EVALUATING THE HR FUNCTION

It is necessary to evaluate the contribution of the HR function to ensure that it is effective at both the strategic level and in terms of service delivery and support. In evaluation it is useful to remember the distinction made by Tsui and Gomez-Mejia (1988) between process criteria – how well things are done, and output criteria – the effectiveness of the end-result. A ‘utility analysis’ approach as described by Boudreau (1988) can be used. This focuses on the impact of HR activities measured wherever possible in financial terms (quantity), improvements in the quality of those activities, and cost/benefit(the minimization of the cost of the activities in relation to the benefits they provide).

Huselid et al (1997) believe that HR effectiveness has two dimensions: 1) strategic HRM – the delivery of services in a way that supports the implementation of the firm’s strategy; and 2) technical HRM – the delivery of HR basics such as recruitment, compensation and benefits. The methods that can be used to evaluate these dimensions are described below.

Quantitative Criteria 

● Organizational: added value per employee, profit per employee, sales value per employee, costs per employee and added value per £ of employment costs. 

● Employee behaviour: retention and turnover rates, absenteeism, sickness, accident rates, grievances, disputes, references to employment tribunals, successful suggestion scheme outcomes. 

● HR service levels and outcomes: time to fill vacancies, time to respond to applicants, ratio of acceptances to offers made, cost of replies to advertisements, training days per employee, time to respond to and settle grievances, measurable improvements in organizational performance as a result of HR practices, ratio of HR costs to total costs, ratio of HR staff to employees, the achievement of specified goals.