HR Evaluation

1. Human Resource Evaluation and
Business Performance
A Study of Contemporary Human Resource Performance Measurement
Practices and its Association with Business Performance

2. Agenda
Objectives of the Study
Business Performance Management
Human Resource Evaluation
The Perfect Performance Management System
Linking HR Evaluation Practices with Profitability of firms

3. Objectives of the Study
To gain complete understanding of Business Performance
Management Systems
To understand the HR Evaluation Practices and critically
examine them
To find the link between HR Evaluation Practices and
Profitability

4. Business Performance
Management System

5. Defining Business Performance
What is Performance?
Efficiency and Productivity
Effectiveness and Efficacy
Quality
Dimensions:
Time Frame
Time Orientation
Means or Ends
Qualitative Vs Quantitative

6. Why Measure Performance?
‗What can‘t be measured, can‘t be improved upon.‘
Control
Communication
Alignment
Strategy
Motivation
Balance and Sustainability
Objectivity

7. The Evolution of Performance Measurement
Systems
DupontPyramid

8. Evolution Contd.
GE‘s Performance Measures

9. Evolution Contd.
Performance Matrix (Keegan, Eiler, Jones)

10. Evolution Contd.
SMART Pyramid(Lynch
and Cross)
Fitzgerald‘s Ends and
Means Model

11. Evolution Contd.
MacroprocessModel
(Brown)
Business Excellence
Framework (EFQM)

12. Evolution Contd.
Balanced Scorecard

13. Evolution Contd.
PRISM Model (Adams, Neely)

14. Human Resource Evaluation

15. Why Measure HR?
Big Expenses
Sustainability and Health of a Company linked to Strategic
HRM
Productivity linked with Employee Morale and Satisfaction
High Attrition Costs
People could be a Competitive Advantage
Differentiation based on Talent

16. Human Resource Accounting
As old as Industrial Revolution itself
‗The Human Oraganisation‘ by Likert
Brummet, HR as Cost
Flamholtz, Replacement Cost
Hekimian, Onward looking Cost
Kermanson, HR as Goodwill
Lev and Schwartz, Economic value of Employee
Freidman and Lez, Market Company Pay Differential
Morse, HR not an Asset
Critique

17. Human Resource Metrics
Productivity
Quality
Costs (Incurred, Saved)
Direct Value Generated
Time
Soft Data
Critique

18. Human Capital Management
Why HCM?
Talent approach
Development and Improvement
Need Automation
Data Analytics
Decision making
Future Oriented
Critique

19. HR Scorecard

21. Audit Approaches
HR Audits
HRD Audit and HRD Scorecard
Why Audits?
Cost
Maturity Constraints
Why not Audits?
Generic
One size doesn‘t fit all
True value added not researched well
Completion and success can‘t be differentiated

22. The Perfect Performance
Management System
IPMS Reference Based Model

23. The Ideal Performance Management System:
The Way Forward
Future: Integrated Performance Management System
(IPMS)
Based on Reference Model

24. IPMS Systems Layer Pyramid Display
Stakeholders Requirements
(Setting Directions)
External Control
(Competition, Market and Uncertainities)
Objectives
(Goal Setting and Employee Performance
Management)
Metrics
(Measure, Coordinate and Control)
Process
(Next Level Pyramid)
Stakeholders Requirements
(Setting Directions)
External Control
(Competition, Market and
Uncertainities)
Objectives
(Goal Setting and Employee
Performance Management)
Metrics
(Measure, Coordinate and
Control)
Process
(Next Level Pyramid)

25. Reference Model(with Levels) for IPMS

26. Why IPMS?
Accountability at Pyramid level
Simplicity and Drill Down Complex Display
Each Level considered (Unit Problem)
Each Stakeholder can be Accommodated
Metrics not bigger than Framework
A good mix of Ends and Means
A good mix of Leading and Lagging Measures
Objective
Needs high level of Automation and IT systems Maturity
and Integration

27. Linking HR Evaluation Practices
with Profitability of a Firm
An industry wide study of Fortune 100 companies

28. Research Problem
How do HR Evaluation Practices Impact Performance of a
Firm?

29. Methodology
Sample: Fortune 500 Companies
Performance : Utilization of Assets (ROA)
Employee Satisfaction: GlassdoorRatings (ESR)
Career Opportunities
Communication
Compensation and Benefits
Employee Morale
Recognition and Feedback
Leadership
Work Life Balance
Fairness and Respect

30. Methodology contd.
Indexed HR Evaluation Practices (HRE)
1.HRA
2.HCM
3.Communication
4.Framework
5.Process Audit
6.Accountability
7.Motivation
Market to Book Value Ration (MBR)
Future Earnings Capacity
Indicator of Certainty, Technology and Intellectual Capital

31. Data Analysis
Model 1ROA = f (HRE, ESR, MBR)
Model 2 ROA = f (ESR, HRE)
Model 3ROA = f (MBR, HRE)
Model 4ROA = f (HRE)

32. Analysis Contd.
Model 1
Model 3

33. Discussions and Conclusions
ESR and ROA poorly correlated for the sample.
ESR and ROA correlation increases with the industry
classification or MBR classification
Higher MBR has been linked with higher ESR Correlation
with ROA
HRE as expected correlates highly and is very significant
in the model
HRE and MBR together explain 55% of variation in ROA.
HRE practices directly influence firms ability to utilize the
talent or human capital
Accountability and Motivation are both important in
order to leverage the HR Evaluation

34. Limitations and Recommendations
Limitations
ESR Source not very clean
Singular measure of performance
High dependence on Secondary Data
No Time Scale Comparison
Recommendations
Further research needed to prove marginal increase in
productivity if HR is held accountable and incentivized
More Time Series data needed to confirm increase in
profitability with change in HR Evaluation Practices
Research based on SBU‘s and not corporations could also link
HR Evaluation Practices with Competitiveness

35. Thank You
Shirshendu Pandey
FORE School Of Management
[email protected]

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