Measuring Human Resource Management’s

Effectiveness in Improving Performance

Sunil J. Ramlall, Ph.D.

Assistant Professor
College of Business
University of St. Thomas
TMH 331B, 1000 LaSalle Avenue
Minneapolis, MN 55403
E-mail: sjramlall@stthomas.edu
Phone: (651) 962-4349

© Ramlall, 2002
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Abstract

This article examines the strategic role of HR and its main practices, describes the outcomes of

the respective category of HR practices, explains the critical reasons for measuring HR’s efforts,

and proposes a framework for assessing HR. Ultimately, organizations would be able to utilize

the information to determine how particular HR practices correlate with better business results;

determine potential areas for investments, expansions, and reductions; justify budget allocations;

and be more accountable for each dollar spent within the organization. The framework proposed

does not merely explain the cost for each of the major HR activity, but demonstrates the value of

the activity and hence, the opportunity to determine if it is a worthwhile investment and strategy

for creating a competitive advantage.

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What value does the human resources (HR) function contribute to the bottom line of the

organization? Over the years, there has been tremendous emphasis placed on HR practitioners

becoming strategic business partners and being a value-added source within organizations.

Traditionally, HR professionals could talk generally and conceptually about employee morale,

turnover, and employee commitment being outcomes of HR efforts. Furthermore, the HR

function is often viewed as an expense-generator and an administrative function and not as a

value-added partner. Ulrich (1997b) reiterated that to fulfill the business partner role of HR,

concepts need to be replaced with evidence, ideas with results, and perceptions with assessments.

This article examines the strategic role of HR and its main practices, describes the

outcomes of the respective category of HR practices, explains the critical reasons for measuring

HR’s efforts, and proposes a framework for assessing HR. Ultimately, organizations would be

able to utilize the information to determine how particular HR practices correlate with better

business results; determine potential areas for investments, expansions, and reductions; justify

budget allocations; and be more accountable for each dollar spent within the organization. The

framework proposed does not merely explain the cost for each of the major HR activity, but

demonstrates the value of the activity and hence, the opportunity to determine if it is a

worthwhile investment and strategy for creating a competitive advantage.

The framework has proven its effectiveness at many companies showing how HR creates

value, utilized the information collected to increase investments in specific HR strategies and

eliminating ineffective investments, and used as a critical resource in the strategic business

planning and budget allocation. The companies include Fortune 500 and smaller companies

from retail, transportation, and financial industries.

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Understanding the Strategic Role of HR

In today’s business environment, organizations need to be constantly evaluating their internal

and external environment for challenges and opportunities to remain competitive and to sustain

growth. Political, economic, social, and even psychological changes within our societies create

significant impact on organizations. Given any significant change or event, how ready are we as

an organization to react in order to remain competitive?

Many factors are driving changes in organizations today including the use of technology,

globalization, changes in workforce demographics, eliminating the bureaucracies in

organizational structures, and balancing work-family issues. Understanding the potential of an

organization’s resources and optimizing the output of such resources given the changes, provides

the impetus for HR being the key source of creating the competitive advantage for the

organization.

Insert figure 1 about here

To create value and deliver results, HR professionals must begin not by focusing on the

work activities or work of HR but by defining the deliverables of that work. HR’s roles in

building a competitive organization include management of strategic human resources,

management of transformation and change, management of firm infrastructure and management

of employee contribution (Ulrich, 1997a). Although these roles are valid and have proven to be

value-added in recent years, there is now the critical need to move beyond the strategic business

partner role to players in the business (Ulrich & Beatty, 2001). Players, according to Ulrich &
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Beatty, contribute to the profitability of the organization, they deliver results and they do things

to make a difference. The roles of players are to a) coach b) design, c) construct, d) change the

organization, e) creating followers, and f) playing by the rules. Another perspective on the role

of HRM suggests that in leading-edge companies, HR professionals play four key roles: a)

strategic business partners, b) innovators, c) collaborators, and d) facilitators (Schueler &

Jackson, 2000). As a strategic business partner, HR professionals should understand the nature

of the business from a strategic, operational, financial, and other aspects necessary to be part of

an effective team managing an organization. Functioning as an innovator, HR professionals are

challenged to continuously search for strategies that will create value for the organization and not

merely function in a reactionary mode. Furthermore, HR professionals will also serve as

collaborators with senior leaders and all employees to implement business strategies forming the

strategic link throughout the organization. As facilitators, HR professionals function as the

change agent providing rationale, support, and readiness for planned changes designed to support

the business strategies.

The fundamental role of HRM is essentially to maximize profitability, quality of work

life and profits through effective management of people (Cascio, 2003). Given this premise, it

can be easily inferred that HR’s role is to help create value to the organization. Figure 1

illustrates some of the external challenges and changes facing organizations, their impact on the

organization, and how HR is impacted.

The Importance of Measuring HR’s Activities

Even though HR professionals are convinced that their efforts add value to the organization’s

bottom-line, there is frequently little evidence to demonstrate such belief. A recent survey of 54
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companies in the Midwest, USA conducted by the author revealed that 51 of the 54 companies

conducted little or no assessment of their HR department’s efforts and therefore could not have

provided any quantitative measures of HR’s value to the organization. In addition, a study

conducted by Becker, Huselid, and Ulrich (2001) indicated that less than 10% of the 968 firms

that participated in their study had a formal estimation procedure to measure HRM.

Measurement in most HR departments is usually restricted to processes measuring costs

and not showing value added (HRPS, 1993). There is now the imperative need to justify each

dollar invested, compare strategies to determine maximum worth, and to decide on where to

invest especially as companies scramble to survive after the September 11 tragedy. Pepitone

(1997) reiterated that HR leaders should know how to prove the value-added of their services

because management is increasingly requiring departments to give evidence of their worth. In

addition, Sorensen (1995) stated that the best way for HR to gain credibility so that it can make

meaningful changes is for practitioners to measure the cost and effectiveness of what they do.

And they must put that into language that senior executives understand: financial results. HR

managers need to measure the cost and effectiveness of their activities far more closely than they

have in the past. Many organizations have been forced and are continuing to determine ways of

being more cost-effective. Many of the other functions including finance, accounting, and

marketing are able to show a return on investment for their respective efforts, so given the

increased emphasis on HR practices, it is imperative for HR to be able to show its effectiveness

in creating value for the organization. The new HR is a transformed role comparing itself to any

other function, not only through espoused value creation strategies, but through outcomes,

qualitative and quantitative measurements, and direct relationships to profitability.

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The simple option of showing HR’s value or becoming extinct as a department presents

itself to HR professionals and given the strong belief of HR as a source of added value in

organizations, there is no choice than for HR professionals to be able to quantitatively and

qualitatively explain its strategic role in the organization. There has been substantial evidence

over the years to show the relationship between HR and organizational performance as

summarized by (Yeung & Berman, 1997). Some of the studies include MacDuffie and Krafcic

(1992), US Department of Labor (1993), Pfeffer (1994), Arthur (1994), Huselid (1995), and

Ostroff (1995).

Even though these studies exist, there still lacks a framework that is grounded in theory,

yet practical enough for practitioners to use that shows the major HR activities, outcomes of the

respective activities, and how they can be measured. The framework describes clusters within

the HR function and encompasses: a) strategic planning, b) selection, c) training and

development, d) organization development and change, e) performance management, f) rewards

system, and g) organizational behavior & theory.

HR’s Activities & Outcomes

Even though there are several classifications or groupings of HR activities, the author uses seven

groups of activities seen as being most strategic and influential in realizing the strategic business

objectives of the organization. Today’s economy dictates that organizations continually assess

the external and internal environment and make relevant changes in order to remain competitive.

The author examines each of the clusters and provides a description of each, its importance in

achieving the business strategy, and how it can be measured to determine its effectiveness.
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Insert figure 2.0 about here

Strategic Planning

The role of the HR function has changed tremendously over the past 10 years where HR

functions have previously been viewed as not being an integral core of the business and merely

viewed as an administrative function to today’s economy where HR practitioners are more

frequently considered business partners. Being a business partner, the ideal situation would be

the inclusion of the HR leader in the strategic business planning (SBP). “In the most

fundamental sense, SBP involves choosing how an organization will compete” (Rothwell, 1994).

The questions of what product to produce, where should the product be sold, how many to make

available, how the products and services differ from the competition are included as part of the

business planning process. Business strategy can also be defined as the “process by which the

basic mission and objectives of the organization are set and the process by which the

organization uses its resources to achieve the objectives”(Tichy, Fombrum, & Devanna, 1982).

Why is it important for HR to be involved in the strategic planning process? In

developing strategies in today’s complex and dynamic business environment, there is the critical

need for business leaders to continually assess their talent pool to determine if the appropriate

expertise needed to accomplish the business strategies are available within the organization. If

not, where and how can the organization acquire the necessary skills? Another critical area is to

identify what skills are needed to be developed internally for current employees to perform at the

level necessary for the organization to be competitive. Does the organization need to change any

of its current policies and practices in order to derive the intended behaviors of employees? How

should performance be measured and what types of rewards should be given for the intended

behaviors? These are all fundamental areas of effectively managing an organization and
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imperative to be addressed at the strategic planning stage. Typically, the HR function has the

most experience and knowledge in addressing these critical issues. Strategic planning seeks to

identify those organizational decisions and actions, which yield the greatest advantage under

various assumptions about the organization and its environment. The integration of human

resource function into the organizational strategy provides the basis to enable the human

resource function to support and implement the strategic plan to achieve a competitive advantage

(Wofford, 2002). This strategy provides for the maximization of human capital, reduction of

wasted and inefficient labor and other financial investment, and eventually maximizing

profitability.

By addressing these issues at the strategic planning stage with HR included, there is the

higher likelihood of more efficiently reaching the business outcomes and avoiding chaos,

massive layoffs, crises resulting from not having skilled employees to carry out particular tasks

and not having the right fit among employees, corporate strategies, and business environments.

C.K Prahalad (Prahalad, 1990) in describing the roots of competitive advantage, stated that the

real sources of competitive advantage are to be found in management’s ability to consolidate

corporate wide technologies and production skills into competencies that empower individual

businesses to adapt quickly to changing opportunities. Moreover, Tichy et al., (Tichy et al.,

1982) reiterated that there are three core elements for organizations to function effectively and

include mission and strategy, organization structure, and human resource management. Clearly,

the HR function plays a pivotal role in determining the business strategy through the assessment

of the organization’s capabilities to successfully compete through a particular strategy,

determining the appropriate rewards system, determining appropriate organization structures,

and developing strategies to increase employees’ performance.

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Given the definition of strategic planning as how an organization will compete, the

question arises as to how would an organization be able to assess the effectiveness of its strategic

plan. Indicators of a successfully crafted strategic plan include creating advantages that are

sustainable over a long period of time. Has the planning resulted in a) the attainment of the

organization’s goals and objectives, b) financial profitability, b) positioning to create advantages

for the short-term and long-term, and d) created a sense of social responsibility? In essence, this

process determines the decisions and actions an organization will undertake to create and sustain

competitive advantages.

Acquisition of Employees

In the era of increasing globalization and the struggle to create sustainable competitive

advantages, organizations are continuously evaluating their strategies to ensure that they have the

expertise needed to help achieve the mission of the organization. The economic challenges due

to the consequences of the 9/11 terrorists attacks on the United States also continue to affect

organizations’ financial position and subsequently on recruitment and selection strategies.

Gatewood & Feild (2001) define selection as a “process of collecting and evaluating information

about an individual in order to extend an offer of employment.”

Fitz-enz (2002) described ways of measuring the cost per hire, source cost per hire, and

interviewing cost. Indeed, these are critical metrics in deciding the cost in acquiring employees.

Nevertheless, to fully understand the value and effectiveness of the selection process, one has to

analyze the impact of the employee’s contribution to the organization not only from a cost factor,

but the performance in the short-term and long-term. Has the employee been able to contribute

to the successful implementation of the business strategy? In examining the efforts that are part
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of the acquisition, one has to examine the effectiveness of the planning process, advertising and

recruitment sources, effectiveness of the interviewers in selecting the right candidate, change in

the pool of qualified candidates, and performance of the incumbent on the job.

HR Planning involves the process that specifies the activities that a firm must use in order

to develop its human resources to improve its overall practices (Gatewood & Feild, 2001). The

process entails determining how many employees the organizations needs to be performing at its

optimum and where the employees should be working in the organization given the external and

internal challenges and opportunities. With the economy still struggling to improve after 9/11

terrorists attacks, organizations have been forced to layoff even thousands of employees in some

cases in order to survive. The real challenge for HR in the upcoming months and even years

would be to predict the demand for their products and services and then to determine the need for

labor. Nevertheless, one still has to be able to reasonably predict labor demands and determine if

employees have to be laid off or how many employees have to be recruited within a specific

period. In addition, HR Planning should involve the skills and competencies currently available

within the organization and what other intellectual capital would be needed in the future to

adequately meet the needs of the stakeholders.

Another aspect of the acquisition process involves the advertising and recruitment

sources. Given the high costs of advertising in newspapers, internet websites, journals,

employment agencies, and direct and indirect costs associated with advertising, there is a definite

need for HR professionals and other senior leaders to be aware of the effectiveness of the

respective sources being used to advertise and recruit their candidates. In assessing the

effectiveness of recruitment and advertisement sources an organization uses to recruit its

employees, it is imperative to relate the actual performance of the incumbent to the advertising
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and recruitment. Some of the factors that should be included in this evaluation are historical

employee turnover data, absenteeism, actual performance on the job, and ability to advance in

one’s career. There may also be a high level of correlation with specific school, number of years

of work experience, education major, GPA, and other such factors with one’s performance.

Given the collection and analysis of this data, HR is much more likely to invest their advertising

and recruitment budget to where real value is created for the organization.

Fitz-enz (2002) described the need to ensure that the recruitment function to be efficient

and further stated that it is better to measure recruiters as a team than as individuals whenever

applicable. In determining their efficiency as a team, Fitz-enz stated that the measurements

should focus on the productivity of their interviewing techniques, the average length of

interviews for the respective job groups, number of interviews needed to make a quality hire.

Another means of determining the effectiveness of the recruitment function is a measure to show

the change in the number of qualified candidates that is available for selection. This could be a

significant cost reduction strategy given that advertising costs can re reduced if there are

qualified candidates available for future openings and other jobs currently available.

Training and Development

The American Society for Training & Development estimates that US organizations are

spending more than $60 billion annually on employee training and development. Given this

significant investment, it is reasonable for one to ask about the benefits of such investments,

especially since more companies are seeing a need for lifelong learning and are integrating

technology in their strategies. Swanson (1995) defined employee training and development as

the process of systematically developing expertise in individuals for the purpose of improving
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performance. The argument as to whether T & D helps to create a competitive advantage has

shown that conceptually, it can be a source of competitive advantage. Nevertheless, there still is

a critical need to develop frameworks and strengthen the argument for being aware of the actual

benefits provided by this intervention. Developing a framework for assessing the financial

benefits of T &D, Swanson (2001) listed three questions that provide the variations on the

assessment of HRD, of which T & D is a major category.

• What is the forecasted financial benefit resulting from the HRD intervention?

• What is the actual financial benefit resulting from the HRD intervention?

• What is the approximate financial benefit resulting from the HRD intervention?

(Approximate financial benefit is used whenever there is some level of uncertainty of the

exact value created by the intervention).

The framework describes three perspectives to assess the benefits including positive benefits,

relative benefits, and return on investment. The positive benefits are those indicators that show

the benefits exceeding the costs. The key issue in this perspective is to determine that the

benefits at least equal the costs. It may also mean the inability of the measurement to show a

financial benefit, but demonstrates the benefit of for example, strengthening the culture and

maintaining the tradition of the organization. Return on investment (ROI) is a ratio that expresses

the relationship of every dollar of performance value to every dollar expended to achieve that

value.

In understanding the impact of the training, it is imperative to determine what difference,

if any, the investment made in supporting the business strategy of the organization. The

assessment of the training should focus on the difference of the performance of the employee, the

department, the process, and the overall performance of the organization. Furthermore, were
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there adequate opportunities for the employee to practice what they learned in the classroom,

were they rewarded for improvements made as a result of attending the training, and can a

relationship be demonstrated with the training and the organization’s performance?

Fitz-enz (2002) suggested that in addressing the results of the training process, the

following questions be answered:

1. How well did the employee learn?

2. How effectively did the employee apply the learning from a business standpoint?

3. What difference did it make to the business perspectives?

In sum, measuring the impact of a training initiative regardless of the scope, size of investment,

and number of employees involved, there is the imperative need to determine the purpose of

doing the training and if the goals have been met at various intervals after the intervention had

been completed. To determine the benefit, ROI, or whatever terminologies we choose to

describe the outcome, one has to consider the direct costs of developing and implementing the

intervention, in addition to the indirect and opportunity costs. This total cost would then have to

be compared with the intended benefits and actual benefits immediately after the training and at

different intervals after the intervention based on its nature. It is therefore imperative to address

the following questions given the critical need to understand the impact of the intervention:

• Has the employee’s attitude changed since the training?

• Did the employee acquire knowledge and expertise in an area that would enable

him/her to perform more effectively on the job?

• Has the employee’s performance changed after the training?

• How has the change in the employee’s performance affected the business strategy

and performance of the organization?

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These are all areas to be integrated in assessing the impact of training and development in

today’s economy. With answers to these questions, it is relatively simple to determine if the

training investment was worthwhile and to articulate how training and development supports the

business strategy and contributes to the bottom-line of the organization.

Organization Change and Development

Given the continuing changes in the global economy, demands of customers, preferences

and values of employees, it is a necessary component of the HR strategy to ensure that the

organization is adapting to the external and internal variables it current faces and would likely

face in the future in order to meet its stakeholders’ expectations. The pace of global, economic,

and technological development makes change an inevitable feature of organizational life

(Cummings & Worley, 2002). A growing importance and competency expected from the HR

professional, therefore, is his or her ability to plan and implement the necessary changes for the

purpose of improving performance. Swanson (1995) defined organization development (OD) as

the process of developing and implementing planned changes in organizations for the purpose of

improving performance. The opportunity for HR through its organization development

interventions is to create organizational effectiveness at the individual, department, function,

process, and organizational levels.

Many OD practitioners may argue that OD is not a measurable effort, at least

quantitatively. The challenge arises again as to what value do the change efforts really have on

the bottom-line of the organization. Should OD be excluded from quantitative measurement?

Given a downturn in the economy and the need to reduce labor cost, are OD practitioners able to

justify their worth to the organization?

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In answering these questions, it is necessary to examine the outputs of OD. In many

instances, the outputs should be an improvement in performance at the individual, process, and

organizational levels. Fitz-enz (2002) suggested that OD can be measured through productivity,

quality, service, responsiveness, development, and survival. How efficiently are products and

services delivered to the customer? These factors are indeed critical in assessing the

effectiveness of OD’s efforts and therefore, should be part of the process of making changes in

organizations. Some of the key measurements can be derived from the following questions:

• What is the quality of the output and does it meet the customers’ expectations?

• Does the service offered by the organization provide a competitive advantage as

compared to its competitors?

• How effectively does the system respond to changes in the external environment?

• Does the organization allow for maximum sharing of information, leveraging each

employee and work unit, and resolving any internal or external challenges?

• Are the values and ethics of each employee and work unit representative of the

overall culture of the organization and supportive of the business strategy?

The responses to these questions based on the respective organization provide the basic

measurements in assessing the readiness and effectiveness of the organization to function

effectively in its current and anticipated internal and external environments. Should the

responses indicate less than optimal performance at the individual, process, and organization

levels, the opportunity exists for HR to conduct an analysis and develop, and implement planned

changes to improve performance at all levels. As pointed out by (Becker et al., 2001), HR

professionals too often want to measure their success by their activity rather than the actual
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business results. By having concrete answers to these questions, there will be appropriate

responses in answering the role of OD in achieving the business strategy of the organization.

Performance Management

“Performance management systems make clear to employees what is expected of them and

assure line managers and strategic planners that employee behaviors will be in line with the

company’s goals” (Noe, Hollenbeck, Gerhart, & Wright, 2003). Many organizations still rely on

the performance appraisal viewed as an annual ritual and primarily the responsibility of the HR

function. In today’s economy and the utmost of managing performance to create a competitive

advantage Noe, et al (2003) grouped performance management into three categories of defining

performance, measuring performance, and the feedback aspect of performance.

Performance management systems are geared to ensure that each employee within the

organization, based on previously conducted job analyses, is performing the tasks intended at the

expected level to support the strategic business objectives of the organization. The thinking of

HR practitioners and other business leaders that an annual performance appraisal is performance

management must become obsolete. Effective performance management entails a process where

each employee is fully aware of his or her role in the organization, what type of output is

expected, and how the output will be measured.

How would one determine the effectiveness of the performance management system in

creating competitive advantages for the organization? In answering this key question, the

following areas should be addressed:

• Ensuring that job descriptions are developed through timely and effective job analyses.
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• Job descriptions are updated on a regular basis to reflect to changing business

environment.

• Feedback is shared continuously among all stakeholders.

• Every employee is fully aware of his or her role in the organization, which can easily be

accomplished in the performance planning phase of the process.

• There are measurable outcomes assigned to every task reflecting the role of the position

and incumbent in achieving the goals and objectives of the organization.

• There must be congruency and consistency in performance measures across the entire

organization and performance standards should always be measured consistently.

• The process and the system must be viewed as credible, fair, valid, and reliable.

• A survey with numerical ratings can be used by employees and supervisors to assess if

one’s role and responsibilities are fully aligned with the goals of the organization,

satisfaction with the actual process and satisfaction with the supervisor’s management of

the performance management process. An aggregate of the responses produces an

assessment of the performance management system and its effectiveness in improving

individual and organizational performance.

One of the critical strategies in performance management is to understand the fundamental role

of each employee in achieving the mission of the organization. By mapping a process through

the identification of the purpose and role of each incumbent, one is easily able to identify where

the deficiencies may exist and to develop corrective actions, identify the strengths of each

individual and to maximize each employee’s potential and hence their contribution to the

financial contribution to the bottom-line of the organization.

Rewards System
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The starting point for any reward system design process needs to be the strategic agenda of the

organization (Lawler, 1990). By understanding where the organization is positioning itself for

various intervals in the future, an organization could design the reward system to provide

incentives specifically designed to foster behaviors, attitudes, and outcomes among the

workforce that directly correlate with the strategic agenda of the organization. As indicated by

Lawler (1990), numerous studies including (Vroom, 1964, Lawler, 1971, and Kerr, 1975) have

shown that effective rewards systems can significantly increase the motivation of individuals to

increase their performance. As inferred from these studies, the fundamental intent of rewards in

organizations is to provide incentives to achieve individual and organizational behaviors that

would enable the organization to create competitive advantages and maximize the value of the

shareholder’s investment.

Given such premise, the question arises as to how one can determine that the actual

rewards provided to the workforce is fostering behaviors from individuals and the organization

in general enabling the organization to maximize its profitability. A core outcome of an effective

rewards system is the role in assisting in attracting and retaining critical employees. In

measuring the effectiveness of the rewards system, the following factors should be considered:

• Does the current rewards system represent and provide incentives that reward behaviors

to support the business strategy?

• Are new employees accepting offers with the organization based in part to the rewards

system?

• How does the rewards system reflect the employees’ personal values and the overall

culture of the organization?

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• What percentage of employees and role within the organization does the reward system

assist in retaining?

• What is the overall satisfaction level of the workforce with the rewards they are offered?

• Is the rewards system flexible enough to be changed if there are external challenges and

opportunities that would create a need for changing the system?

• What is the overall cost of the rewards system as compared to its overall benefits?

A survey conducted by Watson Wyatt (1998), concluded that organizations whose reward

systems are linked to business strategy to a great extent have higher returns than those with less

of a linkage. Schuster (1996)also concluded that organizations using strategically designed pay

systems perform better than the traditional pay counterparts based on financial objectives such as

earnings per share, return on assets, profit per employee, and cash flow. The outputs, therefore,

of an effective rewards system are centered around the financial profitability of the organization

and to create competitive advantages for the organization

Organizational Behavior & Theory

A key aspect of successful leadership is the ability to understand one’s workforce, be able to

influence their behaviors, and predict their behaviors given any specific conditions. Today, the

HR function may not view this as part of their core responsibility, but in reality if is definitely

their responsibility to understand the needs of their workforce and how any given policy or

practice may affect the behaviors of the employees. McShane & Von Glinow (2002) defined

organizational behavior as the study of what people think, feel, and do in and around

organizations. The importance of focusing on organizational behavior is to assess if the way

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people are thinking, feeling, and behaving correspond to the strategic intent of the organization

and produce the outcomes necessary for the attainment of the organization’s business goals.

With an increase in organizational turbulence (Daft, 2001), it is much more difficult to

predict how organization will behave in specific situations as exemplified through the many

layoffs and restructuring of organizations after the September 11 terrorist attacks. Nevertheless,

organizations can be much more successful if HR and other leaders are able to analyze historical

data, benchmarking other departments and organizations, and even using simulations in planning

and implementing future interventions. It is also crucial for HR and other leaders to understand

the theories that are relevant to managing employees within specific contexts and what strategies

may be more effective in improving performance among the workforce.

The measurements, therefore, for organization theory and behavior would be the ability

of HR and other leaders to reasonably predict and plan accordingly for the future based on

historical data and current environments. In addition, it is imperative for the leaders to be fully

aware of what of is transpiring in other organizations across the world, political and economic

developments, and technological changes and the possible effect on one’s organization. Being

able to reasonable to understand and predict the behaviors of employees provides a definite

competitive advantage in making relevant changes to capitalize on current and future

opportunities.

Summary of Framework for Assessing HR in Today’s Global Economy

With the importance of showing how HR contributes to the business strategy and understanding

the how to determine the level of HR’s effectiveness in contributing to the financial profitability

of the organization, it is intended that these strategies be used to enhance the profession in
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creating higher levels of value for organizations. The following summary lists and briefly

describes the respective HR cluster, its outcomes, and possible measurement to determine its

effectiveness in creating value:

Outcomes Measurements

Strategic Planning o Analysis, decisions,  Financial profitability

and actions needed to
create and sustain
competitive
advantages
Acquisition of o New employees
Employees effectively contribute
to the implementation
of the business
strategy
o The planning process,
advertising and
recruitment sources
support the business
strategy
o Interviewers are
effective in selecting
the right candidates
 Social responsibility – viewed by
society as ethical, moral, and a
choice employer
 Integrated all areas of the
organization
 Efficiently utilized available
resources
 Adequate number of qualified
incumbents
 Relatively short period of time to
hire qualified candidate
 Reduced cost per hire
 Increased applicant pool
 Reduced employee turnover ratio
 Higher performance output from
incumbents

Employee Training o Positive change in  Improvement in the performance

& Development attitude of participants of the individual, process, and the
o Increased expertise in organization
areas applicable to
one’s job
o Opportunities to
practice newly
acquired skills on the
job
o Support from peers,
supervisors and others
in utilizing knowledge
gained in training
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Organization o Higher levels of  Ability of the organization to

Development & productivity, quality of effectively compete in the current
Change products, and service internal and external
o Positive change in environments
responsiveness in  The quality of the output with
meeting customers’ respect customers’ expectations
needs  Does the service offered by the
o Organization culture organization provide a
reflects the competitive advantage as
organization and compared to its competitors?
supports the business  The ability of the system to
strategy effectively respond to changes in
o Fluid organization the external environment
structures  The organization allows for
maximum sharing of information,
leveraging each employee and
work unit, and resolving any
internal or external challenges?
Performance o Each position and the  Job descriptions are developed
Management tasks performed by the through timely and effective job
incumbents adequately analyses.
support the strategic  Feedback is shared continuously
business objectives of among all stakeholders.
the organization.  Every employee is fully aware of
o The process is his or her role in the organization.
effective in  Measurable outcomes identified
maximizing employee and measured for each position.
performance  The process and the system
viewed as credible, fair, valid, and
reliable.
Rewards System o Rewards system  New employees accept offers
viewed as motivating with the organization based in
for employees to part to the rewards system
increase their  Rewards system reflect the
performance. employees’ personal values and
o Provide incentives to the overall culture of the
achieve individual and organization
organizational  Outcomes of the rewards system
behaviors aligned with are cost-effective.
business strategies.
investment
Organization o Understand, predict,  The ability of HR and other
Behavior & Theory and influence leaders to reasonably predict and
employees’ behaviors plan accordingly for the future
 24

based on historical data and

current environments.

Conclusion

Does HR contribute to the bottom-lime of an organization? Given that several large-

scale studies have proven that HRM is a critical driver in an organization’s financial

performance, it is imperative for HR and other leaders to understand the critical nature and

utmost importance of understanding the effectiveness of all HR activities in creating value for

the organization. It is only through measuring of HRM that one can really articulate the benefits

of HR strategies in achieving the organization’s business strategy and in the process enhance the

credibility of the HR profession.

The HR profession is at a juncture where measuring HR’s efforts is not just a nice thing

to do, but should be an integral part of an HR department’s efforts. There will be practitioners

that would naturally resist this important aspect of HR, but through coaching, training, and

practice, expertise will be developed and ultimately improving their performance and the

effectiveness of the HR function. It is only through such efforts that HR can validate its claims

that it is a strategic business partner and a value-added department within the organization.
 25

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Figure 1.0

Globalization

Technology

Economic & political

instability

Diverse workforce HRM

Organization structure

Work/family balance

Managing HR’s Role in Driving Performance

 27
Figure 2.0

Strategic Planning

Acquisition of Employees Financial

Profitabilit
y
Training & Development

Organization Change & Development

Performance Management
Competitiv
e
Rewards System
Advantage
s

Organization Theory &

Behavior

Understanding the importance of measurement in enhancing the effectiveness of HR practices