR effectiveness? Check out our latest blog post to find out. https://coreaxis.com/hr-effectiveness/
- https://search-proquest-com.ezproxy.babson.edu/docview/2043820248?pq-origsite=summon https://quarterly.talenteconomy.io/issue/fall-2017/how-to-measure-hr-effectiveness/
- https://www.epaysystems.com/hr-statistics/ https://www.bamboohr.com/blog/why-is-human-resources-important/