Many organizations can quickly determine whether a specific HR initiative is efficient or effective. However, when it is a longer-term goal or a strategic objective that involves different processes over a long period, most organizations struggle to evaluate the effectiveness of their HR plans based on their overall business strategy. Most of this struggle is due to an over-reliance on short-term metrics and an inability to overcome common challenges.
There are certainly major obstacles standing between organizations and making a proper calculation of the usefulness of their HR efforts, but they are not insurmountable. What really stands in the way is a lack of understanding about how these systems fit within the overall business. In 2020, Brandon Hall Group asked businesses what their major challenges were in delivering strategic HR services. Although budgets played a part, many struggled with workforce planning and readiness.
Challenges to Successful HR Service Delivery
The cumulative effect of poor HR strategy evaluation is if there are flaws in the current system, they continue until remedied. HR, in its capacity to affect people, is directly tied to engagement, satisfaction, retention, burnout and more. The biggest consequence of having a poor HR strategy is the inability to adapt whenever there is a major disruption or changes to day-to-day work. Having the right metrics to evaluate your HR strategy creates a closed feedback loop, allowing your organization’s HR strategy to improve where it needs to and stay the course where it is already succeeding.
For an organization to connect the dots between HR strategy and business outcomes, it must first decide what its specific business needs are. Key questions organizations should address include:
• Who is accountable for ensuring your HR strategy is aligned with business priorities?
• How will you measure your HR strategy’s impact at your organization?
• What challenges does your organization face in evaluating its HR strategy and are those
controllable (i.e., not external factors)?
• Where are the areas that HR strategy directly affects employees at your organization?
• What is your organization’s readiness for large-scale change?
Brandon Hall Group POV
One of the key differentiators between top-performing companies and all others is in their use of strategic HR management. Linking HR processes to improving the overall business results and fulfilling strategic initiatives is the ultimate goal, but how do you determine when exactly that happens? Brandon Hall Group HR research has consistently shown that certain metrics are tied to these improvements and are often associated with these changes. Any organization interested in examining how HR is organized and executed in different types of organizations should study the patterns and trends that emerge from this research and build the strategic HR feedback needed to help their organization achieve its goals.
Top-performing organizations already do this, and measure the success of their HR initiatives through HR technology usage (62% of companies), workforce skill improvements (57%) and increased communication to internal customers (52%). All of these metrics are markedly different from traditional ones such as HR personnel versus head count or simple retention rates. The simple test for strategic versus nonstrategic evaluations is to look at how connected it is to overall business strategy.
A lower retention rate, for example, may be reflective of a successful strategy for hiring for more low-level positions that generally last for a shorter amount of time rather than a problem to be addressed right away. A metric such as skills improvement, though, shows a commitment to bettering the workforce, which supports any strategic initiative. Simply put, the effectiveness of your HR strategy should be evaluated on how well it is aligned with how success is defined at your organization.
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Leading minds in HCM choose Brandon Hall Group to help them build future-proof employee-development plans for the new era. For more than 27 years, we have empowered, recognized and certified excellence in organizations around the world, influencing the development of over 10,000,000 associates and executives.